Stocks’ Details
 

Emeco Holdings Limited

Strong Earnings Growth and Reduction in Leverage: Emeco Holdings Limited (ASX: EHL) is engaged in selling, renting and maintaining heavy earthmoving equipment to customers in the mining industry in Australia and overseas. As on 18 February 2020, the market capitalisation of the company stood at ~$734.73 million. The company has recently released its interim results for the period ending 31 December 2019 wherein it reported an increase of 10% in revenue to $246.5 million and a growth of 33% in operating NPAT. The company also reported a strong balance sheet with improvement in leverage to 1.77x, down from 2.0x in 2H19. In the same time span, operating cash flow went up by 89% to $23.3 million. 


1H20 Financial Highlights (Source: Company Reports)

Future Expectations and Growth Opportunities: The company will focus on improving quality and efficiency through continuous improvement in projects and expects an increase in rental margins in FY20. EHL also expects a significant increase in 2H20 ensuring the company to deleverage to 1.5x for FY20 and 1.0x for FY21.

Stock Recommendation: As per ASX, the stock of EHL is inclined towards its 52-week high of $2.825. During FY19, gross margin of the company witnessed an increase over the previous year and stood at 33.9%, up from 28.8% in FY18. In the same time span, net margin of the company was 7.2%, up from 1.4% in FY18. Return on Equity also saw a year on year improvement and stood at 19.2%. On TTM basis, the stock is trading at an EV/Sales multiple of 2.1x, lower than the industry median of 20.1x. The stock is also trading at an EV/EBITDA multiple of 4.8x as compared to the industry (Industrials) median of 6.4x. Considering the current trading levels, improvement in margins and decent growth opportunities, we recommend a “Hold” rating on the stock at the current market price of $2.24, up by 6.667% on 18 February 2020, owing to its recent release of interim results.

Monadelphous Group Limited

Record Half-Year Revenue from Maintenance and Industrial Services: Monadelphous Group Limited (ASX: MND) provides engineering services in Australia. As on 18 February 2020, the market capitalisation of the company stood at ~$1.55 billion. The company has recently released its interim results for the period ending 31 December 2019, wherein it reported an increase of 2.6% in revenue of $852 million. The results reflect a strong performance from the Company’s Maintenance and Industrial Services division which achieved a record half year revenue of $584.5 million, up by 16% on pcp. In the same time span, net profit after tax was $28.5 million. The decent financial performance of the company enabled the Board to declare an interim fully franked dividend of 22 cents per share which is to be paid on 27 March 2020. 


1H20 Financial Highlights (Source: Company Reports)

What to Expect: The company expects increasing opportunities owing to favorable market conditions in resources and energy. MND also anticipates a strong continued demand for maintenance services. The company is likely to achieve a growth of 10% in revenue in FY20, but the financial performance is dependent on impact of coronavirus. 

Stock Recommendation: As per ASX, the stock of MND gave a return of 6.78% in the past six months. During FY19, net margin of the company stood at 3.5%, higher than the industry median of 2.5%. In the same time span, Return on Equity was 12.8% as compared to the industry median of 9.6%. On TTM basis, the stock is trading at an EV/Sales multiple of 0.8x, lower than the industry median (Industrials) of 1.7x. The stock is also trading at a P/E multiple of 30.49x, lower than the industry median (Industrials) of 43.8x. Considering the returns, higher net margin and ROE and decent growth opportunities, we recommend a “Hold” rating on the stock at the current market price of $17.28, up by 5.495% on 18 February 2020, taking cue from its recent release of interim results.

Freelancer Limited

Record Net Revenue and Positive Operating Cash Flow: Freelancer Limited (ASX: FLN) provides online outsourcing marketplace and escrow payment services. As on 18 February 2020, the market capitalisation of the company stood at $199.21 million. The company has recently released its full year results for the period ending 31 December 2019, wherein it reported an increase of 12% in net revenue of $58.0 million. In the same time span, the company made an all-time record in GPV (Gross Payment Volume), which stood at $788 million, up by 6.4% on pcp.


Growth in Revenue (Source: Company Reports)

Future Expectations and Growth Opportunities: The company is looking forward on completing the front-end overhaul of freelancer.com and is highly optimistic about partner opportunities in its API ecosystem. In the future years, FLN expects an increase in growth through expansions in other territories organically and by acquisitions. 

Stock Recommendation: As per ASX, the stock of FLN is trading very close to its 52-weeks low level of $0.432, proffering a decent opportunity for accumulation. During 1H19, EBITDA margin of the company stood at 10.1%, up from 1.3% in 2H18. Net margin of the company also witnessed an improvement over the 2H18 and stood at 0.5%. This indicates that the company is managing its costs well and is able to convert its revenue into profits. On the TTM basis, the stock is trading at an EV/Sales multiple of 3.4x, lower than the industry average (Industrials) of 20.1x. Considering the trading levels, higher EBITDA and net margin, modest outlook and record net revenue, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.435, down by 1.136% on 18 February 2020.

 
Comparative Price 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 do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.