EL&C Baillieu Research Top16 September Stock Picks 2019 – September 2019
Australian Equity Research
September 2019 Top Stock Picks – Mid & Small Caps Overall: We select our preferred picks from our mid and small cap company universe, as well as provide an outlook for the economy and equity market. We also provide key insights from our listed investment company (LICs) coverage. Market commentary: In 2Q19, Australian real GDP growth slowed to just 1.4% YoY, around 28-year lows. This softness was reflected in the August 2019 reporting season, with companies reporting sluggish sales growth, some modest margin pressure, and flat profits. So far in 3Q19 the data is mixed, with soft vehicle sales, retail sales, business and consumer sentiment. Stock Research Analysts valuations remain at above-average levels, with the forward PE for the market above 16x; 12% above average. In the current environment, we remain Malcolm Wood cautious; preferring exposure to companies with growing earnings and low Chief Investment Officer levels of corporate debt. + 612 9250 8916 [email protected] Top stock picks: Post the FY19 reporting season, our list of top mid and small caps are as follows: Adairs (ADH), Ardent Leisure Group (ALG), Bapcor (BAP), James Casey EQT Holdings (EQT), Hansen Technologies (HSN), Monadelphous Group Head of Research (MND), MNF Group (MNF), Steadfast Group (SDF) and Village Roadshow (VRL). + 613 9602 9265 This includes an upgrade of MND to Buy due to valuation support and a robust [email protected] pipeline of near-term opportunities.
Nicolas Burgess Listed investment companies (LICs): EL&C Baillieu provides performance Analyst - Industrials reporting and insights across a universe of 67 LICs. Based on our analysis, our + 613 9602 9379 top picks include AFIC (AFI) and Diversified United Investment (DUI) in [email protected] traditional LICS; WAM Leaders (WLE) and Ophir High Conviction Fund (OPH) in large caps; WAM Microcap (WMI) and Acorn Capital Investment Fund (ACQ) in Nick Caley the small caps; MFF Capital Investments (MFF) and PM Capital Global Analyst - Industrials Opportunities Fund (PGF) internationally; and Hearts and Minds (HM1) among + 613 9602 9283 specialists. [email protected] Summary of top picks Luke Macnab Analyst - Industrials Share Price + 612 9250 8930 [email protected] Stock Code Rating Risk Price Target Analyst
Adairs ADH BUY High 1.74 2.24 James Casey Warren Edney Analyst - Resources Ardent Leisure Group ALG BUY High 1.06 1.55 Nick Caley + 613 9602 9384 [email protected] Bapcor BAP BUY Medium 6.96 7.40 James Casey
EQT Holdings EQT BUY Medium 30.00 35.00 Nicolas Burgess Piers Flanagan Analyst - Industrials Hansen Technologies HSN BUY Low 3.24 4.50 Nicolas Burgess + 613 9282 8127 [email protected] Monadelphous Group MND BUY High 15.62 17.50 Piers Flanagan
MNF Group MNF BUY High 5.04 5.86 Luke Macnab Supun Wijerathna Associate Analyst Steadfast Group SDF BUY Low 3.63 3.90 Nicolas Burgess + 613 9602 9325 [email protected] Village Roadshow VRL BUY Medium 2.84 3.70 Nick Caley
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2 EL&C Baillieu Research Top Stock Picks – September 2019
Table of Contents
Equity market outlook 4
Top Stock Picks:
Adairs (ADH) 8
Ardent Leisure Group (ALG) 10
Bapcor (BAP) 12
EQT Holdings (EQT) 14
Hansen Technologies (HSN) 16
Monadelphous Group (MND) 18
MNF Group (MNF) 20
Steadfast Group (SDF) 22
Village Roadshow (VRL) 24
Listed Investment Companies (LICs) 26
Disclaimer 28
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EL&C Baillieu Research Top Stock Picks – September 2019
Market outlook
• In 2Q19, Australian real GDP growth slowed to just 1.4% YoY, around 28-year lows, with private domestic demand falling 0.3% YoY. This softness was reflected in the August reporting season, with companies reporting sluggish sales growth, some modest margin pressure, and flat profits.
• Looking ahead, the outlook will be driven by the balance between four headwinds and three tailwinds for growth. The headwinds, totalling ~1-2% pa of GDP over 2019-20, include the downturn in housing investment, pressure on squeezed households, emerging headwinds – as drivers like the LNG ramp-up and NBN and NDIS rollouts taper off. The tailwinds, totalling ~1.4% of GDP, include RBA rate cuts (we expect rates to fall to 0.5%), the low and middle income tax offset and the positive terms of trade effect, which if particularly successful could help moderate the headwinds. So far in 3Q19 the data is mixed, with soft vehicle sales, retail sales, job ads and business and consumer sentiment, but strong signs of a turnaround in the established housing market. In our view, Australia needs a much larger fiscal stimulus. In the absence of this, we expect a continuation of weak growth driving flat-to-modestly lower profits.
• Valuation is at above-average levels, with the forward PE above 16x; 12% above average and, on a sector-adjusted basis, 7-23% more expensive than the US. From such valuation levels, the Australian market generally declines ~6-9% on a one-year view. As such, we expect the Australian market to decline modestly to around 6200. At the moment, the equity market is putting little weight on downside risks, expecting a ‘Goldilocks’ scenario where RBA rate cuts lift growth but leave low inflation. In our view, this is too optimistic, and we remain cautious on the local market.
Fig.1: Australian equity market performance – various sectors (common base = 100) 120
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80 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 S&P/ASX 100 Accum. Index S&P/ASX Small Ordinaries Accum. Index
S&P/ASX 300 Industrials Accum. Index S&P/ASX Small Resources Accum. Index
Source: Iress
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Small companies: Valuation multiples remain elevated
• Australian share market indices have performed strongly over the past 12 months, particularly at the large capitalisation end of the market. The S&P/ASX 200 Accumulation Index is up 11.8% over the past 12 months, outperforming the Australian Small Companies Indices, represented by the Small Ordinaries Accumulation Index, which increased a more modest 4.7% over the past 12 months.
• Within the Small Companies Index, the Small Industrials Index increased 6.5%, ahead of the Small Resources Index which declined 1.4% over the past 12 months.
• Based on consensus estimates, the one-year forward price to earnings (P/E) ratio for the Small Ordinaries Index is currently trading on a multiple of 18.2x, a 26% premium to its long-term average of 14.5x. Similarly, the Small Industrials Index is currently trading on a one-year forward P/E ratio of 19.7x, a 39% premium to its long-term average of 14.2x.
• Clearly valuations of smaller companies remain well above long-term averages. Furthermore, the Small Ordinaries PER is at a significant premium (19.2%) compared with the ASX 200 PER. We remain focussed on companies with a track record of growth, strong financial positions and low levels of corporate debt.
Fig.2: Small Ordinaries index – one-year forward PER
AUS Small vs Large Cap Valuation
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8 Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2018 Jan 2019
Small Industrials 12 MF PE ASX200 12MF PE Small Ordinaries 12MF PE
Source: Bloomberg Consensus
Fig.3: Small Ordinaries index – one-year forward PER
Small Ordinaries Forward PER
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10 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Jan 2018 Jan 2019
Source: Bloomberg Consensus baillieu.com.au E.L. & C. Baillieu Limited ABN 74 006 519 393 Please read the disclaimer at the end of this report 5 EL&C Baillieu Research Top Stock Picks – September 2019
Reporting season highlights and earnings revisions
• Reporting Season: Consistent with the soft economy, key themes from the August 2019 reporting season were: 1) sluggish top-line growth; 2) flat operating profit, with margin pressure in financials (NIM, compliance costs), global industrials (input cost pressure) and resources ex-iron ore (weak oil and metals prices); 3) scarcity of pricing power; 4) cost-cutting regaining prominence; and 5) capital management moderating.
• In light of a challenging reporting period, company downgrades outweighed upgrades by a factor of over 2 to 1 amongst small companies.
• Of the 144 companies in the Small Ords that reported during the period, 36 (25%) had positive EPS revisions, while 87 (60%) had negative EPS revisions. The average revision was -6.9%; however, the average price reaction was an increase of 2.2%. The median revision was -1.7%, while the median price reaction was 1.2%. Only 41 (47%) of the companies which had negative EPS revisions recorded a negative price reaction.
Fig.4: Small Ords index – positive reporting season revisions Fig.5: Small Ords index – negative reporting season revisions Next Year Price Reaction - Next Year Price Reaction - Company Name Company Name Revisions 2d Revisions 2d
Metals X Ltd 25.9% -12.5% NEXTDC Ltd -291.0% -8.5% Western Areas Ltd 22.3% 1.2% Superloop Ltd -83.7% 1.1% MACA Ltd 18.7% 0.6% Clinuvel Pharmaceuticals Ltd -64.7% -1.5% Baby Bunting Group Ltd 11.5% 16.5% Ardent Leisure Group Ltd -58.6% -4.2% Ingenia Communities Group 11.2% 4.0% Pilbara Minerals Ltd -53.1% -13.3% EML Payments Ltd 10.7% 17.0% Amaysim Australia Ltd -34.5% -30.6% Clean TeQ Holdings Ltd 9.3% -2.6% Japara Healthcare Ltd -31.3% 2.4% IPH Ltd 8.8% 6.5% Bellamy's Australia Ltd -25.2% -6.3% Mesoblast Ltd 7.4% -3.1% Class Ltd -22.7% -1.1% APN Industria REIT 6.8% 1.7% Nanosonics Ltd -21.8% 30.8% Pro Medicus Ltd 6.3% 14.3% Abacus Property Group -21.7% -4.2% NRW Holdings Ltd 6.2% 9.6% Blackmores Ltd -20.9% -19.6% Cromwell Property Group 6.1% -0.8% Virtus Health Ltd -20.5% -11.4% Chorus Ltd 6.1% -3.5% Inghams Group Ltd -20.0% -20.5% Credit Corp Group Ltd 5.4% -2.3% Megaport Ltd -18.1% 6.3% Kogan.com Ltd 5.3% 14.7% Cooper Energy Ltd -17.8% 0.9% Myer Holdings Ltd 5.3% 7.9% Bega Cheese Ltd -16.7% 5.3% Independence Group NL 4.7% 4.0% Perseus Mining Ltd -15.6% -2.6% Bravura Solutions Ltd 4.7% -4.1% SG Fleet Group Ltd -14.0% -3.3% Austal Ltd 4.7% 16.0% Seven West Media Ltd -13.8% -5.2% Ausdrill Ltd 3.6% 14.3% Praemium Ltd -13.4% 6.9% Integrated Research Ltd 3.5% 12.7% IOOF Holdings Ltd -12.9% -6.3% News Corp 1.7% 8.9% Domain Holdings Australia Ltd -12.4% 11.5% Charter Hall Long WALE REIT 1.6% 3.6% Cedar Woods Properties Ltd -11.9% 3.0% Steadfast Group Ltd 1.5% 7.0% Monadelphous Group Ltd -11.2% -5.7%
Source: Refinitiv Source: Refinitiv
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Six month top and bottom performers
• For the six months to 31-Aug, the Small Industrials Accumulation Index (XSIAI) returned 6.4%, whilst the ASX Small Resources Accumulation Index (XSRAI) returned -4.0%.
• Top performers: Growth dominated the top performing Small Industrials stocks with Pro Medicus (PME), Polynovo (PNV) and EML Payments (EML) – all of which are trading on FY20 forward PEs of >41x – up 168.0%, 157.0% and 137.7% respectively. Elsewhere, the Small Resources top performers were dominated by gold producers, as the spot gold price rallied 21.8%. Key beneficiaries included Ramelius Resources (RMS), Westgold Resources (WGX) and Perseus Mining (PRU), up 108.9%, 93.4% and 68.5% respectively.
• Bottom performers: Stock specific issues were a key determinant for underperformance over the prior six months with Speedcast International (SDA), ARQ Group (ARQ) and Wagners Holdings (WGN) falling 78.8%, 68.8% and 47.5% respectively following earnings downgrades. Within the Small Resources, New Century Resources (NCZ), Liquefied Natural (LNG), and Dacian Gold (DCN) all underperformed, down 65.9%, 63.8% and 60.5% respectively.
Fig.6: Top performers – ASX Small Industrials Fig.7: Bottom performers – ASX Small Industrials Relative Relative Code Company Code Company Performance Performance 1 PME Pro Medicus Limited 161.5% 1 SDA Speedcast International -85.2% 2PNV PolyNovo Limited 150.5% 2 ARQ ARQ Group Limited -75.3% 3 EML EML Payments Ltd 131.2% 3 WGN Wagners Hld Company -54.0% 4JIN Jumbo Interactive 110.1% 4 AYS Amaysim Aus Ltd -48.5% 5 MP1 Megaport Limited 93.1% 5 CGC Costa Group Holdings -46.5% 6 ASB Austal Limited 85.0% 6 SLC Superloop Limited -44.9% 7 APE A.P. Eagers Limited 56.3% 7 ALG Ardent Leisure Group Ltd -43.1% 8 NAN Nanosonics Limited 54.3% 8MYX Mayne Pharma Ltd -42.9% 9IPH IPH Limited 49.2% 9CTD Corp Travel Limited -41.0% 10 KGN Kogan.Com Ltd 47.4% 10 ABC Adelaide Brighton -39.2%
Source: IRESS Source: IRESS
Fig.8: Top performers – ASX Small Resources Fig.9: Bottom performers – ASX Small Resources Relative Relative Code Company Code Company Performance Performance 1 RMS Ramelius Resources 112.9% 1 NCZ New Century Resource -61.9% 2 WGX Westgold Resources. 97.4% 2 LNG Liquefied Natural -59.8% 3 PRU Perseus Mining Ltd 72.5% 3 DCN Dacian Gold Ltd -56.5% 4 SLR Silver Lake Resource 60.6% 4 AJM Altura Mining Ltd -52.3% 5 RSG Resolute Mining 55.8% 5 PLS Pilbara Min Ltd -49.0% 6 GOR Gold Road Res Ltd 45.6% 6 OMH OM Holdings Limited -47.9% 7 SAR Saracen Mineral 44.5% 7 SEA Sundance Energy -47.9% 8 KDR Kidman Resources Ltd 40.3% 8 SYR Syrah Resources -45.2% 9 LYC Lynas Corporation 39.8% 9MLX Metals X Limited -44.4% 10 IMD Imdex Limited 24.7% 10 GXY Galaxy Resources -43.3%
Source: IRESS Source: IRESS
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EL&C Baillieu Research Top Stock Picks – September 2019
Adairs ADH
Recommendations Company Report Rating BUY Take a dare Risk High In a nutshell: We recently upgraded our recommendation on ADH from Hold to Price Target $2.24 BUY due to: 1) store network expansion to underwrite sales growth; 2) online Share Price $1.74 growth to remain robust; 3) trading environment to improve on last year; 4) potential for lower occupancy costs from negative leasing spreads; and 5) Snapshot valuation support. We also increased our price target to $2.24 (from $1.70). Monthly Turnover $37.3mn Store network expansion: Adairs’ total sales increased 9.5% in FY19 (including Market Cap $289mn online sales) while store sales increased 4.7%. Store sales growth was curtailed Shares Issued 165.9mn in FY19 through disciplined store management – ADH closed seven stores in 52-Week High $2.68 FY19, including three Myer concession stores. ADH opened five new stores and upsized five stores, which should benefit sales in the current period. Added to 52-Week Low $1.25 this, the company plans to open an additional 4-6 net new stores in FY20. As Sector Consumer Discretionary such, the company should add between 3-4% space growth in FY20.
Online growth remains strong: Online sales delivered 42% like-for-like sales Business Description growth in FY19. Online sales now represent 17% of Adairs’ total sales, up from Adairs (ADH) is a leading specialty retailer of home 13% in FY18. Management commented online traffic increased 41%, in line with furnishings in Australia and New Zealand with a national footprint of stores across a number of sales growth (+41.7%), while its conversion rate increased 7%. ADH reported formats. online sales increased 26.9% in the first seven weeks of FY20. We expect online growth of c.20% in FY20. 12 Month Price & Volume Trading environment to improve: FY19 was a difficult trading period for most retailers, with a number of uncertainties impacting consumer confidence. We think the stabilisation in housing prices, modest improvements in housing turnover, lower interest rates and tax cuts may provide a better backdrop. Costs kept in check given negative leasing spreads: Negative leasing spreads remain a feature of the retail landscape, assisting retailers manage their costs. We note ADH’s occupancy to sales ratios declined from 12.7% in FY18 to 12.4% due to store closures and rent reductions. We expect further declines in FY20. Valuation support: Based on our current forecasts, ADH is trading on a modest PER multiple of 9.1x; one of the cheapest consumer stocks in the Small Ordinaries. Key risks to our call are: 1) gross margin pressure due to currency; 2) Research Analyst deterioration in trading; and 3) higher distribution costs. James Casey
+ 613 9602 9265 Investment Summary [email protected] Year End: 30 June 2018 (A) 2019 (A) 2020 (E) 2021 (E) 2022 (E) Piers Flanagan Revenue $mn 315 345 367 387 407 + 613 9282 8127 EBITDA $mn 51.0 50.8 52.7 58.8 64.6 [email protected] EBIT $mn 45.3 43.4 45.0 48.9 53.2 Reported Profit $mn 30.6 29.6 31.0 33.8 36.9 Adjusted Profit $mn 30.6 29.6 31.0 33.8 36.9 EPS (Reported) ¢ 18.3 17.8 18.7 20.4 22.3
EPS (Adjusted) ¢ 18.3 17.8 18.7 20.4 22.3 Disclosure EPS Growth % 40.0 -2.4 4.9 8.8 9.4 The author owns no shares in ADH. PER (Adjusted) x 9.3 9.6 9.1 8.4 7.7 EV/EBITDA x 5.9 5.9 5.6 5.1 4.4 Dividend ¢ 13.5 14.5 14.5 16.0 17.5 Yield % 7.8 8.3 8.3 9.2 10.1 Franking % 100 100 100 100 100
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Financial Summary
Adairs Code: ADH Rating: Buy Analyst: James Casey Price Target: $2.24 Date: 16/09/2019 Upside/downside: 28.7% Share Price: $1.74 Valuation: $2.24 Market Capitalisation: 288.6 Valuation method: Blended Year End: 30 June Risk: High PROFIT & LOSS (A$m) FY18A FY19E FY20E FY21E FY22E EARNINGS FY18A FY19E FY20E FY21E FY22E Revenue 314.8 344.4 366.8 386.9 406.2 EPS - Underling cash (diluted) 18.3 17.8 18.7 20.4 22.3 Other Revenue 0.0 0.2 0.3 0.3 0.3 EPS Growth - underlying 40.0% -2.4% 4.9% 8.8% 9.4% Total Revenue 314.8 344.6 367.1 387.2 406.5 EPS - Reported (diluted) 18.3 17.8 18.7 20.4 22.3 Diluted shares (m) 167.1 165.9 165.9 165.9 165.9 Underlying EBITDA 51.0 50.8 52.7 58.8 64.6 DPS (cps) 13.514.514.516.017.5 Depreciation 5.7 7.4 7.7 10.0 11.4 Payout Ratio 74% 81% 77% 79% 79% EBITA 45.3 43.4 45.0 48.9 53.2 Franking 100% 100% 100% 100% 100% Amortisation 0.0 0.0 0.0 0.0 0.0 EBIT 45.3 43.4 45.0 48.9 53.2 VALUATION FY18A FY19E FY20E FY21E FY22E Net interest 1.5 1.2 0.7 0.6 0.4 Underlying P/E (x) 9.3 9.6 9.1 8.4 7.7 PBT 43.8 42.2 44.4 48.2 52.8 EV/EBITDA (x) 5.9 5.9 5.6 5.1 4.4 Tax 13.3 12.6 13.3 14.5 15.8 EV/EBIT (x) 6.7 6.8 6.5 6.1 5.4 Minorities 0.0 0.0 0.0 0.0 0.0 Dividend Yield (%) 7.8% 8.3% 8.3% 9.2% 10.1% Reported NPAT 30.6 29.6 31.0 33.8 36.9 Price/Op. Cash Flow 10.3 7.8 7.5 6.6 6.0
Amortisation of intangibles 0.0 0.0 0.0 0.0 0.0 GROWTH FY18A FY19E FY20E FY21E FY22E Non-recurring items (net tax) 0.0 0.0 0.0 0.0 0.0 Revenue growth 18.8% 9.4% 6.5% 6.0% 5.0% Underlying profit 30.6 29.6 31.0 33.8 36.9 EBITDA growth 39.1% -0.5% 3.8% 11.7% 9.8% PBT growth 51.8% -3.7% 5.1% 8.8% 9.4% BALANCE SHEET (A$m) FY18A FY19E FY20E FY21E FY22E Underlying NPAT growth 41.1% -3.1% 4.9% 8.8% 9.4% Assets Reported NPAT growth 45.9% -3.1% 8.3% 11.6% 8.9% Cash 12.7 16.7 12.0 12.6 13.2 Receivables 6.4 1.9 2.0 2.1 2.2 MARGINS & RETURNS FY18A FY19E FY20E FY21E FY22E Inventory 33.6 42.8 45.6 48.1 50.5 EBITDA Margin 16.2% 14.7% 14.4% 15.2% 15.9% Other 1.8 7.3 4.9 6.7 6.2 EBIT Margin 14.4% 12.6% 12.3% 12.6% 13.1% Total Current Assets 54.4 68.7 64.5 69.4 72.1 PBT Margin 10.9% 12.3% 12.1% 12.5% 13.0% Receivables 0.0 0.0 0.0 0.0 0.0 NPAT Margin 9.7% 8.6% 8.5% 8.7% 9.1% Investments 0.0 0.0 0.0 0.0 0.0 PPE 20.9 20.9 23.6 39.4 39.3 ROIC 21.4% 20.4% 20.8% 21.1% 21.8% Total Intangibles 114.2 113.5 113.5 113.5 113.5 ROE 26.3% 25.0% 24.7% 24.9% 25.1% Tax assets 5.4 7.2 8.3 8.5 8.0 ROA 25.1% 23.1% 23.0% 23.5% 24.3% Other assets 0.0 0.0 0.0 0.0 0.0 Effective Tax Rate 30.3% 30.0% 30.0% 30.0% 30.0% Total Non Current Assets 140.5 141.5 145.4 161.4 160.8 Total Assets 195.0 210.2 209.8 230.9 232.9 GEARING FY18A FY19E FY20E FY21E FY22E Liabilities Net Debt / (cash) (A$m) 12.3 8.3 5.2 9.8 -2.8 Payables 27.1 29.7 31.6 33.3 35.0 Enterprise value 303 297 294 298 286 Borrowings 0.0 0.0 0.0 0.0 0.0 Net Debt/Equity (%) 10.6% 7.0% 4.1% 7.2% -1.9% Other 7.1 16.9 13.1 16.3 15.8 Net Debt/EBITDA 0.24 0.16 0.10 0.17 -0.04 Total Current Liabilities 34.2 46.6 44.7 49.7 50.8 EBITDA/Net interest 34.3 42.4 79.3 95.0 149.0 Creditors 0.0 0.0 0.0 0.0 0.0 Borrowings 25.0 25.0 17.2 22.4 10.4 OPERATIONAL DATA (A$M) FY18A FY19E FY20E FY21E FY22E Other 19.6 20.4 22.2 23.1 24.3 Revenue by type: Total Non Current Liabilities 44.6 45.4 39.4 45.5 34.7 Adairs 314.8 344.4 366.8 386.9 406.2 Total Liabilities 78.8 92.0 84.1 95.1 85.5 Other 0.0 0.0 0.0 0.0 0.0 Equity Group 314.8 344.4 366.8 386.9 406.2 Share capital 68.3 68.3 67.8 67.8 67.8 Reserves 1.5 1.0 1.0 1.0 1.0 Retained earnings 46.4 48.9 56.9 67.0 78.5 Minorities 0.0 0.0 0.0 0.0 0.0 Total shareholders equity 116.2 118.3 125.7 135.8 147.4 CASH FLOW (A$M) FY18A FY19E FY20E FY21E FY22E Cash at Start 14.3 12.7 16.7 12.0 12.6 Cash from from ops 39.1 35.0 38.8 44.3 49.6 Capex -7.1 -7.0 -10.4 -25.8 -11.2 Free cash flow 32.0 28.1 28.4 18.4 38.3 Free cash flow per share (cps) 0.19 0.17 0.17 0.11 0.23 Other cash flow from investing 0.0 0.0 0.0 0.0 0.0 Cash flow from financing -33.6 -24.1 -31.5 -18.2 -38.2 Cash at end 12.7 16.7 12.0 12.6 13.2 GOCF / EBITDA 102% 96% 98% 99% 99%
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EL&C Baillieu Research Top Stock Picks – September 2019
Ardent Leisure Group ALG
Recommendations Company Report Rating BUY Going for Gold on the Gold Coast – Part 1 Risk High Synopsis: Whilst ALG’s US family restaurant/entertainment chain Main Event Price Target $1.55 again dominated earnings in FY19, the Theme Park division’s EBITDA remains Share Price $1.06 c.A$45m below what it achieved prior to the Dreamworld accident in 2016. We view ALG’s decision to reinvest in new rides/attractions at Dreamworld as a Snapshot positive. This will coincide with Main Event’s decision to resume new site roll- Monthly Turnover $28.8mn outs in FY20 after somewhat of a pause in FY19. Market Cap $506mn Key takeaways from FY19 result: 1) Although messy (restructuring costs and Shares Issued 479.7mn non-recurring items) the underlying result for continuing businesses (Main 52-Week High $1.81 Event and Theme Parks) was encouraging, with revenue and EBITDA growth of 14% and 16% respectively; 2) at the revenue line, the group’s FY19 growth was 52-Week Low $0.98 solely provided by Main Event’s 8% pcp growth; 3) negative constant centre Sector Consumer Discretionary revenue growth for Main Event of 1% (FY18: +1.6%) with ALG citing strong competition; 4) Main Event revenue growth due to opening of four new centres Business Description across FY18/19; 5) flat revenue for Theme Parks despite 11% pcp decline in Ardent Leisure Group (ALG) is an owner and attendances – attributed to the ongoing negative publicity from the operator of leisure and entertainment assets across Dreamworld Coronial Inquest in late 2018 and the deferred opening of the key Australia and the United States. ALG’s business Sky Voyager attraction; 6) although underlying margins look flat in FY18, the segment includes US Entertainment Centres and result included only a partial contribution from cost reductions undertaken Australian Theme parks. across the group; 7) balance sheet looks well placed to achieve plans; and 8) a
return to dividends will depend upon trading and capital needs. 12 Month Price & Volume Outlook: 1) Main Event: Target of constant centre revenue growth of 1-2% pa going forward introduced. Four new centres to be opened in FY20, with a target of 5-8 pa thereafter. Medium-term divisional margin of 20% reiterated. 2) Theme Parks: ALG predicting a return to attendance growth from FY20 and a return to traditional divisional earnings over the next 3-5 years through a A$50m investment on new rides/attractions over the same period. Investment view: BUY with DCF valuation of A$1.54 and price target of A$1.55. A material improvement in underlying profitability in FY19 combined well with a detailed results presentation. Whilst the near-term risks of the upcoming Coroner’s Inquest and a potential economic downturn in the US exist, we now believe ALG has passed the bottom of its earnings cycle. Corporate interest in Research Analyst ALG either as whole or at the divisional level is very possible.
Nick Caley + 613 9602 9283 Investment Summary [email protected] Year End: 30 June 2018 (A) 2019 (A) 2020 (E) 2021 (E) 2022 (E) Nicolas Burgess, CFA Revenue $mn 422 483 551 620 700 + 613 9602 9379 EBITDA $mn 46.8 54.2 73.6 104.8 129.1 [email protected] EBIT $mn 3.8 1.8 15.1 38.8 54.6 Reported Profit $mn -90.7 -60.9 -3.1 14.3 26.1 Adjusted Profit $mn -90.7 -60.9 -3.1 14.3 26.1 EPS (Reported) ¢ -19.3 -12.7 -0.6 3.0 5.4 EPS (Adjusted) ¢ -19.3 -12.7 -0.6 3.0 5.4 Disclosure EPS Growth % N/A N/A N/A N/A 83.2 PER (Adjusted) x N/A N/A N/A 35.5 19.4 The author owns no shares in ALG. EV/EBITDA x 20.1 10.7 7.8 5.3 4.1 Dividend ¢ 8.5 0.0 1.0 2.8 5.0 Yield % 8.1 0.0 0.9 2.6 4.7 Franking % 0 0 20 20 20
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EL&C Baillieu Research Top Stock Picks – September 2019
Financial Summary
Ardent Leisure Group Ltd Analyst Nick Caley Rating BUY Date 16-September-2019 Price Target $1.55 Market Capitalisation (A$m) $506 Valuation $1.54 Share Price ($A) $1.06 Upside/(Downside) 47% Year End 30 June Risk High Profit & Loss (A$mn) FY19A FY20E FY21E FY22E Earnings FY19A FY20E FY21E FY22E Operating Revenue 483.3 550.6 620.2 700.1 # EPS - Basic Reported -12.7 -0.6 3.0 5.4 Divisional Expenses 419.1 466.0 503.4 558.1 # EPS - Diluted Reported -12.7 -0.6 3.0 5.4 Underlying Divisional EBITDA 64.2 84.6 116.8 142.1 # EPS Growth (%) n/a n/a n/a 83% Corporate Costs 10.0 11.0 12.0 13.0 # DPS 0.0 1.0 2.8 5.0 Underlying EBITDA 54.2 73.6 104.8 129.1 # Franking (%) 0 20 20 20 Depreciation & Amortisation 52.4 58.5 66.0 74.4 Payout Ratio (%) 0% -155% 93% 92% Underlying EBIT 1.8 15.1 38.8 54.6 Non Cash/One Off Items/Val. Change -39.1 0.0 0.0 0.0 Valuation FY19A FY20E FY21E FY22E Pre-Opening Expenses 2.8 3.2 4.8 4.8 P/E (x) - Reported -8.3 -163.8 35.5 19.4 Net Finance Costs 7.9 9.0 10.2 11.5 EV/EBITDA (x) 10.7 7.8 5.3 4.1 Net Profit Before Tax -48.0 2.9 23.9 38.3 Dividend Yield (%) 0.0% 0.9% 2.6% 4.7% Income Tax Expense 12.3 6.0 9.6 12.2 Price/Book (x) 1.3 1.3 1.3 1.3 Discontinued Operations Post Tax -0.6 0.0 0.0 0.0 Price/NTA (x) 1.7 1.7 1.7 1.6 Net Profit After Tax - Reported -60.9 -3.1 14.3 26.1 Price/Cash/Flow per Share (x) 15.5 7.9 5.6 4.5
Growth FY19A FY20E FY21E FY22E Balance Sheet (A$mn) FY19A FY20E FY21E FY22E Divisional Revenue Growth (% pcp) 14% 14% 13% 13% Cash 92.3 125.7 170.3 224.9 Divisional Exp. Growth (% pcp) 15% 11% 8% 11% Receivables 12.5 12.5 12.5 12.5 Total Expense Growth (% pcp) 14% 11% 8% 11% Derivatives 7.8 7.8 7.8 7.8 Underlying EBITDA Growth (% pcp) 9% 32% 38% 22% Inventories 8.4 8.4 8.4 8.4 Underlying EBIT Growth (% pcp) -52% 725% 157% 41% Other 9.0 9.0 9.0 9.0 Total Current Assets 121.7 155.0 199.6 254.2 Margins & Returns FY19A FY20E FY21E FY22E Investment Properties 0.0 0.0 0.0 0.0 Divisional Underlying EBITDA Margin % 13% 15% 19% 20% Property, Plant & Equipment 478.6 464.2 447.9 429.4 Group Underlying EBITDA Margin % 11% 13% 17% 18% Livestock 0.2 0.2 0.2 0.2 ROIC % -18% -1% 5% 8% Intangibles 79.0 79.0 79.0 79.0 ROE % -15% -1% 4% 7% Deferred Tax 22.8 22.8 22.8 22.8 ROA % -9% 0% 2% 3% Other 3.0 3.0 3.0 3.0 Effective Tax Rate % -26% 206% 40% 32% Total Non Current Assets 583.7 569.2 552.9 534.5 Total Assets 705.3 724.3 752.5 788.7 Gearing & Cash Flow FY19A FY20E FY21E FY21E Payables 69.2 69.2 69.2 69.2 Net Debt (A$mn) 77 66 46 19 Derivatives 0.0 0.0 0.0 0.0 Net Debt/Equity (%) 20% 17% 12% 5% Loans & Borrowings 1.8 1.8 1.8 1.8 Int. Cover (x) - EBITDA/Net Int. 6.8 8.2 10.3 11.2 Provisions 7.9 7.9 7.9 7.9 Other 4.3 4.3 4.3 4.3 Sales Revenue by Division FY19A FY20E FY21E FY21E Total Current Liabilities 83.2 83.2 83.2 83.2 Theme Parks 67.1 80.6 91.3 100.6 Derivatives 0.5 0.5 0.5 0.5 Marinas 0.0 0.0 0.0 0.0 Loans & Borrowings 167.6 189.7 214.5 242.5 Bowling Centres 0.0 0.0 0.0 0.0 Other 68.9 68.9 68.9 68.9 Main Event Entertainment 416.2 470.1 528.9 599.5 Total Non Current Liabilities 237.0 259.0 283.8 311.8 Health Clubs 0.0 0.0 0.0 0.0 Total Liabilities 320.2 342.2 367.1 395.1 Other 0.0 0.0 0.0 0.0 Contributed Capital 777.0 777.0 777.0 777.0 # Total Operating Revenue 483.3 550.6 620.2 700.1 Reserves -92.0 -92.0 -92.0 -92.0 Retained Earnings -299.8 -302.9 -299.5 -291.3 Underlying EBITDA by Division FY19E FY20E FY21E FY22E Minority Interests 0.0 0.0 0.0 0.0 Theme Parks -10.0 4.4 11.0 16.2 Total Equity 385.1 382.0 385.5 393.6 Marinas 0.0 0.0 0.0 0.0 Bowling Centres 0.0 0.0 0.0 0.0 Cash Flow (A$mn) FY19A FY20E FY21E FY22E Main Event Entertainment 74.2 80.2 105.8 125.9 Cash at Start 16.5 92.3 125.7 170.3 Health Clubs 0.0 0.0 0.0 0.0 Cash Flow from Ops 32.5 64.4 90.4 112.0 Corporate -10.0 -11.0 -12.0 -13.0 Cash Flow From Investing -71.3 -44.1 -49.6 -56.0 Total Underlying EBITDA 54.2 73.6 104.8 129.1 Cash Flow From Financing 115.4 13.0 3.8 -1.5 Net Cash Flow 76.7 33.4 44.6 54.6 Operating FY19A FY20E FY21E FY22E Adjustment -0.9 0.0 0.0 0.0 Main Event Centres (no) at end 42 46 52 55 Cash At End 92.3 125.7 170.3 224.9
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EL&C Baillieu Research Top Stock Picks – September 2019
Bapcor BAP
Recommendations Company Report Rating BUY Re-establishing its credentials Risk Medium Overall: Bapcor delivered 9% earnings growth in FY19, despite experiencing the Price Target $7.40 “toughest (industry) conditions since listing”. All businesses reported improved Share Price $6.96 operating results, except for its Retail/Service business which is undergoing substantive change. Significantly, sales momentum improved in 2H19, which Snapshot has continued into the first six weeks of trading in FY20. We maintain our BUY Monthly Turnover $237.0mn recommendation. Market Cap $1,983mn FY19 result in line with guidance: BAP reported an FY19 underlying NPAT of Shares Issued 283.5mn $94.3m, up 9% on the pcp and in line with our forecast. BAP’s operating 52-Week High $7.75 margins increased to 12.7% in FY19, up from 12.1% in FY18. Cash flow from operations improved significantly in 2H19, with a cash conversion ratio of 96%, 52-Week Low $5.32 compared with a cash conversion of 59% in 1H19. Sector Consumer Discretionary Improved momentum evident in 1H20: There were two significant areas of
improvement evident in the 2H19. Firstly, BAP achieved substantial operating Business Description margin improvement, with a 2H19 EBITDA margin of 13.4%, 50bps higher than Bapcor Limited (BAP, formerly Burson Group the 12.9% achieved in 2H18. Secondly, BAP reported improvement in same-store Limited) is an Australian trade company focusing on the distribution of automotive aftermarket parts. BAP sales in 2H19 for all businesses. Based on the first six weeks of trading in FY20, it supplies replacement parts and consumables used appears the momentum in sales growth has been maintained. in the service and repair of vehicles. It also includes the sale of accessories and maintenance products to Outlook: Bapcor management is forecasting mid- to high-single digit profit vehicle owners. growth in FY20. The company plans to spend c.$50m on capital expenditure over the next three years in new store openings across its key businesses, as well as invest in its supply chain. 12 Month Price & Volume Investment view: Following a difficult 1H19, BAP delivered a strong 2H19 result with positive momentum heading into FY20. In our view, the result goes a long way to the company re-establishing itself as a reliable source of profit and dividend growth over the medium term. Key risks going forward are as follows: 1) an unexpected increase in competitive rivalry from its major competitor; 2) inability to pass on price rises to customers following currency changes; and 3) mismanaging its capital expenditure program associated with its supply chain.
Investment Summary Research Analyst Year End: 30 June 2018 (A) 2019 (A) 2020 (E) 2021 (E) 2022 (E) James Casey Revenue $mn 1,235 1,297 1,402 1,492 1,579 + 613 9602 9265 EBITDA $mn 150.0 166.1 190.3 208.8 226.5 [email protected] EBIT $mn 134.4 147.6 159.9 173.0 186.6 Nicolas Burgess, CFA Reported Profit $mn 86.5 94.3 103.0 113.1 123.8 + 613 9602 9379 Adjusted Profit $mn 88.2 96.0 104.7 114.7 125.4 [email protected] EPS (Reported) ¢ 30.9 33.2 36.2 39.7 43.4 EPS (Adjusted) ¢ 31.5 33.8 36.7 40.3 44.0 EPS Growth % 29.6 7.5 8.5 9.6 9.3 PER (Adjusted) x 22.1 20.6 18.9 17.3 15.8 EV/EBITDA x 14.9 13.9 12.0 10.8 9.8 Disclosure Dividend ¢ 15.5 17.0 18.0 20.0 22.0 Yield % 2.2 2.4 2.6 2.9 3.2 The author owns no shares in BAP. Franking % 100 100 100 100 100
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EL&C Baillieu Research Top Stock Picks – September 2019
Financial Summary
Bapcor Limited Code: BAP Rating: Buy Analyst: James Casey Price Target: $7.40 Date: 16/09/2019 Upside/downside: 6.3% Share Price: $6.96 Valuation: $7.40 Market Capitalisation: 1,982.8 Valuation method: Blended Year End: 30 June Risk: Medium PROFIT & LOSS (A$m) FY18A FY19A FY20E FY21E FY22E EARNINGS FY18A FY19A FY20E FY21E FY22E Revenue 1235.3 1296.6 1401.1 1490.9 1577.5 EPS - Underling cash (diluted) 31.5 33.8 36.7 40.3 44.0 Other Revenue 0.0 0.3 1.1 1.3 1.4 EPS Growth - underlying 29.6% 7.5% 8.5% 9.6% 9.3% Total Revenue 1235.3 1296.9 1402.2 1492.2 1578.9 EPS - Reported (diluted) 30.9 33.2 36.2 39.7 43.4 Diluted shares (m) 280.2 283.5 284.9 284.9 284.9 Underlying EBITDA 150.0 166.1 190.3 208.8 226.5 DPS (cps) 15.5 17.0 18.0 20.0 22.0 Depreciation 12.7 15.6 27.5 32.9 37.0 Payout Ratio 50% 51% 50% 50% 51% EBITA 137.3 150.5 162.8 175.9 189.5 Franking 100% 100% 100% 100% 100% Amortisation 2.9 2.9 2.9 2.9 2.9 EBIT 134.4 147.6 159.9 173.0 186.6 VALUATION FY18A FY19A FY20E FY21E FY22E Net interest 13.5 15.3 13.7 12.6 11.0 Underlying P/E (x) 22.1 20.6 18.9 17.3 15.8 PBT 120.9 132.4 146.1 160.4 175.5 EV/EBITDA (x) 14.9 13.9 12.0 10.8 9.8 Tax 34.5 38.1 43.1 47.3 51.8 EV/EBIT (x) 16.7 15.6 14.3 13.1 11.9 Minorities -0.1 0.0 0.0 0.0 0.0 Dividend Yield (%) 2.2% 2.4% 2.6% 2.9% 3.2% Reported NPAT 86.5 94.3 103.0 113.1 123.8 Price/Op. Cash Flow 19.1 14.0 14.9 13.3 12.1
Amortisation of intangibles 2.9 2.9 2.9 2.9 2.9 GROWTH FY18A FY19A FY20E FY21E FY22E Non-recurring items (net tax) 0.0 0.0 0.0 0.0 0.0 Revenue growth 21.9% 5.0% 8.1% 6.5% 6.4% Underlying profit 88.2 96.0 104.7 114.7 125.4 EBITDA growth 27.7% 10.8% 14.6% 9.7% 8.5% PBT growth 28.2% 9.5% 10.4% 9.8% 9.4% BALANCE SHEET (A$m) FY18A FY19A FY20E FY21E FY22E Underlying NPAT growth 30.6% 8.7% 9.1% 9.6% 9.3% Assets Reported NPAT growth 31.4% 9.0% 9.3% 9.8% 9.4% Cash 40.2 47.6 48.6 51.5 54.6 Receivables 146.7 162.5 175.6 186.9 197.7 MARGINS & RETURNS FY18A FY19A FY20E FY21E FY22E Inventory 287.3 326.2 342.5 364.4 385.6 EBITDA Margin 12.1% 12.8% 13.6% 14.0% 14.4% Other 1.7 0.9 1.5 1.3 1.5 EBIT Margin 10.9% 11.4% 11.4% 11.6% 11.8% Total Current Assets 475.9 537.2 568.1 604.0 639.4 PBT Margin 9.3% 10.2% 10.4% 10.8% 11.1% Receivables 0.1 0.0 0.1 0.1 0.1 NPAT Margin 7.0% 7.3% 7.4% 7.6% 7.8% Investments 0.0 0.0 0.0 0.0 0.0 PPE 52.6 60.7 83.2 99.1 112.5 ROIC 10.1% 10.1% 10.0% 10.5% 11.1% Total Intangibles 677.7 734.5 731.6 728.7 725.8 ROE 13.5% 13.1% 13.3% 13.6% 13.8% Tax assets 17.8 18.4 16.2 16.3 16.5 ROA 10.8% 11.8% 12.0% 12.6% 13.1% Other assets 3.4 2.4 3.2 3.1 3.5 Effective Tax Rate 28.5% 28.8% 29.5% 29.5% 29.5% Total Non Current Assets 751.6 816.2 834.3 847.2 858.4 Total Assets 1227.5 1353.4 1402.4 1451.2 1497.7 GEARING FY18A FY19A FY20E FY21E FY22E Liabilities Net Debt / (cash) (A$m) 286.3 332.8 304.1 272.6 231.9 Payables 187.8 183.6 198.4 211.2 223.4 Enterprise value 2239 2308 2289 2258 2218 Borrowings 0.0 0.0 5.7 8.1 7.5 Net Debt/Equity (%) 44.6% 46.1% 39.3% 32.7% 25.8% Other 54.9 50.6 58.2 59.7 64.3 Net Debt/EBITDA 1.91 2.00 1.60 1.31 1.02 Total Current Liabilities 242.7 234.2 262.4 278.9 295.2 EBITDA/Net interest 11.1 10.9 13.8 16.6 20.5 Creditors 0.0 0.0 0.0 0.0 0.0 Borrowings 326.5 380.4 347.0 316.0 279.0 OPERATIONAL DATA (A$M) FY18A FY19A FY20E FY21E FY22E Other 16.0 16.5 17.9 18.9 20.1 Revenue by type: Total Non Current Liabilities 342.5 396.9 364.9 334.9 299.1 Burson Trade 501.6 524.5 583.9 627.7 671.6 Total Liabilities 585.2 631.1 627.3 613.9 594.3 Retail and Service 239.1 255.3 270.6 289.6 306.9 Equity Specialist Wholesale 364.3 413.1 437.9 459.8 480.5 Share capital 606.5 623.5 623.1 623.1 623.1 New Zealand 85.2 165.0 172.4 180.2 187.4 Reserves -3.6 7.3 7.3 7.3 7.3 Other -47.6 -61.3 -63.8 -66.3 -69.0 Retained earnings 37.1 89.1 140.5 200.0 265.1 Group 1235.3 1296.6 1401.1 1490.9 1577.5 Minorities 2.4 2.2 2.4 2.6 2.9 Total shareholders equity 642.3 722.2 773.4 833.1 898.4 CASH FLOW (A$M) FY18A FY19A FY20E FY21E FY22E Cash at Start 39.7 40.2 47.6 48.6 51.5 Cash from from ops 85.4 65.6 123.6 136.0 152.6 Capex -32.6 -21.7 -50.0 -48.7 -50.4 Free cash flow 52.8 44.0 73.6 87.3 102.2 Free cash flow per share (cps) 0.19 0.15 0.26 0.31 0.36 Other cash flow from investing 86.4 -53.5 -0.9 0.2 -0.4 Cash flow from financing -138.7 15.4 -70.4 -80.1 -91.8 Cash at end 40.2 47.6 48.6 51.5 54.6 GOCF / EBITDA 99%79%92%90%92%
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EL&C Baillieu Research Top Stock PickPicks – – September September 2019 2019
EQT Holdings EQT
Recommendations Company Report Rating BUY Independence Day Risk Medium Overall: EQT is one of our key stock picks. We rate the stock a BUY given its Price Target $35.00 robust outlook, strong balance sheet and solid cash flow. We also see the Share Price $30.00 business as well-managed and focused after restructuring initiatives over the last three years. Snapshot FY19 result recap: At its recent FY19 result, EQT reported NPAT of $22.2m, up Monthly Turnover $7.7mn 12.7% over the year and just short of our $22.8m forecast. Adjusted NPATA of Market Cap $617mn $23.8m was also just short of our $24.4m forecast. The company declared a Shares Issued 20.6mn final dividend of 46cps (fully franked), up 9.5% on the pcp and in line with our 52-Week High $32.77 forecast. 52-Week Low $21.84 Drivers/surprises: Total revenue of $92.5m was up 4.6% over the year and just Sector Financials below our $95.1m forecast. Underlying cash costs increased 4.6% over the year to $56.4m. By division, Trustee & Wealth Services (TWS) saw FUMAS increase
11% over the year to $16.8bn – this included the Zurich Super contribution Business Description (~$1bn). TWS revenue was up 2.7% to $61.3m, just below our forecast. EQT Holdings (EQT) is a financial services company Corporate Trustee Services (CTS) saw FUS decline 4.2% over the year to that provides private client, trustee, estate administration and funds management services. The $68.1bn due to client mandate losses and fund closures. Despite this, CTS company has four business units: Funds revenue increased 9.0% on the back of acquisitions and client wins. Management; Private Client Services; Fund Services; and Superannuation. Key takeaways: Management painted a buoyant outlook for the company, with industry and regulatory tailwinds providing new business and acquisition opportunities. To capitalise on this, the company has invested ~$3m into the 12 Month Price & Volume business ($2m people, $1m technology). We expect these costs to annualise in 1H20F, with a return more likely in 2H20F and beyond. EQT paid down $8m of debt during 2H19, and at 30 June had net cash of $42.0m. A further $2-3m regulatory capital relief (license consolidation) is expected by Dec-19. Its UK business (formerly Treasury Capital) reported $2.1m of losses in FY19, but the company expects it to be run-rate breakeven within a year. Investment view: We maintain a BUY rating. As we have stated previously, we believe EQT has a number of factors providing a healthy earnings tailwind for the business. The company is also well capitalised and well managed, in our view. On valuation, the stock is trading on an FY20F PE of 23.1x, offering a two- year EPS CAGR of 12% and a 3.3% dividend yield – good value in an expensive Research Analyst market given the quality characteristics of the company. Nicolas Burgess, CFA
+ 613 9602 9379 Investment Summary [email protected] Year End: 30 June 2018 (A) 2019 (A) 2020 (E) 2021 (E) 2022 (E) Piers Flanagan Revenue $mn 89 93 99 106 113 + 613 9282 8127 EBITDA $mn 34.6 38.3 41.5 45.4 48.5 [email protected] Reported Profit $mn 19.7 22.2 25.5 28.7 32.4 Adjusted Profit $mn 22.0 23.8 26.8 30.0 32.4 EPS (Reported) ¢ 96.7 107.9 123.5 138.9 157.1
EPS (Adjusted) ¢ 108.2 115.8 129.8 145.2 157.1
EPS Growth % 14.9 7.1 12.0 11.9 8.1 Disclosure PER (Adjusted) x 27.7 25.9 23.1 20.7 19.1 The author owns no shares in EQT. Dividend ¢ 82.0 90.0 97.5 109.0 118.0 Yield % 2.7 3.0 3.3 3.6 3.9 Franking % 100 100 100 100 100
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EL&C Baillieu Research Top Stock Picks – September 2019
Financial Summary
Code EQT Rating BUY Analyst Nicolas Burgess Price Target $35.00 Date 16 September, 2019 Upside/downside 16.7% Share Price $30.00 Valuation $35.00 Market Capitalisation $617m Valuation method Blended DCF / PE Year End 30 June Risk Medium Profit & Loss (A$m) FY18A FY19A FY20E FY21E FY22E Earnings FY18A FY19A FY20E FY21E FY22E Operating revenue 88.5 92.5 98.9 106.3 112.5 EPS - Underling cash (diluted) 108.2 115.8 129.8 145.2 157.1 Investment revenue 0.0 0.0 0.0 0.0 0.0 EPS Growth - underlying 14.9% 7.1% 12.0% 11.9% 8.1% Group revenue 88.5 92.5 98.9 106.3 112.5 EPS - Reported (diluted) 96.7 107.9 123.5 138.9 157.1 Operating costs -53.9 -54.2 -58.0 -60.4 -63.0 Diluted shares (m) 20.3 20.6 20.6 20.6 20.6 EBITDA 34.6 38.3 41.5 45.4 48.5 DPS (cps) 82 90 98 109 118 Depreciation & Amortisation -2.4 -2.3 -2.3 -2.3 -2.3 Payout Ratio 85% 83% 79% 78% 75% EBIT 32.2 36.0 39.2 43.1 46.2 Franking 100% 100% 100% 100% 100% UK / Ireland pre-tax - -2.2 -0.5 0.5 1.0 Interest expense -0.8 -0.8 -0.6 -0.6 -0.6 Valuation FY18A FY19A FY20E FY21E FY22E Underlying PBT 31.4 33.0 38.1 43.0 46.6 P/E (x) 27.7 25.9 23.1 20.7 19.1 Tax -9.7 -10.0 -11.4 -12.9 -14.0 EV/EBITDA (x) 16.7 15.0 13.6 12.2 11.3 Minorities 0.3 0.8 0.1 -0.1 -0.2 EV/EBITA (x) 17.9 16.0 14.4 12.9 11.8 Underlying cash NPAT 22.0 23.8 26.8 30.0 32.4 Dividend Yield (%) 2.7% 3.0% 3.3% 3.6% 3.9% Price/Book (x) 2.4 2.3 2.3 2.2 2.0 One-off restructuring costs -0.9 0.0 0.0 0.0 0.0 Price/NTA (x) 15.0 11.8 10.5 9.3 6.2 Intangible amortisation -1.4 -1.6 -1.3 -1.3 0.0 Price/FCF per Share (x) 28.7 27.1 21.6 20.1 18.8 Reported profit 19.7 22.2 25.5 28.7 32.4 Balance Sheet (A$m) FY18A FY19A FY20E FY21E FY22E Growth FY18A FY19A FY20E FY21E FY22E Assets Revenue growth 10.8% 4.5% 7.0% 7.4% 5.8% Cash 60.7 54.4 64.2 73.8 83.4 Operating cost growth 6.2% 0.5% 6.9% 4.2% 4.2% Receivables 13.5 11.7 12.9 14.3 15.6 EBITDA growth 18.8% 10.7% 8.3% 9.4% 6.9% Other current assets 17.1 25.6 25.6 25.6 25.6 EBIT growth 18.8% 11.7% 8.9% 10.0% 7.3% Fixed Assets 7.5 6.7 6.7 6.7 6.7 PBT growth 18.0% 5.0% 15.4% 12.9% 8.5% Financial assets 0.0 0.0 0.0 0.0 0.0 Underlying NPAT growth 16.3% 8.4% 12.3% 11.9% 8.1% Intangibles 213.1 211.0 209.7 208.4 208.4 Reported NPAT growth 27.0% 12.9% 14.7% 12.5% 13.0% Other non-current assets 0.1 0.1 0.1 0.1 0.1 Total Assets 312.0 309.6 319.3 329.0 339.8 Margins & Returns FY18A FY19A FY20E FY21E FY22E Liabilities EBIT Margin 36.4% 38.9% 39.6% 40.5% 41.1% Debt 20.0 12.0 12.0 12.0 12.0 NPBT Margin 35.5% 35.7% 38.5% 40.4% 41.4% Payables 1.4 1.7 2.0 2.1 2.2 ROIC 11.0% 12.3% 13.3% 14.8% 15.1% Current tax liabilities 4.5 1.9 1.9 1.9 1.9 ROE 8.8% 9.2% 10.1% 11.0% 11.1% Provisions 10.4 9.4 9.0 9.0 9.0 ROA 11.4% 12.3% 13.2% 14.0% 0.0% Other liabilities 21.8 21.4 25.7 28.9 7.3 Effective Tax Rate 30.8% 30.2% 30.0% 30.0% 30.0% Total Liabilities 58.1 46.3 50.5 53.9 32.4 Gearing FY18A FY19A FY20E FY21E FY22E Equity Net Debt / (cash) (A$m) -40.7 -42.4 -52.2 -61.8 -71.4 Share capital 238.6 243.0 243.0 243.0 243.0 Enterprise value 577 575 565 556 546 Retained earnings 14.1 18.3 23.8 30.0 62.4 Net Debt/Equity (%) -16.0% -16.1% -19.4% -22.5% -23.2% Other equity 1.1 2.0 2.0 2.0 2.0 EBITDA/Net interest ----- Total shareholders equity 253.9 263.3 268.7 275.0 307.4 Operational Data FY18A FY19A FY20E FY21E FY22E BV per share (cps) 1248.9 1279.4 1303.2 1333.7 1490.7 NTA per share (cps) 200.3 254.3 286.5 323.2 480.3 Operating revenue (A$m) 88.5 92.5 98.9 106.3 112.5 Trustee and Wealth 59.7 61.3 67.5 72.9 77.7 Cash Flow (A$m) FY18A FY19A FY20E FY21E FY22E Corporate Trustee 27.6 30.1 30.9 32.9 34.6 Cash at start 40.3 60.7 54.4 64.2 73.8 Other 1.2 1.1 0.5 0.5 0.2 Cash flow from Ops 25.1 23.3 29.1 31.2 33.4 Capex -3.8-0.5-0.5-0.5-0.5Revenue margins 0.11% 0.11% 0.11% 0.11% 0.11% Free cash flow 21.2 22.8 28.7 30.7 32.8 Trustee and Wealth 0.49% 0.38% 0.38% 0.38% 0.38% Free cash flow per share (cps) 104.4 110.8 139.0 148.9 159.2 Corporate Trustee 0.04% 0.04% 0.04% 0.04% 0.04% Cash flow from investing 5.9 -7.5 0.0 0.0 0.0 Cash flow from financing -6.6 -21.5 -18.8 -21.1 -23.2 Group FUM (A$bn) 86.2 84.9 90.8 96.7 101.3 Cash at end 60.7 54.4 64.2 73.8 83.4 Trustee and Wealth 15.1 16.8 18.4 19.7 21.0 Corporate Trustee 71.1 68.1 72.4 77.0 80.3 GOCF / EBITDA 92% 93% 90% 90% 90% FCF / Underlying cash NPAT 97% 96% 107% 103% 101%
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EL&C Baillieu Research Top Stock Picks – September 2019
Hansen Technologies HSN
Recommendations Company Report Rating BUY Nordic living Risk Low Overall: We believe HSN continues to offer value, with upside from M&A and Price Target $4.50 AUD depreciation. Meanwhile, the stock offers excellent operating cash flow, a Share Price $3.24 diversified earnings base and long-term customer relationships. We maintain a BUY rating. Snapshot FY19 result recap: At its recent FY19 result, HSN reported underlying EBITDA of Monthly Turnover $46.2mn $55.8m, down 6.9% over the year but in line with our forecast of $55.6m. Market Cap $637mn Underlying NPATA of $33.7m was down 12.8% and was also in line with our Shares Issued 197.7mn $34.3m forecast. Cash flow was excellent, with GOCF/EBITDA of 118% in 2H19 52-Week High $4.29 (94% in FY19). The company declared a final dividend of 3.0cps (partially franked), in line with our forecasts. 52-Week Low $2.85 Sector Information Technology Drivers/surprises: Group revenue of $231.3m was up 0.2% over the year, driven by a 1.2% increase in recurring maintenance and support fees as well as a 2.2%
boost from a one-month contribution from the recent Sigma acquisition. Business Description Favourable currency moves also boosted revenue by around 3%. Detracting Hansen Technologies Limited (HSN) is an from the growth was a 2.4% headwind from lower project work. Expense information technology systems and services provider. It develops, integrates and supports billing growth of 2.8% included 2.0% growth in remuneration as well as investment system software for the utilities (electricity, gas and into the Ho Chi Minh development centre. HSN capitalised $10.9m of water) and telecommunications industries, and development costs over the year, in line with our expectations. delivers innovative tailored outsourcing and facilities management solutions across a range of market Key takeaways: HSN is guiding to EBITDA in FY20F of $70-76m, which includes segments. the impact of the recent Sigma acquisition – our revised forecasts are within this range. This includes the impact of investment in Vietnam, with the company not expecting a material benefit for a “couple of years”. Meanwhile, 12 Month Price & Volume new business wins show good momentum in the Nordic region, which implies solid progress in HSN’s Enoro (Finland, Norway) and TeleBilling (Denmark) businesses. Meanwhile, work has begun on integration of the Sigma acquisition, which includes exploring cross-sell and productivity opportunities. Investment view: We maintain a BUY rating. We see HSN as a relatively inexpensive, low risk and diversified stock in the context of an expensive small cap industrials market. Investment into its Vietnam development centre should see operating margin improvements in future years.
Research Analyst Investment Summary Nicolas Burgess, CFA Year End: 30 June 2018 (A) 2019 (A) 2020 (E) 2021 (E) 2022 (E) + 613 9602 9379 Revenue $mn 233 233 309 321 334 [email protected] EBITDA $mn 59.3 55.8 74.1 78.7 83.5 EBIT $mn 50.3 45.1 62.6 65.3 67.6 Piers Flanagan + 613 9282 8127 Reported Profit $mn 28.9 21.5 23.6 31.3 34.1 [email protected] Adjusted Profit $mn 38.0 33.6 40.4 44.1 46.9 EPS (Reported) ¢ 14.7 10.8 11.8 15.7 17.1
EPS (Adjusted) ¢ 19.3 16.9 20.2 22.1 23.5 Disclosure EPS Growth % 26.5 -12.4 19.6 9.1 6.3 The author owns no shares in HSN. PER (Adjusted) x 16.8 19.2 16.0 14.7 13.8 Dividend ¢ 7.0 6.0 6.0 6.6 9.5 E.L. & C. Baillieu Limited’s Chairperson & Director David Trude is Chairperson & Director of Hansen Yield % 2.2 1.9 1.9 2.0 2.9 Technologies Limited. Franking % 60 60 60 60 60
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EL&C Baillieu Research Top Stock Picks – September 2019
Financial Summary
Code HSN Rating BUY Analyst Nicolas Burgess Price Target $4.50 Date 16 September, 2019 Upside/downside 38.8% Share Price $3.24 Valuation $4.50 Market Capitalisation $637m Valuation method DCF / EV/EBIT Year End 30 June Risk Low Profit & Loss (A$m) FY18A FY19A FY20E FY21E FY22E Earnings FY18A FY19A FY20E FY21E FY22E Operating revenue 230.8 231.3 307.7 320.0 332.8 EPS - Underling cash (diluted) 19.3 16.9 20.2 22.1 23.5 Other revenue 1.8 1.6 1.0 1.0 1.0 EPS Growth - underlying 26.5% -12.4% 19.6% 9.1% 6.3% Group revenue 232.6 232.9 308.7 321.0 333.8 EPS - Reported (diluted) 14.7 10.8 11.8 15.7 17.1 Operating costs -173.3 -177.1 -234.6 -242.4 -250.4 Diluted shares (m) 196.6 198.6 199.9 199.9 199.9 EBITDA 59.3 55.8 74.1 78.7 83.5 DPS (cps) 7.0 6.0 6.0 6.6 9.5 Depreciation -3.9 -3.8 -2.9 -2.9 -3.3 Payout Ratio 36% 35% 30% 30% 40% EBITA 55.4 52.0 71.2 75.7 80.2 Franking 100% 60% 60% 60% 60% Amortisation -5.1 -6.9 -8.6 -10.4 -12.6 EBIT 50.3 45.1 62.6 65.3 67.6 Valuation FY18A FY19A FY20E FY21E FY22E Interest expense -2.0 -2.0 -9.4 -7.2 -5.8 P/E (x) cash, underlying 16.8 19.2 16.0 14.7 13.8 Other 0.0 -0.5 0.0 0.0 0.0 EV/EBIT (x) 12.7 17.4 12.2 11.3 10.5 Underlying PBT 48.4 42.6 53.2 58.1 61.8 EV/EBITDA (x) 10.8 14.1 10.3 9.4 8.5 Tax -10.4 -9.0 -12.8 -13.9 -14.8 Dividend Yield (%) 2.2% 1.9% 1.9% 2.0% 2.9% Minorities 0.0 0.0 0.0 0.0 0.0 Price/Book (x) 2.8 2.6 2.5 2.3 2.2 Underlying NPATA 38.0 33.6 40.4 44.1 46.9 Price/NTA (x) -47.1 -4.2 -5.8 -9.5 -27.1 Price/FCF 16.2 25.0 19.4 17.2 14.8 Non-recurring items (net tax) -9.1 -12.2 -16.8 -12.8 -12.8 Reported profit 28.9 21.5 23.6 31.3 34.1 Growth FY18A FY19A FY20E FY21E FY22E Balance Sheet (A$m) FY18A FY19A FY20E FY21E FY22E Revenue growth 33.0% 0.1% 32.5% 4.0% 4.0% Assets Operating cost growth 34.5% 2.2% 32.5% 3.3% 3.3% Cash 23.2 38.3 29.9 25.1 23.0 EBITA growth 28.6% -5.8% 32.7% 6.2% 6.1% Receivables 37.3 49.5 66.7 70.0 73.6 PBT growth 26.1% -11.9% 24.9% 9.1% 6.3% Deferred tax assets 4.1 4.6 4.6 4.6 4.6 Underlying NPAT growth 35.0% -11.5% 20.3% 9.1% 6.3% PPE 10.6 11.0 11.2 11.4 11.5 Reported NPAT growth 20.1% -25.7% 10.2% 32.6% 8.9% Intangibles 243.4 402.8 373.2 346.8 318.2 Other assets 11.238.938.938.938.9Margins & Returns FY18A FY19A FY20E FY21E FY22E Total Assets 329.8 545.0 524.5 496.9 469.7 EBITDA Margin 25.5% 24.0% 24.0% 24.5% 25.0% Liabilities NPBT Margin 20.8% 18.3% 17.2% 18.1% 18.5% Payables 16.5 21.2 27.8 28.9 30.0 ROIC 23.0% 12.2% 12.7% 13.5% 14.4% Debt 27.2 186.6 156.6 126.6 96.6 ROE 19.9% 14.0% 15.9% 16.4% 16.4% Provisions 30.0 59.4 59.4 59.4 59.4 ROA 20.5% 11.2% 12.3% 13.4% 14.7% Tax liabilities 3.2 1.8 1.8 1.8 1.8 Effective Tax Rate 21.5% 21.1% 24.0% 24.0% 24.0% Other liabilities 22.9 27.3 18.3 1.3 -12.3 Total Liabilities 99.8 296.1 263.8 217.9 175.4 Gearing FY18A FY19A FY20E FY21E FY22E Net Debt / (cash) (A$m) 4.0 148.3 126.7 101.5 73.6 Equity Enterprise value 641 785 764 738 710 Share capital 136.9 138.7 138.7 138.7 138.7 Net Debt/Equity (%) 1.7% 37.3% 32.7% 26.7% 20.0% Retained earnings 73.2 82.9 94.6 113.0 128.3 EBITDA/Net interest 30.3 28.2 7.9 10.9 14.3 Other equity 19.8 27.3 27.3 27.3 27.3 Net debt/EBITDA 0.1 2.7 1.7 1.3 0.9 Total shareholders equity 229.9 248.9 260.7 279.0 294.4
BV per share (cps) 117.0 125.3 130.4 139.6 147.3 NTA per share (cps) -6.9 -77.5 -56.3 -33.9 -11.9
Cash Flow (A$m) FY18A FY19A FY20E FY21E FY22E Cash at Start 13.6 21.8 36.9 28.5 23.7 Cash from from ops 52.1 39.7 50.4 55.2 60.4 Capex -2.8 -3.0 -3.1 -3.2 -3.3 R&D -10.0 -10.9 -13.8 -14.4 -13.3 Free cash flow 39.2 25.8 33.5 37.6 43.8 Free cash flow per share (cps) 20.0 13.0 16.7 18.8 21.9 Cash flow from investing -77.7 -173.3 -16.9 -17.6 -16.6 Cash flow from financing 35.1 148.7 -41.8 -42.4 -45.9 Cash at end 21.8 36.9 28.5 23.7 21.6
GOCF / EBITDA 104% 94% 100% 100% 95% FCF / Underlying cash NPAT 103% 77% 83% 85% 93%
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EL&C Baillieu Research Top Stock Picks – September 2019
Monadelphous Group MND
Recommendations Company Report Rating BUY Upgrade to BUY Risk High Overall: We upgrade MND to BUY (from Hold) reflecting the following: 1) MND’s Price Target $17.50 revenue mix shift towards its higher margin Engineering and Construction (E&C) Share Price $15.62 division; 2) solid project wins in CY20 adding to its development pipeline / construction backlog; 3) significant near-term E&C opportunities with major Snapshot customers; and 4) valuation support following recent share price weakness. Monthly Turnover $228.0mn Shift to E&C work should result in higher margins: Increasingly, a larger Market Cap $1,470mn portion of MND’s secured project work is within the company’s higher margin Shares Issued 94.3mn E&C division (~$500m in CY20). Whilst management have cautioned 52-Week High $20.07 associating current E&C work leading to material margin increases due to 1) heightened market competition and 2) pricing sensitivities for cost competitive 52-Week Low $12.51 delivery, MND maintains a strong track record of E&C execution. As such, we Sector Industrials forecast improvement in MND’s EBITDA margin from 6.6% in FY19 to 6.7% in FY20, 7.1% in FY21 and 7.2% in FY22. Business Description FY20 year-to-date pipeline looks strong: MND has secured ~$1.4bn of contract Monadelphous Group Limited (MND) is an work since the start of FY19. This includes contract work of $520m in 1H19, engineering group whose primary business is providing engineering construction, asset $430m in 2H19 and ~$400m in FY20YTD. Major construction contracts recently management and maintenance services to the secured include BHP’s South Flank Project, Rio Tinto’s West Angelas Project in resources, energy and infrastructure industry the Pilbara and Albemarle Lithium’s new Kemerton plant. The aforementioned sectors. The company operates in two business wins have created a strong pipeline of work for the company. segments: 1) Engineering Construction; 2) Maintenance and Industrial Services. Significant pipeline of work yet to be awarded: We understand a further $1bn worth of E&C work is still to be awarded in FY20. Upcoming major projects include Koodarderi, Robe River, and Iron Bridge. As a tier one contractor, we 12 Month Price & Volume believe MND is well placed to win its share of these high value contracts. Investment view: MND is now cycling negative revenue growth into a peak period of resources E&C contract commencements which should provide revenue tailwinds over the forecast years. Near-term contract announcements are a potential catalyst for FY20 earnings upgrades, in our view. Following recent share price weakness, MND is trading on an FY20f PE and EV/EBITDA of 21.4x and 11.2x respectively. We upgrade our MND recommendation from Hold to BUY, with an unchanged price target of $17.50.
Investment Summary Research Analyst Year End: 30 June 2018 (A) 2019 (A) 2020 (E) 2021 (E) 2022 (E) Piers Flanagan Revenue $mn 1,790 1,608 1,801 2,105 2,225 + 613 9282 8127 EBITDA $mn 119.0 106.8 120.7 149.5 160.0 [email protected] EBIT $mn 101.2 86.0 96.6 123.8 133.9 Nick Caley Reported Profit $mn 71.5 57.4 68.7 88.5 96.5 + 613 9602 9283 Adjusted Profit $mn 71.5 50.6 68.7 88.5 96.5 [email protected] EPS (Reported) ¢ 76.1 53.7 73.0 94.1 102.5 Nicolas Burgess, CFA EPS (Adjusted) ¢ 76.1 53.7 73.0 94.1 102.5 + 613 9602 9379 EPS Growth % 23.9 -29.4 35.9 28.9 9.0 [email protected] PER (Adjusted) x 20.5 29.1 21.4 16.6 15.2 EV/EBITDA x 10.8 12.6 11.2 8.8 8.0 Disclosure Dividend ¢ 62.0 48.0 57.5 75.0 82.5 Yield % 4.0 3.1 3.7 4.8 5.3 The author owns no shares in MND. Franking % 100 100 100 100 100
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EL&C Baillieu Research Top Stock Picks – September 2019
Financial Summary
Code MND Rating BUY Analyst Piers Flanagan Price Target $17.50 Date 13-September-2019 Upside/(Downside) 12.0% Share Price ($A) $15.62 Valuation Method DCF / EV/EBITDA Market Capitalisation ($Am) $1,470 Risk HIGH Year End 30-June Profit & Loss (A$m) FY18A FY19A FY20E FY21E FY22E Earnings FY18A FY19A FY20E FY21E FY22E Sales Revenue 1790.0 1608.3 1801.1 2104.7 2224.6 EPS - Underlying Diluted 76.1 53.7 73.0 94.1 102.5 Operating Expenses 1619.1 1375.9 1680.4 1955.2 2064.6 EPS -Reported 76.1 53.7 73.0 94.1 102.5 EBITDA 119.0 106.8 120.7 149.5 160.0 EPS Underlying - Growth (%) 23.9% -29.4% 35.9% 28.9% 9.0% Depreciation & Amortisation 17.8 20.8 24.1 25.7 26.1 Diluted Shares (m) 93.9 94.3 94.1 94.1 94.1 EBIT 101.2 86.0 96.6 123.8 133.9 DPS 62.0 48.0 57.5 75.0 82.5 Net Interest Expense 2.1 0.3 1.6 2.7 3.9 Franking (%) 100% 100% 100% 100% 100% Net Profit Before Tax (NPBT) 102.8 83.4 98.1 126.5 137.8 Payout Ratio (%) 81% 89% 79% 80% 80% Income Tax Expense 30.6 31.3 29.4 37.9 41.4 Valuation FY18A FY19A FY20E FY21E FY22E Adjusted NPAT 71.5 50.6 68.7 88.5 96.5 P/E (x) 20.5 29.1 21.4 16.6 15.2 Non-Recurring Items 0.0 0.0 0.0 0.0 0.0 EV/EBIT (x) 12.7 15.6 14.0 10.6 9.6 Reported NPAT 71.5 57.4 68.7 88.5 96.5 EV/EBITDA (x) 10.8 12.6 11.2 8.8 8.0 BALANCE SHEET (A$mn) FY18A FY19A FY20E FY21E FY22E Dividend Yield (%) 4.0% 3.1% 3.7% 4.8% 5.3% Cash 208.8 164.0 144.7 177.1 211.4 Price/FCF per Share (x) 55.1 -393.6 32.2 15.3 13.4 Receivables 288.4 322.8 378.2 399.9 400.4 Price/Book (x) 3.7 3.7 3.6 3.4 3.2 Inventory 47.2 4.6 5.4 21.0 22.2 Price/NTA (x) 3.7 3.8 3.6 3.4 3.2 Other 0.0 0.2 0.2 0.2 0.2 Growth FY18A FY19A FY20E FY21E FY22E Total Current Assets 544.3 521.1 566.4 640.3 667.6 Total Rev. Growth (% pcp) -7.3% -10.2% 12.0% 16.9% 5.7% PPE 102.0 115.4 116.3 117.0 116.4 EBITDA Growth (% pcp) -13.6% -10.3% 13.0% 23.9% 7.1% Intangibles and Goodwill 3.1 3.1 1.5 0.4 -0.7 EBIT Growth (% pcp) -14.0% -15.0% 12.3% 28.2% 8.2% Deferred tax asset 35.3 34.2 34.2 34.2 34.2 NPBT Growth (% pcp) -13.5% -18.9% 17.6% 28.9% 9.0% Other 4.2 10.9 10.9 10.9 10.9 NPAT Growth (% pcp) -14.1% -29.3% 35.9% 28.9% 9.0% Total Non Current Assets 144.7 163.9 163.2 162.8 161.1 Margins & Returns FY18A FY19A FY20E FY21E FY22E Total Assets 689.0 685.0 729.6 803.1 828.7 EBITDA Margin (%) 6.7% 6.6% 6.7% 7.1% 7.2% Payables 164.0 184.3 225.1 273.6 278.1 EBIT Margin (%) 5.7% 5.3% 5.4% 5.9% 6.0% Loans & Borrowings 7.9 10.9 0.9 0.9 0.9 NPBT Margin (%) 5.7% 5.2% 5.4% 6.0% 6.2% Provisions 94.1 63.1 63.1 63.1 63.1 ROIC (%) 39.7% 22.5% 24.1% 30.0% 33.7% Current tax 8.5 0.0 0.0 0.0 0.0 ROE (%) 18.5% 14.6% 17.1% 20.8% 21.5% Total Current Liabilities 274.6 258.3 289.1 337.5 342.0 ROA (%) 14.9% 12.5% 13.7% 16.2% 16.4% Loans & Borrowings 13.0 27.4 22.4 22.4 22.4 Effective Tax Rate (%) 29.7% 37.5% 30.0% 30.0% 30.0% Provisions 5.3 4.5 4.5 4.5 4.5 Gearing FY18A FY19A FY20E FY21E FY22E Deferred tax liability 0.0 0.1 0.1 0.1 0.1 Net Debt (A$mn) -187.8 -125.8 -121.5 -153.8 -188.2 Total Non-Current Liabilities 18.3 32.0 27.0 27.0 27.0 Enterprise value 1282.2 1344.2 1348.5 1316.1 1281.8 Total Liabilities 292.9 290.3 316.1 364.6 369.0 Net Debt/Equity (%) nanananana Contributed Capital 125.7 128.7 128.7 128.7 128.7 Int. Cover (x) - EBITDA/Net Int. 56.1 315.0 76.2 56.1 40.6 Reserves 30.3 33.7 33.7 33.7 33.7 Segmental FY18A FY19A FY20E FY21E FY22E Retained Earnings 238.5 231.0 249.8 274.8 296.0 Segment Revenue Minority Interests 1.6 1.2 1.2 1.2 1.2 Engineering and Construction 949.9 622.9 713.3 893.1 933.3 Total Equity 396.1 394.7 413.5 438.5 459.7 Maintenance and Industrial Services 841.1 998.4 1102.7 1226.6 1306.3 Total Segment Revenue 1784.0 1608.3 1801.1 2104.7 2224.6 BV per share (cps) 421.8 418.6 439.4 466.0 488.5 NTA per share (cps) 418.5 415.3 437.8 465.5 489.2
Cash Flow (A$m) FY18A FY19A FY20E FY21E FY22E Cash at Start 241.9 208.8 164.0 144.7 177.1 Cash Flow from Ops 51.6 16.0 69.0 121.1 134.1 Capex -25.0 -19.7 -23.4 -25.3 -24.5 Free cash flow 26.6 -3.7 45.6 95.8 109.6 Free cash flow per share (cps) 28.3 -4.0 48.4 101.8 116.5 Cash Flow From Investing -23.6 -14.1 -23.4 -25.3 -24.5 Cash Flow From Financing -61.5 -47.8 -64.9 -63.5 -75.3 Net Cash Flow -33.5 -46.0 -19.3 32.3 34.3 Cash At End 208.8 164.0 144.7 177.1 211.4
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EL&C Baillieu Research Top Stock Picks – September 2019
MNF Group MNF
Recommendations Company Report Rating BUY Riding the tailwinds Risk High Riding the tailwinds: MNF provides software platforms and applications which Price Target $5.86 enable the providers of digital communications products to service their clients. Share Price $5.04 MNF’s business is benefiting from multiple tailwinds, including: 1) the shutting down of legacy PSTN and ISDN services, which are being replaced by digital Snapshot platforms; 2) the rollout of the NBN, which will drive increased take-up of VOIP; Monthly Turnover $32.9mn and 3) the global expansion of communications companies/platforms such as Market Cap $370mn Skype, Zoom, Microsoft and Google. Shares Issued 73.5mn Strong FY19 result: MNF reported revenue of $216m, gross margin of $83m 52-Week High $5.21 (+20% on pcp), underlying EBITDA of $27.2m (+11%) and underlying NPATA of $15.9m (+13%). High-margin recurring revenue was $74m (+89% on the pcp), 52-Week Low $3.25 with recurring GM at $49m (+60%), driven by seven months of TIAB Sector Telecommunication Services contribution and 23% organic growth in the Domestic Wholesale division.
Robust financial position: Cashflow was impacted by the unwinding of the Business Description supplier contract novation in 1H19, with the final $7m payment meaning MNF Group is Australia’s largest provider of VoIP operating cashflow was -$5.6m for the half. In 2H19, operating cashflow was telephony. The company provides services to businesses, enterprises and government as well as $11.1m, being more reflective of the normalised situation going forward. MNF to wholesale buyers, competing with Tier 1 also refinanced its loan facility and lowered its average interest rate by 90bp to incumbents. The company also provides wholesale 3.8%. Net debt at 30 June was $40m (from $44m at 31 December), giving an services to global carriers after acquiring TNZI. FY20 ND/EBITDA of c.1.2x.
Multiple growth drivers: MNF expects to drive strong organic growth from a 12 Month Price & Volume number of sources, including: 1) winning new customers; 2) expanding its software capabilities with existing customers; 3) benefiting from the growth of its wholesale clients; and 4) expanding into Asia on the back of demand by large, global unified communications service providers. Their potential Asia- Pacific addressable population is 650m (compared with 30m in Australia & NZ). Investment view: This was a very good result (especially in 2H19) which provides a platform for strong growth in FY20. The increase in higher-margin recurring revenues was a positive, as was the stabilisation in international usage revenues in 2H19. We believe MNF is a quality growth story and is good value, trading on an FY21 P/E of 16x, with average EPS growth of 25% to FY21. BUY.
Research Analyst Investment Summary Luke Macnab, CFA Year End: 30 June 2018A 2019A 2020E 2021E 2022E + 612 9250 8930 Revenue $mn 220.7 215.6 256.1 273.3 289.5 [email protected] EBITDA $mn 24.3 26.3 34.6 39.1 44.8 Nicolas Burgess, CFA EBIT $mn 18.0 17.3 24.7 29.2 34.9 + 613 9602 9379 Reported Profit $mn 11.9 11.4 16.0 19.7 23.5 [email protected] Adjusted Profit $mn 13.3 14.9 19.2 22.8 26.7 EPS (Reported) ¢ 16.1 15.4 21.5 26.4 31.5 EPS (Adjusted) ¢ 18.0 20.1 25.8 30.6 35.7 EPS Growth % -7.2 12.0 28.1 18.8 16.7 PER (Adjusted) x 28.1 25.1 19.6 16.5 14.1 Disclosure EV/EBITDA x 14.9 15.6 11.5 9.8 8.2 Dividend ¢ 8.4 6.1 8.1 10.3 12.5 The author owns no shares in MNF. Yield % 1.7 1.2 1.6 2.0 2.5 Franking % 100 100 100 100 100
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EL&C Baillieu Research Top Stock Picks – September 2019
Financial Summary
MNF GROUP Code: MNF Rating: BUY Analyst: Luke Macnab Price Target: $5.86 Date: 13 September, 2019 Upside/downside: 16% Share Price: $5.04 Valuation: $5.86 Market Capitalisation: $370m Valuation method: DCF/Multiple Financial Year End: June Risk: High
PROFIT & LOSS (A$m) FY18A FY19A FY20E FY21E FY22E EARNINGS FY18A FY19A FY20E FY21E FY22E Operating revenue 220.7 215.6 256.1 273.3 289.5 EPS - Underlying NPATA (cps) 18.0 20.1 25.8 30.6 35.7 COGS -151.7 -133.1 -156.6 -166.1 -174.6 EPS Growth - Underlying NPATA -7% 12% 28% 19% 17% Gross profit 69.0 82.5 99.6 107.2 114.9 EPS - Reported (cps) 16.1 15.4 21.5 26.4 31.5 Expenses -44.7 -56.2 -65.0 -68.1 -70.1 Diluted shares (m) 73.8 74.3 74.5 74.6 74.7 EBITDA 24.3 26.3 34.6 39.1 44.8 DPS (cps) 8.4 6.1 8.1 10.3 12.5 Depreciation -4.3 -5.6 -5.3 -5.3 -5.3 Dividend Yield 1.7% 1.2% 1.6% 2.0% 2.5% EBITA 20.0 20.7 29.2 33.7 39.4 Payout Ratio 51% 36% 37% 38% 39% Amortisation -2.0 -3.4 -4.5 -4.5 -4.5 Franking 100% 100% 100% 100% 100% EBIT 18.0 17.3 24.7 29.2 34.9 Net Interest expense -1.3 -1.7 -3.4 -3.0 -3.6 VALUATION FY18A FY19A FY20E FY21E FY22E Underlying PBT 16.8 15.6 21.4 26.2 31.4 P/E - Underlying (x) 28.1 25.1 19.6 16.5 14.1 Other costs 0.0 0.0 0.0 0.0 0.0 EV/EBIT (x) 20.1 23.7 16.1 13.1 10.6 Tax -4.9 -3.0 -5.3 -6.6 -7.8 EV/EBITA (x) 18.1 19.8 13.6 11.4 9.4 Underlying NPAT 11.9 12.6 16.0 19.7 23.5 EV/EBITDA (x) 14.9 15.6 11.5 9.8 8.2 Underlying NPATA 13.3 14.9 19.2 22.8 26.7 Price/Book (x) 4.9 4.4 3.9 3.5 3.0 Price/NTA (x) 13.5 -70.4 165.3 32.5 16.5 Significant items (net of tax) 0.0 -1.2 0.0 0.0 0.0 Price/FCF -15.3 -206.4 23.0 20.5 17.2 Reported NPAT 11.9 11.4 16.0 19.7 23.5 GROWTH FY18A FY19A FY20E FY21E FY22E BALANCE SHEET (A$m) FY18A FY19A FY20E FY21E FY22E Revenue growth 15% -2% 19% 7% 6% Assets COGS growth 14% -12% 18% 6% 5% Cash 18.9 15.5 27.9 41.1 56.4 Expenses growth 29% 26% 16% 5% 3% Receivables 33.5 42.0 43.9 46.9 49.7 EBITDA growth 2% 8% 32% 13% 15% PPE 23.1 30.8 25.4 20.1 14.8 PBT growth -1% -7% 37% 23% 20% Goodwill & Intangibles 48.8 89.8 93.0 96.6 100.8 Reported NPAT growth -4% 6% 28% 23% 20% Investments 0.0 0.0 0.0 0.0 0.0 Underlying NPAT growth -4% -4% 41% 23% 20% Other assets 1.7 4.5 4.5 4.5 4.5 Total Assets 125.9 182.5 194.7 209.2 226.1 MARGINS & RETURNS FY18A FY19A FY20E FY21E FY22E Liabilities EBITDA Margin 11.0% 12.2% 13.5% 14.3% 15.5% Payables 30.1 32.2 33.2 35.1 36.7 EBITA Margin 9.1% 9.6% 11.4% 12.3% 13.6% Debt 10.7 55.6 55.6 55.6 55.6 NPBT Margin 7.6% 7.2% 8.3% 9.6% 10.8% Provisions 3.7 5.0 5.0 5.0 5.0 ROIC 20.3% 17.1% 17.6% 20.4% 23.9% Tax payable 2.0 0.0 1.5 1.9 2.2 ROE 16.4% 15.6% 17.9% 19.3% 20.3% Deferred Revenue 1.9 1.2 1.2 1.2 1.2 ROA 14.5% 13.4% 15.5% 16.7% 18.1% Other liabilities 1.3 4.0 4.0 4.0 4.0 Effective Tax Rate 29.2% 19.2% 25.0% 25.0% 25.0% Total Liabilities 49.7 98.1 100.7 102.9 104.8 Equity GEARING FY18A FY19A FY20E FY21E FY22E Share capital 50.2 51.1 51.8 52.7 53.8 Net Debt -8.2 40.1 27.7 14.5 -0.8 Retained earnings 24.5 31.4 41.5 53.6 67.9 Enterprise value 361.6 409.9 397.5 384.3 369.0 Other equity 1.5 1.9 1.9 1.9 1.9 Net Debt/EV (%) -2.3% 9.8% 7.0% 3.8% -0.2% Total shareholders equity 76.2 84.5 95.2 108.2 123.6 Net Debt/EBITDA (x) -0.3 1.5 0.8 0.4 0.0 EBITDA/Net Interest (x) 19.2 15.1 10.3 13.1 12.5 BV per share (cps) 103.3 113.8 127.8 145.0 165.5 NTA per share (cps) 37.2 -7.2 3.0 15.5 30.5 SEGMENT REVENUES (A$m) FY18A FY19A FY20E FY21E FY22E Domestic Retail 35.4 36.4 37.5 38.6 39.8 CASH FLOW (A$m) FY18A FY19A FY20E FY21E FY22E Domestic Wholesale 33.8 67.9 101.8 111.9 120.9 Cash at Start 52.4 18.9 15.5 27.9 41.1 Global Wholesale 151.6 111.3 116.9 122.7 128.9 Cash from operations -16.3 5.5 24.0 26.6 30.6 Inabox 0.0 0.0 0.0 0.0 0.0 Capex -8.1 -7.3 -7.7 -8.2 -8.7 Free cash flow -24.4 -1.8 16.3 18.4 21.9 Cash flow from investing -3.7 -43.4 0.0 0.0 0.0 Cash flow from financing -5.7 41.3 -3.8 -5.2 -6.6 Cash at end 18.6 14.9 27.9 41.1 56.4
Free cash flow per share (cps) -33.0 -2.4 21.9 24.6 29.3 GOCF / EBITDA -48%48%96%97%98% FCF / Underlying cash NPAT -206% -14% 102% 93% 93%
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EL&C Baillieu Research Top Stock Picks – September 2019
Steadfast Group SDF
Recommendations Company Report Rating BUY Rising tide Risk Low Overall: SDF is exhibiting all the characteristics of peak operating performance Price Target $3.90 at the moment, with strong organic growth, good cash flow and robust Share Price $3.63 guidance for the year ahead. The company is also raising up to $120m of equity to bolster the acquisition pipeline. We retain a BUY rating. Snapshot FY19 result recap: At its recent FY19 result, SDF reported underlying NPATA of Monthly Turnover $211.1mn $114.1m, up 17.3% on the pcp and in line with our forecast of $115.7m. Market Cap $2,874mn Underlying EBITA of $194.1m was in the middle of the company’s $190-200m Shares Issued 822.6mn guidance range and up 17.8% on the pcp. Operating cash flow increased 22% to 52-Week High $3.89 $117.7m. SDF declared a final dividend of 5.3cps (fully franked), in line with our forecasts. 52-Week Low $2.49 Sector Financials Drivers/surprises: Gross written premium increased 16% over the year, driven by organic growth of 6% given the favourable premium rate environment as
well as network additions. By business line, Equity Brokers recorded 10% EBITA Business Description growth to $128.2m, driven by rate-related organic growth of 6% and Steadfast (SDF) was founded in 1996 and listed in acquisitions of 4%. Underwriting Agencies was the star performer, with EBITA 2013. It is a general insurance buying group with equity stakes in a number of SME insurance broking up 25% to $93.3m due to market share gains and price increases. firms across Australia and New Zealand. The Key takeaways: The company has issued earnings guidance for FY20, including company has interests in underwriting agencies and a premium funding JV. SDF has a stated strategy to underlying EBITA of $215-225m and diluted EPS growth of 5-10%. SDF is also further consolidate the insurance broking market. raising up to $120m of equity ($100m insto placement, $20m SPP), most of which ($89m) is earmarked for future acquisitions. Included in the earnings guidance is the proposed acquisition of certain revenue streams of IBNA and 12 Month Price & Volume the Steadfast Network. Both of these deals, as well as acquisitions yet to occur, should supplement SDF’s organic growth over the next two years, in our view. Investment view: We maintain a BUY rating. There are a lot of moving parts with SDF at the moment, all of which should supplement growth in earnings and dividends over the next couple of years, in our view. Whilst the operating conditions continue to be buoyant and may be described as “late cycle”, we do not envisage a material change over the next 12 months. In that context, SDF appears to us to be a relatively safe investment in an expensive market. On our forecasts, SDF is priced on a PE of 22.8x, offering a two-year EPS CAGR of 10%, a dividend yield of 2.6% and upside from further acquisitions.
Research Analyst Nicolas Burgess, CFA + 613 9602 9379 [email protected] Investment Summary Nick Caley Year End: 30 June 2018 (A) 2019 (A) 2020 (E) 2021 (E) 2022 (E) + 613 9602 9283 EBITA $mn 165.6 194.2 223.8 246.3 258.2 [email protected] Reported Profit $mn 74.9 89.3 104.8 120.4 129.9 Adjusted Profit $mn 97.2 114.2 134.5 150.2 159.6
EPS (Reported) ¢ 9.7 11.3 12.4 14.1 15.2
EPS (Adjusted) ¢ 12.6 14.4 15.9 17.5 18.7 EPS Growth % 8.1 14.6 10.3 10.2 6.4 PER (Adjusted) x 28.8 25.2 22.8 20.7 19.5 Disclosure Dividend ¢ 7.5 8.5 9.6 10.5 11.2 The author owns no shares in SDF. Yield % 2.1 2.3 2.6 2.9 3.1 Franking % 100 100 100 100 100
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EL&C Baillieu Research Top Stock Picks – September 2019
Financial Summary
Code SDF Rating BUY Analyst Nicolas Burgess Price Target $3.90 Date 16 September, 2019 Upside/downside 7.3% Share Price $3.63 Valuation $3.90 Market Capitalisation $2874m Valuation method DCF / PE blend Year End 30 June Risk Low Profit & Loss (A$m) FY18A FY19A FY20E FY21E FY22E Earnings FY18A FY19A FY20E FY21E FY22E Consolidated EBITA 141.0 168.4 196.0 216.5 226.4 EPS - Underling cash (diluted) 12.6 14.4 15.9 17.5 18.7 Associates EBITA 24.6 25.0 27.8 29.8 31.8 EPS Growth - underlying 8.1% 14.6% 10.3% 10.2% 6.4% EBITA pre corporate costs 165.6 193.4 223.8 246.3 258.2 EPS - Reported (diluted) 9.7 11.3 12.4 14.1 15.2 Net corporate costs 0.0 0.8 0.0 0.0 0.0 EPS Growth - reported 9.4% 16.3% 9.8% 13.4% 8.0% EBITA post corporate costs 165.6 194.2 223.8 246.3 258.2 Diluted shares (m) 772.0 791.6 845.6 856.8 855.8 Net interest -10.6 -14.6 -17.0 -17.0 -17.0 DPS (cps) 7.5 8.5 9.6 10.5 11.2 Amortisation -25.2 -28.6 -35.0 -35.0 -35.0 Payout Ratio 60% 59% 60% 60% 60% PBT 129.8 151.0 171.8 194.2 206.2 Franking 100% 100% 100% 100% 100% Tax -40.9 -44.0 -51.5 -58.3 -61.8 Valuation FY18A FY19A FY20E FY21E FY22E Minorities -14.0 -17.7 -15.5 -15.5 -14.4 P/E (x) 28.8 25.2 22.8 20.7 19.5 NPAT 74.9 89.3 104.8 120.4 129.9 EV/EBITA (x) 18.2 16.0 13.6 12.3 11.7 Dividend Yield (%) 2.1% 2.3% 2.6% 2.9% 3.1% Add back: Price/Book (x) 2.8 2.7 2.6 2.4 2.3 Amortisation 22.3 24.9 29.8 29.8 29.8 Price/NTA (x) 40.6 -66.0 18.6 11.9 8.6 Abnormals 0.0 0.0 0.0 0.0 0.0 Price/FCF per Share (x) 33.9 18.5 32.6 30.2 28.6 Underlying cash NPAT 97.2 114.2 134.5 150.2 159.6 Growth FY18A FY19A FY20E FY21E FY22E BALANCE SHEET (A$m) FY18A FY19A FY20E FY21E FY22E EBITA growth 15.6% 16.8% 15.7% 10.0% 4.8% Assets PBT growth 18.1% 16.3% 13.8% 13.1% 6.1% Cash 76.7 116.5 167.5 174.9 186.1 Underlying NPAT growth 11.5% 17.5% 17.8% 11.6% 6.3% Cash - Trust 310.9 427.4 427.4 427.4 427.4 Reported NPAT growth 12.8% 19.2% 17.3% 14.9% 7.8% Receivables 430.1 164.6 176.7 190.3 199.8 PPE 39.0 43.7 43.7 43.7 43.7 Margins & Returns FY18A FY19A FY20E FY21E FY22E Intangibles 171.7 193.2 158.2 123.2 88.2 Operating margin - consol 23.9% 23.0% 24.6% 24.9% 24.8% Goodwill 816.2 945.5 945.5 945.5 945.5 ROIC 9.9% 10.9% 11.4% 11.9% 0.0% Other Assets 237.0 266.2 266.2 266.2 266.2 ROE 10.4% 11.3% 12.2% 12.3% 0.0% Total Assets 2081.6 2157.2 2185.3 2171.3 2156.9 ROA 8.5% 9.2% 10.3% 11.3% 0.0% Liabilities Effective Tax Rate 31.5% 29.1% 30.0% 30.0% 30.0% Payables 659.8 410.3 798.1 859.3 902.3 Loans & Borrowings 219.2 340.7 340.7 340.7 340.7 Gearing FY18A FY19A FY20E FY21E FY22E Provisions 27.1 34.5 34.5 34.5 34.5 Net Debt (A$m) 142.5 224.2 173.2 165.8 154.6 Other Liabilities 118.4 276.4 -257.1 -392.4 -513.5 Enterprise value 3,016 3,098 3,047 3,039 3,028 Total Liabilities 1024.6 1061.9 916.3 842.2 764.0 Net Debt/Equity (%) 13.5% 20.5% 13.7% 12.5% 11.1% Equity EBITDA/Gross interest 16.0 13.6 13.4 14.8 15.4 Contributed Capital 967.2 977.6 1097.6 1097.6 1097.6 Retained Earnings 30.4 37.8 91.6 151.7 215.5 Minority Interests 59.4 79.8 79.8 79.8 79.8 Operational Data FY18A FY19A FY20E FY21E FY22E Total Equity 1057.0 1095.2 1269.0 1329.1 1392.9 Consolidated brokers 66.1 75.0 81.4 91.0 98.7 Equity accounted brokers 50.0 53.2 58.2 62.9 66.0 BV per share ($ps) 1.28 1.36 1.40 1.52 1.59 Underwriting agencies 74.6 93.3 105.0 113.4 114.6 NTA per Share (cps) 9 -5 20 30 42 Ancillary -0.4 0.5 0.8 0.9 0.9 Cash Flow (A$m) FY18A FY19A FY20E FY21E FY22E MPF 6.0 3.0 9.3 9.9 10.4 Cash at Start 329.7 387.6 544.0 594.9 602.4 Steadfast 2.0 0.2 3.1 3.3 3.4 Cash Flow from Ops 96.1 161.3 96.6 105.2 110.8 Total EBITA 198.3 225.2 257.8 281.2 294.0 Capex -13.5 -6.4 -2.3 -2.3 -2.3 Less Associate EBITA -57.3 -56.8 -61.9 -64.7 -67.6 Free cash flow 82.6 155.0 94.3 102.9 108.5 Consolidated EBITA 141.0 168.4 196.0 216.5 226.4 Free cash per share (cps) 10.7 19.6 11.1 12.0 12.7 Cash Flow from Investing -135.1 -47.8 -8.3 -8.3 -2.3 Associate EBITA 24.6 25.0 27.8 29.8 31.8 Cash Flow from Financing 70.5 -38.5 -37.3 -89.5 -97.4 Group EBITA pre corporate 165.6 193.4 223.8 246.3 258.2 Cash At End 387.6 544.0 594.9 602.4 613.5
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EL&C Baillieu Research Top Stock Picks – September 2019
Village Roadshow VRL
Recommendations Company Report Rating BUY Going for gold on the Gold Coast – part 2 Risk Medium Synopsis: VRL’s FY19 result delivered 37% pcp EBITDA growth, driven by a Price Target $3.70 material turnaround in its Theme Park operations which largely comprise its Share Price $2.84 assets on the Gold Coast. We see further upside from VRL’s decision to reinvest in Sea World over the next two years, which could see visitations return to levels Snapshot seen prior to the 2016 accident at the competing Dreamworld property. Monthly Turnover $9.6mn Key takeaways from FY19 result: 1) Result generally in line with guidance Market Cap $554mn provided at VRL’s June strategy update; 2) Theme Parks: material turnaround Shares Issued 195.2mn with 100% (pcp) increase in EBITDA to A$77m – continued the strong trend from 52-Week High $3.90 1H19, with quantum ticket re-pricing only resulting in a nominal decline in attendances on the Gold Coast. Investments at Movie World (hyper-coaster) 52-Week Low $2.10 would appear to have franked the decision to ramp up investment at Sea World; Sector 3) Cinema Exhibition: a weaker 2H19 than 1H19, with the success of Avengers: Endgame unable to offset weakness in the balance of the film slate; 4) Film Business Description Distribution: remains a problem child, with only nominal EBITDA contribution in Village Roadshow Limited (VRL) is an international 2H19 due to the underperformance of underwritten film titles; 5) sale of Edge entertainment company which operates businesses Loyalty for A$32m (small profit on sale) with the proceeds to reduce debt; 6) such as Theme Parks, Film Distribution, Cinema VRL cited the removal of A$10m in annualised costs during FY19; and 7) net Exhibition and Film Production. debt of A$220m down from a peak of A$554m at 1H17 – resumption of dividends confirms VRL is back in charge of its balance sheet. 12 Month Price & Volume Outlook: 1) Theme Parks: VRL cited a strong start to FY20 with July attendances up 25% (pcp) – new rides/attraction at Sea World will start to open from late 2019; 2) Cinema Exhibition: VRL cited a strong start to FY20 due to The Lion King with a number of key titles yet to come; 3) Film Distribution: VRL cited a soft start to FY20 due to film release schedule – result ultimately dependent upon success of film schedule, with performance guarantees provided by VRL. Investment view: BUY retained with DCF valuation of A$3.69 and price target of A$3.70. We view the content of the FY19 result as a calming influence post the de-rating of the stock which followed the June strategy update. Despite the sizeable improvement in Theme Parks in FY19, we see more to go in that story as the market returns to pre-Dreamworld attendance levels. VRL’s premium Research Analyst pricing strategy for Theme Parks has effectively ended the era of discounting from the market. Film slate is promising, with key titles for the balance of FY20. Nick Caley + 613 9602 9283 [email protected] Investment Summary Nicolas Burgess, CFA Year End: 30 June 2018 (A) 2019 (A) 2020 (E) 2021 (E) 2022 (E) + 613 9602 9379 Revenue $mn 954 982 991 1,042 1,089 [email protected] EBITDA $mn 90.9 124.9 135.5 151.0 160.0 EBIT $mn 20.1 54.4 57.0 67.5 71.5 Reported Profit $mn 0.2 -6.6 31.0 35.2 38.0
Adjusted Profit $mn -7.3 20.6 28.0 35.2 38.0
EPS (Reported) ¢ 0.1 -3.4 15.9 18.1 19.6 Disclosure EPS (Adjusted) ¢ -4.5 10.7 14.4 18.1 19.6 The author owns no shares in VRL. EPS Growth % N/A N/A 34.2 26.0 7.8 PER (Adjusted) x N/A 26.5 19.7 15.7 14.5 EV/EBITDA x 7.7 6.1 5.3 4.5 4.1 Dividend ¢ 0.0 5.0 10.0 12.5 13.5 Yield % 0.0 1.8 3.5 4.4 4.8 Franking % 100 100 100 100 100
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EL&C Baillieu Research Top Stock Picks – September 2019
Financial Summary
Village Roadshow Ltd Analyst Nick Caley Rating BUY Date 16-September-2019 Price Target $3.70 Share Price ($A) $2.84 Valuation $3.69 Year End 30 June Upside/(Downside) 30% Profit & Loss (A$mn) FY18A FY19A FY20E FY21E FY22E Risk Medium Sales Revenue 952.8 980.5 989.9 1,040.5 1,087.8 Market Capitalisation (A$m) $554 Interest Revenue 1.3 1.4 1.2 1.2 1.2 Earnings FY18A FY19A FY20E FY21E FY22E Total Revenue 954.1 981.9 991.1 1,041.7 1,089.0 EPS - Reported 0.1 -3.4 15.9 18.1 19.6 Total Operating Expenses 861.9 855.7 854.4 889.5 927.8 EPS - Normalised -4.5 10.7 14.4 18.1 19.6 EBITDA 90.9 124.9 135.5 151.0 160.0 EPS Growth (%) n/a n/a 34% 26% 8% Depreciation & Amortisation 70.7 70.4 78.5 83.5 88.5 DPS -Ordinary 0.0 5.0 10.0 12.5 13.5 EBIT 20.1 54.4 57.0 67.5 71.5 DPS -Special 0.0 0.0 0.0 0.0 0.0 Interest Revenue 1.3 1.4 1.2 1.2 1.2 DPS -Total 0.0 5.0 10.0 12.5 13.5 Finance Costs 30.6 29.8 16.9 16.9 16.9 Franking (%) 100 100 100 100 100 Net Interest Expense 29.3 28.5 15.7 15.7 15.7 Payout Ratio (%) - Normalised 0%47%69%69%69% Net Profit Before Tax -9.2 26.0 41.4 51.8 55.8 Valuation FY18A FY19A FY20E FY21E FY22E Income Tax Expense - Norm. -2.7 5.7 12.4 15.5 16.7 P/E (x) -63.0 26.5 19.7 15.7 14.5 Minority Interests 0.8 -0.3 1.0 1.0 1.1 EV/EBIT (x) 34.7 14.1 12.6 10.2 9.2 Net Profit After Tax - Norm. -7.3 20.6 28.0 35.2 38.0 EV/EBITDA (x) 7.7 6.1 5.3 4.5 4.1 Discontinued Operations 0.0 0.0 1.0 0.0 0.0 Dividend Yield (%) 0.0% 1.8% 3.5% 4.4% 4.8% Material Items Post Tax 7.5 -27.2 2.0 0.0 0.0 Price/Book (x) 1.2 1.3 1.2 1.2 1.2 Net Profit After Tax - Rep. 0.2 -6.6 31.0 35.2 38.0 Price/NTA (x) 3.3 2.8 2.3 2.2 2.1 Price/Cash/Flow per Share (x) 21.5 6.6 5.1 4.6 4.3 Balance Sheet (A$mn) FY18A FY19A FY20E FY21E FY22E Growth FY18A FY19A FY20E FY21E FY22E Cash 63.4 61.7 116.2 146.2 178.2 Total Rev. Growth (% pcp) -5% 3% 1% 5% 5% Receivables 2.4 1.7 1.7 1.7 1.7 Cash Op. Exp. Growth (% pcp) 0% -1% 0% 4% 4% Inventories 47.7 37.4 37.4 37.4 37.4 EBITDA Growth (% pcp) -33% 37% 9% 11% 6% Other 102.0 58.6 58.6 58.6 58.6 EBIT Growth (% pcp) -68% 170% 5% 18% 6% Total Current Assets 308.3 272.8 327.3 357.3 389.3 NPBT Growth (% pcp) -128% -383% 59% 25% 8% Receivables 23.9 17.6 17.6 17.6 17.6 NPAT Growth (% pcp) -131% n/a 36% 26% 8% Intangibles 253.7 240.0 208.0 208.0 208.0 Margins & Returns FY18A FY19A FY20E FY21E FY22E Equity Accounted Investments 31.7 32.5 32.5 32.5 32.5 EBITDA Margin (%) 10% 13% 14% 14% 15% For Sale Assets 1.7 1.2 1.2 1.2 1.2 EBIT Margin (%) 2% 6% 6% 6% 7% Property, Plant & Equipment 639.9 656.2 643.2 628.2 610.0 NPBT Margin (%) -1% 3% 4% 5% 5% Other 75.3 62.0 62.0 62.0 62.0 ROIC (%) -5% 11% 12% 14% 15% Total Non Current Assets 1026.3 1009.5 964.5 949.4 931.2 ROE (%) -2% 5% 6% 8% 8% Total Assets 1334.6 1282.2 1291.8 1306.7 1320.5 ROA (%) 0%2%2%3%3% Payables 202.8 228.4 228.4 228.4 228.4 Effective Tax Rate (%) 30% 22% 30% 30% 30% Loans & Borrowings 6.9 6.0 6.0 6.0 6.0 Gearing & Cash Flow FY18A FY19A FY20E FY21E FY22E Other 93.6 95.7 95.7 95.7 95.7 Net Debt (A$mn) 338 220 165 135 103 Total Current Liabilities 303.2 330.1 330.1 330.1 330.1 Net Debt/Equity (%) 86% 51% 37% 29% 22% Payables 42.7 50.8 50.8 50.8 50.8 Int. Cover (x) - EBITDA/Net Int. 3.1 4.4 8.6 9.6 10.2 Loans & Borrowings 395.0 275.2 275.2 275.2 275.2 Net Debt/EBITDA 3.7 1.8 1.2 0.9 0.6 Other 199.8 191.6 191.6 191.6 191.6 Total Non Current Liabilities 637.6 517.6 517.6 517.6 517.6 Segmental FY18A FY19A FY20E FY21E FY22E Total Liabilities Revenue Contributed Capital 225.5 275.2 275.2 275.2 275.2 Theme Parks 296.9 329.9 378.7 407.4 438.2 Reserves 86.8 88.7 88.7 88.7 88.7 Cinema Exhibition 293.8 308.3 325.1 339.8 348.9 Retained Earnings 70.5 62.7 74.3 88.2 100.9 Film Distribution 304.5 288.8 254.2 259.3 264.5 Minority Interests 11.0 7.9 8.9 9.9 11.0 Marketing Solutions 72.7 70.7 47.2 49.6 52.0 Total Equity 393.8 434.5 447.0 462.0 475.8 Corporate/Digital 2.9 1.4 1.2 1.2 1.2 Eliminations -16.7 -17.1 -15.3 -15.6 -15.9 Cash Flow (A$mn) FY18A FY19A FY20E FY21E FY22E Total Revenue 954.1 981.9 991.1 1041.7 1089.0 Cash at Start 100.4 63.4 61.7 116.2 146.2 EBITDA Cash Flow from Ops 21.4 82.4 107.4 119.8 127.6 Theme Parks 38.3 76.5 90.8 98.5 106.4 Cash Flow From Investing 169.1 -9.1 -33.5 -68.4 -70.3 Cinema Exhibition 58.1 53.9 55.3 57.8 59.3 Cash Flow From Financing -227.9 -75.6 -19.4 -21.4 -25.2 Film Distribution 13.8 8.6 8.9 13.0 13.2 Net Cash Flow -37.4 -2.3 54.5 30.0 32.0 Marketing Solutions 8.3 5.3 4.7 6.9 7.3 Adjustment 0.4 0.5 0.0 0.0 0.0 Corporate/Digital -27.6 -19.5 -24.2 -25.2 -26.2 Cash At End 63.4 61.7 116.2 146.2 178.2 Total EBITDA 90.9 124.9 135.5 151.0 160.0
baillieu.com.au E.L. & C. Baillieu Limited ABN 74 006 519 393 Please read the disclaimer at the end of this report 25
EL&C Baillieu Research Top Stock Picks – September 2019
Listed Investment Companies (LICs)
Sector Report
LIC update – top picks Top picks: Our top picks refer to preferred exposures within each sector based on numerous quantitative and qualitative factors. However, they should not be treated as official stock recommendations but merely as a guide to where we would apportion funds at this particular point in time.
Traditional LICs: On average, traditional LICs (+5.0%) outperformed the All Ordinaries Accumulation Index (XAOAI) by 2.1% in July (on a TSR basis) in the lead up to ex-dividend dates. Average August performance of -2.1% (TSR) was broadly line with the XAOAI, despite a majority of traditional LICs trading ex- dividend. With dividend run-up trading now predominately washed through, we believe trading levels should revert to more normalised averages. Top picks AFIC (AFI) and Diversified United Investment (DUI) are currently trading at estimated 2.9% and 6.2% discounts to NTA respectively.
Large capitalisation: Providing actively managed exposure to the ASX 200 with key sectors including financials (23.5%) and materials (21.1%), WAM Leaders (WLE) is a top pick, trading at an estimated 6.5% discount to NTA. We believe short-term risk is skewed to the upside in the lead-up to WLE’s ex- dividend date (11-Oct: 3cps final dividend). Elsewhere, although the underlying NTA performance of OPH lagged during Aug-19 due to weakness among top holdings including A2M (-20.9%) and CWY (-14.5%), we believe the current estimated discount of 8.5% is an attractive entry point given OPH’s long-term track record of outperformance (22.1% pa since inception).
Small capitalisation: WAM Microcap (WMI) is our top pick. WMI has performed strongly in FY20 YTD, up 15.5% (TSR). This outperformance has been driven by underlying NTA growth as well a 2.25cps special dividend (4.5cps final). As previously discussed, although difficult to forecast, we believe WMI is currently trading in line with its NTA. Risk of a further trading level re-rating remains to the upside, in our view, as we note WMI has previously traded at a premium to NTA. Elsewhere, providing exposure to a diversified portfolio of small cap and unlisted securities, Acorn Capital Investment Fund (ACQ) is a top pick. It is currently trading at an estimated 18.0% discount to NTA. International: Geopolitical tension continues to influence global markets, with the MSCI World Index (MSCI) down 2.1% in Aug-19. This was partially offset by the continued deprecation of the AUDUSD (-1.6% in Aug). Our top pick for Research Analyst exposure to the US is MFF Capital Investments (MFF), which is currently Piers Flanagan trading at an estimated 7.7% discount to NTA. Our top pick for broad-based + 613 9282 8127 global exposure is PM Capital Global Opportunities Fund (PGF). It is trading at [email protected] an estimated 16.1% discount to NTA. Specialist: Hearts and Minds (HM1) is our top pick. It provides exposure to the Disclosure highest conviction ideas (domestic and global) from a number of Australia’s leading investment managers (many of whom are not overly accessible to The author owns no shares in any of the companies retail investors). HM1 has performed strongly since inception (Nov-18), up mentioned. 14.6% (TSR). We estimate HM1 is currently trading at a 4.6% discount to NTA.
baillieu.com.au E.L. & C. Baillieu Limited ABN 74 006 519 393 Please read the disclaimer at the end of this report 26 EL&C Baillieu Research Top Stock Picks – September 2019
Sector Update
EL&C BAILLIEU - EQUITY RESEARCH Listed Investment Companies Coverage by Sector Figures as at: 13 Sept 2019
Market Trailing Current Current Share Dividend Grossed TSR since July July 1 Yr Ave 3 Yr Ave Traditional LICs Code Cap. Dividend Est. Estimated MER Price Yield Up Yield Aug 1 NTA Disc/Prem Disc/Prem Disc/Prem ($m) (cents) NTA Disc/Prem Australian Foundat. AFI 6.29 7587.7 32.0 5.1% 7.3% -1.0% 6.48 -2.9% 6.64 -2.1% 0.7% 0.7% 0.14% Argo Investments ARG 8.12 5805.2 33.0 4.1% 5.8% -0.5% 8.55 -5.1% 8.59 -3.0% -1.2% -0.2% 0.17% Australian United In AUI 9.23 1147.5 36.0 3.9% 5.6% -0.6% 10.05 -8.2% 10.09 -6.0% -6.0% -5.3% 0.10% BKI Investment Ltd BKI 1.63 1195.5 9.8 6.0% 8.6% -2.2% 1.67 -2.2% 1.73 -0.9% -3.6% -0.3% 0.17% Djerriwarrh DJW 3.46 773.4 20.0 5.8% 8.3% -2.1% 3.28 5.6% 3.40 7.1% 4.3% 8.9% 0.46% Diversified United DUI 4.60 970.4 15.5 3.4% 4.8% 1.0% 4.90 -6.2% 4.95 -6.3% -6.4% -6.2% 0.13% Milton Corporation MLT 4.74 3177.0 21.9 4.6% 6.6% -0.3% 4.94 -4.1% 5.03 -3.4% -3.5% -1.9% 0.12%
Market Trailing Current Current Share Dividend Grossed TSR since July July 1 Yr Ave 3 Yr Ave Large Capitalisation Code Cap. Dividend Est. Estimated MER Price Yield Up Yield Aug 1 NTA Disc/Prem Disc/Prem Disc/Prem ($m) (cents) NTA Disc/Prem Australian Leaders ALF 0.95 228.4 4.0 4.2% 6.0% 2.7% n.a n.a 1.17 -20.9% -17.8% -7.6% 1.00% Concentrated Leaders CLF 1.24 73.7 9.0 7.3% 10.4% -4.6% n.a n.a 1.39 -6.5% -6.0% -7.2% 0.75% AMCIL Limited AMH 0.88 245.1 7.0 8.0% 11.4% -2.2% 0.97 -9.1% 1.01 -7.4% -6.8% -4.0% 0.65% Clime Capital CAM 0.93 105.7 5.0 5.4% 7.7% 1.1% n.a n.a 0.96 -4.2% -3.9% -7.9% 0.83% CBG Capital CBC 1.03 26.9 3.3 3.2% 4.6% 2.0% n.a n.a 1.08 -6.9% -7.4% -10.4% 1.00% Cadence Capital CDM 0.80 256.2 7.0 8.8% 12.5% 1.9% 0.91 -12.1% 0.92 -14.4% -4.8% 2.7% 1.00% Contango Inc Gen Ltd CIE 0.82 85.6 5.2 6.3% 9.0% 1.9% 0.99 -17.0% 0.98 -16.9% -13.4% -7.8% 0.95% Carlton Investments CIN 31.44 832.4 203.0 6.5% 9.2% 1.1% 38.08 -17.4% 37.03 -13.9% -13.1% -12.6% 0.09% Future Gen Ltd FGX 1.12 445.0 4.6 4.1% 5.9% -6.7% n.a n.a 1.26 -4.8% 1.2% -1.3% 0.00% L1 Long Short Fnd Ltd LSF 1.55 1030.5 0.0 0.0% 0.0% 5.1% 1.75 -11.6% 1.69 -12.6% -6.1% -3.9% 1.25% Mirrabooka Invest. MIR 2.51 404.7 20.0 8.0% 11.4% -0.4% 2.43 3.3% 2.42 4.1% 7.4% 12.0% 0.65% Ophir High Conviction OPH 2.49 498.0 0.0 na na -4.2% 2.72 -8.5% 2.77 -6.1% -0.2% na 1.23% Perpetual Equity Ltd PIC 1.05 360.4 6.4 6.1% 8.7% -2.8% 1.13 -7.4% 1.13 -4.6% -2.7% -4.2% 1.00% Plato Income Max. PL8 1.12 383.5 9.5 8.5% 12.1% -3.4% n.a n.a 1.12 4.1% -3.2% -1.7% 0.80% Qv Equities Limited QVE 1.02 280.4 7.5 7.4% 10.6% -1.2% 1.13 -10.5% 1.17 -10.3% -6.3% 1.0% 0.90% WAM Capital Limited WAM 2.25 1614.5 15.5 6.9% 9.8% 4.2% n.a n.a 1.90 13.5% 17.8% 19.7% 1.00% WAM Leaders Limited WLE 1.18 925.0 5.2 4.4% 6.2% 0.0% 1.26 -6.5% 1.27 -7.2% -4.3% -2.7% 1.00% Whitefield Ltd WHF 4.95 456.0 19.8 4.0% 5.7% -0.2% 5.42 -8.6% 5.42 -8.5% -8.0% -8.1% 0.25%
Market Trailing Current Current Share Dividend Grossed TSR since July July 1 Yr Ave 3 Yr Ave Small Capitalisation Code Cap. Dividend Est. Estimated MER Price Yield Up Yield Aug 1 NTA Disc/Prem Disc/Prem Disc/Prem ($m) (cents) NTA Disc/Prem Acorn Cap Inv Fund ACQ 1.07 56.8 7.0 6.5% 7.7% -0.5% 1.31 -18.0% 1.28 -15.8% -10.4% -12.2% 0.95% Barrack St Invest BST 1.00 18.2 5.8 5.8% 6.8% 4.6% 1.30 -23.4% 1.31 -25.3% -21.8% -18.3% 1.00% Naos Small Cap Opp NSC 0.69 114.7 4.0 5.8% 6.8% 19.9% n.a n.a 0.71 -18.3% -15.1% -10.4% 1.25% Forager Aust. Shares FOR 1.25 142.3 0.9 0.8% 0.8% 0.8% 1.42 -12.0% 1.36 -8.8% 0.3% 7.2% 1.00% Glennon SML Co Ltd GC1 0.86 41.4 3.0 3.5% 4.1% 4.9% n.a n.a 1.00 -16.0% -11.3% -10.4% 1.00% Naos Emerg Opp NCC 1.05 63.0 7.3 6.9% 9.9% 5.0% n.a n.a 1.07 -6.5% -1.7% 0.1% 1.25% NGE Capital NGE 0.63 23.5 0.0 n.a n.a -19.9% n.a n.a 0.91 -13.6% -16.5% -21.4% 1.90% Ozgrowth Limited OZG 0.17 58.7 0.5 3.0% 4.3% -1.4% 0.21 -22.9% 0.21 -18.3% -18.7% -19.4% 1.00% Ryder Capital RYD 1.45 85.8 6.0 4.1% 5.9% 5.8% n.a n.a 1.61 -13.1% -15.1% -10.0% 1.25% Spheria Emerging Co SEC 1.70 112.8 6.0 3.5% 5.0% -7.6% 1.97 -13.7% 2.08 -9.4% -11.3% -8.7% 1.00% WAM Research Ltd WAX 1.44 274.9 9.6 6.7% 9.5% 1.4% n.a n.a 1.24 14.2% 21.3% 22.3% 1.00% Westoz Inv Ltd WIC 1.07 142.9 6.0 5.6% 8.0% -2.1% 1.25 -14.8% 1.21 -7.1% -9.2% -10.8% 1.00% WAM Microcap Ltd WMI 1.41 197.9 6.3 4.4% 6.4% 9.8% n.a n.a 1.39 -7.7% 0.8% 5.1% 1.00% 8Ip Emerg Co Ltd 8EC 0.30 12.3 1.6 5.4% 7.8% 2.3% n.a n.a 0.87 -6.4% -15.0% -13.8% 1.25%
Market Trailing Current Current Share Dividend Grossed TSR since July July 1 Yr Ave 3 Yr Ave International Code Cap. Dividend Est. Estimated MER Price Yield Up Yield Aug 1 NTA Disc/Prem Disc/Prem Disc/Prem ($m) (cents) NTA Disc/Prem Argo Global Ltd ALI 2.33 329.8 6.5 2.8% 2.8% 3.0% 2.58 -9.7% 2.56 -10.2% -13.1% -12.8% 1.25% Antipodes Global APL 0.96 529.5 9.5 9.9% 9.9% -0.4% 1.10 -12.9% 1.14 -12.8% -8.9% -2.5% 1.10% Ellerston Asian EAI 0.92 134.6 2.5 2.7% 2.7% -3.6% 1.10 -16.3% 1.13 -14.0% -8.9% -9.8% 0.75% Ellerston Global Inv EGI 0.94 103.5 3.0 3.2% 4.6% -2.1% n.a n.a 1.17 -16.5% -11.4% -10.9% 0.75% Future Glb Invest Co FGG 1.33 519.1 1.0 0.8% 1.1% -3.6% n.a n.a 1.43 -3.9% 0.7% -1.7% 0.00% Global Value Fnd Ltd GVF 1.04 153.2 6.3 6.1% 8.7% 1.0% 1.10 -6.0% 1.09 -6.2% -3.0% -0.1% 1.50% Pengana International PIA 1.07 270.6 7.0 6.6% 9.4% -1.4% 1.23 -13.5% 1.25 -13.7% -8.6% -6.2% 1.50% MFF Capital Invest. MFF 3.17 1718.4 3.0 0.9% 1.4% 1.9% 3.44 -7.7% 3.38 -8.1% -6.2% -9.8% 1.25% Magellan Global Trust MGG 1.75 2163.2 6.0 3.4% 3.4% -6.4% 1.88 -7.1% 1.86 0.2% -0.6% -0.5% 1.35% Pm Capital Asian Ops PAF 0.80 45.5 3.5 4.4% 6.3% -12.8% 0.88 -9.1% 0.95 -2.1% -2.5% -3.5% 1.00% Platinum Asia Ltd PAI 0.92 331.3 4.0 4.4% 6.2% -11.8% 1.07 -14.2% 1.09 -3.2% 3.0% -0.5% 1.10% Pm Capital Fund PGF 1.07 374.9 3.8 3.6% 5.1% -5.6% 1.27 -16.1% 1.32 -12.6% -9.9% -8.5% 1.00% Platinum Capital Ltd PMC 1.48 425.6 10.0 6.8% 9.7% -6.5% 1.55 -4.6% 1.60 1.2% 8.7% 6.8% 1.10% Templeton Global TGG 1.17 255.0 11.5 9.8% 14.0% -2.8% 1.37 -14.8% 1.45 -13.3% -10.4% -10.1% 1.20% WAM Global WGB 2.09 442.3 0.0 n.a n.a 1.0% n.a n.a 2.42 -14.4% -8.5% -7.3% 1.25% VGI Partners Global VG1 2.36 960.3 0.0 n.a n.a 0.9% n.a n.a 2.45 -4.5% 2.6% 2.1% 1.50%
Market Trailing Current Current Share Dividend Grossed TSR since July July 1 Yr Ave 3 Yr Ave Specialist Code Cap. Dividend Est. Estimated MER Price Yield Up Yield Aug 1 NTA Disc/Prem Disc/Prem Disc/Prem ($m) (cents) NTA Disc/Prem Blue Sky Alt Access BAF 0.79 159.4 5.0 6.4% 9.1% 2.4% 1.14 -31.0% 1.14 -29.3% -25.0% -8.0% 1.20% Bailador Tech Inv BTI 0.97 116.6 0.0 n.a n.a -8.1% 1.33 -27.1% 1.33 -20.7% -27.6% -20.7% 1.75% Hearts and Minds HM1 2.91 582.0 0.0 n.a n.a -7.6% 3.05 -4.6% 3.13 0.6% 0.6% na 0.00% Lowell Resource Fund LRT 5.10 14.2 0.0 n.a n.a 2.2% 6.79 -24.9% 6.69 -25.4% -19.6% -14.6% 2.16% Lion Selection Grp LSX 0.41 61.6 0.0 n.a n.a 1.2% n.a n.a 0.47 -13.8% -14.0% -5.7% 1.50% Monash Absolute MA1 0.97 42.7 1.0 1.0% 1.5% 8.4% n.a n.a 1.11 -19.6% -17.9% -11.5% 1.50% NAOS ex-50 Opport. NAC 0.89 46.1 5.2 5.8% 8.3% 6.2% n.a n.a 1.02 -16.7% -14.2% -8.2% 1.75% Sandon Capital Ltd SNC 0.81 85.6 7.0 8.7% 12.4% -4.7% n.a n.a 0.90 -5.8% -8.1% -4.2% 1.25% Tribeca Glb Resources TGF 1.92 121.0 0.0 0.0% 0.0% -12.7% n.a n.a 2.37 -7.2% -3.7% na 1.50% Thorney Opp Ltd TOP 0.69 140.5 1.8 2.6% 3.7% 0.2% n.a n.a 0.89 -21.5% -17.9% -11.8% 0.75% URB Investments URB 1.08 79.3 6.8 6.3% 8.9% 6.6% n.a n.a 1.19 -11.8% -12.9% na 0.50% WAM Active Limited WAA 1.06 49.0 5.8 5.5% 7.8% 1.0% n.a n.a 1.07 -1.5% 0.4% 3.9% 1.0% Source: Company releases, Bloomberg, EL&C Baillieu estimates
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