Crown Resorts Ltd

CWN Details
Proceeds from Melco Resorts to reduce the net debt: Recently, Crown Resorts Ltd (ASX: CWN) completed the sale of its remaining assets in Melco Resorts. The group’s wholly owned subsidiary, Crown Asia Investments Pty Ltd, had entered into an agreement with Melco Resorts & Entertainment Limited (NASDAQ: MLCO) for the repurchase of its remaining interest in Melco Resorts. As per the repurchase agreement, Crown Asia Investments Pty Ltd sold 165.3 million Melco Resorts’ ordinary shares (representing 11.2% of Melco Resorts’ ordinary shares outstanding) at US$7.04 per share. Upon completion of the Repurchase Agreement, Crown Resorts no longer holds an interest in Melco Resorts and is not entitled to a seat on the Melco Resorts Board. Post transaction, the CWN is expected to reduce net debt as it is expected to generate net proceeds of ~US$987 million (equivalent to US$5.97 per Melco Resorts ordinary share and US$17.91 per Melco Resorts American Depositary Shares). Crown Resorts’ net debt stood at $1.77 billion (US$1.30 billion) at the end of 2016. In terms of financials, the group reported NPAT growth of 75.15% to $359.14m for the half-year ended 31 December 2016 while revenue from ordinary activities were down 5.87% from last year.
 
Recommendation:The stock has moved up about 20.4% and 16.6% over the past six months, three months respectively, as at May 19, 2017. We give a “Hold” recommendation on the stock at the current market price of $ 12.67
 

CWN Daily Chart (Source: Thomson Reuters) 

Qantas Airways Limited

QAN Details
Introduction of digital boarding passes on mobile devices:Qantas Airways Limited (ASX: QAN) has introduced mobile check-in and digital boarding passes for customers travelling between Australia and New Zealand, the first step towards more seamless travel across the Tasman. The modern technology allows eligible customers travelling between Australia and New Zealand to finalize check-in and get through passport checks online and head straight to the lounge or boarding gate after passing through immigration and security. The offering will be initially made through web and mobile (Qantas.com) before being extended to the Qantas app in June 2017 and implementation of the technology is expected to be completed across all relevant airports by early 2018. For Q3FY17, Quants reported a 1.4% year on year (yoy) decline in revenue to $3.96 billion due to tough conditions in the international market. QAN’s overall revenue per unit decreased by 1.8% led by 5.6% decline in international operations, while the domestic unit revenue increased by 4.6% yoy against Q3FY16. Going forward, the positive trend in unit revenue for the group’s domestic operations is expected to continue into the Q4FY17, while there might be continued de-growth for international operations. For FY17, the group is expected to report an underlying profit before tax in the range of $1.35 billion - $1.40 billion, driven by improving performance from the group’s domestic and Qantas Loyalty program partially offsetting a relatively weaker International performance in a highly competitive market.
 

Group operating margin (Source: Company reports)
 
Recommendation:Recently, Moody’s Investors Service has upgraded the issuer, senior unsecured debt and backed senior unsecured bank credit facility ratings of QAN to Baa2 from Baa3 with a stable outlook. The stock has moved up 56.2% and 39.6% over the past six months, three months, respectively (as on May 19, 2017). Given the trading scenario and continued challenges in international market, we give an “Expensive” recommendation on the stock at the current market price of $ 4.91


QAN Daily Chart (Source: Thomson Reuters) 

REA Group Limited

REA Details
Robust Q3FY17 driven by strong Australian business:For Q3FY17, REA Group Limited (ASX: REA) reported a revenue growth of 16% yoy to $493 million, while posting 20% yoy growth in EBITDA to $86 million, driven by the strength of residential business in Australia. Notably, the group witnessed robust growth despite lower listing volumes, declining dwelling commencements in Australia, as well as continuing soft market conditions in Malaysia and Hong Kong.Further, the group expects the phasing of costs to be higher in Q4FY17 due to increased investment in product innovation and associated marketing expenses.
 

Financial results summary (Source: Company reports)
 
Recommendation:The stock has surged up 25.6% over the past six months and currently peaking towards its 52-week’s high level (as on May 19, 2017). We give a “Hold” recommendation on the stock at the current market price of $ 63.07


REA Daily Chart (Source: Thomson Reuters) 

Computershare Limited

CPU Details
Sustained earnings growth:Computershare Limited (ASX: CPU) is a global market leader in transfer agency and share registration, employee equity plans, mortgage servicing, proxy solicitation and stakeholder communications. It is also specialized in corporate trust, bankruptcy, class action and a range of other diversified financial and governance services. For H1FY17, CPU’s revenue and EBITDA grew by 9.0% yoy and 10.6% yoy, to US$1.0 billion and US$250.5 million, respectively. During the period, revenues were inflated by the maiden contribution from UK Asset Resolution, in UK mortgage services, and diluted group EBITDA margin; however, the group expects margins to improve in the H2FY17 with support from US interest rate.
 

H1 FY17 at a glance (Source: Company reports)
 
During H1FY17, CPU completed the disposal of the company’s global headquarters in Melbourne and investment in INVeSHARE Inc.Going forward, it expects to maintain debt/EBITDA between 1.75x – 2.25x (excluding the non-recourse SLS advance facility debt), with flexibility to temporarily go above this range to take advantage of compelling investment opportunities. The group is also under discussions for the sale of its 50% interest in Karvy Computershare.
 
Recommendation:The stock soared up 25% and about 40% over the past six months and twelve months, respectively (as on May 19, 2017), over better performance across business verticals. However, given the current high trading scenario,we maintain an “Expensive” recommendation on the stock at the current market price of $ 14.66
 

CPU Daily Chart (Source: Thomson Reuters) 

Spark Infrastructure Group

SKI Details
Strong outlook for TransGrid due to rising energy demand:Recently, Spark Infrastructure Group (ASX: SKI) announced that Victoria Power Networks (Finance) Pty Ltd (VPNF), the common funding vehicle for Victoria Power Networks (CitiPower and Powercor), in which SKI holds a 49% interest, has placed US$80 million of bonds, maturing in June 2027. As part of the transaction, cross currency swaps have been said to be simultaneously executed to convert the US dollars into Australian dollars. The total proceeds raised equate to approximately A$106 million and will be applied to refinance pending debt maturities in July 2017. Further, this transaction combined with the February Hong Kong private placement transactions, brings the total of funds raised this calendar year to ~A$503 million.
 

Transgrid regulatory update (Source: Company reports)
 
For FY16, SKI reported a 13.1% yoy decline in revenue to $243.9 million while posting a 7.9% decline in net profit at $81.1 million, largely driven by SA Power Networks as its revenue decreased to $98.2 million coupled with 39% increase in staff costs. However, operating cash flows increased by 47.4% to $305.6 million, primarily due to increased distributions from associates. Spark Infrastructure has bank debt facilities of $250 million with $225 million maturing in November 2018 and $25 million maturing in November 2020. A total of $205 million of these available facilities were drawn down during December 2015 to fund Spark Infrastructure’s investment in TransGrid and a further $15 million was temporarily drawn during the year.
 
Recommendation:Over the past six months, the stock has moved up 24.2% (as on May 19, 2017), on account of ongoing progress of the projects and increasing demand for energy coupled with low debt on balance sheet. Although, the stock is trading at high levels currently, we believe that the recent push in budget for infrastructure and energy spending is a long term positive. We give a “Buy” recommendation on the stock at the current market price of $ 2.65
 

SKI Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.