3 stocks on roller-coaster ride: SCG, QAN and WTC

3 stocks on roller-coaster ride: SCG, QAN and WTC

Summary

  • Social distancing and closing of international borders significantly impacted consumer centric businesses such as aviation, travel & tourism
  • With share prices experiencing massive fall, companies such as SCG suspended guidance for financial year 2020, amid uncertainties stemming from coronavirus pandemic
  • QAN secured additional funding in order to strengthen its position to deal with short-term impact of coronavirus
  • Despite experiencing significant fall during March, WTC has shown recovery with decent cash generation from operations

The coronavirus pandemic and the bushfire have stalled the Australian economy affecting industries and stock market heavily. The journey of the Australian securities market is experiencing a roller coaster ride with stock markets recording a major sell-off in the month of March 2020.

Social distancing and closing of international borders have put a dent on all consumer centric businesses. Industries such as aviation, travel & tourism witnessed a robust decline in their businesses leading to layoffs, furloughs, and closure. In the following article, we will look at three stocks, which have seen the maximum decline on year-till-date.

Do Read: Is Second wave of COVID-19 approaching the market?

Scentre Group

Scentre Group (ASX: SCG) owns and operate Westfield living centres and retail outlets in ANZ with interests in 42 Westfield Living Centres. The share price witnessed a 38.18% fall on Year-till-date basis with a year-till-date low recorded on March 24th when the share price hit $1.43 on day close.

Despite such a grieve share price fall, the company’s business performance is not that pessimistic. Recently, the company has priced US$1.5 billion debt issue in the United States market. This comprises US$750 million 5.7-year fixed rate senior guaranteed notes with a coupon of 3.625% and US$750 million 10-year fixed rate senior guaranteed notes with a coupon of 4.375%. The company will utilise the proceeds from this debt issue for repayment of existing debt including revolving bank facilities.

Do Read: A look at real estate sector dynamics and code of conduct.

During the quarter ended March 2020, the company’s all 42 Westfield Living Centres were operational with 57% of retailers representing 70% of gross lettable area currently open and trading. Significantly more retailers are expected to reopen in the upcoming period. In the month of January and February 2020, SCG experienced strong operational performance

In the month of April 2020, the group has increased its liquidity to $3.1 billion. Moreover, the amount of debt maturing through to December 2021 has been further decreased to $1.9 billion because of additional refinancing of bank facilities.

Due to the impact of COVID-19 pandemic and volatility in markets globally, the company has suspended its guidance for FY20. The company had also decided not to pay an interim distribution for 1H FY20 considering the uncertainty regarding the pandemic, its duration, the economic impact as well as the timing of operating cash flows.

At the close of trading session on 18th June 2020, the stock of SCG settled at $2.32 per share with a fall of 2.521% against its previous closing price.               

Qantas Airways Limited

Qantas Airways Limited (ASX: QAN) is engaged into international and domestic air transportation services. The stock of QAN went down by 36.87% on year-till-date basis with a year-till-date low recorded on March 19th when the share price hit $2.14 on day close.

Recently, the company updated the market players about the investigation commenced by the Australian Competition & Consumer Commission (ACCC) on the acquisition of a 19.9% stake in Alliance Aviation by Qantas Airways Limited. Qantas is alleged of not seeking clearance from ACCC for the acquisition.

In another update, the company stated that it has continued to bolster its ability to combat with the short and the likely long-term impacts of the coronavirus crisis. QAN has extended flight cancellations to the end of July from May end.

Do Read: Impact of COVID-19 on travel industry.

On the liquidity front, the company has secured funding of $550 million against three Boeing 787-9 aircraft. This funding follows the raising of$1.05 billion in March against seven 787-9s. As of now, QAN possesses enough liquidity in order to respond to several recovery scenarios. In the event of requirement of more funds, the company has $2.7 billion in unencumbered aircraft assets and can grim more fund from these assets.

Net debt position of the company is currently within the middle of the target range i.e. at $5.8 billion. QAN has no financial covenants on any existing or new debt facilities as well as no significant debt maturities until June 2021.

 As on 4th May 2020, the short-term liquidity of the company stood at $3.5 billion, which include a undrawn facility amounting to $1 billion.

At the close of trading session on 18th June 2020, the stock of QAN settled at $4.350 per share with a fall of 3.761% against its previous closing price.

WiseTech Global Limited

WiseTech Global Limited (ASX: WTC) develops and provides software solutions to the logistics execution industry globally. The stock of QAN went down by 4.61% on year-till-date basis with a year-till-date low recorded on March 14th when the share price hit $10.48 on day close.

Recently, as released on 28th May 2020, the company has renegotiated earnout arrangements for several strategic acquisitions in order to cement its robust balance sheet and for better alignment of resources

WTC has worked collaboratively with 17 of its acquired businesses to replace significant cash payments with equity and decrease and close-out future earnouts. As a result of these negotiations:

  • WTC experienced a decline in liabilities from $215.5 million to $68.5 million.
  • The company witnessed removal of $151.5 million of future contingent cash liabilities
  • Negotiation also resulted in equity issuance of $81.4 million

During the three months ended 31st March 2020, the company’s business traded in line with its expected target. This indicated continued growth in revenue, cash generation from operations and further onboarding of additional users.  The company remains in a robust financial position with significant liquidity and strong cash generation for assisting its strategic and operational initiatives. As at 31st March 2020, net cash position of the company stood at $230 million.

On the guidance front, the company expects revenue in the range of $420 million - $450 million for FY20. EBITDA is anticipated to be between $114 million - $132 million.

At the close of trading session on 18th June 2020, the stock of WTC settled at $21.71 per share with a fall of 2.78% against its previous closing price.

 


Disclaimer
The website https://kalkinemedia.com/au is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) or engage in any investment activity under discussion. We are neither licensed nor qualified to provide investment advice through this platform. All pictures are copyright to their respective owner(s). Kalkinemedia.com does not claim ownership of any of the pictures displayed on this website unless stated otherwise. Some of the images used on this website are taken from the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image.

 

There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

CLICK HERE FOR YOUR FREE REPORT!
   
x
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK