Sydney Airport

SYD Details

Reduction in FY20 Net Debt: Sydney Airport (ASX: SYD) is primarily engaged in the ownership and operation of Sydney Airport. During October 2020, total passenger traffic was 225,000 passengers, representing a decline of 94.3% on pcp. Domestic passengers stood at 187,000, down 92.6% on the pcp, recovering slightly due to lifting of travel restrictions between New South Wales and South Australia and New South Wales and the Northern Territory. During the half-year ended 30^th June 2020, revenue stood at $511 million, down 35.9% on pcp. Net operating receipts went down by 79% to $90.4 million.

October Traffic Performance (Source: Company Reports)

Capital Raising: The company completed a Retail Shortfall Bookbuild recently, raising a total of $695 million from the issue of approximately 152 million securities at an offer price of $4.56 each. In addition, the company raised gross proceeds of $2.0 billion through an Entitlement Offer, reducing its pro forma net debt position from $9.1 billion to $7.1bn as at 30 June 2020.

What to Expect: The company remains on track to deliver targeted operating cost outcomes for 12 months to March 2021, representing a reduction of at least 35% on the pcp. Capital expenditure for the 12 months to March 2021 is targeted between $150 million to $200 million.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: In the last one month, the stock price has gone up by 15.32%. On a technical analysis front, the stock of SYD has a support level of ~$5.352 and resistance level of ~$7.506. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and arrived at a price correction of single-digit (in percentage terms). Considering the passenger traffic performance in October 2020, uncertainty regarding travel conditions, COVID-19 impact on financial performance, valuation and key risks, we give an ‘Expensive’ rating on the stock at the current market price of $6.720, up 0.448% on 27^th November 2020.

SYD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Helloworld Travel Limited

HLO Details

New Agreement to Acquire CruiseCo: Helloworld Travel Limited (ASX: HLO) is a leading Australian & New Zealand travel distribution company. The company recently entered into an agreement to acquire cruise wholesaling specialist, CruiseCo, to expand its cruise offerings in Australia and New Zealand. The company also renewed its partnership with Qantas with a new three-year commercial agreement to sell the national carrier’s fares and products until 2023.

Trading Update: During the September quarter, the company’s TTV went down by 90.6% to $176.8 million. Operating Expenses amounted to $16.4 million, down 76.6% on pcp. At the end of the quarter, the company had total free cash of $105 million, which was reduced to ~$85 million after payment of bank debt. Retail networks in Australia and New Zealand have remained largely intact. Below is a snapshot of the FY20 performance of the company.

FY20 Results Highlights (Source: Company Reports)

What to Expect: The company expects demand for cruising to come back strongly from 2022 and is looking forward to working with its cruise partners and agencies to capture that demand. Considering the trading conditions in September 2020, the company expects aggregate TTV and revenues from travel operations to remain at around 10 - 15% of previous levels until early 2021. HLO expects to incur underlying EBITDA losses of $1.5m - $2.0m per month for the next 5-6 months, moving to a break-even or better position in Q4 FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of the company gave positive returns of 50.52% in the last three months. On a technical analysis front, the stock of HLO has a support level of ~$1.694 and resistance level of ~$3.379. The company has a diversified business mix of domestic and international leisure travel, corporate travel, and wholesale travel, which places it in a decent position for recovery. 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 upside (in % terms). Considering the aforesaid factors, we give a ‘Speculative Buy’ recommendation on the stock at the current market price of $2.940, down 3.922% on 27^th November 2020.

HLO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Mayfield Group Holdings Limited

MYG Details

Capital Raising Worth $1.2 Million: Mayfield Group Holdings Limited (ASX: MYG) is a specialist manufacturing and service provider to electrical infrastructure operators throughout Australia. The company was formerly known as Stream Group Limited (ASX: SGO) and changed its name on 18^th November 2020. On 20^th November 2020, the company also acquired Mayfield Group Investments Pty Ltd and issued 3,333,333 ordinary fully paid shares pursuant to the prospectus dated 14 October 2020 to raise $1.2 million to comply with ASX listing requirements. The company recently announced that suspension of trading in its securities was lifted on 25^th November 2020.

Financial Results: As on 30^th June 2020, the company had cash amounting to ~$2.94 million and net assets worth ~$13.28 million. Net profit after tax for the year ended 30^th June 2020 amounted to ~$2.59 million, as compared to ~$3.98 million in FY19. As on 30^th September 2020, the company’s cash and cash equivalents stood at ~$2.66 million.

Financial Performance (Source: Company Reports)

Growth Strategy: The company’s growth strategy revolved around incorporating robotics and 3D design capability, integrated with manufacturing facilities, to reduce costs, growing contracted maintenance services in the renewables and high-voltage transmission segments, invest further in wireless data-communication, and further integrate the operations of its five operating companies to create synergies. To implement the growth strategy, the company has estimated a capital expenditure on equipment and facilities of $1.57 million and $0.95 million on Robotics.

Stock Recommendation: The stock of MYG has a Price to Book value multiple of 17.1x, as compared to the industry median (Industrials) of 2.1x. On a technical analysis front, the stock of MYG has a support level of ~$0.381 and a resistance level of ~$0.598. The company has a well-defined growth strategy and capital expenditure plan in place to take advantage of future opportunities. However, considering the high volatility of the stock, limited trading, current trading levels, and key risks, we give an ‘Expensive’ rating on the stock at the current market price of $0.550, down 8.334% on 27^th November 2020.

MYG Daily Technical Chart (Source: Refinitiv, 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 personalised advice.