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Investors looks for diversification in order to mitigate the risks during bear market phases. Investors look for sustainable business models, which would provide earnings growth on a consistent basis. The performance of a business depends upon several factors like, products offered by the company, target consumers, feedback of consumers and after sales service provided by the company. New generation businesses are using information technology to cater a larger section of consumers as a whole. There are certain evergreen businesses where there will be continuous demand such as construction material business, railway freight business, electricity-generation business, real estate and so on. We will be discussing a few diversified businesses with sound financials. Let’s go through the recent updates along with the financial and business highlights of these businesses.
Aurizon Holdings Limited (ASX: AZJ)
Aurizon Holdings Limited is an operator of heavy haul railway freight and transporter of coal by railway carriage to the port for export markets directly from mine.
Key H1FY20 Financial Highlights for the Period ended 31 December 2019: AZJ came up with its half-yearly results, wherein the company reported revenue of $1,529 million, up 5% from prior corresponding period (pcp). Underlying EBIT and underlying NPAT came in at $ 456 million and $269 million, up 12% and 19% respectively on a y-o-y basis. The company reported EPS on an underlying basis at 13.6 cps, which witnessed a growth of 19% from pcp. The increase in EBIT was majorly driven by improved income from the UT5 undertaking and robust performances from bulk business segment driven by new contracts and operational efficiencies. During the period, the company reported that the $300 million on-market share buy-back was extended by $100 million to $400 million
Key Income Statement Highlights for H1FY20 (Source: Company’s Report)
Other Highlights: The Coal business reported that a total of 106.3 million tonnes of coal was railed in Queensland and New South Wales during H1FY20. The Bulk business derived underlying EBIT of $44 million as compared to $14 million in previous corresponding period on account of newly secured contracts and growing revenues. The business also delivered expanded services and additional volumes with existing customers and delivered improved cost efficiencies.
Dividend Distribution: The Board of Directors has declared an interim dividend payment of 13.7 cents per ordinary share with 70% franked and with a payment date of 23 March 2020.
Guidance: AZJ expects FY2020 Underlying EBIT within the range of $880 million to $930 million, while Rail Coal volumes are expected at around 210mt to 220mt.
Stock Update: The stock of AZJ closed at $5.480 with a market capitalization of $10.8 billion on 14th February 2020. The stock is available at a price to earnings multiple of 18.19x. At current market price, the stock has generated a dividend yield of 4.72%. The stock has generated negative returns of 2.30% and 8.29% in the last three months and six-months, respectively. The 52-week low and high of the stock stood at $4.340 to $6.110, respectively.
Boral Limited (ASX: BLD)
Boral Limited is associated with the manufacturing and distribution of building and construction materials.
Key H1FY20 Financial Highlights for the Period ended 31 December 2019: BLD declared its half-yearly results, wherein the company reported revenue of $2,960 million, depicting a growth of 2% on pcp terms. EBITDA of the company excluding the impact of new lease standard stood at $440 million, down 6% on y-o-y basis. Revenue from Australia segment came in at $1,752 million, down 2% from previous corresponding period while the business derived an income of $1,208 million from the North America segment, which was up 9%. Within the North America Segment, the business witnessed 5% increase of volume and 10% increase in the price of fly ash. However, the earnings stood lower due to completion of several site service construction projects as expected, followed by higher costs.
Key Income Statement Highlights for H1FY20 (Source: Company’s Report)
Guidance: A per the FY20 guidance, the company expects EBITDA to be relatively lower than FY19 on account of lower reported EBITDA across the three divisions. NPAT is expected within the range of $320 million to $340 million.
Dividend Distribution: The company has announced a 50% franked dividend of $0.095 per ordinary share with a payment date of 15 April 2020.
Stock Update: The stock of BLD closed at $4.720 with a market capitalization of $5.56 billion on 14th February 2020. The stock is available at a price to earnings multiple of 20.43x. The stock price has corrected by 4.82% and 6.32% in the last three months and six-months, respectively. The stock has delivered a dividend yield of 4.85% on an annualized basis.
Contact Energy Limited (ASX: CEN)
Contact Energy Limited is engaged in electricity generation and retailing of electricity.
H1FY20 Business Highlights for the Period ended 31 December 2019: CEN declared its half- year results, wherein, the company reported operating earnings of NZ$221 million, as compared to NZ$291 million in previous corresponding period. The business reported profit of NZ$59 million, witnessing a decline of 79% on y-o-y basis. Operating free cash flow stood at NZ$120 million, decline from NZ$203 million in H1FY19. The first half was marked by restriction in the natural gas supply and followed by increasing costs of thermal generation which include gas, carbon and gas storage. The quarter was marked by disciplined and active commodity risk management and a decline in fixed priced sales. Operating free cash flow per share stood at 16.8 cps, down 41% from H1FY19.
Dividend Distribution: The Board of directors have declared an unfranked dividend of NZ$ 0.17764706 per ordinary share with a payment date of 7th April 2020.
Stock Update: The stock of CEN closed at $7.17 with a market capitalization of $5.18 billion on 14th February 2020. The stock is available at a price to earnings multiple of 41.580x. The stock has delivered a mixed return of 12.48% and -9.31% in the last three months and six-months, respectively. The stock has delivered a dividend yield of 4.85% on an annualized basis.
Cooper Energy Limited (ASX: COE)
Cooper Energy Limited is associate in the exploration and production business and derives its revenue from gas supply to south-east Australia and low-cost Cooper Basin oil production.
On 10 February 2020, the company announces its agreement for a new gas supply for the supply of 1 PJ per annum for two years starting from 01 January 2021. This agreement is with O-I.
As per the Management, the company will likely supply the gas from the company’s share of production from its Casino Henry operations.
Key Operational Highlights for the Q2FY20: COE announced its quarterly highlights, wherein the company reported quarterly production of 0.27 million boe, as compared to 0.39 million boe in previous quarter. The company reported quarterly revenue of $16.4 million, down from $22.7 million in in prior quarter, due to due to lower gas and oil volumes and lower oil prices. During the period, the company reported appraisal well tests at 7 sites in Callawonga and Butlers; Dombey confirmed new fairway in the Penola Trough in onshore Otway Basin. The business reported average realized AUD oil price for the quarter at $101.00/bbl, depicting a decline of 6% from the prior quarter of $107.48/bbl. The company incurred capex of $24.3 million, as compared to $39.3 million in the previous quarter. The business reported a cash of $150.7 million as on 31 December 2019. The company posted a net debt of $73.3 million as on 31 December 2019.
Stock Update: The stock of COE closed at $0.560 with a market capitalization of $894.66 million on 14th February 2020. The stock has corrected by 1.79% and 1.82% in the last three months and six-months, respectively.
Rea Group Ltd (ASX: REA)
Rea Group Ltd is a multinational digital advertising business focusing on residential, commercial and shared property websites.
H1FY20 Operational Highlights for the Period ended 31 December 2019: REA declared its half-yearly business performance, wherein the company reported revenue of $440.3 million, down 6% on y-o-y basis. The company reported EBITDA of $272.1 million, witnessed a decline of 7% from H1FY19. Net Profit stood at $152.9 million, depicting a fall of 13% on pcp.
As per the macro scenario, there is a drop in the national residential listings by ~14%. The business reported robust top-line growth within the geographies like Malaysia, India and North America. Joint Venture with 99.co reported a rapid growth for the market share across the Singapore and Indonesia region.
The business reported total monthly customer visits of 84 million on the Australian website which was 2.95 times higher than that of its nearest competitor and monthly searches of the business stood ~103 million, which grew 14% on a y-o-y basis.
Dividend Announcement: The Board of Directors announced a fully franked dividend of $ 0.55000 per ordinary share, payable on 24 March 2020.
Stock update: The stock of REA closed at $113.730, with a market capitalization of $15.14 billion on 14th February 2020. The stock is available at a price to earnings multiple of 60.510x on its trailing twelve months (TTM) basis. The stock has generated a dividend yield of 1.03% on an annualized basis. The stock has generated a positive return of 12.75% and 13.44% in the last three months and six-months, respectively.
