UGL Limited

UGL Details
· Takeover offer from Cimic: UGL Limited (ASX: UGL) stock surged over 48.6% on October 10, 2016 driven by the announcement made by Cimic Group Ltd (ASX: CIM) on its move for a final and unconditional offer for UGL’s takeover. CIM made an unconditional takeover offer at a price of $3.15 per share in cash for UGL shares. CIMIC also reported that they already acquired a major stake of 13.84% of the issued capital of UGL. After this move, CIM intends to perform a strategic review of UGL and is seeking to enhance operational efficiencies and improvements at the group’s project delivery and analyze its composition and assets. UGL could leverage CIMIC’s capabilities to generate synergies between both the firms’ businesses.

· Recommendation: We believe that the stock is “Expensive” at the current price of $3.18
 

McMillan Shakespeare Limited

MMS Details
· Novated leasing update: McMillan Shakespeare Limited (ASX: MMS) stock surged over 5.1% on October 10, 2016 as the group’s subsidiary, Remuneration Services (RemServ) is appointed to the novated leasing panel for the Queensland Government. RemServ is now among the eight organizations authorized to originate and manage novated leases for employees of the Queensland Government. The appointment is effective since 7^th November 2016 and would be there for three years having an option (exercisable by the Queensland Government) to extend for further two years. Financial implications of the novated leasing contract are expected to be consistent with the Company’s disclosure in the FY2016 results. MMS stock fell over 16.7% in the last three months (as of October 07, 2016) due to investor’s concerns over the group’s ability of retaining novated leasing services coupled with the lower than estimated fiscal year of 2016 performance. But we believe the stock would recover in the coming months and recommend investors to leverage the current levels. MMS segment revenue surged over 29.9% to $503.2 million for fiscal year of 2016 while EBITDA rose 30.6% to $137.3 million. Free cash flow enhanced by 42.1% to $93.5 million. MMS major segment, GRS revenue rose 6.9%, while EBITDA surged over 11.5% and UNPATA improved by 31.9% yoy to $15.3 million. MMS believes their organic growth to continue in FY17 from new business wins, coupled with retention of contracts and rising participation rates. MMS is focusing on Maxxia Plus, improving technology and making selective acquisitions to enhance shareholder value.

· Recommendation: We give a “Hold” recommendation on the stock at the current price of $12.17

 

GRS performance highlights (Source: Company Reports)

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