Spotless Group Holdings Ltd


SPO Details

·       Weak first half performance: Spotless Group Holdings Ltd.’s (ASX: SPO) stock crashed over 13.68% on February 28, 2017 impacted by the weak 1H FY17 top line performance. SPO sales revenue fell over 9.4% to $ 1,455 million during the six months ended at 31 December 2016 due to contract losses and renewals. Moreover, the group reported a loss of $358 million owing to margin pressure in some sectors coupled with heavy investments in business development. As a result, the group also cut their interim dividend per share by 61% year on year (yoy) to 1.35 cents from 3.5 cents in the prior corresponding period. SPO incurred an impairment, restructuring charge (largely non-cash) of $391m (post tax) on the back of contract portfolio restructure. The group expects a profit after tax (pre-exceptional items) in the range of $80 million -$90 million for FY17 due to depreciation and investment in future growth. On the other hand, the group has introduced a reset strategy to revamp growth, and is accordingly, progressing well. The group’s new business win rates and pipeline of quality opportunities are improving. Moreover, their core segment- Defense, Government, Health, Education and PPPs performance is strong and is not affected by the contract portfolio restructure. The group is targeting for returns driven by rationalizing the contract book and simplifying overhead structure.

·       Recommendation:We maintain a “Buy” recommendation on the stock at the current price of $0.82


First half performance (Source: Company Reports)
 
Capitol Health Ltd


CAJ Details

·       Boosting capital position: Capitol Health Ltd.’s (ASX: CAJ) stock fell over 6.1% on February 28, 2017 due to lower than estimated results. The group delivered a revenue rise of $2.6 million to $80.0 million during the first half of 2017. EBITDA prior to individually significant items (ISI) fell to $ 9.30 million during the first half of 2017 from $10.93 million of prior corresponding period. Higher borrowing cost impacted the group’s NPAT which was of the order of $2.2 million against $2.21 million in the prior corresponding period. On the other hand, CAJ is targeting an annualized cost saving of $3?4 million per annum, for which initiatives are forecasted to be implemented in FY17 while the savings are forecasted to be realised in FY18. The group is also boosting their capital position by raising $38.5 million at an offer price of $0.14 per share. The group would use the proceeds to cut their net debt.

·       Recommendation:CAJ stock rallied over 37.5% in the last four weeks (as of February 27, 2017) while we maintain our “Hold” recommendation on the stock at the current price of $0.155
 

Underlying to Statutory Results (Source: Company Reports)

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