Stocks’ Details

Transurban Group

Growth Across all Key Markets: Transurban Group (ASX: TCL) is engaged in the development, operation, maintenance and financing of toll road assets as well as management of associated customer and government relationships. The company recently updated that its financial arm, Transurban Finance Company Pty Limited, has priced a €350 million private placement of senior secured 15-year notes under the Euro Medium Term Note Programme. As per the release, pricing was completed on 26 June 2019 and settlement was expected to occur on 3 July 2019. Proceeds from the Notes will be used for general corporate purposes and to fund the development pipeline. In another announcement, the company updated that distribution of 30 cents per share will be paid on 09 August 2019 for the six months ended 30 June 2019.

Highlights of March Quarter: During the quarter, the company witnessed growth in all the key markets with an increase in average daily traffic by 2.3%. ADT for Sydney increase by 2.1% during the period to 813,000 trips. ADT in Melbourne reported an increase of 3.1% with 856,000 transactions. Despite construction disruption, ADT in Brisbane increased by 1.1% and that for North America’s increased by 2.9%.

Highlights of 1HFY19: During the first half, the company reported EBITDA amounting to $971 million as compared to $850 million on pcp. Toll revenue for the period was reported at $1,298 million against pcp revenue of $1,131 million.


Statutory Results (Source: Company Reports)

Outlook: In the interim results report for the period ended 31 December 2018, the company reaffirmed the distribution guidance of 59.0 cps for FY19. In addition, the company expects 5 projects to be completed by FY21 and further 4 by FY24.

Stock Recommendation: The stock of the company generated returns of 28.72% over a period of 1 year. The company has a number of projects in the pipeline in the coming years that are expected to support the ongoing distribution growth. The projected FY19 distribution growth based on the guidance of 59 cps is 5.4%. Hence, considering the ongoing progress in the business and current trading level, we recommend a “Hold” rating on the stock at the current market price of $15.320, up 1.256% on 05 July 2019.
 

Lendlease Group

Remarkable Performance by Investment and Development Segments: Lendlease Group (ASX: LLC) operates in the property and infrastructure sector. In an announcement to the exchange in May 2019, the company updated that voting power of The Vanguard Group, Inc increased from 5.007% to 6.010%.

Key Highlights of 1HFY19: During the six months ended 31 December 2018, revenue from contracts with customers stood at $7,679.7 million, reporting a decline of 11.04% on pcp. During the period, profit after tax attributable to shareholders amounted to $15.7 million as compared to 1HFY18 profit of $425.6 million. Earnings per security for the period were 2.8 cents. During the period, Group EBITDA was reported at $83.1 million. EBITDA for the period was impacted by underperforming projects in engineering and services business.

EBITDA, for the investments segment, stood at $273.2 million and for the Development segment stood at $260.8 million. With a large number of anticipated residential apartment settlements, the development segment is expected to generate decent earnings in the second half.


1HFY19 Income Statement (Source: Company Reports)

Outlook: The company enjoys a competitive advantage due to its integrated business model that positions it well for future success, despite the challenges in the current period. The growing pipeline in its development and investment segments provides high earnings visibility in the near future.

Stock Recommendation: The stock of the company generated returns of 3.78% and 13.93% over a period of 1 month and 3 months, respectively. The company achieved growth in revenue and EBITDA during the first half along with a robust performance by the investments and development segments, earnings from which are skewed to the second half. The development pipeline for the segments provide high earnings visibility for the future.  Hence, we give a “Buy” recommendation to the stock at a current market price of $13.990, up 1.23% on 05 July 2019.
 

Sonic Healthcare Limited

Well Set for Ongoing Strong Growth:Sonic Healthcare Limited (ASX: SHL) provides medical diagnostic services, administrative services and facilities to medical practitioners. The company recently updated that it has issued 68,000 fully paid shares to exercise of options. In another recent update, the company announced that it has sold 85% shareholding in GLP Systems GmbH to Abbott. Pursuant to the sale of GLP, the company will generate an after-tax profit of around A$48 million.

Financial Highlights: During the half year ended 31 December 2018, the company generated revenue amounting to A$2.9 billion, up 9% on pcp. Underlying EBITDA for the period stood at A$485 million, up 7% on pcp. Net profit for the period was reported at A$223 million, up 7% on 1HFY18. The company reported EPS of 51.9 cents, which grew on pcp by 5%.The period was marked by a strong performance in U.S., Australian and Swiss laboratory operations.

Financial Summary (Source: Company Reports)

Outlook: On the outlook front, the company has a rich pipeline of acquisitions, joint ventures and contracts, which are expected to promote the ongoing growth.

Stock Recommendation: The stock of the company generated returns of 7.67% and 12.72% over a period of 1 month and 3 months, respectively. The stock is currently priced close to its 52 weeks high level of $28.030. EV/EBITDA multiple for the company is 14.2x, which is higher than the industry median of 9.7x. Price Earnings multiple for the company is 24.78x, higher than the industry median of 15.3x. Given the backdrop of aforesaid factors and stretched valuations, we give an “Expensive” rating to the stock at the current market price of $27.650, up 1.06% on 05 July 2019.
 

Goodman Group

Overvalued at Current Level:Goodman Group (ASX: GMG) is an integrated property group and the consolidated financial results are comprised of Goodman Limited, Goodman Industrial Trust, and Goodman Logistics HK Limited. GMG has footprints throughout Australia, New Zealand, Asia, Continental Europe, the UK, North America, and Brazil.

The company recently announced an ordinary dividend of AUD 0.150 per security, which will be paid on September 9, 2019. The company also updated that S&P Dow Jones, in its quarterly rebalancing of the S&P/ASX Indices, has added Goodman Group to S&P/ASX 20 Index, which had got effective at the open on June 24, 2019.


Key Metrics (Source: Company Reports)

As per the 3QFY19 update, the company delivered decent results on the face of continued demand proximity to consumers in urban locations. For the nine months ending to 31 March 2019, total asset under management stood at $44.1 billion. Like for like NPI growth for managed partnership stood at 3.3% with 98% occupancy across the group and partnerships.

What to Expect: The company stated that development activity is strong and growing. Considering the high-quality locations of the landbank and increasing the scale of development projects, the company is expecting work in progress (WIP) to approach $5 billion in FY20. Management reaffirmed FY19 operating EPS of 51.1 cents (up 9.5%, YoY), and distribution per share of 30 cents (up 7%, YoY).

Stock Recommendation: At the current market price of $16.070, the stock is trading at price to earnings multiple of 19.550x. EV/EBITDA multiple for the stock is at 28.4x, which is significantly higher as compared to 19.6x of industry median. The stock is trading closer to its 52-week higher levels of $16.100. Looking at the historical price performance, the stock has gained 67.40% in the last 1-year. Hence, considering the above-mentioned factors along with higher valuations and recent price movement, we give an “Expensive” recommendation on the stock at the current market price of $16.070 per share (up 2.161% on 05 July 2019).


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.