3 Top Industrial Stocks to Watch in February 2020- TCL, CIM, DOW

  • Feb 17, 2020 AEDT
  • Team Kalkine
3 Top Industrial Stocks to Watch in February 2020- TCL, CIM, DOW

The industrial sector is generally comprised of companies that is into the production and offering of services for machinery, equipment, and supplies, that are further used for manufacturing of different end products for the customers.

Despite of heavy turmoil during the full year 2019, that consisted of slowing global growth, political problems, effects of trade wars between US & the trading partner China, decline in housing and commodity markets, but overall the Industrial stocks gave good results. These stocks are anticipated to continue to perform in 2020 on the back of receding concerns about the global growth, the US and China negotiating to reduce trade tensions, the Brexit risks are also falling and there is rebound in the housing market in the US and Australia. Therefore, there will be increase in infrastructure & construction activities.

Additionally, the industrial sector still has lot of value as the stocks of this sector does not have trading multiples stretched compared to other sector stocks like healthcare and IT stocks.

On 17 February 2020, the Australian benchmark was trading at 7122.2 points, falling by 0.1 percent (at AEDT 1:32 PM). However, the S&P/ASX 200 had closed 27 points up or was 0.4% higher at 7130 points on Friday, which reflected the fourth straight session of gains. This was on back of strong corporate earnings, which outweighed worries of fast-spreading coronavirus outbreak, that has taken the whole world in turmoil as it had claimed about 1,500 lives so far.

Moreover, on 17 February 2020, S&P/ASX 200 Industrials (Sector) was trading at 7,194.8 points, falling by 0.14 percent (at AEDT 1:39 PM). Let us now look at the three Industrial stocks and their recent updates.

Transurban Group (ASX: TCL)

Transurban Group (ASX: TCL) is a leading player in the world that operates toll-road and is into the planning, forecasting & development networks in Australia and North America.

Further, the company uses the technology for the project development, management of customers & community engagement. During past one & half year the company had completed major projects and TCL anticipates completing two more projects by mid-2020.

During the first half 2020, the company has opened two new assets to traffic the new M4 in Sydney, which is a part of the WestConnex that connects the new M4 tunnels and the 395 Express Lanes in the US. The company has now acquired the remaining 34.6% minority interest in the M5 West, which the company funded it fully through an underwritten institutional placement of shares and a share purchase plan.

Decent Performance in the First Half 2020:

Moreover, for fiscal 2020, the company has reaffirmed the distribution of 62 cps to its shareholders, which represents 5.1% growth on FY19. For the first half of 2020, the company posted 2.3% rise in the Average daily traffic (ADT), 8.6% growth in the proportional toll revenue to $1,396 million on the back of increase in traffic & revenue from the existing Australian and North American networks, increase from new assets and higher ownership in M5 West.

During 1H 2020, there has been 9.5% increase in the proportional earnings before interest, tax, depreciation and amortisation (EBITDA) and before significant items to $1,094 million. The company during 1H 2020 generated free cash flow of $927 million & reported the statutory profit of $162 million.

Also, TCL has paid the dividend of 31 cents on 14 February 2020, comprising of a 29-cps distributed from Transurban Holding Trust and controlled entities and a 2 cps fully franked dividend have been distributed from Transurban Holdings Limited and controlled entities.

1H FY 20 Financial Performance (Source: Company’s Report)

On 17 February 2020, TCL was trading at $16.170, falling by 1.222 percent (at AEDT 1:58 PM). Moreover, TCL stock has risen 9.06% in three months as on February 14th, 2020.

Cimic Group Ltd (ASX: CIM)

Formerly known as Leighton Holdings, Cimic Group Ltd (ASX: CIM) takes up projects on contract that are related to sectors like telecom, engineering etc.

CIM’s group companies recently secured contracts worth $614 million & Appointment of CEO:

CIM’s group company UGL has bagged the contracts to deliver services like maintenance, turnarounds and such to the consumers in the oil and gas space, which is projected to produce an aggregate topline to UGL of about $450 million. These contracts have to be executed over a period of multiple years.

Moreover, CIM’s group’s CPB Contractors has been chosen for 2 key regional highway projects, of total consideration of $164 million in the form of revenue to CPB Contractors. On the other hand, Juan Santamaria has been hired as the CEO or Chief Executive Officer and Managing Director of CIM, effective from 5 February 2020. Earlier, he was the MD or Managing Director of CIM’s CPB Contractors.

On 17 February 2020, CIM was trading at $27.68, moving up by 1.059 percent (at AEDT 2:10 PM). Meanwhile, CIM stock has fallen 19.30% in three months as on February 14th, 2020 and has an annual dividend yield of 5.73%.

Downer EDI Limited (ASX: DOW)

Downer EDI Limited (ASX: DOW), formerly known as Public Works department, Ministry of Works and Works Infrastructure Limited. The company is into the engineering & management of infrastructure like rail, road, power, telecommunications, mining etc in both Australian and New Zealand region. DOW for the first half of 2020, has delivered 3.3% rise in the total revenue to $6.8 billion.

Subdued Performance in 1H 2020:

However, during 1H 2020, the company has reported 23.8% decrease in the Earnings before interest and tax (EBIT) to $180.4 million, decline of 29.3% in statutory net profit after tax and before amortisation of acquired intangible assets (NPATA) to $115.5 million and fall of 35.4% in statutory net profit after tax (NPAT) to $91.4 million.

1H FY 20 Financial Performance (Source: Company’s Report)

On 17 February 2020, DOW was trading at $6.805, slipping by 0.366 percent (at AEDT 2:20 PM). Therefore, DOW stock has fallen 15.68% in three months as on February 14th, 2020 and is trading at a P/E ratio of 19.26x.


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