Six Industrial Sector Stocks with Positive ROE

Amcor Limited

AMC Details
Acquisition of Hebei Qite Packing Co. Ltd.: Amcor Limited (ASX: AMC) has acquired Hebei Qite Packing Co. Ltd. (Qite) at RMB 185 million (US$28 million) to expand its flexible packaging platform in the strategically important Northern China region, while the returns of it will be obtained in three years. The acquisition would happen after getting regulatory approvals. AMC already has eleven flexible packaging plants in China, including two plants in the close proximity to Qite in Northern China.

 

Acquisitions Status (Source: Company Reports)
 
Moreover, AMC acquired the North American rigid plastics blow molding operations of Sonoco Products Company at a price of US$280 million that represents a multiple of 8.0 times last twelve months’ EBITDA. On the other hand, AMC stock is trading at an unreasonable P/E. We give an “Expensive” recommendation on the stock at the current price of – $ 13.83

 
AMC Daily Chart (Source: Thomson Reuters) 

Brambles Limited

BXB Details
Divestment of the CHEP Aerospace Solutions business: Brambles Limited (ASX: BXB) is divesting the CHEP Aerospace Solutions business to EQT Infrastructure II for which BXB expects to receive net cash proceeds of over US$125 million. This would be recognized as the discontinued operations. Additionally, BXB has entered into an agreement to combine its Oil & Gas containers solutions businesses Ferguson Group and CHEP Catalyst & Chemical Containers with Hoover Container Solutions to form Hoover-Ferguson Group. The joint venture will be 50% owned by Brambles and 50% owned by Hoover after getting the necessary regulatory approvals. The group’s FY16 sales revenue grew by 8% while underlying profit grew by 9%. On the other hand, BXB stock has been under pressure due to their weak first quarter of FY17 update. The group expects the constant-currency sales revenue growth of 7% to 9% in FY 17 and growth of 9% to 11% in the underlying profit of between US$1,055 million to US$1,075 million (at 30 June 2016 exchange rates). Still the stock is trading at a high P/E and we give an “Expensive” recommendation on the stock at the current price of – $ 11.66

 
BXB Daily Chart (Source: Thomson Reuters) 

Incitec Pivot Ltd

IPL Details
Completion of the construction of world scale ammonia plant: Incitec Pivot Ltd (ASX: IPL) reported the 67.9% fall in the net profit after tax in FY 16. The FY 16 earnings are impacted by the cyclical and structural changes in the markets IPL serves that had impacted EBIT. However, IPL’s primary focus is on managing the controllable factors, and BEx delivered $70.9 million in productivity benefits. Moreover, IPL finished construction of world scale Louisiana ammonia plant safely, on time and below US$850m budget.
 

FY 16 EBIT (Source: Company Reports)
 
Additionally, IPL has manufactured a record 345k mt of ammonium nitrate at Moranbah despite gas supply curtailments. IPL has achieved four record production months and produced 1,010kt of ammonium phosphates, despite the December 2015 train derailment. In addition, the gas contracts secured during FY 16 are expected to reduce the gas costs from calendar year 2017 to 2028. The group will hold its AGM on December 16, 2016. Meanwhile, IPL stock rose over 10.73% in the last three months (as of November 15, 2016) and we maintain a “Hold” recommendation on the stock at the current price of – $ 3.26

 
IPL Daily Chart (Source: Thomson Reuters) 

Transurban Group

TCL Details
Not awarded for procurement of I-66: Transurban Group (ASX: TCL) has not been awarded the preferred bidder status in the procurement of I-66 by the Virginia Department of Transportation (VDOT) although TCL continues to work with VDOT for various growth opportunities. Moreover, TCL’s core strategy is to expand its footprint in the USA and therefore the group is exploring further opportunities with the partner in Virginia, and considering other potential markets in North America. TCL is having developments projects in the Greater Washington Area that includes the 395 Express Lanes project and extensions to the 95 Express Lanes, including the 14-kilometer extension to Fredericksburg (Atlantic Gateway Project). The group has also announced for the appointment of New Non-Executive Director, Dr Jane Wilson. On the other hand, TCL stock fell over 20.08% in the last six months (as of November 15, 2016) and still the stock is trading at an unreasonable P/E. We give an “Expensive” recommendation on the stock at the current price of – $ 9.77

 
TCL Daily Chart (Source: Thomson Reuters) 

Downer EDI Limited

DOW Details
Awarded major contracts: Downer EDI Limited (ASX: DOW) had delivered FY16 results as per its guidance and paid a fully franked dividend of 24 cents per share while buying back 7.9 million shares. The group also has been awarded five contracts valued at over $250 million through its mining services businesses. Moreover, DOW got three contracts for the supply, manufacture and delivery of explosives and down the hole blasting services. DOW has also been awarded an underground mining contract at Newmarket Gold Inc.’s Fosterville Gold which includes providing ground support services and related mining services. In addition, Waanyi ReGen (WRJV), which is a 50:50 joint venture between the Waanyi Prescribed Body Corporate (Waanyi PBC) and Downer's ReGen business, has been awarded a three-year contract covering water and land management and erosion prevention activities at the Century mine site. Downer had work-in-hand of $4.7billion from rail in FY 16. Meanwhile, DOW stock rose over 46.21% in the last six months (as of November 15, 2016), and the stock is trading at a decent P/E. We give a “Hold” recommendation on the stock at the current price of – $ 5.65

 
DOW Daily Chart (Source: Thomson Reuters) 

CIMIC Group Ltd

CIM Details
Offer for acquisition of UGL: CIMIC Group Ltd (ASX: CIM) has made an unconditional offer to acquire 100% of UGL for a price of AUD3.15 per UGL share and is expected to be funded from a combination of debt and cash. The offer is scheduled to close on November 25, 2016 and has been now made under sixth supplementary bidder’s statement. Moreover, CIM group company, CPB Contractors, has been selected by the Australian Department of Defence to deliver the C?17A Maintenance Facility, Aircraft Apron and Associated Infrastructure Project at the RAAF Base Amberley in Queensland.  The contract is expected to generate revenue to CPB Contractors of about $180 million. We give an “Expensive” recommendation on the stock at the current price of – $ 30.25

 
CIM Daily Chart (Source: Thomson Reuters)

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