Transurban Group (ASX: TCL)

Delivering value to customers:TCL released its 1H18 results and continued its focus on improving the experience for its customers with significant projects in pipeline across all its regions. The Average daily traffic grew by 1.4% and the proportional earnings before interest, tax, depreciation and amortisation (EBITDA) also increased by 11.6% and were recorded at $911 million for 1H18 as compared to the same period in the last year. Proportional toll revenue increased by 10.5% and reached to $1,176 million as compared to last year. A distribution totalling 28.0 cps will be paid on 16 February 2018 for the six months ending 31 December 2017 and it affirms the same for FY18. This will consist of a 25.5 cps distribution from Transurban Holding Trust and a 2.5 cps fully franked dividend from Transurban Holdings Limited. FY18 distribution guidance was highlighted to be 56.0 cps which reflected a growth of 8.7% over FY17. It also made changes in its Board effective from 1 February 2018 for a better support to Transurban’s future strategy. If we talk about the key network activities in Sydney, its proportional toll revenue and EBIT increased by 9.8% and 10.3%, respectively in 1H18. In Melbourne, the proportional toll revenue from its network activities also grew by 14.2% and new lanes on Transurban’s section of CTW works opened three months ahead of the schedule. We give a “Buy” recommendation on the stock at the current price of $11.33, given the long-term view.
 

1H18 Performance (Source: Company Reports)
 

Boral Limited (ASX: BLD)

Transformation of Business: BLD released its 1H18 result that entailed revenue from its continuing operations growing by 49.7% as compared 1H17 and net profit that was attributable to its members also increased by 12.8% on pcp basis. These results reflected a full period contribution from the acquired Headwaters businesses in North America together with a strong operating result from Boral Australia and USG Boral joint venture. During FY17, the organisation continued to develop plans to improve its cement position in Victoria. Net interest of $50 million and tax of $52 million also increased as a result of acquisition growth but the effective tax rate was lower than expected due to increased recognition of tax losses and lowering of US tax rate. An interim dividend of 12.5 cents per share was announced which will be paid in March 2018. Boral Australia is expected to deliver high single-digit EBITDA growth and a low double-digit EBIT growth in FY2018. It is well on its way to exceed its targeted synergies for the full year with US$18 million of synergy benefits banked in the first half and to exceed US$100 million in four years. We maintain a “Buy” recommendation at the current price of $7.28


Dividends (Source: Company Reports)
 

Cochlear Ltd (ASX: COH)

Mixed bag of result:COH released its first half results for 2018. The developed market unit growth was up by 12% as compared to the same corresponding period in the prior year. Net Profit was recorded at $110.8m which is down by 1% and included $5.5m of one-time non-cash expense, which was due to the changes in the US tax legislation. Its solid cash flow generation supported an 8% increase in interim dividend. Cochlear implant sales revenue was up by 6% on pcp basis while Emerging market units were down which was primarily driven by the timing of tenders, particularly in China.  New products were also launched and included 7 nucleus sound processor, Kanso Sound Processor and Slim Modiolar electrodes that generated a strong demand. The group maintained its guidance for FY 18 and expects net profit to be in the range of $240-250m and a target pay-out ratio of 70% of its net profit. However, net impact of the changes in US tax legislation are expected to reduce the net profit by $3-4 million in FY18. With this backdrop, the stock looks “Expensive” at the current price of $171.74
 

Regional Sales Performance (Source: Company Reports)
 

Challenger Ltd (ASX: CGF)

Impacted by negative investment experience:In September 2017, Challenger’s full range of annuity products were available via AMP’s adviser portal to their retail and corporate superannuation customers. Challenger is making its annuities available on the new innovative BT Panorama platform and this program is targeted to launch in June 2018 quarter. The MS Primary annuity relationship has contributed 17% of Challenger’s 1H18 annuity sales. In February 2018, Challenger announced a new boutique partnership with Garelick Capital Partners. Challenger’s business is highly scalable and efficient and in 1H18 its normalised cost to income ratio was 32.1%, a record low and at the mid-point of guidance range. Normalised EPS also increased by 1% from 35.0cps in 1H17 to 35.2 cps in 1H18 which reflected an increase in normalised profit after tax. However, ROE was 16.8% in 1H18 and decreased by 190 bps from 1H17. It was due to a higher level of capital that was held following the equity placement to MS&AD. The Board declared a dividend of 17.5 cents per share which was 3% higher than the 1H17 dividend. Amidst the scenario, CGF reported a first-half net profit fall of 3% to $195.4 million after a $13 million negative investment experience while the group is on track to meet full-year guidance. Given these headwinds, we maintain an “Expensive” recommendation at the current price of $12.82
 

Life Asset Allocation Growth Trend (Source: Company Reports)
 

Donaco International Ltd (ASX: DNA)

Result to be impacted by impairment charge: Donaco International Ltd.’s stock plunged 8.6% on February 13, 2018 despite sticking to its earlier provided guidance of November 2017, indicating half-year revenue in the range of $43 million to $44 million, with EBITDA in the range of $19 million to $20 million. DNA further indicated that the result is expected to include non-recurring items (warrant revaluation, and exchange rate gains), with a net positive impact of $1 million. However, DNA has highlighted an impairment charge of $144 million in relation to its Star Vegas Casino Licence. This has come as a direct result of the breaches of agreement by the Thai vendor, Mr Somboon Sukcharoenkraisri, and his two sons, “Ham” Techatut Sukcharoenkraisri and “Qoo” Bhuvasith Chaiarunrojh, and the group has commenced litigation accordingly against the accused. The group will release its half year results on February 28, 2018. We have put a “Hold” on the stock at the current price of $0.265
 

MNF Group Ltd (ASX: MNF)

Relaunching the Pennytel brand: Down 8% on February 13, 2018, MNF Group reported for a 25% increase in half-year profit for 1H FY18 with 19% rise in EBITDA. Strong organic growth boosted the gross margin. MNF witnessed solid growth in all three operating segments of the business: Domestic Retail (39% growth), Domestic Wholesale (17% organic growth) and Global Wholesale (27% gross margin growth). However, the stock seemed to be impacted by the announcement on relaunching the Pennytel brand, which invites for a one-off strategic investment of about $3.5m while this is expected to drive future growth. The management has thus downgraded its FY18 NPAT forecast from $15 million to $12.5 million. While this may be a short-term pain, the group can benefit in the long term, and therefore, we maintain a “Hold” at the current price of $5.50
 

FY18 Guidance (Source: Company Reports)

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