Vocus Group Ltd

VOC Details

Weak underlying NPAT and non-cash impairments: Telecom player, Vocus Group Ltd (ASX: VOC) has reported an underlying EBITDA of $366.4 million in fiscal year of 2017 in line with their guidance range of $365-375 million. On the other hand, the group’s unaudited FY17 underlying NPAT reached $152.3 million which is below their guidance range of $160-165 million impacted by higher than expected net finance costs and a higher effective tax rate at 33.4%. Moreover, after auditing the carrying value of their assets and goodwill, they would recognize a non-cash impairment of $1,532 million post tax spread across both the Australian ($1,333 million) and New Zealand ($199 million), cash generating units. The stock slipped by 2% on August 17, 2017.We give a “Hold” recommendation on the stock at the current price of $ 3.21

Financial covenants (Source: Company reports) 

Evolution Mining Ltd

EVN Details

Reported a positive bottom line: Evolution Mining Ltd (ASX: EVN) reported a strong statutory net profit after tax of A$217.6 million for fiscal year of 2017 as compared to a net loss A$24.3 million in the prior corresponding period. Even the top line showed a decent growth by 11% to A$1,479.9 million while EBITDA surged 17% year on year (yoy) to A$713.9 million. Gold production enhanced 5% to 844,124 ounces during the year driven by the Ernest Henry copper-gold mine acquisition as well as the divestment of Pajingo. On the other hand, despite controlling costs the average AISC reached A$907 (US$684) per ounce. Operating cash flow enhanced 12% to a record A$706.5 million while net mine cash flow surged 8% to a record A$461.5 million. Total debt repayments reached A$325.0 million while gearing was reduced from 22.0% to 15.9% in the June 2017 half-year. Final fully franked dividend reached 3 cents per share as per a new dividend policy of a payout ratio of 50% of after tax earnings. For FY18, the group intends to enhance their gold production to 820,000 – 880,000 ounces range. AISC would be in the range of A$850 – A$900 per ounce but this is also dependent on the volatility in gold prices. The group expects to have a major project capital investment with expansion projects at Cowal with mine development of A$45.0 – A$50.0 million and float tails leach project investment of $30.0 – A$35.0 million. The stock has risen 5.9% on August 17, 2017 post the result update and is nearing high levels. We maintain our “Expensive” recommendation on the stock at the current price of $ 2.38

Cochlear Ltd

COH Details

Decent FY17 performance: Hearing implant maker, Cochlear Ltd (ASX: COH), reported a decent net profit rise of 18% yoy to $223.6 million while sales revenue enhanced 7% in Australian dollars to $1.2 billion with 15% constant currency sales revenue growth in the second half. Cochlear implant units surged 8% to 32,554. The group also raised its final dividend by 17%. Net profit enhanced 11% yoy to $223.6 million during the year; but for FY18, the group expects a net profit guidance in the range of $240-250 million only, based on an AUD/USD of 80 cents. The group forecasts net profit to be weighted to the second half given the timing of the Nucleus 7 Sound Processor launch, while R&D expenditure is expected to be $160-170 million range. COH stock rallied over 7% on August 17, 2017 and is trading at high levels given the price to earnings fundamentals. We believe that the stock is “Expensive” at the current price of $ 153.02 

Financial performance (Source: Company reports)

Wesfarmers Ltd

WES Details

Ongoing pressure on Coles:Wesfarmers Ltd (ASX: WES) reported a revenue growth of 3.7% yoy to $68.444 million in fiscal year of 2017 while EBITDA surged over 114.5% on a yoy basis. On the other hand, their Coles segment continued to face pressure with EBIT losing 13.5% yoy to $1,609 million during the year. Coles’ return on capital (RoC) fell to 9.7% during fiscal year of 2017 from 11.2% in the prior corresponding period. The group expects ongoing competition for Coles and accordingly forecasts their FY18 earnings to be affected by the annualisation of 2H17 investment in the customer offer, lower property earnings and lower Financial Services’ earnings following the sale of Coles’ credit card receivables. We maintain our “Expensive” recommendation on the stock at the current price of $ 41.87


Divisional performance (Source: Company reports) 

QBE Insurance Group Ltd

QBE Details

Weak Emerging Markets and accident year claims performance dragged the stock lower: QBE Insurance Group Ltd (ASX: QBE) witnessed a stock price fall of over 7% on August 17, 2017, despite that the group reported a net profit rise of 30% yoy to $345 million in the half year ended on June 2017. The adjusted combined operating ratio rose to 95.3% during the period against 94.5% in the prior corresponding period, in line with the last guidance at the back of weaker underwriting result in Emerging Markets as well as a decrease of positive prior accident year claims development. Primarily, the overall payout ratio has worsened in its emerging markets unit. QBE has further indicated that its emerging markets CEO (David Fried) will step down and the unit will be split into two divisions, Asia Pacific and Latin America. The group has also witnessed a blow in the recent time at the back of the boardroom scandal and political developments in the UK. For FY17, the group expects a modest growth for their gross written premium while combined operating ratio is forecasted to be towards the upper end of 94.5% - 96.0%. We believe the stock is “Expensive” at the current price of $ 11.17

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