LYNAS CORPORATION LIMITED

Lynas Corporation Limited (ASX: LYC) with a market cap of 1.56bn and with its strong customer relationship across the key jurisdiction, has maintained its position as the second largest NdPr producer in the world and the largest supplier of NdPr to the free market.

Healthy financial performance driven by strong sales and production levels:The group salescontributed to statutory NPAT of $53.1m, and EBIT recorded a growth to $81m in FY18 from a loss of $14.5m in FY17. Adjusted EBITDA increased to $127m in FY18 from $31.9m in FY17. Gross profit for the year grew to $121.1m in FY18 from $14.7m in FY17. Cash flows from operating activities recorded growth up to $118.5m in FY18 from $34.0m in FY17. Strong financial performance supported the early repayments to lenders recording the total principal amount of the Group’s loan facilities to US$165.2m at June 30 2018. Driven by strong production volumes, long term relationships with customers in Japan and China and increased sales prices, sales revenue after commissions recorded growth up to $374.1m in FY18 from $257.0m in FY17. EBITDA margin grew to 33.9% in FY18 from 12.9% in FY17. ROE for FY18 was well above the industry median at 19.4% in FY18. Debt/equity ratio dropped significantly to 0.52 in FY18 from 4.4 in FY17.

The group revenues for the quarter ending September 30 2018 were of the order of $105.6 million, up 15% on the prior quarter. This was driven by demand from Japanese customers.

Technically on a 3 month chart with daily candle interval, the scrip has remained an uptrend from October 25, 2018, with slight reversal after November 12, 2018. The scrip is trading above the 50-day EMA (Exponential moving average). Formation of negative divergence is slightly indicated on Relative Strength index.

At current juncture LYC with beta above 1 and price/earnings ratio of 27.5x, has its NEXT project well on time and on budget to be completed by December 2018, which can support the expansion of the product range and lead to overall improvement in the production efficiency. However, the Malaysian operations have been under pressure in the past and a review report post the latest public hearing (in relation to the solid residue known as NUF on Malaysia plant) will be submitted to Minister towards the end of November. We therefore, give a wait and watch view on LYC at the current price levels of $2.29.
 

ATLAS ARTERIA

Atlas Arteria (ASX: ALX) with a market cap of $4.62bn is a global infrastructure developer and operator with its focus on the investment in quality infrastructure assets that provide easy access to long-dated, predictable and growing cash flows and generate healthy returns for its shareholders. ALX under its portfolio APRR and AREA has received an approval from the French State for a capital investment plan of a total value of €187 million, which will be partly financed by local authorities, and it has 12 projects that include new and improved motorway exchanges, environmental protection developments and improved customer services.

Moderate Financials with reduced net debt:ALX reported 5.6% growth in the revenue in 1H18 over FY17. Further, 6.2% growth in the group EBITDA was reported during 1H18. APRR under the portfolio of ALX posted significant growth in the traffic for 1H18. The improved traffic performance was supported  by the opening of a 5.5km link between the A89 and A66 on March 3, 2018, under its management contract agreement with the French State as well as rail and Air France strikes in France. ALX paid approximately US$50.7m of the debt service in February 2018, improving its debt to equity ratio and providing greater confidence for its future growth. Management has increased its distribution guidance for the year FY19 to 30 cents per security in FY19 from 24 cents per security in FY18. Debt to equity to 0.87 in 1H18 from 0.92 in previous period is noted. Net cash reported during 1H18 grew by approximately 26% to $155.96m from $122.55m in 1H17.

Meanwhile, weighted average toll revenue and traffic for the September 2018 quarter increased by 3.4% and 0.9%, respectively on the pcp and this came at the back of increased aggregate traffic levels at APRR, ADELAC and Warnow, while Dulles Greenway saw a dip.
Technically on a 3 month chart with daily candle interval, the scrip has remained at an uptrend from October 26, 2018, with some dips were noted in November 2018. The scrip is trading above the 50-day EMA (Exponential moving average) of around $6.7.
ALX with price/earnings ratio of 97.13x, and a beta below 1 with moderate financials and new capital investment plan approvals portrays a “Hold” scenario at the current price levels of $6.88, up 1.775% on November 20, 2018.