Are These 3 Stocks In Undervalued Zone – BLD, REA And DMP

Are These 3 Stocks In Undervalued Zone - BLD, REA And DMP

Boral Limited (ASX: BLD)

Subdued Performance for the 1H FY 19: Boral Limited (ASX: BLD) for the first half of FY 19, has reported 6% fall in the net profit after tax before amortisation (NPATA) & significant items to $224 million & 3% ($15) fall in the EBITDA to $485 million. This $15 fall in the EBITDA is attributed to reduction in earnings from the divestments of US block and Denver Construction Materials. However, for the first half of FY 19, the revenue grew 2% to $2.99 billion on 1H FY18, driven by a slight rise in revenue of Boral North America and Boral Australia. Overall, for the first half of FY 19, the company was affected due to bad weather, particularly in North America, along with volume delays due from the project in Australia. Moreover, for FY 19, the company expects EBITDA to be more than FY18 for continuing operations with growth expected to come more in 2H FY19. In FY19 Boral Australia is expected to post EBITDA in line with FY 18. For Boral North America, EBITDA is expected to grow approximately 15% in USD in FY19 and USG Boral is expected to post slight decline in profits in FY19 compared with FY2018.

1H FY 19 Financial Performance (source: Company Reports)

1H FY 19 Financial Performance (source: Company Reports)

The company is currently available at an EV/Sales of 1.2x vs. industry median of 1.5x, it has a P/B ratio of 0.9x vs. industry median P/B of 1.6x. The stock is currently trading at close to a 52-week low level.

REA Group Limited (ASX: REA)

Strong Performance for the 1H FY 19: REA Group Limited (ASX: REA) has made significant changes in the key terms of the employment contract for the Chief Executive Officer, Mr. Owen Wilson, who was Chief Financial Officer in the company, effective from 7 January 2019. The total remuneration is increased to $1.3 million per annum, short term incentive has been increased to $0.8 million, long term incentive includes an additional 2,014 performance rights with a performance period ending June 2021. Further, for the first half of FY 19, the company reported 15% rise in revenue on the prior year to $469.2m and 19% increase in EBITDA to $289.1m. The company during the first half of FY 19, has also reported 20% rise in net profit to $176.6m. The revenue growth is on back of 15% growth in the Australian Residential business, including Hometrack business and also the contribution from the Smartline business for full six month compared to five months last year. Further, 14% growth in revenue was reported in the Asian business on the back of myfun and Malaysia. Additionally, there has been 17% increase in the interim dividend to 55 cents per share fully franked. REA stock has risen 1.50% in three months as on March 29th, 2019.

On the valuation front, the company is currently available at an EV/EBITDA of 16.6x vs. industry median of 9.8x. Also, it has a P/B ratio of 8.6x vs. industry median of 3.6x. The stock is currently trading at close to 52-week low level with a high PE multiple of 80.15x.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Outlook for FY19: Domino’s Pizza Enterprises Ltd.’s (ASX: DMP) stock moved up lately on ASX after Domino’s Pizza, US parent company has signed the partnership with Xevo, which is in-car commerce and service provider, for providing pizza through AnyWare pizza ordering platform to cars in the coming months. This can be applied in Australia if it gets successful in the US. Meanwhile, in the first seven trading weeks of H219, DMP has reported a four percent rise on a Same Store Sales, compared to the pcp. In the first seven weeks of H2 19, the company has constructed and opened thirteen new organic stores. For FY 19, DMP expects Same Store Sales to be within its guidance and expected to be at the mid-to-lower end of the range (3-6% range). Therefore, the company expects 2019 EBIT to be at the lower end of guidance range of $227m-$247m. Further, the group anticipates less store openings in the 2HFY19. The company expects the new store construction to be also a tad lower than originally projected and expected to be in the band of +200 to + 215 organic new stores, which implies the company’s store growth to be between seven percent to nine percent growth each year. Net Capex for FY 19 is projected to be in the ambit of $60 Mn to 70 Mn, that comprises of the benefit on the back of the continued sell-down of the Franchisee loan book.

On the valuation front, the company is currently available at an EV/EBITDA of 13.2x vs. industry median of 9.0x. Also, it has a P/B ratio of 9.9x vs. industry median of 2.2x.

The stock is  trading below the average of 52 weeks high and low level of ~$47.95 with PE multiple of 32.09x. As of now, the stock is trading below the average of 52 weeks high and low level of ~$47.95 with PE multiple of 32.09x.


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