Tracking for 2 Industrial Stocks – PPE, DOW

Tracking for 2 Industrial Stocks – PPE, DOW

Industrial Sector generally comprises of manufacturing, facilities, construction, engineering and maintenance businesses. It is one of the key sectors steering the economic growth of any nation.

Let’s track the two ASX-listed companies operating in this sector- PPE and DOW.

People Infrastructure Ltd (ASX: PPE)

About the Company: People Infrastructure is a leader in workforce management focused on key sectors that include Health and Community Care, Information Technology, and Blue collar and specialist services. The various sub-sectors it services include disability care, childcare, healthcare, infrastructure, manufacturing, mining, information technology and hospitality amongst others.

Estimated Proforma Profit by Industry FY2020 (Source: Company Presentation)

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Latest Update on Capital Raising:  People Infrastructure Ltd has successfully raised fresh equity proceeds of $20 million via a share placement. This placement was made at an issue price of $2.70 per share, which represents a 6.89% discount on the last close of $2.90 (as at 12 June 2019).

The company received such an overwhelming response to its placement offer that it had to increase the size of the placement from $15 million to $20 million. Further, it is expected that this placement would settle on Tuesday, 18 June 2019, resulting in the issue of 7,407,408 new fully paid ordinary shares in People infrastructure.

Managing Director, Declan Sherman stated that “The company is delighted by the support received for the placement, confirming significant market support for the company’s growth strategy.”

People infrastructure intends to utilise the proceeds to fund further acquisitions, including potential strategic acquisitions in the health and community care business. The funds may also be used to meet the costs associated with the placement.

The report read that the Placement shares will comprise approximately 11.4% of the People Infrastructure’s pre-placement issued share capital and will rank equally with the company’s existing ordinary shares.

Acquisition Strategy: People Infrastructure has successfully closed on the acquisition of Halcyon Knights Pty Ltd, a market leader in the provision of IT recruitment services in Victoria and NSW. With the strict investment criteria, the company maintains a strong pipeline of strategic opportunities, including potential acquisitions in the health and community care business.

Mr Sherman added that People Infrastructure has a number of potential accretive acquisitions in the pipeline, with the funds from the placement, allowing the company to act swiftly in the execution of its growth strategy.

Strong Growth: People Infrastructure is positioned as the second largest provider of workforce management and agency services to the Healthcare sector in Australia. In its recent investor presentation, the company confirmed that the second half of 2019 is tracking ahead of the first half of 2019. The entire business leverages its leading technology offering to provide a superior customer experience in a manner that is highly scalable.

EBITDA Growth (Source: Company Presentation)

 

It further continues to achieve strong organic growth throughout the business underpinned by leading customer service, strong sales focus and attractive industry fundamentals. Nearly 50% of People Infrastructure earnings is generated by healthcare clients.

Forward Plan: The company intends to release its Fiscal 2019 financial results in late August 2019. Alongside the acquisition, the company focuses on cash flow generation across the business and a conservative balance sheet in order to invest in future growth with net debt /EBITDA of 0.8x post capital raise.

Stock Performance: PPE settled the day’s trade at $3.060, up 2%, on 14 June 2019. Over the past 12 months, the stock has surged up by 79.64%, including a positive price change of 22.45% recorded in the past three months.

Downer EDI Limited (ASX: DOW)

About the Company: Downer EDI Limited is an integrated services provider, which aims to create and sustain the modern environment by using world leading insights and solutions to design, build and sustain assets, infrastructure and facilities.

Downer owns a diversified set of business that includes the following sectors:

  • Transport- Road Services, Rail, and Transport Infrastructure
  • Utilities- Power and Gas, Water, Renewable Energy, Communications
  • Facilities- Infrastructure and Construction, Government, Hospitality and Facilities Management, Laundries and Defence.
  • EC&M- Engineering, Construction and Maintenance, and Mining

Road Services Sites in Australia (Source: Company Presentation)

 

Murra Warra Wind Farm Update: Stage One of the Murra Warra Wind Farm located near Horsham in Western Victoria is progressing at an advanced stage with approximately 95% of Downer’s balance of plant work been completed on schedule and on budget, as per the latest official update. 26 (out of 61) wind turbine generators have been instituted and all remaining towers and blades are either at the manufacturing site, port or at farm location.

The project is owned jointly by Downer EDI Limited and its partner Senvion GmbH (Senvion), a leading global manufacturer of wind turbines based in Germany. Downer is currently discussing with Senvion’s court-appointed Custodian and other concerned parties, including Partners Group, the owner of the wind farm for completion of Stage 1.

Financial Performance: For the half-year ended 31 December 2018, the Group reported 222.9% growth in statutory EBITA to $268.0 million, compared to $83.0 million in the previous corresponding period. The company stated that increase is primarily from Mining, Utilities, Transport and Facilities, partially offset by a lower contribution from EC&M. NPATA for the Group increased by 23.8% to $163.4 million in comparison to underlying NPATA of $132.0 million in 1HFY18.

Financial Summary of Downers 1HFY19 Results (Source: Company Presentation)

 

The Downer Board paid an interim dividend of 14.0 cents per share for 1HFY19, 50% franked, up 13.0 cents per share in the prior corresponding period.

Outlook: In the half-year presentation, Downer increased its guidance for Fiscal 2019 to $352 million consolidated NPATA before amortisation of acquired intangible assets and before minority interests. The increase reflects the fair value gain of $17 million from the acquisition of the remaining 50% of the Downer Mouchel Joint Venture in late 1H19.

Stock Performance: DOW settled at AUD 7.00, up 1.302%, on 14 June 2019. The stock closed at a PE multiple of 19.210x with a market capitalisation of $4.11 billion.

Over the past 12 months, the stock has dipped by 1.14% despite the positive price change of 7.13% recorded in the past six months. In the short-term, the stock price continues to decline as one-month and three-month return stands at -12.86% and -6.50%, respectively.


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