Industrial Space Growth Charter for Investors - BXB, TCL, SYD, AZJ, AIA

The COVID-19 pandemic, with ~2.4 million confirmed cases and over 165k reported deaths at the time of writing, has created havoc in the world. The infectious disease has severely wounded the global economy, and these wounds are expected to linger for a long time – several months or even years. Almost every sector has been affected by the coronavirus, including the industrial sector, with SARS-CoV-2 sparing none.

The industrials sector is identified by the S&P/ASX 200 Industrials (Sector) on the ASX. The sector includes companies with businesses such as manufacture and distribution of capital goods which includes construction, aerospace & defence, electrical equipment, industrial machinery and engineering & building products. The sector also consists of those entities, which are in the business of offering commercial services and supplies.

In the following article, we will look at five industrial companies with a growth aspect amid uncertainties from COVID-19.

GOOD READ: Industrial Stocks Suffer From COVID-19 Woes, But Stay Calm Amid Turbulent Market

Brambles Limited (ASX:BXB)

Brambles Limited is a supply-chain logistics entity, having operations in the over 50 countries. The specialised services of the Company are unit-load equipment and associated services.

As previously announced, Stephen Johns would be retiring from the role of Chairman and a Non-Executive Director on 01 July 2020 and on the same day, John Mullen would commence his role as Chairman.

Revenue Growth Despite Uncertainty in Market:

During Q3 FY20 and the first nine months of FY20, Brambles experienced a growth of 6% in sales revenue. The growth indicated the resilient and defensive nature of the business, with continuing price momentum and strong volume growth throughout its major markets, despite increased uncertainty from COVID-19. BXB possesses a robust balance sheet as well as a sturdy liquidity profile with deposit amounting to $1.1 billion and undrawn committed credit facilities US$1.3 billion as at 28 March 2020.

Guidance Revised Due to COVID-19:

In the wake of increased uncertainty in the overall trading environment as well as the expected impacts of COVID-19 on Q4 trading performance, the Company has revised its FY20 guidance. The Company currently expects sales revenue growth of 5-7% for FY20 and underlying Profit growth of between 3-5%.

BXB shares were trading at $11.080 on 20 April 2020 (03:01 PM AEST), a decline of 4.318% from its previous closing price. The stock has generated negative returns of 5.78% and 0.69% in the last three months and six months, respectively.

Transurban Group (ASX:TCL)

Transurban Group develops, operations and owns electric toll roads and smart transport system.

Drop in Average Daily Traffic (ADT) due to COVID-19:

During the March 2020 quarter, the Company experienced a decline of 4.8% in Average Daily Traffic due to the restrictions in movement imposed by the governments concerning the COVID-19 pandemic.

  • The Company has expended its existing Linkt Assist program to support vulnerable customers, businesses and other members of the community in response to COVID-19.
  • For Sydney segment, TCL reported a fall of 5.2% in ADT to 771,000 trips. Average workday traffic fell by 4.1% and average weekend/public holiday traffic decreased by 9.1% for the March 2020 quarter.

TCL shares were trading at $13.240 on 20 April 2020 (03:01 PM AEST), an increase of 0.455% from its previous closing price. The stock has generated negative returns of 16.42% and 10.52% in the last three months and six months, respectively.

Sydney Airport (ASX:SYD)

Sydney Airport Limited is the owner of Sydney airport and regulates all operations associated with it. The Company recently announced that it would conduct its 2020 AGM on 22 May 2020 virtually due to ongoing extraordinary circumstances.

In response to COVID-19, the Company is working through the scheduling impacts on Sydney Airport with its airline partners. However, it expects, and is planning, for a significant but temporary reduction in international and domestic traffic.

Also, the Company is optimistic about its robust balance sheet as well as liquidity position. SYD’s average debt maturity has a tenor of more than six years. It possesses cash of over $370 million and $1.0 billion of available undrawn bank facilities from over ten domestic and large global banks.

The Company is in the process of reviewing its entire capital expenditure program for 2020 despite the strength of its balance sheet

SYD shares were trading at $6.210 on 20 April 2020 (03:01 PM AEST), a decline of 1.115% from its previous closing price. The stock has generated negative returns of 30.53% and 25.59% in the last three months and six months, respectively.

Aurizon Holdings Limited (ASX:AZJ)

Aurizon Holdings Limited is mainly engaged in the provisioning of access to, and operation of, the Central Queensland Coal Network and maintenance and renewal of Network assets.

No Material Impact on Coal or Bulk Volumes: During March 2020 quarter total above rail volumes witnessed a rise of 2% as compared to pcp because of increased volumes in bulk, with Coal volumes flat. However, the Company has not experienced any material impact to Coal or Bulk above rail volumes from COVID-19 during March quarter. For FY20, it expects Coal volume in the range of 210 mt - 220 mt. Moreover, stronger volumes for Iron Ore has assisted the Company to drive a rise of 12% in bulk volumes.

Aurizon Holdings Limited

AZJ shares were trading at $4.620 on 20 April 2020 (03:01 PM AEST), an increase of 1.094% from its previous closing price. The stock has generated negative returns of 19.12% and 21.21% in the last three months and six months, respectively.

Auckland International Airport Limited (ASX:AIA)

AIA is engaged in managing the operations of Auckland airport. During February 2020, the Company experienced a decline of 8% in total passenger volume. Moreover, international passenger volume witnessed a drop of 8.4%. Also, there was a decline of 25.3% and 7.3% in transit passengers and domestic passengers, respectively. The fall in total passengers during February 2020 indicates the initial impact of COVID-19 pandemic on the travel and tourism industry of New Zealand.

For March 2020 (preview), the Company reported a decline of 42.0% in total passengers and drop of 43.2%, 49.5% and 40.1% in International passengers (excl. Transits), transit passengers and domestic passengers, respectively. The decline in total passengers for the month implies the impact of further travel restrictions, which was imposed by the New Zealand Government as a measure to contain the spread of the coronavirus.

Severe Impact of COVID-19; AIA bolsters its balance sheet, lowers costs

Despite the challenges, the Company has taken various steps to control the damage caused by the present scenario. AIA has actively taken cost-lowering measures such as a reduction in operating costs, CAPEX and cancelled the interim dividend payout.

On 06 April 2020, the Company announced that it would raise ~NZ$1.2 billion through capital raising to strengthen its balance sheet and to be in a decent position once the COVID-19 impact subsides. On 09 April 2020, AIA updated the market about a share repurchase plan worth NZ$200 million, as part of the capital raising announced a few days earlier.

AIA shares were trading at $5.660 on 20 April 2020 (03:01 PM AEST), a decline of 4.068% from its previous closing price. The stock has generated negative returns of 32.80% and 30.51% in the last three months and six months, respectively.


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