A Glance at 3 ASX listed Diversified entities - SG Fleet, Altura and South32

  • Mar 28, 2020 AEDT
  • Team Kalkine
A Glance at 3 ASX listed Diversified entities - SG Fleet, Altura and South32

Diversified investment portfolio is a portfolio of different asset classes that reduces exposure to risk and earn highest returns. An investment portfolio that consists different kinds of investment is needed to tackle any market condition.

Global markets have been see-sawing for weeks amid the coronavirus pandemic prompting selloffs of high-risk investments and has spooked global investors. Supply disruptions, collapsing oil prices and market volatility have also triggered concerns of approaching recession resulting in a significant shift in the investor sentiment.

A proper mix of cash, stocks, bonds, ETFs and mutual funds constitute a diversified investment portfolio. An investor needs to diversify his/her portfoliowith investments of different rates of return and risk along with rebalancing it time and again making adjustments accordingly.

Let’s now have a look at the diversified stocks- SGF, AJM, S32

SG Fleet Group Limited  (ASX: SGF)

The Group is into fleet management, vehicle leasing and salary packaging services.

The stock price of the company fell from a high of $2.5 on 17 February 2020 to $1 on 23 March 2020 amidst the virus spread. The stock last traded at $1.110 on 27 March 2020, down 6.723% from its last close.

The Group gives precedence to the well-being of its employees and customers. Subsequently, it has incorporated specific initiatives to minimise any disruptions to its operations and service delivery that includes remote working facilities.

As per a trading update released on 27 March 2020, the Company advised that its corporate and novated lease portfolio funding structure remains operational and provision of lease portfolio financing by its panel of funders has not been affected by COVID-19.

The costs are being managed actively to reflect the impact of the present situation as the bulk of SG Fleet’s revenue is generated during the life of the lease, primarily in monthly payments. At the same time, cash is received on annuity basis in addition to its existing cash-on-hand.

Also Read:Three Industrial Stocks amid Pandemic Fear – ALX, RWC, SGF

As at 31 December 2019, the group’s net corporate leverage was at 0.4 times statutory EBITDA and that its current debt facility is in place until December 2022. SG FLeet’s balance sheet remains healthy as most of the lease portfolio funding occurring on principal and agency basis.

While SGF continues to make new deals, enquiry levels have started falling since mid-March in line with weaker consumer confidence. The demand for second-hand vehicles is also expected to reduce temporarily in the current environment. Nonetheless, the Company is actively supporting novated customers economically impacted by COVID-19 in cooperation with funders. 

As uncertainty looms around the severity and duration of COVID-19, its impact on consumer confidence and the resulting demand for leases, visibility on the financial performance of the business has become limited. 

Hence, SGF withdrew its guidance given during 1H20 results.

Altura Mining Limited (ASX: AJM)

The Company is a well-established player in the global lithium market. 

 

                  Source: Company’s Report

                         Source: Company’s Report

 

The stock price of AJM fell from a high of $0.063 on 13 January 2020 to $0.029 on 23 March 2020 amidst the virus spread. The stock last traded at $0.032 on 27 March 2020, down 8.571% compared to its last close.

In its latest update of 27 March 2020, AJM announced that the loading of its second shipment of about 12,400 wet metric tonnes for the March quarter is scheduled to commence on 30 March 2020.

The completion of the shipment by 31 March 2020 would result in estimated sales of 34,000-35,000 dry metric tonnes (dmt) for the March quarter, which is lower than the expected sales of 40,000-50,000 dmt as per update of quarterly activities report released on 31 January 2020. 

However, if there are any delays to the loading and it is not completed by 31 March 2020, that will lead to shipment being classified as a sale in the June quarter.

March quarter production is expected to be 40,000-43,000 wmt, marginally lower than the previous guidance of 45,000-50,000 wmt due to adverse impact of tropical cyclones during the period.

Also Read: Staying Positive while ABS Talks About COVID-19 Driven Impact on Businesses

Altura has implemented appropriate processes and procedures across all working areas, including restricted access to the mine site and process plant amid COVID-19 impact. 

The Company’s lithium mine and plant continue to be fully operational.

South32 Limited (ASX: S32)

South32 is a globally diversified metals and mining company. 

The stock price of the company fell from a high of $2.906 on 20 January 2020 to $1.665 on 23 March 2020 due to the virus outbreak. The stock traded at $1.770 on 27 March 2020, down 5.851% from its last close.

The Company is taking specific steps to maintain the financial strength of the business and keeping its people safe and well, as COVID-19 impacts people all over the world. 

The initiatives announced on 27 March 2020 aims to deliver US$160 million in lower expenditure over the next 15 months to protect its financial position. Lower expenditure comprises of the expected reduction in sustained capital expenditure (US$150 million) and exploration activity(US$10 million).

The balance sheet reported US$277 million on 31 December 2019 that includes cash and cash equivalents of US$1.4 billion, no term debt and undrawn US$1.5 billion revolving credit facility.

To prepare for an extended period of low prices-

  • Activity across the Group is being reviewed to reduce controllable costs and building on strong operating unit cost performance in H1FY20.
  • The firm is also working with its joint venture partner to preserve the value of Eagle Downs Metallurgical Coal investment beyond the investment decision scheduled for the end of the calendar year. 
  • Pre-feasibility study at Hermosa is now expected to be concluded in September 2020 quarter in an attempt to review the evolving environment over a longer-term.

 

Further, the company has suspended US$121M of South32’s current on-market share buy-back with the opportunity to review its extension ahead of its expiry on 4 September 2020.


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