2 Stocks That Have Been Knocked Down- SDA And BAL

  • Dec 24, 2018 AEDT
  • Team Kalkine
2 Stocks That Have Been Knocked Down- SDA And BAL

Speedcast International Limited (ASX: SDA): The price of the scrip is trading on the downside this year providing a negative YTD return of 42% to investors. In the last three months, the company’s stock price fell by 50%. With the close of trading hours today, the shares are trading at AUD 3.020, down by 0.33%.

The company operates in the telecommunications sector. It is the world's largest global satellite communications provider, offering network services, value-added services, equipment sales and wholesale Voice over Internet Protocol (VoIP) to its government and enterprise customers.

The company’s shares plunged today on the announcement of earning expectations downgrade, impacted majorly by energy and cruise performance. Speedcast is now expecting an underlying EBITDA to be in the range of USD 130 million to USD 135 million, as opposed to previously communicated USD 135 to USD 145 million. As stated by the company, this is attributable to slower renewal agreement with cruise operator Carnival and below expectation performance of Energy division, now expecting to grow from USD 76 million in the first half of the year to USD 82-84 million in the second half, much below previous forecasts.

However, the company is anticipating future growth potential for the next three years upon renewal of the cruise contract.

As stated in the company’s 2017 financial statement, Speedcast posted a 195% increase in EBITDA to USD 514.2 million. The EBITDA margin increased to 23.8% as compared to 19% in the financial year 2016 reflecting the impact of increased synergies from the integration of Harris CapRock, that closed on 1 January 2017. NPATA per share impressively increased to 13.5CPS, representing an increase of 41%.

Bellamy's Australia Limited (ASX: BAL):  The stock of Bellamy's Australia has demonstrated a dismal performance this year with a negative YTD of around 32% till date. In the last six months, the stock price is down by 61%. The share price plunged by 3.4% today and is currently trading at 6.8c as compared to the previous close of 7.05c on 21 December 2018.

Bellamy's Australia is Australia’s leading food and beverages company, involved in sale and distribution of nutritious organic formula milk and food products to babies and kids. In its recently released annual financial statement, Bellamy reported a 37% increase in group revenue (to $329 million) and 65% upside in EBITDA (to $71 million) in the FY2018. The company’s balance sheet reflects $88 million cash and $39 million in supply chain investments. The company undertook significant work on brand and product upgrade and including new food and formula lines.

However, the company anticipates short-term trade-off to sales and profit in 1H2019 and performance to be 10-15% below 1H2018 due to $10-15 million run-down of trade inventory before the roll-out of formula re-launch in 2H2019. The company sheds light on its expected slow-down in cross-border formula growth as well. Its SAMR registration of Chinese- label formula is progressing but with timing uncertainty.

However, the company expects a growth trajectory in the medium term on the grounds of an aggressive three-year growth strategy, category fundamentals and future channel opportunities. It foresees stronger performance with FY19 EBITDA margin to continue at 2H2018 levels off 22-25%.


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