Surfstitch Group Ltd

SRF Details
· Strategic review update: Surfstitch Group Ltd (ASX: SRF) stock rose 2.9% on November 02, 2016 after the company gave the strategic review of their business units and other investments. In the stage 1 of the strategic review, SRF had identified Surf Hardware International (SHI) as a non-core business and is considering a number of proposals for its sale and the alternative options for that business. SRF has booked over $99.3m impairment charge to the FY16 results and confirmed the importance of the SRF’s content strategy in the stage 1. Moreover, the stage 2 of the strategic review has begun while the company would explore options to preserve and create value for the company, and its shareholders. In the stage 2, SRF has engaged 333 capital to advise the company on its strategic options while enhancing their focus on cost reduction within the company. Moreover, SRF as part of stage 2 of the strategic review has received a number of unsolicited, non-binding and indicative proposals and these are being assessed but there is no assurance that they would lead to a transaction. Among them is one in which SRF has received a non-binding indicative proposal for 100% of the shares of SRF from Coastalwatch Pty Ltd (CW), which the company is not considering. In addition, CW is one of the principal claimants in the continuing litigation as SRF is currently defending litigation about the contracts entered into in FY 16. SRF stock has fallen 83.09% in the last six months as on November 01, 2016. The company will hold its AGM on November 16, 2016.

· Recommendation: Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 0.18

CSR Limited

CSR Details
· First half 2017 performance driven by the segment Building Products: CSR Limited (ASX: CSR) stock rose 8.6% on November 02, 2016 after the company posted the half year of FY 17 results ending September 30, 2016. CSR reported a 12% growth in net profit after tax (before significant items) to $103.1 million in the first half and after significant items, net profit after tax grew 48% to $114.5 million. The growth in the profit is due to the increase in earnings from Building Products, which delivered a record EBIT growth of 29% to $114.6 million during the period (including the consolidated earnings of the PGH Bricks JV). On the other hand, CSR stock has fallen 7.69% in the last three months as on November 01, 2016, due to challenges in addressable market.

· Recommendation: We give an “Expensive” recommendation on the stock at the current price of $ 3.91


1H FY17 Financial Performance (Source: Company Reports)

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