Surfstitch Group Ltd
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SRF Details
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Weak trading update hurt the stock sentiment: The shares of Surfstitch Group Ltd (ASX: SRF) stock plunged over 21% on June 09, 2016 impacted by the group’s weak trading update. During the second half of 2016, the group made agreements for the provision of several services like access to software and hosting the Surfstitch online store, due to which the payment terms were extended in the perpetual license agreement. Consequently, the group estimates an impact of $20.3 million as revenue reversal for the fiscal year of 2016. Accordingly, SRF estimates a pro-forma EBITDA to be in loss for FY2016 in the range of $17.3 million to $18.3 million. Management reported that their FY16 performance has been heavily affected by tough market conditions in major markets, and slower than estimated integration of the group’s acquisitions in the last 12 months. As a result, SRF stock already fell over 78.7% during this year to date (as of June 08, 2016). However, the group estimates a return to profitability and be cash-flow positive by FY2017.
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Recommendation: We give a “Hold” recommendation on the stock at the current price of $0.32
Incitec Pivot Ltd
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IPL Details
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Dividend payment: Incitec Pivot Ltd (ASX: IPL) lost over 4.5% on June 09, 2016 even though there is no major update from the group. IPL reported a dividend/distribution payment of AUD 0.041. On the other hand, IPL have already rallied over 23.8% in just last four weeks (as of June 08, 2016). IPL reported a softness in EBIT in first half of 2016, with EBIT ex IMIs falling over 8.5% against prior corresponding period.
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Recommendation: Looking at the future potential, we give a “Buy” recommendation on the stock at the current price of $3.38
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IPL financial performance (Source: Company Reports)
Amcor Limited
AMC Details
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Impact from Venezuela operations: Amcor Limited (ASX: AMC) stock plunged over 8.05% on June 09, 2016 on the back of weak update from the group’s Venezuela operations. The group reported that the challenging conditions in Venezuela would impact its Rigid Plastics business which also comprises the effect of rising variability of access to US dollars needed for importing raw materials via several exchange rate mechanisms. Accordingly, AMC estimates a one-off charge of over US$350 million of earnings for the fiscal year of 2016. The group forecasts this weakness to continue even for the fiscal year of June 2017 and expects its profit before interest and tax (PBIT) for both the Amcor group and the Rigid Plastics business to witness an impact of over US$40 million while profit after tax (PAT) would see an impact of over US$20 million during the period.
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Recommendation: We believe that the stock would continue to face pressure in the coming months as well, and accordingly we give an “Expensive” recommendation on this dividend yield stock at the current price of $14.82
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