Telstra Corporation Limited
TLS Details
Business Updates: Telstra Corporation Limited (ASX: TLS) is engaged in the provisioning of telecommunications and information services, including mobiles, internet, and pay television.
Business Updates (Source: Analysis by Kalkine Group)
Insights of 1HFY22: 1HFY22 results indicated the positive momentum delivered through its T22 strategy and place the business in a strong position as it transitions into T25.
Financial Summary (Source: Analysis by Kalkine Group)
Key Risks: The company’s business could be affected by the breach in cyber security, which may create disruption to its operations. TLS is also exposed to risks arising from the loss of customers.
Outlook: The company is on track to deliver our T22 productivity target of $2.7 billion. For FY22, the company expects total income in the range of $21.6 -$23.6 billion and underlying EBITDA of between $7.0-$7.3 billion.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock has a 52-week low-high range of $3.300 - $4.310, respectively. The stock of TLS has been corrected by ~5.23% in the past three months. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average P/E multiple, considering the COVID-19 Uncertainties and falling earnings, etc. For the purpose of valuation, few peers like Spark New Zealand Ltd (ASX: SPK), TPG Telecom Ltd (ASX: TPG), and Uniti Group Ltd (ASX: UWL) have been considered. Considering the expected upside in valuation, cost reduction, rising, optimistic outlook, decent liquidity position, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing price of $3.960, up by ~1.538% as on 31 March 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing
TLS Daily Technical Chart, Data Source: REFINITIV
Fletcher Building Limited
FBU Details
Appointment of CIO: Fletcher Building Limited (ASX: FBU) is involved in the manufacturing and distribution of building materials and residential and commercial construction. Recently, the company has appointed Joe Locandro as Chief Information Officer (CIO), replacing Dan Beecham.
Highlights of 1HFY22: Despite the impact of lockdown in Australia and New Zealand during Q1, the company delivered a strong HY22 performance, supported by improved operational performance and cost disciplines.
Financial Summary (Source: Analysis by Kalkine Group)
Key Risks: The company’s operational and financial performance could be affected by adverse movements in the prices of raw materials for construction. In addition, the business is also exposed to liquidity risk; any failure in the funding could impact its topline growth.
Outlook: For 2HFY22, FBU expects EBIT margins of ~9.5%, reflecting a rise of 230 basis points. The company expects to deliver FY22 EBIT (before significant items) of ~NZ$750 million.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of FBU is trading below its 52-week low-high average of $5.640 - $7.640, respectively. The stock has been corrected by ~6.01% in the past one month. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ median P/E multiple, considering the lower business margins and high debt to equity ratio, etc. For the purpose of valuation, few peers like James Hardie Industries PLC (ASX: JHX), Adbri Ltd (ASX: ABC), and NRW Holdings Ltd (ASX: NWH) have been considered. Considering the expected upside in valuation, rising revenue & earnings, decent outlook, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing price of $5.870, up by ~0.513% as on 31 March 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing
FBU Daily Technical Chart, Data Source: REFINITIV
Reliance Worldwide Corporation Limited
RWC Details
Change in Directors’ Holdings: Reliance Worldwide Corporation Limited (ASX: RWC) is involved in designing, manufacturing and supply of high quality, reliable and premium branded water flow, control and monitoring products and solutions for the plumbing and heating industry. Recently, RWC notified that Ian Rowden had made a change to holdings in the company by acquiring 5,000 shares at a consideration of $20,775.
1HFY22 Financial & Operational Summary: During 1HFY22, the company posted decent results and sales for the period, including a partial contribution from EZ-FLO following the completion of the acquisition in mid-November. In addition, a planned increase in inventory levels impacted its CFO.
Financial Summary (Source: Analysis by Kalkine Group)
Key Risks: RWC’s business could be impacted by supply chain issues relating to shipping and freight delays, materials shortages, and construction sector delays. In addition, the business is exposed to risks arising from adverse movement in foreign exchange as it has operations in multiple geographies.
Outlook: Looking forward, the company would be focused on driving growth in core and adjacent markets. RWC believes that M&A is a potential growth path for the pursuit of organic growth initiatives.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of RWC is trading below its 52-week low-high average of $3.910 - $6.610, respectively. The stock has been corrected by ~8.29% in the past one month. The stock has been valued using a P/E multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average P/E multiple, considering the declining margins and supply chain issues, etc. For the purpose of valuation, a few peers like James Hardie Industries PLC (ASX: JHX), Boral Ltd (ASX: BLD), and Adbri Ltd (ASX: ABC) have been considered. Considering the expected upside in valuation, rising top-line, core volume growth, optimistic outlook, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $4.260, down by ~2.962% as on 31 March 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
RWC Daily Technical Chart, Data Source: REFINITIV
Codan Healthcare Limited
CDA Details
1HFY22 (31 December 2021) Results in Overview: Codan Healthcare Limited (ASX: CDA) manufactures and markets communications equipment to security organisations, military, mining companies, etc. Metal detection and Communications are its key operating segments.
- Sales of the Communications segment grew from ~$33.6 million in 1HFY21 to ~$117.7 million in 1HFY22, driven by growth in the first-year profits of the DTC and Zetron acquisitions.
- The Metal detection sales declined by ~11% Y-o-Y (up ~38% on 1HFY20) due to civil unrest experienced in Minelab’s gold detector market (Sudan).
- CDA invested ~9% of sales in product development with a split of ~67% and ~33% between Communications and Metal detection divisions, respectively, in 1HFY22.
Growth Trend of Underlying NPAT; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of supply chain disruptions, prevailing global geopolitical tensions, technological shifts, civil unrest in the metal detection market of Africa, etc.
Outlook:
- CDA expects to be placed in a robust position in 2HFY22 due to inventory investment in FY21.
- With the launch of the GPX6000® gold detector and robust sales in the recreational market, CDA plans to release multiple new detector platforms in FY23 and expand geographically.
- CDA aims to transform the Communications division from a product-centric business to a total solutions provider and holds a forward orderbook of ~$163 million.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of CDA gave a negative return of ~22.53% in the past three months and a negative return of ~42.67% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $6.900 - $19.430. The stock has been valued using the P/E based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median P/E multiple, considering the decline in metal detection sales, an uptick in the debt-to-equity ratio, and inventory management challenges. For this purpose of valuation, a few peers like Ava Risk Group Ltd (ASX: AVA), Elsight Ltd (ASX: ELS), Senetas Corp Ltd (ASX: SEN) have been considered. Considering the current trading levels, decent 1HFY22 financial results, order book for Communications segment, plans to grow metal detector sales, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $7.320, up by ~0.136% as of 31 March 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
CDA Daily Technical Chart, Data Source: REFINITIV
Copper Mining Mountain Corporation
C6C Details
FY21 Financial Highlights: Copper Mining Mountain Corporation (ASX: C6C) focuses on the development of the Copper Mountain project in British Columbia and the Cameron copper (Cu) - gold (Au) project in Australia.
- The copper production increased from ~77.55 million lb (pounds) in FY20 to ~90.14 million lb in FY21. The silver production grew from ~392.49 million lb in FY20 to ~523.82 million lb in FY21.
- The third ball mill at the Copper Mountain mine project was commissioned in December 2021 quarter expanding the plant milling capacity from ~40K tonnes per day to ~45K tonnes per day.
Growth in Key Metrics, Highlights; (Analysis by Kalkine Group)
Key Risks: The company faces commodity price and forex rate changes, supply chain issues, resource exploration and expansion, and labour availability shortages.
Outlook: C6C expects to produce ~80 - 90 million Cu pounds in 2022 and ~90 - 105 million pounds of Cu in 2023. It estimates the copper All-in-Costs (AIC) will be between ~US$2.00 - US$2.50 per pound in 2022.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of C6C gave a positive return of ~9.06% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $3.000 - $5.420. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average EV/Sales multiple, considering the expected increase in FY22 AIC for copper, inflationary risk, the continued COVID-19 impacts on the supply chain and labour. For this purpose of valuation, a few peers like Rio Tinto Ltd (ASX: RIO), Iluka Resources Ltd (ASX: ILU), 29Metals Ltd. (ASX: 29 M) have been considered. Considering the current trading levels, decent growth in top & bottom line, and net operating cashflows, ongoing project improvements at the Copper mine project, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $3.970, as of 31 March 2022.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
C6C Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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