05/09/2016 - 06:14

Lessons from the Australian Earnings Season: Our Top 5 Picks

05/09/2016 - 06:14


Save articles for future reference.

US stocks were higher on Friday night (Dow +85 points), Crude oil +2.97% and the SPI is +33 points, as US payrolls increased by 151,000 in August……….. Less than expected….

Good Morning,


Trust that you had a great father’s day, shared some good food, drank some nice wine and most importantly, had a few laughs with family and friends.


Yes, Monday is here once again and we are getting ourselves set for another busy week on markets….


So what can we expect today?


US stocks were higher on Friday night (Dow +85 points), Crude oil +2.97% and the SPI is +33 points, as US payrolls increased by 151,000 in August……….. Less than expected….


But “bad news is now good news” as investors push back their interest rate expectations.


So we should have a good open and we certainly need it, with the XJO -2.4% last week…


ouch… ouch… ouch….


So what were some lessons learned from the AUS reporting season?


Here are our top picks……..


Peak’s Top 5 picks: Lessons from earnings season:


1.       Ramsay Health Care (RHC) : Core NPAT $481.4m v consensus $473.091m. EBITDA $1.26b v consensus $1.25b. Core EPS exactly in line 231.4cps.


A very strong in underpinned by growth with all segments performing at or above expectations. EBITDAR margins remain strong 26.1% and NHS patient admissions increased by 8.0%; now more than 75% of UK admissions. Ramsay is targeting Core NPAT and Core EPS growth of 10% to 12% for FY2017. We see upside. Buy


2.       Appen (APX) : 1H2016 NPAT $5.4m +102% pcp. The result was 20%+ above consensus. Hits it out of the park! 


Strong result driven by revenue growth +49% to $53.4m and increase in the EBITDA margin from 13.5% in 1H2015 to 16.6% in 1H2016. Both divisions performed better than expected with Content Relevance delivering revenue and EBITDA of $35.0m and $6.1m and Language Resources delivering $18.4m and $7.4m.


Upgraded guidance from “earnings growth trending to high teen percentages and above” to “full year earnings growth is anticipated to exceed 20% on FY2015.”  AUD/USD currency assumption for the guidance is the same at 76c. The company also said it now has revenue plus orders in hand for delivery in 2016 of around $100m up from around $75m end of April.  We currently have forecast revenue of $100m in 2016 and forecast EBITDA growth of 22%.   


3.       Corporate Travel Management (CTD): Underlying EBITDA $69m v consensus $68.4m. Adjusted NPAT $48.6m v consensus $42m. Definitely a beat, very strong result that will surprise many.


North America was the big winner, sector EBITDA up 123%. Strong FY 17 guidance Underlying EBITDA in the range of 85-90m (23-30% p.c.p). Expecting decent movement today especially with the heavy shorts on the stock, 30 days to cover. The stock however has run strongly into the result.


4.       Mayne Pharma (MYX) : EBITDA up 143% $88.5m v consensus $85.583m. NPAT up 379% 37.4m v consensus 33.5m. Strong result with the business flying. In FY17, GPD expected to represent >70% of revenue following US product acquisitions. Strong outlook given as well. Buy.


5.       TFS Corp (TFC) : Cash EBITDA up 8.2% $62.2m V consensus $61.825m. EPS 25.66 v consensus 24.1. Net comprehensive income 90.385m v consensus 83.6m. Good result Long-term contracts secured with Chinese and Indian wood buyers. Supply agreements now in place for the majority of harvests through to 2021. Strong financial platform established for further growth, with cash balance of $107.0 million (30 June 2015: $72.7 million) and debt refinance completed.


Outlook: TFS expects to increase Adjusted Cash EBITDA in FY17 by at least 25% on FY16 with strong growth in cash. The Company also expects to establish approximately 1,500 hectares of new plantations in FY17, to be completed in the northern Australia dry season, which will take the total estate under management to around 13,500 hectares.


So here they are…………


The SPI is up 33 points this morning


Niv Dagan is an Executive Director of Melbourne based boutique funds management and corporate advisory firm, Peak Asset Management (www.peakassetmanagement.com.au). He is also a regular financial commentator on Sky Business


Subscription Options