Spark New Zealand Ltd


SPK Details

Delivered a strong result:Spark New Zealand Ltd (ASX: SPK) reported a net earnings’ rise of 13% yoy (year on year) to $418 million in the fiscal year of 2017 while revenue enhanced 3.3% yoy leading to $3.614 billion. IT services revenue enhanced 19.0% while mobile revenue surged 5.6% on a yoy basis. Moreover, the $20 million contribution from the sale of surplus land at Mayoral Drive in Auckland drove the bottom line. On the other hand, the group faced challenges in delivering a better customer service last winter as well as in managing workload given the rising Telecommunications-as-a-Service and IT service contract wins. Also, they incurred costs to support large-scale migration of customers off copper to wireless or fibre, and from Yahoo to SMX email. Management warned over the concerns relating to the rising competition, wholesale costs as well as margins pressure. But their ‘Upgrade New Zealand’ program enabled wireless broadband connections increased to 84,000 while fibre connections rose to 172,000. They also migrated 800,000 customer email accounts safely to New Zealand-based provider SMX, and entered new partnerships with Netflix and Spark Arena to complement their Lightbox and Spotify value add-ons.
 

Overall performance execution (Source: Company reports)
 
The group intends to have 85% of their broadband customers migrated away from copper onto fibre or wireless technologies by 2020. Given that the stock is trading at a decent dividend but in a challenging telecom sector environment, we give a “Hold” recommendation at the current price of $3.62
 

SPK Daily Chart (Source: Thomson Reuters)
 
AVJennings Ltd


AVJ Details

Better outlook: AVJennings Ltd (ASX: AVJ) reported a profit before tax of $51 million, down 13.2%, while maintained the full year dividends at 5.0 cents per share for fiscal year of 2017. The group’s business momentum continued which added nine new projects representing over 4,800 lots. Work in Progress surged 28.6% to 2,161 lots while the group expects over 1,900 – 2,100 contract signings for fiscal year of 2018.
 

Outlook (Source: Company Reports)
 
AVJ average revenue per contract enhanced from $246k to $292k driven by new projects. The group’s ‘Rosny’ apartment building at Waterline Place in Williamstown showed strong sales while their GEM apartment building at Waterline, showed good pre-sales. Moreover, they acquired a 67-apartment development site in the dynamic middle ring suburb of Kogarah, 19km south of Sydney’s CBD. AVJ has over 10,000 lots land bank and expects a better second half given the revamped consumer confidence in the housing sector. AVJ stock generated over 19.8% in the last three months (as at August 17, 2017) and a further upside is expected based on business momentum and market conditions. We give a “Speculative Buy” at the current price of $0.725
 

AVJ Daily Chart (Source: Thomson Reuters)
 
Domino's Pizza Enterprises Ltd
 

DMP Details

Rising online sales is hampering offline performance: Domino's Pizza Enterprises Ltd (ASX: DMP) stock rose about 3% on August 18, 2017 boosted by their on-market share buy-back program for up to $300 million. The group reported that their Net Leverage Ratio would be 2.6x, including entire buy-back and finishing the buying of the minority interest in Domino’s Pizza Japan. They expect a 7-9% rise in their Same Store Sales in FY18 while their recent SSS performance was driven by online sales. On the other hand, online sales growth is coming at the expense of the offline sales, which fell in the second half of 2017 as compared to first half of 2017. The group’s FY18 performance started on a positive note which showed a sales growth of 6.3% for the group. Organic store openings, reached +12. Their Europe division business opened on a positive note in FY18 while OneDigital implementation contribution is driving the performance. Japan’s SSS performance is also in line wherein the group forecasts a positive SSS growth this financial year. But, ANZ SSS growth is forecasted to be lower in the first half of 2018 after achieving the highest SSS growth in October 2017. DMP stock corrected over 21.2% in the last four weeks (as of August 17, 2017) and still the stock is trading at a high P/E. We rate the stock “Expensive” at the current price of $44.97
 

DMP Daily Chart (Source: Thomson Reuters)

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