Stocks’ Details

G.U.D. Holdings Limited

Growth from Acquisitions in Automotive and Davey Businesses: G.U.D. Holdings Limited (ASX:GUD) is engaged in manufacture, distribution and sale of automotive products, pumps, pool and spa systems & water pressure systems.

Dividend Update: The company recently released an announcement regarding the payment of ordinary dividend amounting to AUD 0.31 per share. The dividend will be paid to the shareholders on 30 August 2019.

Change in Director’s Interest: The company recently disclosed that one of its Director Mark Graham Smith, who had an indirect interest in the Company, had acquired total 4,000 fully paid ordinary shares via on-market trade for the total consideration of $38,599.99.

FY19 Results: During the year ended 30 June 2019, the company’s reported net profit after tax amounted to $59.6 million, down from a profit of $101.8 million in the prior corresponding period. Profit in the previous year was inclusive of contribution from discontinued operations of Oates business. NPAT from continuing operations rose by 18% on pcp. Underlying NPAT from continuing operations amounted to $60.9 million, up 10% on last year. Revenue from continuing operations was reported at $434 million, up 9% on pcp. Underlying EBIT for the year stood at $88.9 million, up 6% on FY18 EBIT of $83.5 million. The company declared a fully franked final dividend of 31 cents per share, up 11% on the previous year.This summarized a total dividend payment of 56 cents per share (fully-franked) for FY19, which is higher than the prior year total dividend payment of 52 cents per share.


FY19 Performance Summary (Source: Company Reports)

Outlook: With strong brands, products, and customer service in the automotive division, the company is well-positioned to grow in the medium to long term horizon. In FY20, revenue and EBIT for the automotive and water businesses are expected to increase further.

Stock Recommendation: The stock of the company generated negative returns of 13.79% and 22.81%, in the past one month and three months, respectively. Currently, the stock is priced close to its 52-week low level of $ 8.430 with reasonable PE multiple of 13.060x and an annual dividend yield of 6.22%, indicating a decent opportunity for accumulation. In FY19, the company delivered a decent full-year dividend to its shareholders with a payout ratio in-line with the previous year. Increased revenue in FY19 was a factor of favourable performance from acquisitions pertaining to Automotive and Davey businesses. During the period, the company also secured government innovation grant funding in two automotive businesses, which augur positive future outcomes. Davey business expects to see continuing green shoots as it progresses over the next 24 months. Hence, considering the above-factors and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $9.190, up 2.111% on 23 August 2019.
 

Accent Group Limited

Improved Operating Leverage from New Stores:Accent Group Limited (ASX: AX1) owns and operates numerous footwear and apparel businesses. Recently, the company released its results for FY19, wherein it stated that it has opened 54 new stores and reported digital growth of 93%. The cost of doing business has been improved by 50 basis points to 45.1%, which was a result on continued focus on front line productivity, sustainable lease renewals and operating leverage from new stores & digital as well as TAF corporate store growth. Total company owned sales amounted to $772.5 million, reflecting a rise of 14.3% on the previous year.


Financial Summary (Source: Company Reports)

In FY19, the company has declared a fully franked final dividend of 3.75 cps, which brings the full year dividends to 8.25 cps, reflecting a rise of 22.2% on the previous year.The company will be paying the final dividend on 26 September 2019. At the current market price of A$1.620 per share, the annual dividend yield of the company stands at 5.54% as compared to the industry median (consumer cycles) of 4.9%. The current ratio of the company stood at 1.29x in 1H FY19 as compared to the industry median of 1.18x, which implies that the company is in a decent position to address its short-term obligations. It posted a return on equity of 8.1% in 1H FY19, reflecting a rise of 1.3%. Coming to the stock’s performance, it produced a return of 25.21% on YTD basis. Currently, the stock is priced close to its 52-week high level of $1.710. 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$1.620 per share (up 8.725% on 23^rd August 2019, owing to the release of FY19 results).
 

Boral Limited

Strong Growth Reported in Boral North America:Boral Limited (ASX: BLD) is primarily engaged in manufacture and supply of building and construction materials in Australia, Asia and the USA.

Agreement to Sell Midland Brick: The company recently entered into an agreement to sell its Midland Brick business. The agreement has been entered with a Western Australian consortium consisting of Linc Property, Fini Group and Birchmead, a part of the CFC Group. The agreement involves a total consideration amounting to $86 million, which will be utilised to repay debt and fund strategic growth opportunities. The transaction is expected to be completed by the end of CY19 or soon after and is subject to a number of customary pre-closing conditions (including third party consents).

Change in Shareholding: The company updated that the voting power of Blackrock Group reduced to 5.70% from 7.02%. In addition, Sumitomo Mitsui Trust Holdings, Inc., became a substantial shareholder in the company with the voting power of 5.03% since 7 August 2019.

Financial Performance: In 1HFY19, the company reported EBITDA amounting to $485 million, as compared to 1HFY18 EBITDA of A$500 million. Net profit after tax for the half, amounted to A$200 million, down 6% on pcp NPAT of A$214 million. Earnings per share in 1HFY19 amounted to 17.1 cents as compared to 18.2 cents in 1HFY18. During the half, the company also declared an interim dividend of 13.0 cents, up 4% on prior corresponding period.


1HFY19 Results (Source: Company Reports)
 
Outlook: FY19 EBITDA for Boral Australia is expected to be broadly in-line with the prior year. The company expects EBITDA for Boral North America to grow by approximately 15% in US dollar terms. FY19 profits for USG Boral are expected to be slightly lower in comparison to FY18.
 
Stock Recommendation: The stock generated negative returns of 8.29% and 3.86% over a period of 1 month and 3 months, respectively. Performance in 1HFY19 was characterised by strong operating cash flows, steady earnings excluding discontinued operations and solid underlying activity in key markets. Revenue increase in Boral North America was driven by strong growth in Roofing. In the second half, the company foresees improved performance in Boral Australia supported by higher volumes from new major projects and business improvement initiatives. Boral North America is expected to report synergies of approximately US$25 million in FY19. Furthermore, price growth in the region is expected to either boost or hold the margins at the current level. Based on the aforesaid factors, we give a “Buy” recommendation on the stock at the current market price of $4.960 (down 0.402% on 23 August 2019), ahead of its full-year results which are to be released on 26 August 2019.


Comparative Price Chart (Source: Thomson Reuters)

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