Impact of Bushfires on ASX Stocks- ELD, BGA, ATL

Till now, Australia’s devastating bushfires has impacted the lives of many and has razed around 11 million hectares of land. For over two months, the country is in a state of emergency while the country’s firefighters continue to fight bravely to control the damage. Although, Australia’s Prime Minister Mr. Scott Morrison has announced a 2 billion Australian dollar bushfire recovery fund, many Aussies are not pleased with him as he has been slow in responding to the crisis.

Bushfires have also impacted several businesses and operations. As an informed investor one must take a closer look at the impact of the bushfires being occurring on several businesses. We have screened few stocks which have provided an update on the impact of the bushfires. Let’s take a look at those stocks and their updates.

Elders Limited (ASX: ELD)

Australia’s leading agribusiness, Elders Limited (ASX: ELD) specializes in providing tailor-made products and services to meet the needs of its varied clients. Due to the Bushfire crisis in Australia company’s various clients have experienced devastating property and livestock losses, however, the company has maintained that none of its property has been damaged, and all branches are currently operational.

While providing an update on bushfire impact, the company stated that it is too early to assess the full impact of the fires, which are still burning in many parts of Australia, however, in the immediate term, the company expect that livestock agency commissions and farm supplies sales will be negatively impacted in bushfire impacted regions.

The company has informed that in Q1 FY20, its trading was in line with its expectations, a positive piece of news for the company. At the recently held Annual General Meeting (AGM), the company’s management confirmed that it is on track to meet the second Eight Point Plan’s target of 5-10% growth in underlying earnings throughout the cycles to the end of FY20. Taking a three-year average, the company has ROC (Return on capital) of 22.8% -- well above its target, and with a reasonably optimistic outlook for FY20.

The company’s stock is currently trading at a PE multiple of 10.980x with an annual dividend yield of 2.88%. At market close on 13 January 2020, ELD stock was trading at a price of $6.270 with a market cap of $974.51 million.

Bega Cheese Limited (ASX: BGA)

Australian cheese manufacturer, Bega Cheese Limited (ASX: BGA) recently announced an update on the bushfire impact wherein it announced that there has been minimal direct impact to the company overall or milk supply or its ongoing operations.

The good news is no dairy sheds have been lost in the bushfires. However, farm operations and infrastructure have been impacted.

Despite a very challenging year for the Australian dairy industry, Cheese generated a record normalised earnings before interest, depreciation and tax (EBITDA) of $115.4 million in FY2019 by producing a record 280,405 metric tonnes of dairy and other products. The company generated record revenue of $1.42 billion in FY2019, up by 13% on last year. Export sales increased by 4% to $442 million in FY19, with the Group exports to key markets in south east Asia, Japan, China and the Middle East representing the majority of its export business.

As per the estimates provided in October 2019, the company expects its FY20 EBITDA to be in the range of $95 – 105 million compared to $115 million in FY2019.

The company stock is currently trading at a PE multiple of 77.370x with an annual dividend yield of 2.49% (as per ASX). At market close on 13 January 2020, BGA stock was trading at a price of $4.460 with a market cap of $944.82 million.

Apollo Tourism & Leisure Ltd (ASX: ATL)

Apollo Tourism & Leisure Ltd (ASX: ATL) has recently provided a trading update given the unprecedented bushfire situation across Australia and its impact on the company and its guests.

The company has informed that through its telematics solution, it has been able to establish geo-fencing around affected regions and it is attempting to contact any guest entering a geofenced area to ensure they are safe and are aware of the current situation.

As of now, the extent of the impact from the bushfire situation on Australian rental bookings into H2 FY20 is unclear, however, any negative impact on H2 FY20 bookings, combined with the reduction in last minute summer bookings in Australia and the, although improving, global RV sales markets remaining subdued, will make it challenging for the company to reach the underlying FY19 net profit of $14.7 million in FY20.

On 13 January, the company announced the appointment of highly experienced and knowledgeable Mr. Robert Baker as an Independent Non-executive Director. “He is an experienced executive and director whose global industry knowledge and strong financial acumen will complement the Board’s existing mix of skills and experience,” said Apollo’s Chairman, Sophie Mitchell.

Recent Trading Update (provided at last AGM)

• Solid start to FY20 core rental operations, with positive forward rental bookings
• Retail RV sale volumes in Australia YTD are up on the prior year
• Brexit remains an issue in the UK, with the impact on retail vehicle sales currently uncertain
• Optimising margins on RV sales continues to remain challenging globally
• Promising 2019 summer season performance in Europe provides a foundation for additional expansion
• The Group continues to consolidate acquisitions and implement growth strategies.

In the last one year, ATL stock has provided a return of 7.5% to its shareholders. At market close on 13 January 2020, ATL stock was trading at a price of $0.390, down by 9.302% intraday, with a market cap of $80.04 million.