Value and Stability in a Bear Market – A Glance at S32, NSR, CTX

Whenever the economy comes across any instability or downturn caused by unprecedented macro-events like dip in oil prices, ongoing uncertainty emerging from COVID-19 infection causing global disruption, and a massive stock market sell-off, it leads toward a bear market.

Speaking of bear market, it takes place when the price of an investment plunges down towards a minimum of 20 percent or beyond compared to its price noted at 52 weeks high.

In such a scenario, most of the investors run to save their wealth and in order to do this, investors look for investing in blue-chip companies, which possesses decent fundamentals as well as decent business. Some investors look for companies (Value Shares), which trades on a low price and have capability to appreciate their share price over a span of time.

Do Read: Secrets of Value Investing

Let us now look at some of the ASX-listed stocks, which are trading near to their 52-week lows and have decent fundamentals:

South32 Limited (ASX: S32)

South32 Limited (ASX: S32) is a diversified metals and mining company, which is engaged in the production of bauxite, alumina, aluminium, energy and metallurgical coal etc.

South32 recently notified the market with the operational and financial numbers for the March 2020 quarter and outlined the following:

  • During the period, S32 received approval from government to undertake limited activity at its South African manganese ore and export coal operations during the national lockdown, which is remobilising at a reduced rate in April.
  • Net cash balance for the quarter witnessed a decline to US$150 million. At the end of the quarter, the company held strong balance sheet comprising cash and cash equivalents of US$1.2 billion, no term debt and an undrawn revolving credit facility amounting to US$1.5 billion.

Measures in Response to COVID-19: S32 has suspended the remaining US$121 million of its current on-market share buy-back program and decided to lower FY20 sustaining capital expenditure guidance in order to maintain financial strength of its business as a response to current unprecedented market conditions.

The Company has withdrawn guidance for its operations in South Africa and Colombia and lowered FY20 production guidance by 5% at Australia Manganese in response to evolving spread of COVID-19. S32 has also maintained FY20 guidance for all other operations, where it has not experienced any effect on its production and sales to date (20th April 2020).

The stock of S32 closed the day’s trading session at $1.82 per share on 22nd April 2020, indicating a fall of 2.674% against its previous closing price. The market capitalisation of South32 stood at $9.06 billion as on 22nd April 2020.While, the total outstanding shares of the Company was noted at 4.85 billion. In the duration of last three months and six months, the stock of S32 has given returns of -34.07% and -22.99%, respectively.

National Storage REIT (ASX: NSR)

Australia based National Storage REIT (ASX: NSR) is involved in management and operation’s related activities of self-storage centres in both Australian and New Zealand regions with 182 centres.

No Impact on All Storage Centres from COVID-19

On the operational front, all 182 NSR centres throughout Australia and New Zealand were open and operational across the COVID-19 pandemic. The resilient nature of the self-storage asset class to economic volatility was reflected by the continuous storage revenues.

  • In addition to undrawn pre-existing debt facilities amounting to $80 million, the Company has attained increased documented facilities of $125 million from its club banks, plus a commitment from J.P. Morgan for a new facility of $100 million.
  • Until July 2021, the company has no debt maturities with a weighted average debt expiry of 3.2 years as at 31 March 2020.

Do Read: Acquisition Proposal from Gaw Capital Partners.

NSR has reiterated its FY20 earnings guidance, which is in the range of 8.5cps - 9.0cps. The Company is optimistic that the resilient nature of its business is exemplified through this result in such a challenging and volatile environment, despite its revised guidance.

The stock of NSR closed the day’s trading session at $1.575 per share on 22nd April 2020, indicating a rise of 0.639% against its previous closing price. The market capitalisation of National Storage REIT stood at $1.24 billion as on 22nd April 2020. The Company’s total outstanding shares were noted at 791.87 million. During the span of three months and six months, the stock of NSR has provided shareholders the returns of -22.91 and -14.71%, respectively.

Caltex Australia Limited (ASX: CTX)

Australia based company, Caltex Australia Limited (ASX: CTX) is involved with the activities like buying, refining, supplying, and marketing of (petroleum) goods. CTX is also operates convenience shops.

On 21 April 2020, CTX updated that in accordance with the Government of Australia’s public health restrictions, the Company’s stakeholders would be unable to physically participate its Annual General Meeting to be held in Sydney on 14 May this year. However, the AGM would be webcast live, and the stakeholders would be able to take part in it and put their queries across virtually in the meeting. The guidelines, on how to take part in the meeting has been updated on the Company’s website.

Recently, the Company notified the market with the update on acquisition discussions between Caltex and Alimentation Couche-Tard Inc. with regards to the conditional, non-binding and indicative acquisition proposal for Caltex have been completed.

Caltex has also updated the market with results for first quarter of FY20 for the period closed 31 March this year, which reflects resilience of its integrated business, with strong performance in Convenience Retail mitigating the impacts of record low refiner margins as well as weakness throughout the economy. This includes significant volume impacts from bushfires early in the year as well as the government response to COVID-19.

During Q1 2020, the Company witnessed a fall of 8% in CR fuel volumes to 1.1 billion, these were affected by bushfires, floods, as well as broader economic weakness. This also include COVID-19 restrictions, which were imposed in late March 2020. Some of the other highlights of the period are as follows:

  • During Q1 2020, Fuels & Infrastructure ex-Lytton EBIT witnessed a decline of 32% as compared to pcp. It added that the Q1 2020 was affected by unprecedented global oil market disruptions resulted by the combination of the new IMO2020 marine fuel standards, OPEC+ production tensions, as well as the emerging impacts of COVID-19.
  • The Company entered the period of uncertainty caused by COVID-19 with a robust balance sheet and it would continue to protect its cashflows and to place CTX to take benefits of opportunities which would arise when markets recover.

key financials (source: Company' report)

The stock of CTX closed the day’s trading session at $22.580 per share on 22nd April 2020, indicating a rise of 2.73% against its previous closing price. The market capitalisation of Caltex Australia was at $5.49 billion as on 22nd April 2020 and the total outstanding shares stood at 249.71 million. In the period of last three months and six months, CTX has given the returns of –37.18 and -19.81%, respectively.


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