Orica Limited 

ORI Details

Dividend Distribution: Orica Limited (ASX: ORI) is engaged in the manufacture and distribution of commercial blasting systems, including technical services and tunnelling support systems to the mining and infrastructure markets. ORI has announced on 16 June 2021 regarding dividend distribution details to its shareholders. The company has paid a dividend amounting to $0.075 on 9 July 2021. The ex-date for the dividend was on 31 May 2021. 

Change in Interest of a Substantial Holder: ORI has announced on 4 June 2021 regarding a change in the interest of a substantial holder. As a result, AustralianSuper Pty Ltd has increased its holding to 11.99% in the company from 10.99% earlier. 

Increase in Director’s Holding: On 26 May 2021, the company announced that John Richard Beevers, a director of ORI, has acquired an additional 200 shares at the price of $14.16 per share and 1,500 shares at the price of $14.15 per share on 18 May 2021. 

1HFY21 Highlights:

• A decline in Sales Revenue – ORI has seen a declining sales revenue in 1HFY21 across all regions due to Covid-19 impacts.
• Decline in Net Profit – ORI has registered a decline in Net Profit mainly due to a decline in revenue and ongoing operating costs.
• Increase in Cash Balance – ORI has reported an increase in its cash balance to $988.8mn as on 31 March 2021 against $920.50mn as on 30 September 2020.

Cash Balance (Source: Analysis by Kalkine Group)

Key Risks: 

• Geopolitical Risks: The company operates in multiple countries. Hence, it is exposed to geopolitical tensions in global markets.
• Foreign Exchange Headwinds: The company is exposed to foreign exchange risks. Any adverse change in foreign exchange prices may impact the business severely.
  

Outlook:  The company is adopting new technology for its business growth and expecting to strengthen its initiatives, going forward. Moreover, the company is positive on the outlook for gold, copper, and iron ore. The company is expanding in growing markets such as India and Canada.

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)

Source: Analysis by Kalkine Group  

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of ORI gave a return of ~-11.55% in the last six months and a return of ~-20.18% in the last nine months. The current market capitalisation of ORI stands at ~$5.36bn as of 13 July 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$11.17-~$18.62. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in % terms) upside. We believe that the company can trade at a slight discount as compared to its peer median, considering a decline in sales revenue, net profit and challenging external environment. For this purpose, we have taken peers Salt Lake Potash Ltd (ASX: SO4), Incitec Pivot Ltd (ASX: IPL), Scidev Ltd (ASX: SDV), to name a few. Considering an increase in cash balance as on 31 March 2021, dividend distribution to its shareholders, positive outlook for gold and copper, current trading levels, and valuations, we recommend a “Buy” rating on the stock at the current market price of $13.41, up by ~1.822%, as on 13 July 2021.

ORI Daily Technical Chart, Data Source: REFINITIV

Bingo Industries Limited  

BIN Details

Dividend Distribution Update: Bingo Industries Limited (ASX: BIN) is waste management and recycling company. Its services include skip bins, commercial waste, liquid waste, recycling centres, contaminated soils, and education. BIN has announced on 13 July 2021 regarding dividend distribution to its shareholders. Accordingly, BIN has announced to pay a special dividend of $0.1170 per share to its shareholders on 28 July 2021. The ex-date for the dividend will be on 16 July 2021. 

Scheme of Arrangement: BIN has announced regarding a scheme of the arrangement after approval for the same from its shareholders. Under the scheme, Recycle and Resource Operations Pty Limited (Owned by Macquarie Infrastructure and Real Assets) will acquire all the issued shares in BIN. The shareholders have an option to receive either $3.45 cash per share or a mix of cash and unlisted scrip alternative. The shareholders choosing the mixed option is likely to receive $1.32 in cash and the remaining $3.30 in unlisted scrip in RollCo. The scheme remains subject to approval from the court hearing scheduled on 15 July 2021. On approval for the scheme from the court, BIN proposes to lodge a copy of the order from the court with the Australian Securities and Investments Commission (ASIC) on the same day. In such a case, Bingo shares remain suspended from closing on 15 July 2021 till the scheme, which will be implemented on 5 August 2021.  

Key Dates: 

• 15 July 2021 – Second Court Date
• 15 July 2021 – Court Order Lodged with ASIC, Delisting of Bingo Shares
• 19 July 2021 – Special dividend Record Date
• 22 July 2021 – Scheme Record Date
• 28 July 2021 – Special Dividend Payment Date
• 5 August 2021 – Implementation Date
  

1HFY21 Highlights:

• Decline in Revenue – The company has witnessed a decline in revenue in 1HFY21 mainly due to Covid-19 impacts.
• A decline in Profit – BIN has seen a decline in profit due to higher operating costs associated with increased volumes in NSW post-collections at lower average rates and other operating costs.
• Decline in Non-Current Borrowings – The company has witnessed a decline in non-current borrowings to $336.97mn as on 31 December 2020 against $363.72mn as on 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: 

• Covid-19 Related Risks: The company has witnessed a softening in the company’s addressable market due to Covid-19, resulting in contraction in EBITDA margins.
• Regulatory Risks: The company require regulatory approvals to operate its business efficiently. Therefore, any delay in regulatory approvals may impact the business of the company.
  

Outlook:  BIN is positive about its network capacity and remains well placed to offer sustainable growth from FY22. The company aims to enter the Queensland market in FY22 through organic and inorganic growth.

Valuation Methodology: Price/Cash Flow based Relative Valuation Method (Illustrative) 

Source: Analysis by Kalkine Group  

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of BIN gave a return of ~26.93% in the last six months and a return of ~82.01% in the last 12 months. The current market capitalisation of BIN stands at ~$2.24bn as of 13 July 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$1.82-~$3.45. We have valued the stock using a Price/Cash Flow multiple-based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in % terms). We believe that the company can trade at a slight premium as compared to its peer median, considering shareholder’s approval for scheme of arrangement and distribution of dividend to its shareholders. For this purpose, we have taken peers Cleanaway Waste Management Ltd (ASX: CWY), HRL Holdings Ltd (ASX: HRL), to name a few. Considering a decline in revenue and profit in 1HFY21, scheme implementation deed with Macquarie Infrastructure and Real Assets, decent stock price movement over the past few months, current trading levels, and valuation, we suggest investors to book profits and recommend a “Sell” rating on the stock at the market price of $3.445 as on July 13, 2021, 11:36 AM (GMT+10), Sydney, Eastern Australia.

BIN Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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