Stocks’ Details

Treasury Wine Estates Limited

Growth in Net Sales Revenue:Treasury Wine Estates Limited (ASX: TWE) is an international wine company with the portfolio of luxury, premium and commercial wines. Recently, the company announced its results for the financial year 2019, wherein it reported net sales revenue (NSR) of $2,831.6 Mn, reflecting a rise of 17% on YoY basis. However, on a constant currency basis, it witnessed a rise of 12% in net sales revenue. Return on Capital Employed (ROCE) stood at 14.9% in FY19, representing a rise of 2.3ppts underpinned by its disciplined approach toward cost allocation. The company reported strong EBITS growth in Asia, which was resulted by the company’s premiumisation strategy, the increased availability of Luxury and Masstige wine and outstanding execution.

Key Measures of Performance (Source: Company Reports)

What to Expect: The company stated that it has the people, brands, wine, business models and customer partnerships in order to execute its premiumisation strategy in FY20 and beyond. The company re-iterated guidance of around 15% to 20% in reported EBITS growth for F20, which would be delivered by growth in all markets, through continued top-line growth and premiumization as well as ongoing operational efficiency.

Stock Recommendation: The company’s investments in French production and vineyard assets and increased Luxury winemaking capacity in Australia are expected to support the next stage of growth. The Board of the company has declared a fully franked final dividend 20 cps, which brings the full-year dividend to 38 cps, delivering growth of 18.8% in comparison to FY18, and a pay-out ratio of 62.9%. Currently, the stock is priced close to its 52-week high levels of $19.90 with PE multiple of 32.38x. Therefore, considering the above-stated facts, we give a “Hold” rating on the stock at the current market price of A$18.670 per share (down 1.269% on 4^th September 2019).

Woolworths Group Limited

A Look at FY19 Results: Woolworths Group Limited (ASX: WOW) is into retail operations across Australian Food, Endeavour Drinks, New Zealand Food, BIG W and Hotels. It has a market capitalisation of ~A$46.21 Bn as on 4^th September 2019. Recently, the company stated that Gordon Cairns has made a change to his holdings in the company by acquiring 1,608 ordinary shares on 30^th August 2019. The company has recently released its full-year 2019 results, wherein it stated that it made good progress on its transformation throughout all of its businesses in FY19 with improving sales and EBIT momentum in 2H. The company has witnessed a rise of 5.3% on a statutory basis and 3.4% on a normalised basis in sales from continuing operations with all businesses reporting sales growth on the prior year and improved sales growth rates in the 2H FY19 as compared to 1H FY19. The company’s Sales from continuing operations amounted to A$59,984 million in FY 2019 as compared to A$56,944 million in FY 2018. The group online sales witnessed a growth of 34.5%, which was driven by strong growth from WooliesX, CountdownX, and BIG W.


Key Financial Metrics (Source: Company Reports)

Future Perspective: With respect to Australian Food, WOW remains confident in its plans to deliver sales growth through more localised ranging, an improved fresh experience and store renewals. The online sales are anticipated to continue to grow strongly, and the company will increase the launch of Metro stores. When it comes to New Zealand Food, the company will continue to focus on delivering great prices for its New Zealand customers, improve fresh quality and experience.

Stock Recommendation: The Board of the company has declared a final dividend amounting to 57 cents per share, fully franked.This brings the full-year dividend to 102 cents per share, reflecting a rise of 9.7% improvement on the previous year. Currently, the stock is priced slightly towards its 52-week high level of $38.06. Hence, considering the above-stated facts and current trading levels, we give a “Hold” rating on the stock at the current market price of A$36.680 per share (down 0.082% on 4^th September 2019). 

Coles Group Limited

Dividend to be paid on 26 September 2019: Coles Group Limited (ASX: COL) is in retailing of products like fresh food, groceries, household goods, etc. The market capitalisation of the company stood at ~A$18.88 Bn as on 4^th September 2019. The company recently announced that David Cheesewright made a change to his holdings in the company by purchasing 20,000 fully paid ordinary shares involving consideration of $13.4412 average price per share on 28^th August 2019. In another update, the company announced its results for the financial year 2019, wherein it stated that it delivered 47th consecutive quarter of Supermarkets comparable sales growth. On retail calendar basis, in FY19, sales revenue (excluding Fuel sales and Hotels) increased by 3.1% to $35.0 Bn. EBIT (ex. Fuel sales and Hotels) for the period was reported at $1,325 million, as compared to $1,442 million for the prior year. Based on the performance, the company has declared a total fully franked dividend of 35.5 cps, comprising a final dividend of 24.0 cents per share and a special dividend of 11.5 cents per share which covers the period from 28 November 2018 to 30 June 2019.Both dividends are to be paid on 26 September 2019.


Financial Summary (Source: Company Reports)

Future Aspects: With respect to Express, the company stated that the growth in fuel volumes has been encouraging after more competitive fuel pricing and the introduction of the Little Shop 2 campaign. However, it would take time to build volumes to target levels, and as a result, the company anticipates earnings growth under the New Alliance Agreement to remain subdued in FY20.

Stock Recommendation: Coles Group Limited has strong cash realisation of 110% and a robust balance sheet with net debt position, improving to $0.5 billion, which provides significant flexibility for long term growth. Currently, the stock is trading close to its 52-week high levels of $14.268 with PE multiple of 13.16x. Hence, in light of above-stated facts and current trading levels, we give a “Hold” rating on the stock at the current market price of A$14.220 per share (up 0.495% on 4^th September 2019).
 

The A2 Milk Company Limited

Robust Increase in Revenue: The A2 Milk Company Limited (ASX: A2M) is into the sale of branded products in targeted markets made with milk from cows that produce milk naturally containing only the A2 protein type. The company recently announced that UBS Group AG and its related bodies corporate have ceased to become a substantial holder in the company, which became effective on 29^th August 2019. The company recently stated that the company has delivered record financial and market share results for 2019 which was enabled by strong revenue growth throughout its key product segments of liquid milk, infant nutrition as well as other nutritional milk products and throughout each of its key regions. The company delivered revenue amounting to $1,304.5 Mn, reflecting a rise of 41.4%.

 
Geographic segment revenue & EBITDA (Source: Company Reports)

Future Prospect: The company stated that full-year FY20 EBITDA as a percentage of sales is anticipated to be broadly consistent with 2H FY19 EBITDA margin of 28.2%, which primarily reflects (1) increased full year marketing investment to around 12% of the sales, (2) continued investment in organisational capability in order to support future growth, and (3) gross margin percentage anticipated to be broadly in-line with FY19.

Stock Recommendation: The company reported operating cash flow of $289.1 Mn and a closing cash balance of $464.8 Mn in FY19. On the stock’s performance front, it produced a return of 31.54% on YTD basis. As per ASX, the stock is trading slightly higher than its 52-week low-high average range of $8.14-$17.30. Hence, considering the above-stated facts and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of A$13.720 per share (up 0.292% on 4^th September 2019).
 

Coca-Cola Amatil Limited

Key Takeaways from Presentation: Coca-Cola Amatil Limited (ASX: CCL) is involved in manufacturing, distribution and marketing of beverages and has a market capitalization of ~A$7.9 Bn as on 4^th September 2019.Recently, the company has published Barclays Global Consumer Staples Conference presentation, wherein it highlighted about operational and financial performance for the 1H FY19. The company reported strong revenue growth of 5.2% for the period reflecting the results of strategic initiatives throughout the group. It posted ongoing EBIT amounting to $289.9 Mn and ongoing NPAT of $173.3 Mn, which reflected declines of 3.8 % and 3.9%, respectively which were in accordance with its expectations. The following picture provides an idea of the results:


Segment Results (Source: Company Reports)

Future Aspects: The company mentioned that Australian Beverages is being positioned for growth in 2020 with the completion of the additional investments in its Accelerated Australian Growth Plan as well as with container deposit schemes in New South Wales and Queensland substantially embedded by the end of 2019. It added that the corporate & services are anticipated to record an EBIT loss of around $12 Mn. New Zealand & Fiji, Papua New Guinea and Alcohol & Coffee are anticipated to deliver growth in accordance with its shareholder value proposition.

Stock Recommendation: In 1H FY19, the company has declared total unfranked dividend amounting to 25.0 cps, which comprises interim dividend of 21.0 cps and a special dividend of 4.0 cps, following the sale of SPC business. 
On the stock performance front, it produced a return of 6.31% and 16.86% in the time span of one month and three months, respectively. Thus, considering the above-stated facts, we recommend a “Hold” rating on the stock at the current market price of A$10.940 per share (up 0.275% on 4^th September 2019).


Comparative Price Chart (Source: Thomson Reuters)

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