Recent Updates on 5 stocks from the Industrial Sector: SIQ, VAH, ASB, SSM and MMS

Economists bifurcate the economy into three sectors: Primary, secondary and Tertiary/service sector. The industrial sector, which is also known as the secondary sector, provides with the finished products that are used by the manufacturing or construction industry. It is amongst the top three sectors which form the backbone of an economy.

The industrial sector typically comprises of companies from

  • Automobile industry
  • Tobacco industry
  • Textile industry
  • Energy industry
  • Industrial equipment
  • Aerospace manufacturing
  • Brewing industry, etc.

The Australian Industrial sector is represented by S&P/ASX 200 Industrials on the ASX. As at AEST: 12:23 PM, 20 August 2019, the S&P/ASX 200 Industrials (Sector) was up by 1.02% to 6,740.5, beating the benchmark index S&P/ASX 200 which was up by 0.69% to 6,467.4. From 2 January 2019 till 19 August 2019, the S&P/ASX 200 Industrials (Sector) has appreciated by ~ 16.93%. On the other hand, in the same time frame, S&P/ASX 200 has increased by ~ 14%. the industrial sector has outperformed S&P/ASX 200 (sector) by over 250 bps.

In this article, we have covered five different stocks from the industrial sector and their recent updates.

Smartgroup Corporation Ltd

Smartgroup Corporation Ltd (ASX: SIQ), a company which provides salary packaging administration and fleet management services, witnessed a significant 21.7% increase in its share price by the closure of the market on 19 August 2019. At present, the shares of SIQ are trading at A$10.980 (AEST: 12:20 PM, 20 August 2019), down by 0.182% as compared to its previous closing price. Smartgroup Corporation Ltd has a market cap of A$1.45 billion, with approximately 131.89 million shares outstanding.

1H FY2019 Results:

Recently, on 16 August 2019, released its half-yearly results for the half-year ended 30 June 2019. The company reported a 3% growth in its revenue from ordinary activities to $125.979 million. The net profit after tax attributable to the owners of Smartgroup Corporation Ltd increased by 6% to $30.857 million as compared to its previous corresponding period (pcp). NPATA for the period increased by 5% to $40.5 million on pcp. The company declared an interim dividend of 21.5 cents per share which is expected to be paid on 16 September 2019. The interim dividend represents a 5% growth on pcp.

The company reported an increase in the operating cash flow during the period. The increase in the cash flow was due to the increase in the cash receipt from $135.048 million in 1H FY2018 to $142.352 million in 1H FY2019. The cash inflow through the investing activities was $0.345 million. There was a significant cash outflow through the financing activities, reported at $45.224 million, primarily on account of the payment of dividend. The net cash available with the company by the end of 1H FY2019 was at $79.692 million.

During the period, the company obtained success in servicing existing clients and growing service offering. The company continued to progress with the integration of acquired businesses.

Resignation and Appointment of Company Secretary:

On 16 August 2019, the company also announced the resignation of Amanda Morgan from the position of Company Secretary. Her position is now taken up by Jonathan Swain, effective from 19 August 2019. Sophie MacIntosh, who is the Chief Legal Officer, will be the Joint Company Secretary. 

Virgin Australia Holdings Limited

 

Virgin Australia Holdings Limited (ASX: VAH), a company catering to the airlines’ operations in Australia closed at its 52 weeks low price on 19 August 2019. The shares of VAH are currently trading at a price 3.125% above its last closing price at A$0.165 (AEST: 1:52 PM, 20 August 2019). VAH has a market cap of A$1.35 billion and approximately 8.45 billion outstanding shares.

Recently on 11 August 2019, Virgin Australia Holdings Limited provided an update on Velocity Frequent Flyer. Connectivity Pte Limited (Affinity) is looking for options to withdraw from its 35% minority investment in Velocity Frequent Flyer Holdco Pty Limited (Velocity).

Velocity was launched by Virgin Australia in the year 2005 in partnership with National Australia Bank which provides a companion credit card. Being the loyalty program of Virgin Australia, the members of Velocity are provided with personal, real as well as inspirational experiences. Velocity points can be earned even by sitting at home, and the points can be enjoyed by these members.

Virgin Australia Holdings Limited highlighted that it would remain to be committed towards the long-term growth of velocity business and expects that it would continue to be the majority investor in Velocity.

Austal Limited

Austal Limited (ASX: ASB), an Australian shipbuilder, defense prime contractor and maritime technology partner of choice was trading on ASX at a price of A$3.895 (AEST: 2:14PM, 20 Aug 2019), 1.432% above its previous closing price. The market cap of Austal Limited was recorded at A$1.35 billion and ~ 352.79 million shares are outstanding.

On 19 August 2019, Austal Limited (Austal) informed the market that Royal Australian Navy (RAN) has entered into a 2 years lease extension with the National Australia Bank (NAB) for its 2 Cape Class Patrol Boats (CCPB), Cape Inscription as well as Cape Fourcroy.

The lease extends the charter from a period of the three years to five years. The vessels’ current in-service support along with the sustainment, is being provided by Austral.

The charter along with the sustainment of Cape Fourcroy got extended till April 2022 and Cape Inscription till May 2022. As a result of extension in the contract, the total residual value of the 2 vessels declined from $42 million to circa $24 .3 million. Thus, it resulted in CCPB 9 & 10 associated debt on the balance sheet to become non-current and would further be reduced from $48.8 million at 30 June 2019 and would reach $24.3 million in late FY2022 by maturity.

The Cape Class Patrol Boat of ASB is a 58m aluminium monohull vessel which is designed for the purpose of border protection and maritime security tasks. ASB’s CEO, David Singleton, commenting on the announcement stated that the proven capability of the CCPB has drawn the attention from the export markets. He further explained that the lease extension also includes a sustainment package which would be delivered by the company with a potential revenue stream.

Recently on 16 August 2019, Austal Limited released an announcement to the market related to the delivery of the 4th  Guardian Class Patrol Boat (GCPB) to the Australian Department of Defence.

Another announcement from ASB on the same day was regarding the contract which it has entered to build two Cape Class Patrol Boats (CCPB) for the Government of the Republic of Trinidad and Tobago (GORTT) for A$126 million. These vessels are expected to be transported in the second half of 2020.

Service Stream Limited

 

Service Stream Limited (ASX: SSM), a company which provides services to infrastructure-based industries like telecom and utility sectors, was trading at a price of A$2.745 (AEST: 2:52 PM, 20 August 2019), up 4.373% as compared to its previous closing price. SSM has a market cap of A$1.06 billion and approximately 401.62 million shares outstanding.

Recently on 26 July 2019, Service Stream Limited provided an update on the change of interests of a substantial holder. Thorney International Pty Ltd and each of the entities listed who were holding 27,119,766 fully paid ordinary shares of the company with a voting power of 6.75% are now holding 22,659,766 766 fully paid ordinary shares of the company with a voting power of 5.64%.

 

McMillan Shakespeare Limited

McMillan Shakespeare Limited (ASX: MMS), through its subsidiaries, is the largest provider of salary packaging and novated leasing services in Australia. It is also the largest provider of fleet and asset management, along with consumer and fleet financing.

At present, the shares of MMS were trading at A$13.140 (AEST: 2:54 PM, 20 August 2019), marginally down by 0.53% as compared to its previous closing price. MMS has a market cap of A$1.1 billion and approximately 83.2 million outstanding shares.

On 8 August 2019, McMillan Shakespeare Limited highlighted that it would webcast the outcome of FY2019 presentation on 21 August 2019 at 9:00 am (AEST). The presentation would be given by the CEO Mr Mike Salisbury and CFO, Mr Mark Blackburn.

Recently, on 30 July 2019, McMillan Shakespeare Limited also provided an update on the change in the substantial holding. FMR LLC and the entities were earlier having 7,612,700 common shares of the company with a voting power of 9.15%. Now, post the change in the substantial holding FMR LLC and the entities are holding 6,777,198 common shares of the company translating to a voting power of 8.15%.


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