Many analysts believe that the disruption caused by Covid-19 in the equities market might have given birth to some undervalued opportunities. There is a strong possibility that investors might have overreacted to coronavirus fears, causing many stocks to go down substantially.
We have screened a few stocks which are trading near to its 52 weeks low price. Let us closely look at these stocks and their recent updates.
Computershare Limited (ASX: CPU)
Global market leader in transfer agency and share registration Computershare Limited (ASX: CPU) has reduced its FY20 guidance recently, in response to recent rate cuts and the new yield curves.
The company now expects its margin income revenue to be down by around 25% for FY20 versus FY19 and has assumed average daily balances of around US$15-16 billion for the full year which implies that the margin income revenues will be around US$185 million for this year down from $245 million in FY19. The company expects its FY21 margin income revenue to be around US$115 million with the full impact of interest rate changes.
Even at the low rates, the company expects to generate significant margin income revenues and believes that it has the benefit of long-term term deposits and around US$5 billion that are not exposed to interest rates.
Last month, when the company released its first half FY20 results, it has reiterated guidance for Management EPS to be down around 5% for the full year and at that time it had assumed further rate cuts in both Australia and the UK during the second half and had expected margin income revenue for the full year FY20 to be down around 8-10% versus FY19.
In line with the expectations, the rates in Australia actually fell, however, the 50bps cut in the US and Canada were not anticipated. Due to this, the interest rate expectations for the remainder of FY20 fell beyond the actual expectation. Although the company has reduced the guidance, it has assured that it is focused on strengthening its core business lines and delivering great outcomes for customers in challenging conditions.
Notably, in the last one month, the stock price has declined by 35.33% on ASX. The stock is currently trading near to its 52 weeks low price.
Synlait Milk Limited (ASX: SM1)
Infant formula company, Synlait Milk Limited has announced that it is going to acquire farmland adjacent to its Dunsandel facility for $25.7 million which will allow the company to pursue several strategic supply chain and sustainability initiatives that support Dunsandel’s long-term operation and expansion.
The land will provide the company with certainty over access to water and disposal of its factory processing water and it will offer opportunities to evaluate and trial sustainable farming practices and carry out on-farm research.
Synlait had recently updated the market regarding its full year 2020 guidance outlook wherein it highlighted that it is expecting its FY20 NPAT to be in between $70 million and $85 million. For the six months ended 31 January 2020, the company expects NPAT to be in between $26.5 million to $28.5 million and expects the result to be impacted by:
- increased incremental interest, manufacturing and SG&A costs associated with the Pokeno and advanced liquid dairy packaging facilities;
- lower sales of infant base powders due to the China infant nutrition market consolidation; and
- lower sales volumes of ingredient products than anticipated due to sales phasing and product mix impacts.
SM1 had recently appointed highly experienced Angela Dixon as its new CFO.
In the last one month, SM1 stock price has declined by 37.96%. The stock is currently trading near to its 52 weeks low price.
CIMIC Group (ASX: CIM)
CIMIC Group’s services specialist- UGL has been awarded two rail sector contracts which include:
- a contract for the operations and maintenance of Adelaide’s North - South tram and bus network.
- a contract to manufacture new locomotives for Qube Logistics, over a period of 18 months.
These contracts extend the company’s light rail capability alongside its Adelaide heavy rail presence. These contracts will further strengthen UGL’s presence in New South Wales and will further improve its reputation for the manufacture, operations as well as maintenance of heavy and light rail across Australia. Both these contracts are expected to generate revenue of more than $180 million.
Before this, UGL had secured contracts of approximately $180 million to provide maintenance, shutdown and project services in the mining sector and to provide multi-discipline services for Alcoa across the Wagerup and Pinjarra sites.
CIMIC’s construction business named CPB Contractors, has recently been granted a contract by the Government of South Australia to deliver three projects, the scope works of which include:
- the Joy Baluch AM Bridge Duplication in Port Augusta,
- the Port Wakefield Overpass and Highway Duplication, and
- the Augusta Highway Planning Project located between Port Augusta and Port Wakefield
There would be a strategic alliance between the Department of Planning, Transport and Infrastructure, Aurecon Australasia and GHD for completing the projects. Moreover, these projects are expected to generate revenue of around $236.8 million.
Subject to market conditions, CIMIC group is expecting NPAT for FY20 in the ambit of $810 million-$850 million. CIMIC is optimistic about its outlook throughout core markets. During last financial year, CIMIC returned an amount of $526 million to shareholders in the form of dividends and share buyback. The company is focused on generating cash, sustaining a decent balance sheet and adopts a rigorous approach to tendering and project delivery.
Over the last three months, CIMIC has witnessed a decline of 41% in its share price and its stock is currently trading near to its 52 weeks low price of $18.130.