SRG Ltd (ASX: SRG)

SRG Details
 

Gaining momentum: SRG Ltd.’s stock has been down by 14% in last one year, as at October 23, 2017. In last five days, the stock has surged about 5%. The complex services company has reported for record asset utilisation and new contracts in mining. The group seems to benefit from the recent $22.8M JV contract for Margaret River Perimeter Road project with WBHO Infrastructure. Further, SRG has signed an agreement with Traylor Bros., Inc. to target dam strengthening work in the US and Canada. A $26.5M international LNG tank project with Hyundai Engineering & Construction Co., Ltd has been a significant win for the group under which post tensioning works will be undertaken for eight LNG tanks. The group has been delivering various bridge projects for Main Roads Western Australia. The successful drilling trial with BGC contracting at Koolyanobbing mine in Western Australia is another update on the group’s progress. Overall, the group is gaining momentum through the Development Phase of its strategy. For FY17, the group reported for revenue growth of 29% and NPBT of 25% while EPS was up 24% to 12.24 cents per share with 17% dividend growth. The group’s work in hand for FY18 has been indicated to be $160M with $1.25B pipeline. Given the development phase and on-going momentum in infrastructure sector, we put a “Speculative Buy” on the stock at the current price of $1.46

 

SRG Phases (Source: Company Reports)

Asaleo Care Ltd (ASX: AHY)

AHY Details
 

Stock price weakness with rising challenges: Asaleo Care, which is a personal care and hygiene company, saw a stock price plunge of about 8.5% on October 24, 2017 while weakness in the stock is creeping in. Lately, Credit Suisse has slashed FY18 earnings forecasts on the group by 15% and this led to heavy selling in the shares. Particularly, Chinese import restrictions on recycled paper are resulting in increase in wood pulp prices and are said to have an impact on AHY’s tissue products. Challenges from rise in electricity costs and dollar fluctuations might also impact the performance. On the other hand, any relief in pulp pricing around the end of the calendar year with an ease in import restrictions in China, may prove to be supporting AHY.

AHY otherwise had reported statutory NPAT rise of 11% to $27.7m for the half-year ended 30 June 2017 while revenue was up 0.5%. There has also been a reduction in net debt. Though some weakness is prevailing at the moment, the capital optimisation initiatives and transformation projects seem to provide some benefits to the group while it maintained its low single digit growth for full year despite the challenges owing to pulp prices, electricity costs and competitive retail environment. We give a “Hold” on the stock at the current price of $1.45

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