Stocks’ Details

Boral Limited

Announced Sale of North American Meridian Brick Business: Boral Limited (ASX: BLD) is involved in the production and distribution of building and construction materials in the US, Asia, and Australia. As on 21^st January 2021, the market capitalisation of the company stood at ~$6.25 billion.  On 18^th December 2020, BLD announced that along with its joint venture partner, an affiliate of Lone Star Funds, it has decided to sell the North American based Meridian Brick business to Wienerberger for US$250 million. The deal is subject to closure basis regulatory approvals and closing terms. The company estimates to book a small pre-tax accounting profit on a $10 million sale at closure.

Q1FY21 Trading Update: During Q1FY21, the company reported a fall in revenue and EBIT by 9% and 5%, respectively, as compared to their corresponding Q1FY20 figures. This was due to disruptions in the business though relatively lesser than experienced in the last 6 months. During the quarter, the company reduced its net debt to $1.95 billion from $2.19 billion as on 30^th June 2020. The construction business witnessed slowdown in the execution phase of the project works, although the Group continued to bid for infrastructure projects.

FY20 Result Highlights: For FY20, Boral Limited recorded a fall in revenue by 1% YoY to $5.67 billion due to reduction of revenue across divisions. The Board declared a 50% franked interim dividend of 9.5 cents per share for FY20 in line with the payout policy but refrained from declaring a final dividend due to market uncertainty. For FY20, its cash flows from operations stood at $631 million.

FY20 Financial Highlights (Source: Company Reports)

Outlook: The company expects to close the deal to sell its 50% share in USG Boral to Knauf for US$1.015 billion in FY21. It estimates to book a profit before tax of $540 million and use funds to decrease net debt and grow its present portfolio. For FY21, BLD estimates earnings from Property business to remain below the long-term average of $35 million (approx.).

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of BLD gave a positive return of 7.17% in the past three months and a positive return of 32.63% in the past six months. The stock is currently inclined towards its 52-weeks’ high level of $5.29. On the technical analysis front, the stock of BLD has a support level of ~$4.86 and a resistance level of ~$5.10. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price with a downside of high single-digit (in % terms). For the purpose, we have taken peers like Fletcher Building Limited (ASX: FBU), CSR Limited (ASX: CSR), Adbri Limited (ASX: ABC) and others. Considering the high trading levels, the impact of COVID-19 on FY20 business activity, slowdown in construction business, and valuation, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $5.08, down by 0.393% on 21 January 2021.

Telix Pharmaceuticals Limited

Progress Update on the Study of TLX101: Telix Pharmaceuticals Limited (ASX: TLX) is engaged in the clinical stage production of therapeutic and diagnostic products for the treatment of oncology and rare diseases using molecularly-targeted radiation (MTR). As on 21^st January 2021, the market capitalization of the company stood at ~$1.25 billion. In a recent update on 23^rd December 2020, TLX announced an update on the analysis of the first group of patients from the research of TLX101 in the treatment of recurrent glioblastoma multiforme (GBM) in Europe and Australia. The company discovered evidence of anti-tumour effect with relatively low doses and no side-effect profile. Given these findings, TLX plans to speed up the development the TLX101 asset in 2021 and add US patients to its further clinical activities.

1H20 Highlights: The company recorded a 12% YoY reduction in revenue from continuing operations for 1H20 to $1.6 million. It reported a 76% increase in the loss after tax to shareholders at $18.30 million in 1H20 vs $10.36 million in 1H19. The clinical trial activity on Zircon for renal cancer paused, and patient recruitment stopped during March-June 2020. Site operations were also down in ANZ, Canada, Turkey, and USA and resumed during Q3FY20. 

Q3FY20 Results Update: During Q3FY20, the company reported sale of 2,000 patient doses from TLX591-CDx prostate cancer imaging kits and earned $0.82 million cash receipts. It experienced a 14% fall in cash received on QoQ basis due to the impact of the pandemic. Over the quarter, Telix Pharmaceuticals Limited reported operating expenditures of $9.2 million due to the submission of a new drug application (NDA) for the TLX591-CDx with USFDA and product related expenses for roll-out planned in FY21. TLX held cash reserves of $25.7 million and garnered net cash flows from operating activities of $2.18 million at the quarter end.

September 2020, Cash Flow from Operations (Source: Company Reports)

Completed Acquisition of TheraPharm GmbH: On 14^th December 2020, the company announced purchase of TheraPharm GmbH from Scientec Diagnostics GmbH including a few IP and personnel contracts. The company paid $16.5 million as the final amount for the issued capital of TheraPharm it acquired.

Outlook: The company plans to launch TLX591-CDx product in the US in FY21 post the grant of USFDA approval for the NDA currently lodged. It has also submitted TLX591-CDx for marketing authorisation approval in EU and expects to receive medical consensus in early FY21.

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

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of TLX gave a positive return of 148.29% in the past three months and a positive return of 228.57% in the past six months. The stock is currently inclined towards its 52-weeks’ high level of $4.69. On the technical analysis front, the stock of TLX has a support level of ~$4.124 and a resistance level of ~$4.56. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit (in % terms). For the purpose, we have taken peers like Suda Pharmaceuticals Limited (ASX: SUD), Clinuvel Pharmaceuticals Limited (ASX: CUV), Opthea Ltd (ASX: OPT) and others. Considering the high trading levels, impact of COVID-19 on the aforesaid clinical activity, decline in top-line of 1H20 results, significant rise in stock prices in the past few months, and valuation, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $4.370, down by 2.238% on 21 January 2021.

Future Generation Investment Company Limited

December 2020 Investment Update: Future Generation Investment Company Limited (ASX: FGX) is an investment management firm that primarily operates 2 key funds - Future Generation Australia (FGX) and Future Generation Global (FGG). As on 21^st January 2021, the market capitalization of the company stood at ~$504.43 million. In an investment update release on 14^th January 2021, the company reported that the investment portfolio of FGX has delivered decent investment performance in 2020. The portfolio of FGX has increased by 10%, outperforming S&P/ASX All ordinaries Accumulated index by 6.4%.

1H20 Result Highlights: For 1H20, the company reported a fall in investment income from operating activities to $13.86 million. Its operating profit stood at $11.3 million in 1H20, lower than $19.34 million in 1H19. The company felt the impact on its operating profit due to the amount of distribution income collected from the investments with the underlying fund managers. The FGX outperformed S&P/ASX All Ordinaries Accumulation Index by 3.3% during 1H20. The Board declared an interim dividend of 2.6 cents per share fully franked for 1H20. The company had a cash and cash equivalents balance of $33.96 million and zero non-current liabilities as on 30 June 2020.

1H20 Income Statement (Source: Company Reports)

Stock Recommendation: The stock of FGX gave a positive return of 9.01% in the past three months and a positive return of 23.30% in the past six months. The stock is trading near to its 52-weeks’ high level of $1.32. On the technical analysis front, the stock of FGX has a support level of ~$1.110 and a resistance level of ~$1.310. On a TTM basis, the stock of FGX is trading at Price to Earnings multiple of 30.3x as compared to industry median (Investment Banking & Investment Services) 16x, thus seems overvalued. Considering the stock’s decent returns in the past few months, trading level, and valuation on TTM basis, we are of the view that most of the positive factors are priced in at current levels. Hence, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $1.265, up 0.396% on 21^st January 2021.

Comparative Price 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.