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Summary
- Social distancing and closing of international borders significantly impacted consumer centric businesses such as aviation, travel & tourism
- With share prices experiencing massive fall, companies such as SCG suspended guidance for financial year 2020, amid uncertainties stemming from coronavirus pandemic
- QAN secured additional funding in order to strengthen its position to deal with short-term impact of coronavirus
- Despite experiencing significant fall during March, WTC has shown recovery with decent cash generation from operations
The coronavirus pandemic and the bushfire have stalled the Australian economy affecting industries and stock market heavily. The journey of the Australian securities market is experiencing a roller coaster ride with stock markets recording a major sell-off in the month of March 2020.
Social distancing and closing of international borders have put a dent on all consumer centric businesses. Industries such as aviation, travel & tourism witnessed a robust decline in their businesses leading to layoffs, furloughs, and closure. In the following article, we will look at three stocks, which have seen the maximum decline on year-till-date.
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Scentre Group
Scentre Group (ASX: SCG) owns and operate Westfield living centres and retail outlets in ANZ with interests in 42 Westfield Living Centres. The share price witnessed a 38.18% fall on Year-till-date basis with a year-till-date low recorded on March 24th when the share price hit $1.43 on day close.
Despite such a grieve share price fall, the company’s business performance is not that pessimistic. Recently, the company has priced US$1.5 billion debt issue in the United States market. This comprises US$750 million 5.7-year fixed rate senior guaranteed notes with a coupon of 3.625% and US$750 million 10-year fixed rate senior guaranteed notes with a coupon of 4.375%. The company will utilise the proceeds from this debt issue for repayment of existing debt including revolving bank facilities.
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During the quarter ended March 2020, the company’s all 42 Westfield Living Centres were operational with 57% of retailers representing 70% of gross lettable area currently open and trading. Significantly more retailers are expected to reopen in the upcoming period. In the month of January and February 2020, SCG experienced strong operational performance
In the month of April 2020, the group has increased its liquidity to $3.1 billion. Moreover, the amount of debt maturing through to December 2021 has been further decreased to $1.9 billion because of additional refinancing of bank facilities.
Due to the impact of COVID-19 pandemic and volatility in markets globally, the company has suspended its guidance for FY20. The company had also decided not to pay an interim distribution for 1H FY20 considering the uncertainty regarding the pandemic, its duration, the economic impact as well as the timing of operating cash flows.
At the close of trading session on 18th June 2020, the stock of SCG settled at $2.32 per share with a fall of 2.521% against its previous closing price.
Qantas Airways Limited
Qantas Airways Limited (ASX: QAN) is engaged into international and domestic air transportation services. The stock of QAN went down by 36.87% on year-till-date basis with a year-till-date low recorded on March 19th when the share price hit $2.14 on day close.
Recently, the company updated the market players about the investigation commenced by the Australian Competition & Consumer Commission (ACCC) on the acquisition of a 19.9% stake in Alliance Aviation by Qantas Airways Limited. Qantas is alleged of not seeking clearance from ACCC for the acquisition.
In another update, the company stated that it has continued to bolster its ability to combat with the short and the likely long-term impacts of the coronavirus crisis. QAN has extended flight cancellations to the end of July from May end.
Do Read: Impact of COVID-19 on travel industry.
On the liquidity front, the company has secured funding of $550 million against three Boeing 787-9 aircraft. This funding follows the raising of$1.05 billion in March against seven 787-9s. As of now, QAN possesses enough liquidity in order to respond to several recovery scenarios. In the event of requirement of more funds, the company has $2.7 billion in unencumbered aircraft assets and can grim more fund from these assets.
Net debt position of the company is currently within the middle of the target range i.e. at $5.8 billion. QAN has no financial covenants on any existing or new debt facilities as well as no significant debt maturities until June 2021.
As on 4th May 2020, the short-term liquidity of the company stood at $3.5 billion, which include a undrawn facility amounting to $1 billion.
At the close of trading session on 18th June 2020, the stock of QAN settled at $4.350 per share with a fall of 3.761% against its previous closing price.
WiseTech Global Limited
WiseTech Global Limited (ASX: WTC) develops and provides software solutions to the logistics execution industry globally. The stock of QAN went down by 4.61% on year-till-date basis with a year-till-date low recorded on March 14th when the share price hit $10.48 on day close.
Recently, as released on 28th May 2020, the company has renegotiated earnout arrangements for several strategic acquisitions in order to cement its robust balance sheet and for better alignment of resources
WTC has worked collaboratively with 17 of its acquired businesses to replace significant cash payments with equity and decrease and close-out future earnouts. As a result of these negotiations:
- WTC experienced a decline in liabilities from $215.5 million to $68.5 million.
- The company witnessed removal of $151.5 million of future contingent cash liabilities
- Negotiation also resulted in equity issuance of $81.4 million
During the three months ended 31st March 2020, the company’s business traded in line with its expected target. This indicated continued growth in revenue, cash generation from operations and further onboarding of additional users. The company remains in a robust financial position with significant liquidity and strong cash generation for assisting its strategic and operational initiatives. As at 31st March 2020, net cash position of the company stood at $230 million.
On the guidance front, the company expects revenue in the range of $420 million - $450 million for FY20. EBITDA is anticipated to be between $114 million - $132 million.
At the close of trading session on 18th June 2020, the stock of WTC settled at $21.71 per share with a fall of 2.78% against its previous closing price.
