Buy, Sell or Hold - 4 Well Known Stocks: MYR, CWN, FLT and RIO

Myer Holdings Limited (ASX: MYR)

MYR Details

No interim dividend declared: Myer Holdings released its financial results (reporting period 26 weeks ending on 27 January 18) entailing a decline of 3.6 per cent in total sales from ordinary activities and amounting to $1,719.7 million as compared to previous corresponding period (26 weeks ending on 28 January 17). Net Profit After Tax pre-implementation costs and individually significant items decreased by 36.1 per cent on pcp basis and amounted to $40.1 million. The Company recorded a statutory Net Loss After Tax of $476.2 million for the period which included a non-cash impairment charge of $500.2 million (post-tax) on the carrying value of Myer Goodwill and brand name intangibles on the Company’s balance sheet and other asset impairments of $6.4 million (post-tax). Implementation costs were $9.7 million (post-tax). Earning per share, pre-implementation costs and individually significant items was 4.9 cents in 1H18 as compared to 7.7 cents per share in 1H17.  At the end of the period, inventory was $31.1 million and Net Debt was $27.9 million higher than last year leading the group to be in a net-debt position of $19.9 million with available liquidity of $400 million.
 

Shareholders Fund Performance (Source: Company Reports)
 
During the first seven weeks of 2H2018, Myer invested in price competitiveness and sales improved but week to week volatility continued to exist. Further, the group did not declare any interim dividend and will take a stock of the situation in terms of FY18 full year. The Group announced some remuneration changes for the Myer Board and for the Executive Chairman. The Board agreed that all Board members will target a shareholding in the Company that is equivalent to at least one year’s director’s fees within three years. The stock price was down by 37.23% in the past six months but climbed up by 3.61% in the past one week followed by a 3.5% fall on March 21, 2018. We give a “Hold” recommendation at a current market price of $0.415
 

MYR Daily Chart (Source: Thomson Reuters)
 

Crown Resorts Limited (ASX: CWN)

CWN Details

Resignation by James Packer: Crown Resorts’ stock edged slightly low on March 21, 2018 as James Packer, the director (who owns 47% interests in CWN) resigned for some personal reasons. On the other side, group’s strategy on sale of non-core assets and other efforts articulated by Executive Chairman John Alexander are expected to yield better results for the group. The Company also proposed a buy-back of the outstanding Subordinate Notes that were listed on ASX under the code ‘CWNHA’ (Notes). As on 16 March 2018, a cumulative total of 1,276,329 Notes were bought back while 4,043,371 of Outstanding Notes were not bought back by the Company. CPH Crown Holdings Pty Limited settled the sale of 8,240,933 of fully paid ordinary shares in Crown Resorts Limited. CPH sold the shares without complying to the disclosure to investors under Part 6D.2 of the Corporation Act 2001 and Crown complied with the provisions of Chapter 2M and section 674 of the Corporations Act. As per the prospectus, a Mandatory Deferral Event exists if Crown’s Interest Cover Ratio in relation to a Testing Date is less than the Minimum Level (being 2.5 times) or if Crown’s Leverage Ratio in relation to two consecutive Testing Dates is above the Maximum Level (being 5.0 times).
 

Debt Profile (Source: Company Reports)
 
The interest coverage Ratio and Leverage Ratio for the six months ending 31 December 17 was 12.1 times and 1.4 times, respectively. The price was up by 15.56 per cent in the past six months but declined by 2.46 per cent in the past one week, while we maintain a “Buy” recommendation at the current market price of $12.95
 

CWN Daily Chart (Source: Thomson Reuters)
 

Flight Centre Travel Group Limited (ASX: FLT)

FLT Details

Expects further market growth globally: BlackRock Group ceased to be a substantial holder of Flight Centre Travel Group since 16 March 2018; while, Bennelong Australian Equity Partners Ltd became the substantial holder since 7 March 18 by holding 8,250,920 of securities with 8.163 per cent of the voting power. Meanwhile, FLT released its results for six months ending 31 December 17 and revealed $139.4 million of profits before tax, representing an increase of 23.2 per cent as compared to profits for the 1HFY17. Profits were slightly above the targeted 1H range ($120 million-$135 million), which compelled FLT to lift its full year guidance of PBT to $360 million-$385 million as compared to its initial target of $350 million-$380 million.
 

Net Margin Seasonality (Source: Company Reports)
 
Revenue for the six months rose up by 5.4 per cent and amounted to $1.37 billion which led to a lower overall income margin. The Board declared a fully franked interim dividend of 60 cents per share which will be paid on 13 April 2018 and is 33 per cent higher as compared to prior corresponding period. The transformation program that was initiated late in FY17 to ensure that FLT achieves its profit growth, has been gaining momentum. The stock prices were up by 31.98 per cent in the past six months and by 7.5 per cent in the past five days. We expect that the stock might get a boost from the upcoming holiday period, and we give a “Hold” recommendation at the current market price of $57.99, ahead of the stock trading ex-dividend on March 22, 2018.
 

FLT Daily Chart (Source: Thomson Reuters)
 

Rio Tinto Limited (ASX: RIO)

RIO Details
Coal Asset divestment and launch of a new debt Reduction Programme:Recently, RIO announced a bond purchase and a redemption plan for up to $2.25 billion which will help the Group in reducing its surplus liquidity that will further reduce the gross debt. RIO issued notices of redemption for all of its 4.125 per cent Notes (due in May 2021) and 3.750 per cent Notes (due in September 2021) which were issued by Rio Tinto Finance (USA) Limited. It commenced invitations to holders outside the United States to sell up approximately $850 million of two series of its Euro-denominated notes which will mature in 2020 and in 2024. It is a part of the Group’s ongoing capital management plan and will follow the successful completion of a series of $10 billion of US dollar-denominated note redemptions.

Meanwhile, RIO entered into a binding agreement with Glencore for the sale of its entire interests in the Hail Creek coal mine and of Valeria coal development project in Queensland for $1.7 billion. This move has come at the back of RIO pointing to huge value loss to the coal business in Mozambique a few years ago. Meanwhile, Hail Creek will continue to perform strongly under its new owner and will secure long-term jobs and will continue its contributions to the State of Queensland. It is expected that the transaction will be completed in the second half of 2018. However, no special pay-out has been flagged before the half-year results in August in view of this sale. The stock price was up by 13.9 per cent in the past six months and looks “Expensive” at the current market price of $75.23, given the market volatility over geopolitical scenario.
 

RIO Daily Chart (Source: Thomson Reuters)

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