Stocks’ Details

James Hardie Industries Plc

Decent Top-Line Performance in Q3FY19:James Hardie Industries Plc (ASX: JHX) recently announced dividend/distribution of AUD 0.37281400on security JHX - CHESS DEPOSITARY INTERESTS 1:1, with record date and payment date of June 6, 2019, and August 2, 2019, respectively.

In its quarterly report (ended on March 31, 2019), JHX reported an increase in net sales by 19% pcp to $624.8 Mn (Q4FY19). Its net operating profit after tax was reported at US$0.8 Mn in Q4FY19 as compared to loss at US$57.6 Mn in Q4FY18.


Q4FY19 P&L Statement (Source: Company Reports)

What To Expect:The Company expects to see modest growth in the US housing market in fiscal year 2020. The single family new construction market and repair and remodel market growth rates in fiscal year 2020 are expected to grow, albeit at a growth rate lower than that in fiscal year 2019. The Company expects new construction starts between approximately 1.2 million and 1.3 million.

James Hardie also expects its North America Fiber Cement segment EBIT margin to be in the top half of the range of 20% to 25% for fiscal year 2020.This expectation is based upon Company’s continuous improvement in the operating performance in its plants, improved net average sales price and mix, continued inflation for input costs and modest underlying housing growth.

Stock Recommendation:Its gross margin and EBITDA Margin for Q4FY19 stand at 33.7%, and 20.7%, which are better than the results in Q3FY19 at 32.8%, and 19.7%, respectively which indicates the company has shown improvement in its financial performance than its previous quarter.

Hence, considering the aforesaid facts and current trading level, we recommend a “Buy” rating on the stock at the current market price of $18.300 per share (up 1.217% on June 7, 2019).
 

IRESS Limited

Steady Growth in FY18:IRESS Limited (ASX: IRE) is a technology company that provides software to the financial services industry. The company has its operations spread across Australia, New Zealand, the United Kingdom, South Africa, Canada, and Asia. In an announcement dated 31 May 2019, the Company notified about the acquisition of QuantHouse for a purchase price of €38.9 million on a debt and cash free basis. The acquisition will lead to the expansion of a global client base and greater scale.

Financial Highlights: For the financial year ended 31 December 2018, the company reported group revenue amounting to $464.6 million, up 8% on 2017 and amount of NPAT was $64.1 million, up 7% on 2017.The results in the United Kingdom and Australia were remarkable with strong revenue growth and acceleration in demand, respectively. It also reported strong fundamentals with a cash conversion rate of 94% and recurring revenue rate of approximately 90%.


2018 Financial Highlights (Source: Company Reports)
 
Outlook: In 2019, the reported Segment Profit is expected to grow between 6% and 11% ($146 million - $153 million).Non-operating costs will be substantially lower, subject to any further acquisitions.
 
Stock Performance:The stock has a Price-Earnings Ratio of 34.84x. IRESS is expected to strengthen its presence in the international market and avail cost synergies through QuantHouse’s acquisition. The company also reported strong performance growth in FY 2018. However, the stock is trading slightly towards the 52-week higher levels. Hence, we give an “Expensive” recommendation on the stock at a current market price of $13.140 per share (up 0.305% on 7 June 2019).
 

Objective Corporation Limited

Transition Phase During 1H FY 2019:Objective Corporation Limited (ASX: OCL) is a supplier of information technology software and services. On 23 May 2019, the company made an announcement for the issue of 150,000 Options pursuant to the Employee Incentive Plan exercisable at $2.75 per option. 100,000 Options expire on 1 January 2029 and remaining 50,000 expire on 1 April 2029. In another recent announcement, the company lodged Form 484 with ASIC for cancellation of 13,929 shares acquired under Share Buyback announced on 30 July 2018.

Financial Highlights: For the half year ended 31 December 2018, the company reported group revenue amounting to $29.2 million, down 12% on the prior corresponding value of $33.3 million.The adoption of new accounting standard AASB-16led to a revision to the treatment of costs on operating leases and a rise in EBITDA of $0.9 million.

Net profit after tax amounted to $3.6 million reporting a decrease by 11% on the prior corresponding figure of $4.1 million. The financials also demonstrated a strong cash generation with operating cash flow of $14.3 million, 255% of EBITDA.


Growth in Revenue and EBITDA (Source: Company Reports)
 
Outlook: The robust increase in the proportion of recurring revenue and growth in ARR demonstrated continued progress of its strategy.The management maintains a positive outlook for the business as it has significantly grown its market and focused on leveraging its customer relationships.

Stock Performance:The company’s stock yielded returns of -2.50% and -1.09% over a period of 1 month and 3 months, respectively. During the year, the company demarcated strong performance owing to strong cash flow, growth in subscription and SaaS products and expansion of its addressable markets.

Looking at the above factors, we give a “Buy” recommendation on the stock which last traded at a market price of $2.730per share.
 
 

JB HI-FI Limited

Highest FY19 Revenue Guidance for JB HI-FI Australia:JB HI-FI Limited (ASX: JBH) is engaged in the retailing of home consumer products. Its offerings consumer electronics, software, whitegoods, and appliances. On 07 June 2019, the company made an announcement to the exchange notifying a change in interests of a substantial shareholder, Pendal Group Limited. The voting power of the shareholder reduced from 7.26% to 6.23%.


JB HI-FI Group Model (Source: Company Reports)
 
Financial Highlights: During Q3FY19, the total sales for JB HI-FI Australia division grew at a rate of 2.6% as compared to Q3FY18 growth rate of 7.5%. YTD FY19 total sales growth in the region was at a rate of 4.1% whereas YTD FY18 total sales grew by 9.8%.
 
For JB HI-FI New Zealand, the total sales went down by 1.2% while in Q3FY18 the decline was at a rate of 4.4%. YTD FY19 sales in the region grew at a rate of 3.7% while YTD FY18 sales declined at a rate of 1.7%. 
 
The Good Guys segment,Q3FY19 total sales growth was 2.2% whereas there was a decline of 1.3% in Q3FY18. YTD FY19 total sales grew by 2.6% as compared to 1.2% in YTD FY18.
 
FY19 Guidance: The Company reaffirmed the already announced FY19 guidance with total group sales to be approximately $7.1 billion comprising JB HI-FI Australia sales at $4.73 billion, JB HI-FI New Zealand sales at $0.24 billion and The Good Guys sales at $2.15 billion.The Group NPAT is expected to be in the range of $237 million to $245 million, an increase of 1.6% to 5.1% on pcp.
 
Stock Performance: The company’s stock yielded returns of 10.57% and 22.13% over a period of 1 month and 3 months, respectively. Considering the performance of the stock in the recent past, the expected revenue and profit growth in the future along with a blend of other factors like low cost operating model, Quality store locations, strong partnerships and continued investments, the company’s future looks quite promising. However, it is trading towards its 52-week higher levels of $28.520. Thus, we think that the stock is “Expensive” at the current market price of $27.720 per share (down 0.716% on 07 June 2019).
 

WorleyParsons Limited

WOR’s Subsidiary Wins Contract By Intecsa:Energy Sector company, WorleyParsons Limited (ASX: WOR) recently announced that Chemetics Inc, a wholly owned subsidiary acquired by Worley in the Jacobs ECR acquisition, has been awarded a contract by Intecsa Industrial S.A. In April end, the Group completed the acquisition of Jacobs Engineering Group Inc’s Energy, Chemicals and Resources (Jacobs ECR) Division for which it had entered into a binding agreement in October 2018. It has paid a consideration of US$3.2 billion as a closure to the deal.

H1 FY 2019 Financial Performance:Total revenue and other income increased by 9.8% pcp to $2.64 Bn. The net profit after income tax for H1FY19 was reported at $87.4 Mn as compared to $9.2 Mn in H1FY18.

H1FY19 P&L Statement (Source: Company Reports)

What To Expect:Driven by continued improvement in market conditions, company’s resources and energy customers are increasing early phase activity for the next cycle of investment. This is reflected in the recent level of contract awards and its growing backlog. By maintaining its focus and growing its position in the resources and energy markets, the company expects to deliver improved earnings in FY2019, before including the contribution of the Jacobs ECR acquisition. The company’s focus on costs will continue so that operating leverage is delivered as the business grows. The company expects earnings to be weighted to the second half, before including the contribution of the Jacobs ECR acquisition.

Stock Recommendation:Its gross margin, EBITDA margin and net margin for H1FY19 stand at 8%, 6.9%, and 3.3%, which are better than the results in H1FY18 at 7.2%, 6.8%, and 2.8%, respectively which indicate that the company has shown improvement in its financial performance than its previous corresponding period. Its current ratio for H1FY19 stands at 3.31x, which is better than the 1H FY18 current ratio of 1.29x, which implies the company is in a better position to address its short-term obligations than its previous corresponding period. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $13.390 (up 2.058% on June 7, 2019).

 
Comparative Price Chart (Source: Thomson Reuters) 

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