Reporting Season Summary

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Rodger Austin
5 years ago
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1 20-Jan 21-Jan 22-Jan 23-Jan 24-Jan 25-Jan 26-Jan 27-Jan 28-Jan 29-Jan 30-Jan 31-Jan 01-Feb 02-Feb 03-Feb 04-Feb 05-Feb 06-Feb 07-Feb 08-Feb 09-Feb 10-Feb 11-Feb 12-Feb 13-Feb 14-Feb 15-Feb 16-Feb 17-Feb 20-Jan 21-Jan 22-Jan 23-Jan 24-Jan 25-Jan 26-Jan 27-Jan 28-Jan 29-Jan 30-Jan 31-Jan 01-Feb 02-Feb 03-Feb 04-Feb 05-Feb 06-Feb 07-Feb 08-Feb 09-Feb 10-Feb 11-Feb 12-Feb 13-Feb 14-Feb 15-Feb 16-Feb 17-Feb Reporting Season Summary Overview ASX200 as at 18/02/14 08:06 Yesterday was a mixed bag of results with seven companies within the S&P/ASX 200 posting earnings figures. Thus far, we ve seen just over 23% of companies within the benchmark index release earnings with the next four days schedule taking us well beyond the halfway mark. On the whole, market reactions towards results continue to be generally positive as seen by the solid share price gains which have taken the S&P/ASX 200 into positive territory for 2014 (+0.57%). While it s still early days, there are some themes that are beginning to emerge which are not too vastly dissimilar to those that earmarked most of On has been the effectiveness and ongoing nature of cost out strategies. The majority of companies that have reported have posted sales figures largely in line with expectations but we ve seen a larger proportion beat expectations on the earnings side as was the case at the FY13 results. This suggests that even in the early stages, companies may have been experiencing some gross margin expansion however the subdued nature of outlook statements holds us back from getting over excited with the index at its current level. There were some major share price moves yesterday following results with Ansell Ltd (ANN) and UGL Ltd (UGL) losing 5.08% and 12.01% respectively after some relatively disappointing earnings. ANN s result was weaker than expected on the back of uninspiring underlying organic growth however the company did maintain its full year guidance. UGL on the other hand reduced its full year earnings guidance to the lower end of its previously guided range. The company s decision to not pay an interim dividend also caught the market by surprise. While weaker cash flow from Engineering should have been expected, the prospect of a rapidly declining pipeline together with uncertainty regarding the required balance sheet metrics for the demerger of DTZ to go ahead weighed on investors throughout the day. Distribution of Results by Week No. Companies Distribution of Results by Week 80 Week Ending No. of Companies 70 31/01/ /02/ /02/ /02/ /02/ /03/ /03/ /03/ /03/ Reported to Date Reported 23.38% Still to Report 76.62% Week Ending Reported 23.38% It wasn t all bad news though, with two of our Undervalued stock picks, Ardent Leisure (AAD) and Aurizon Holdings (AZJ) producing strong results which saw their share prices gain 1.93% and 1.76% respectively. AAD reported net profit after tax ahead of expectations with US and Theme Parks the highlight while the domestic leisure outlook continued to show signs of improvement. AZJ was able to extract greater haulage volumes while at the same time stepping up its cost out program which included voluntary redundancies and reductions in the locomotive fleet. The stock hit a fresh all time high following the result. Still to Report 76.62% ASX200 During Reporting Season Earnings vs Consensus Estimtes Sales vs Consensus Estimates 2.00% 1.00% 0.00% Cumulative Return In-Line 30.43% Beat 32.61% Beat 10.64% -1.00% -2.00% -3.00% In-Line 55.32% Miss 34.04% -4.00% -5.00% Miss 36.96% Earnings Growth vs Previous Year Sales Growth vs Previous Year 1.50% 1.00% Daily Returns Flat 13.04% Flat 23.91% 0.50% 0.00% -0.50% -1.00% -ve 30.43% +ve 56.52% +ve 52.17% -1.50% -2.00% -ve 23.91% Source: Bloomberg

2 Upcoming Results Report Date Code Company Est. EPS Est. Sales What to look for - eqr Comment 18-Feb AIO Asciano Ltd $1,988 Coal division performing strongly with volumes up 16.5% in 1Q14. Risk is that PN Rail and terminals perform poorly and diluting coal division. 18-Feb 18-Feb ARI Arrium Ltd 18-Feb BHP BHP Billiton Ltd $34, Feb CCL Coca-Cola Amatil Ltd N/A N/A 18-Feb AMC CDD Amcor Ltd Cardno Ltd $6, $3, $ Feb CFX CFS Retail Property Trust Grou $ Feb CGF Challenger Ltd $290 Benefit from moderating input costs. Adverse weather conditions in the US and Europe in the DecQ likely to result in weak food and beverage volumes. Iron ore prices remained above expectations in 2HCY13 and the A$ weakened. Both of these factors should work in favour of ARI. Increased production in 1Q14 & 2Q14 provide upside risk while market will be looking for clues on free cash flow and potential return to shareholders. COGS pressures eased and should offset some pricing pressure felt in grocery channel. Favourable summer weather may drive a positive surprise. We expect broad based improvement in US which represents over 50% of group sales. Potentially offset by slowdown in Australia. Little earnings surprise risk in our view. Focus on next phase of internalisation of rights which would be CBA sale of its stake ($411m). COE guidance is a normalised number, highly predictable. 18-Feb MND Monadelphous Group Ltd $1, Feb ORA Orora Ltd $0 18-Feb PBG Pacific Brands Ltd $ Feb SAI SAI Global Ltd $ Feb SHL Sonic Healthcare Ltd $1, Feb SWM Seven West Media Ltd $ Feb VRL Village Roadshow Ltd $ Feb AAX Ausenco Ltd N/A N/A 19-Feb AOG Aveo Group N/A N/A 19-Feb APA APA Group $ Feb APN APN News & Media Ltd N/A N/A 19-Feb BXB Brambles Ltd $2, Feb FMG Fortescue Metals Group Ltd $6, Feb MGX Mount Gibson Iron Ltd $ Feb SEK Seek Ltd $ Feb SUN Suncorp Group Ltd $4, Feb SXL Southern Cross Media Group Ltd $ Feb TOL Toll Holdings Ltd $4, Feb WES Wesfarmers Ltd $31, Feb WPL Woodside Petroleum Ltd N/A N/A 20-Feb ABC Adelaide Brighton Ltd N/A N/A 20-Feb AIA Auckland International Airport N/A N/A 20-Feb AMP AMP Ltd N/A N/A 20-Feb AWC Alumina Ltd N/A N/A 20-Feb BRG Breville Group Ltd $ Feb DLS Drillsearch Energy Ltd $198 Weakness in Australian resources & energy capex and spending to weigh on revenues/margins across all businesses. Market volumes have remained challenging in Australian fibre and beverages markets. Growth in Packaging earnings will lag the economic PBG recovery. strategy under new management continues to develop and appears sound. Weak consumer, excess inventory, falling AUD are challenges. Information Services expected to see top growth and margin expansion due to uplift in property volumes and IT investment improving efficiencies. Focus on update of progress and effectiveness of cost out program. Expect Pathology growth will be assisted by Healthscope lab acquisition. We expect a rebound in the advertising in 1Q14E, driven by political adspend, but note the underlying ad market remains weak. Consensus factoring in a lot of the upside from Wet'n'Wild Sydney. Dec13 opening will see limited upside in 1H14 and pre-opening costs of A$8m. Sentiment dependent on commodity prices and whether resources clients choose to resume engineering projects. Lower retirement and residential income. 1H14 subject to risk related to weather impacting volumes on APA's gas transmission network. Continued softness in adspend and newspaper circulation declines represents a downside risk. Mild rebound in Radio. Guidance is conservative. We believe the US business is performing well while growth in EU & EM remains. Lower Aussie dollar also positive. Production, sales, costs and net debt (forecast as at Mar-14) are known so low risk at the next earnings result. The company provides sales volumes, pricing and cost estimates for the period so little risk to earnings. FX and iron ore will also impact earnings. Employment market has seen some weakness on volumes. Contribution from International operations & Education may surprise on the upside. Claims inflation and frequency uncertain. There may still be volatility in bank and life divisions, but general insurance trends will be reasonably robust. Risks include 1) Ratings performance in Metro Radio & 2) Continued weak TV ratings & revenue performance. The economic and market conditions remain difficult for many parts of TOL's business. Forecasting NPAT of A$1,337m for 1H14, up 4.1% on pcp. Coles EBIT margin to expand in 1H14 with Food & Liquor at 4.97% vs 4.81% in the pcp. Revenue, exploration expense, asset impairments and PRRT benefit already guided to at 4Q13 result. Little downside risk from here. Softening A$ should help to support domestic clinker/cement prices. YTD PAX growth has been strong at 5.3% and we expect a strong 1H14 with the implied FY14 performance at or above upper end of guidance. AMP pre-guided the FY13 life insruance result in October Alcoa's net income to non-controlling interests is pre-reported, and is a proxy for AWC's NPAT. Trading has been variable month to month but we think the categories to which BRG is leveraged such as food preparation have performed well. 1Q & 2Q FY14 production strongly beat expectations and the stock jumped after both news. We think DLS can beat its newly upgraded guidance.

3 Last Reported Company Releases Price Charts as at 18/02/14 08:06 Newcrest Mining (NCM): A slightly soft DecH13 result due to a weaker cash-flow result than expected, although this is explained by significant drawdown of payables. NCM has also reclassified ~9moz of group reserves at Telfer/Lihir to resources, which is unsurprising, given the underlying cost base of these assets, in our view. The weaker cash-flow result (~$150m) and currency translation of US$ debt (~$100m impact given AUD 0.89 at DecH13 vs 0.92 at JunH13) contributed to higher net debt; assuming flat A$ gold px, we expect stronger 2H cash-flows to reduce gearing by JunH14 as one-off tax and working capital payments roll off HoH. $29.00 NCM $24.00 $19.00 $14.00 $9.00 $4.00 Orica Limited (ORI): ORI has entered into a long-term AN supply agreement with CF Industries to supply up to 800k short tons (726k metric tonnes) per annum for its North American operations. The AN supply agreement is for ten years from January 2017 with an option for ORI to extend for a further five years until the end of CF will supply AN from its Yazoo City manufacturing facility in Mississippi, USA. $29.00 $27.00 $25.00 $23.00 $21.00 ORI $19.00 $17.00 Paladin Energy Ltd (PDN): Paladin s interim result reflected ongoing weak market conditions and prices with a loss recorded for the period of US$29 million. Nonetheless, management appears to be doing what they can to restructure the balance sheet and reduce debt through: 1) lowering operating costs; 2) the closure of the higher-cost Kayelekera asset; 3) the part-sale of Langer Heinrich; and 4) the recent equity raising. $1.30 $1.20 PDN $1.10 $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 Sims Metal Management Ltd (SGM): SGM delivered 1H14 NPAT of $42.1m, in line with our $42.2m forecast. Weakness in North America which remains plagued by competition for unprocessed material was offset by a strong performance from the Australasia division, a return to profitability for Europe, and outperformance on cost savings. While conditions in North America remain difficult, the prospect of further cost savings and internally driven business improvements should ensure the division, and the Group, remains profitable. $11.50 $11.00 $10.50 $10.00 $9.50 $9.00 $8.50 SGM $8.00 Transpacific Industries (TPI): TPI reported 1H14 underlying NPAT of A$41.7m, up 16.5% on the pcp and ahead of our A$34.2m forecast. However, most of the beat vs our expectations was due to a lower-than-expected D&A charge, which was influenced by landfill location and volume mix. Given a recovery in economic conditions is required to meaningfully grow volumes, the near-term outlook for underlying EBITDA growth remains subdued. $1.30 $1.20 $1.10 $1.00 $0.90 TPI $0.80 $0.70 SCA Property Group (SCP): SCP reported 1H14 distributable earnings of $39.5m, 2% above our forecast of $38.7m due to a higher than expected contribution from the Woolworths rent guarantee. NTA increased +1.3% to $1.59. Management upgraded FY14 EPS guidance +1% to 12.3 and DPS guidance +2% to 11.0, driven by the debt refinance and Tasmanian portfolio acquisition in November. The major surprise was the announcement of an on-market buy-back. $1.90 $1.85 SCP $1.80 $1.75 $1.70 $1.65 $1.60 $1.55 $1.50 $1.45 $1.40 Source: Bloomberg

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Concentrated Income Equities Strategy

Concentrated Income Equities Strategy September 2010 Strategy Overview Objective eqr Securities in conjunction with BT Financial Group equities research provides strategic equities investment support in