Is it good to hold these 2 stocks that swung to profit rise – Stockland and Fairfax Media?

Stockland Corporation Ltd

SGP Details

·         Ongoing record performance from Retirement Living business: Stockland Corporation Ltd (ASX: SGP) delivered a statutory profit growth of 34.4% year on year (yoy) to $1,195 million, in fiscal year of 2017 while Total Funds from Operations (FFO) rose 8.5% yoy to $802 million during the period. FFO per security rose 7.4% yoy to 33.4 cents, while Adjusted Funds from Operations surged 10.3% yoy to $687 million. The group’s Retirement Living business generated strong result for fourth consecutive year by delivering a double-digit growth. Residential operating profit enhanced 17.4% on a yoy basis. Net Tangible Assets (NTA) per security enhanced 5.8% yoy to $4.04, while Distribution Per Security (DPS) rose 4.1% yoy to 25.5 cents, during the year. However, the group has signaled that rising electricity prices may impact profit growth this year. Further, funds from operations are expected to be a little lower next year. The stock slipped over 1% post the release of the result and outlook on August 16, 2017. 

Property portfolio (Source: Company reports)
 
·         Stock performance: Stockland has good average customer satisfaction score of 82% across their businesses. They settled 6,604 lots during the reporting period, with over 50% of net deposits from first home buyers. For FY18, the group expects an FFO per security rise in the range of 5.0-6.5% (assuming no major change in market conditions) while distribution per security is forecasted to be 26.5 cents, which is a 4% rise against FY17, assuming no material change in market conditions. Given the mixed outlook following the present performance, we give a “Hold” recommendation on the stock at the current price of $ 4.34


SGP Daily Chart (Source: Thomson Reuters)

Fairfax Media Ltd

FXJ Details

·         Strong Domain business: Fairfax Media Ltd (ASX: FXJ) reported a solid net profit rise of about 8% yoy to $142.6 million, while earnings per share growth was 8.5% during fiscal year of 2017. Group Operating EBITDA performance was better than expected which reached $271 from their preliminary and unaudited forecasted range of $262 million to $266 million, driven by a strong year-end performance from Metro. The group’s Domain business generated a solid 19% growth in digital revenue as second half listings cycle improved. Accordingly, digital EBITDA rose 20% in the second half of 2017. Fairfax now expects Domain to begin trading in November and aims to retain 60% interest with 40% to be given to shareholders. Despite challenging conditions, their publishing business’ performance was decent. The group’s cost reduction programs led to a 6% fall in their operating expenses. For FY18, the group forecasts their Domain business to rise over 13% as compared to FY17. They expect their FY18 revenue trends to be in line with FY17 second half wherein digital revenue rise would offset the print revenue pressure. 

Trading Performance (Source: Company Reports)
 
·         Stock performance: FXJ stock opened positive on August 16, 2017 but edged slightly lower towards the close of trade. FXJ stock generated over 14.1% returns in this year to date (as of August 15, 2017). We maintain a “Hold” recommendation on the stock at the current price of $ 1.01


FXJ Daily Chart (Source: Thomson Reuters)

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