Latest Research

TOX Free Solutions (TOX) - Working Off A lower Base

TOX Free Solutions LogoWhile FY17 EBITDA of $82.8m was in line, the guidance for FY18 was well below our prior expectations. As a result, although we believe TOX has a solid, diversified base off which to grow, this base is lower than we had previously thought. Our FY18 and FY19 EBITDA forecasts are 7% and 12% lower than prior, and this has impacted our valuation and recommendation. We downgrade to hold (prior buy) on an amended valuation of $2.15 (prior $2.50).

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CTI Logistics (CLX) - WA Barometer

CTI Logistics Limited LogoCLX’s FY17 results came in largely in line with our expectations, reflecting the weakness in WA over the last year. However, some recent positive economic signs and more upbeat commentary from a number of Perth-based businesses are worthy of notice. We anticipate a medium-term recovery in CLX’s earnings in the west to add to a stable performance from GMK on the east coast, and believe that FY17 will prove to be the trough year in this cycle. It is appropriate looking beyond the near term, in which case we believe CLX offers compelling value. Buy maintained on a $1.50 valuation.

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Pacific Energy (PEA) - Waiting On Pipeline Conversion

Pacific Energy LogoPEA’s FY17 result of $40m EBITDA was in-line with guidance and forecasts. Growth into FY18 is underpinned by current contracts in hand, and the Company has given guidance for FY18 EBITDA of $43-44m (representing ~9% growth). However, longer-term growth is less certain with intensifying competition, a broader shift to gas (for which PEA has less competitive advantage), and a lack of progress in Africa. We peel back long-term growth forecasts pending evidence of pipeline conversion. Until then, and given our reduced valuation of $0.70 per share, we downgrade to a HOLD (prior BUY on $0.80 valuation).

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Austal Limited (ASB) - Growing Confidence In US Margin

Austal Limited LogoSolid performance from the US last financial year did two things. It underpinned $58.7m group underlying EBIT in FY17 and gave ASB the confidence to upgrade margin guidance for US shipbuilding from 5-7% to 6-8%. US ships’ revenue in FY17 was $849m, so it implies a meaningful uplift. It offsets current weak earnings in Australia and the Philippines, where work transition has impacted revenue and profit recognition. There is cause for optimism for both these regions given significant recent intake of ferry contracts and upcoming potential naval work. We expect a marked earnings pick-up in FY19, a year which could see all three regions delivering in tandem. It helps lift our valuation to $1.96 (prior $1.80) and brings us to upgrade to buy (prior hold).

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Peet Limited (PPC) - Reaping The Benefits

Peet Limited LogoThe FY17 results showed PPC is reaping the benefits of prior year restructuring. NPAT of $44.8m was up 5% on FY16 and ahead of our forecast, while an ongoing focus on capital management and a disciplined approach to new investment delivered strong cash flow and reduced gearing to 21%. PPC is well positioned for growth in FY18 and beyond, with more than 80% of the diversified land bank expected to be in development by 2019. The >50k lots on hand would sustain PPC for the next 17 years at current sales rates. Our upgraded valuation of $1.50 (prior $1.40) underpins our maintained buy call.

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