Stocks’ Details

Transurban Group

Decent Rise in Financial Metrics: Transurban Group (ASX: TCL) owns, operates and develops electric toll roads and intelligent transport system. The market capitalisation of the company stood at $44 Bn as on 11^th February 2020. The company recently released its results for 1HFY20 and stated that average daily traffic witnessed a rise of 2.3%. TCL reported proportional toll revenue amounting to $1,396 million, with a rise of 8.6%. As per the key personnel, TCL, together with its construction partners, has achieved major progress on delivering its project pipeline. The company declared an interim distribution of 31.0 cents per share.

With respect to North America, the company reported a rise of 16.2% to $186 million in proportional toll revenue. Also, in the same division, the company has begun the procurement process for the 495 Express Lanes Northern Extension. 


North America Performance (Source: Company Reports)

Distribution Guidance:For FY20, the company is anticipating a distribution of 62.0 cents per share. The company is well placed for emerging opportunities with a scalable organisation, enhanced capability as well as a strong capital position.

Stock Recommendation: The capital strategy of the company is focused on maintaining strong investment-grade credit metrics. Also, the company has raised an amount of $0.8 billion during the period through institutional placement and the security purchase plan. The company would utilise the funds towards the acquisition of the remaining M5 West equity interests. During the span of three months and six months, the stock of TCL provided returns of 7.76% and 6.27%, respectively. Hence, considering the company’s decent performance in 1HFY20, focus on emerging opportunities and returns in the past months, we maintain a “Hold” rating on the stock at the current market price of $16.330 per share, up by 1.429% on 11^th February 2020.

Northern Star Resources Ltd

Robust Improvement in Financials: Northern Star Resources Ltd (ASX: NST) is engaged in the production and exploration of gold. The market capitalisation of the company stood at $10.07 Bn as on 11^th February 2020. For the six months ended 31^st December 2019 (1H FY20), the company reported a robust rise in revenue, earnings, cashflow and dividend. NST witnessed a rise of 54% to $126.8 million in net profit after tax. These results have been fueled on the back of gold sales of 398,640 ounces. The Board of the company declared a fully franked interim dividend amounting to 7.5 cents per share, reflecting a rise of 25%. The company also completed the acquisition of KCGM on 3^rd January 2020.

 
1H FY20 Highlights (Source: Company Reports)

Production Guidance for FY20: For FY20, the company is expecting production in the range of 920koz – 1,040koz with AISC in the ambit of $1,240/oz – 1,340/oz. Moreover, with respect to KCGM, the company is anticipating production between 120koz and 140koz for 2H FY20.

Stock Recommendation: Going forward, the company is anticipating benefits out of the KCGM acquisition. The company is confident that this acquisition would generate more substantial growth in its net cashflow while maintaining strong overall financial returns. Current ratio of the company stood at 2.08x in FY19 as compared to the industry median of 1.75x. This reflects that the company is in a decent position to address its short-term obligations against the broader industry. Debt to equity multiple of the company stood at 0.04x in FY19 versus the industry median of 0.13x. Therefore, considering the deleveraged balance sheet, decent liquidity position and dividend to shareholders, we give a “Hold” recommendation on the stock at the current market price of $13.670 per share, up 0.367% on 11^th February 2020.
 

Aventus Group

CAGR of 4.4% in FFO Per Security: Aventus Group (ASX: AVN) is engaged in the investment and management of large format retail property assets. The market capitalisation of the group stood at $1.6 Bn as on 11^th February 2020. The company recently reported its operational and financial performance for 1HFY20 and stated that it witnessed LFL (Like-for-Like) net operating income growth of 3.1%. The company achieved net property valuation gains amounting to $20 million. This brought assets under management to $2.2 billion. Funds from operations of the company stood at $53 million, reflecting an increase of 9.6%. Also, since listing in FY16, the company experienced a CAGR of 4.4% in FFO per security.


Strong Growth (Source: Company Reports)

Guidance for FFO Growth Per Security: The portfolio of the company is well placed in the current market for offering retailers quality centres at affordable rents. For FY20, the company is anticipating FFO growth per security in the range of 3 – 4%, on the back of the portfolio’s growth potential, in combination with a lower cost of debt.

Valuation Methodology:P/E Based Valuation

P/E Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Gross margin and EBITDA margin of the company stood at 78.8% and 67.7% in FY19 as compared to the industry median of 72.2% and 65.2%, respectively. We have valued the stock using P/E-based relative valuation method and for the purpose, we have taken peers such as Charter Hall Retail REIT (ASX: CQR), Shopping Centres Australasia Property Group Re Ltd (ASX: SCP) and Scentre Group (ASX: SCG) and arrived at a target price, which is offering marginal correction (in % terms). Hence, considering the current trading levels and valuation, we have a watch view on the stock at the current market price of $2.890 per share, up by 0.697% on 11^th February 2020.

 
Comparative Price Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.