McGrath Ltd

Weak trading update: McGrath Ltd (ASX: MEA) issued a weak trading update for the first four months of FY18, primarily at the back of challenges seen in the property market. The group seems to have underperformed in Company Owned Sales, with some impact from other factors like ongoing subdued volumes of listings in most markets. Moreover, government policy changes around foreign buyers and developers coupled with tightened lending requirements have raised the pressure.Management has now reported that their EBITDA for FY18 would not reach $16.6 million, as estimated by Bell Potter in a research note; and can be even 20-25% lower than this estimate. This led to the stock fall of over 15.6% in the trading session on November 06, 2017. We give a “Hold” recommendation at the current price of $0.515
 

Orica Ltd

Weak bottom line: Orica Ltd(ASX:ORI) stock lost over 9.8% on November 06, 2017due to their weak FY17 performance. The group’s EBIT before individually material items fell 1% yoy to $635 million in FY17 while NPAT before individually material items lost 1% yoy to $386 million. The statutory NPAT was up 13% over prior corresponding period. Despite the mining sector recovery, the group expects a lag before the recovery makes a material difference to the services sector. Accordingly,the FY17 pressure is expected to continue in FY18. The group expects over $50 - $55 million impact from contract rollovers and FY17 price resets flow on, and around $10 million flow on impact from FY17 increased input costs from previously negotiated contracts. Pricing scenario for explosives and cyanide products, and currency also weigh on the group. ORI has also forecastedfor flat global Ammonium Nitrate product volumes for FY18.

Given the shortcomings, the stock does not look to be of value; and we rate it to be “Expensive” at the current price of $19.28
 

FY17 Performance (Source: Company Reports)

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