Uncertainty around Coronavirus Causing Stocks to Tighten their Guidance 

Companies all around the world are busy assessing the impact of the coronavirus outbreak on their business. Although several companies have assured that operations have not been materially impacted by the outbreak, there are many who have already lowered their expectations for the current term of business.

Gentrack Group Ltd (ASX:GTK)

Recently software an Australian software company Gentrack Group Ltd (ASX:GTK) recently suspended its FY20 guidance due to the rapidly increasing uncertainty surrounding the duration and scale of the COVID-19 outbreak. The company is worried that the virus outbreak might impact its ongoing projects and its sales pipeline.

The company has assured that it still has a strong balance sheet with no net debt. Further, the company continues to enjoy the contractually recurring revenue which provides a strong foundation for the business at this time of significant uncertainty. The company is now planning to update on full year guidance with the half year results in May 2020.

In the past month, there are several Australian firms which have reduced down their earnings expectations due to the uncertainty around the Coronavirus and several other reasons.

In the last month alone, GTK stock has declined by 32.95% and is currently trading near to its 52 weeks price of $1.320.

Computershare Limited (ASX: CPU)

On 11 March 2020, Computershare Limited announced that it has decided to reduce its earning expectation for FY19, owing to a decline in interest rates in the US and Canada. The company now expects margin income revenue for FY20 to be around $185 million with a fall in EPS of roughly around 15%.

For the first half of FY20, the company had reported revenue of $1,121.3 million and Net statutory profit after tax $124.7 million. Trading results of the company were also strong in the month of January as well as in February which it the confidence to achieve the guidance for the year which it gave in February 2020. However, due to the recent interest rate changes, the company has revised its earnings guidance for FY20 and is now focused on strengthening its core business lines.

At the time of writing, i.e., AEDT 2:45 PM on 17 March 2020, CPU stock was trading at $9.200 with a market cap of around $4.92 billion. The stock is currently trading near to its 52 weeks low price of $8.770.

Compumedics Limited (ASX: CMP)

Australian medical device company, Compumedics Limited recently informed the market that it has been discussing with its key distributors in China with regards to the impact of the Coronavirus and from these discussions it has understood that there has been a diversion of resources in the health/hospital sector to tackle the spread of Coronavirus, and as a result, purchasing and funding has been reallocated temporarily. The Company is of the view that sales to China will slow in the second half of FY20 and as a result has adjusted its full year guidance.

The company now expects its full-year Sales to be around $40 million – 42 million, from previous guidance of $42 million -44 million; EBITDA $5.5 million -6.5 million, from previous guidance of $6.5 million-$7.5 million; and NPAT $4.0 million-5.0 million, in line with previous guidance.

In the first half of FY20, the company had generated revenues of $18.3 million, representing a 2% decrease over the previous corresponding period (pcp) of $18.7 million, mainly due to some key US sales not being booked by 31 December 2019.

EML Payments Limited (ASX: EML)

Payments solutions company, EML Payments Limited has also tightened its guidance range for the FY20 year. For FY20, the company expects to its revenue to be around $120 million - $129 million (previously $116 million - $132 million). Further, the company expects its EBITDA to be around $39.5 million - $42.5 million (previously $38.5 million - $42.5 million).

In the first half of FY20, the company generated EBITDA of $19.7 million which excludes $3.4 million of acquisition related costs in connection with our acquisition of Prepaid Financial Services (Ireland) Limited (‘PFS’) announced in November 2019. Prior period comparative EBITDA numbers have been represented to exclude acquisition costs for comparability.

By AEDT 2:45 PM, EML was trading at a price of $2.02 with a market cap of around $673.62 million. The stock is trading at a PE multiple of 53.350.

There are several companies which have not changed their guidance as they do expect any material impact from coronavirus on their operations.

Aristocrat Leisure Limited (ASX: ALL)

Aristocrat Leisure Limited, a gaming company in Australia, reiterated the guidance provided in November 2019 as per which it expects continued growth over the 2020 fiscal full year driven by the following:

• Land-based Outright Sales which is expected to result in further incremental gains in attractive North American adjacencies. The company expects to maintain market-leading share positions across key for sale segments globally;
• Land-based Gaming Operations which is expected to expand the company’s total Gaming Operations installed base, leveraging its broadening portfolio, while maintaining market-leading average fee per day performance across the overall combined installed base;
• Anticipated growth in Digital bookings supported by scaling of recently released new games
• Expected cash tax savings is expected enhance the Group’s ability to invest to sustain its growth momentum and create value for shareholders

On the topic of Covid 19 virus issue, Aristocrat Leisure assured that its stakeholders that it has no direct operations in mainland China, and relatively small exposure to the Asian region generally.

At the time of writing, i.e., AEDT 2:45 PM on 17 March 2020, ALL stock was trading near to its 52 weeks low of $19.940.