Stock Research - Investor Desk

SGM delivered a strong 1H22 driven by higher volumes and selling prices.

Post author By lvc-admin
Post date March 15, 2022
No Comments on SGM delivered a strong 1H22 driven by higher volumes and selling prices.

Investment Thesis
Improvement in scrap volumes.
Improvement in scrap prices across key regions.
Cloud recycling could add significant earnings over the long run.
Investment in improving scrap quality should improve SGM’s competitive position.
Undemanding valuation relative to its own historical average and ASX200 Industrials Index.
Self-help initiatives to support earnings.
Improving Return on Capital (ROC).
Current on-market share buyback.

Key Risks
Significant downturn in global economy.
Trade war between China and the U.S. escalates.
Weaker scrap prices in key regions.
Lower volumes.
Regulatory changes – particularly around China’s anti-pollution policies.
Cost pressures impacting group margins.

1H22 Results Highlights
North America Metal (NAM) sales revenue of $1,997.2 was up 87.2% driven by higher sales prices and sales volumes (up +11.3%). Intake also improved over the period and returned to pre-Covid levels. Trading margin of $421.6m was up +74.6% as a significant proportion of the trading margin spread in percentage terms was retained due to higher commodity prices. Segment underlying EBIT of $142.2m was up +478%.
Australia & New Zealand Metal (ANZ) revenue of $815.6m was up +70.5% driven by +72.2% increase in average selling prices. Sales volumes were largely unchanged on pcp. Trading margin of $225m was up +58.8%. Costs were up +12.3% driven by higher contract labour costs to cover staffing shortages and inflationary pressures. Segment EBIT of $94.9m was up +243.8%. Management noted that despite Covid disruptions in Australia and New Zealand, intake volumes showed improvement and recovered to near pre-Covid levels.
UK Metal sales volumes was up +5.8% and average selling prices up +64.4%, leading to sales revenue of $744.4m increasing +73.9%. Management noted that Trading Margin of $115.7m was up +39.6% “due to market structure and competitive dynamics, UK was not able to hold onto as much of the sales price increase as NAM or ANZ.” Segment underlying EBIT of $29.4m was up +180% on pcp. Management noted that whilst the intake volumes in 1H22 were consistent with pcp, they remain below pre-Covid levels.
Sims Lifecycle Services reported revenue of $166m (up +9%) and underlying EBIT of $9.9m was up +45.6% driven by +44.4% growth in repurposed units and +9% growth in sales revenue. SA Recycling reported sales volumes growth of +18.6% and underlying EBIT (50% share) growth of +427.5% to $128.7m.

Company Profile
Sims Ltd (SGM) collects, sorts and processes scrap metal materials which are recycled for resale. SGM’s segments include ferrous recycling, non-ferrous recycling, secondary processing of non-ferrous metals and plastics, international trading of metal commodities and the merchandising of steel semi-fabricated products.

(Source: Banyantree)

General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Tags Commodities, Iron

Daily Report Financial Markets

Shanghai Market Outlook – 15 March 2022

Post author By sakshi Khamesara
Post date March 15, 2022
No Comments on Shanghai Market Outlook – 15 March 2022

Peoples Republic of China flag, stock market, exchange economy and Trade, oil production, container ship in export and import business and logistics.

Shanghai-Market-Outlook-15-March-2022 Download

Tags Shanghai Market

Property

Goodman Group reported a strong 1H22 result with solid contributions from all segments

Post author By lvc-admin
Post date March 15, 2022
No Comments on Goodman Group reported a strong 1H22 result with solid contributions from all segments

Property investment, savings money for buy new home concepts. A man hand holding coin over small residence house, stack of coins and money bag with blurred real estate. A sustainable investment.

Investment Thesis

Management’s upgraded FY22 EPS guidance provides us with certainty in near-term earnings outlook.
GMG’s high-quality investment portfolio which is globally diversified and gives exposure to developed and emerging markets.
Strong property fundamentals which should see valuation uplifts.
With more than 50% of earnings derived offshore it is expected that GMG will benefit from FX translation and a prolonged period of lower rates.
Transitioning to longer and larger projects in development
Strong performances in Partnerships such as Cornerstone.
GMG’s solid balance sheet providing firepower and access to expertise to move on opportunities in key gateway cities with demand for logistics space (and supply constraints) and diversify risk by partnering (i.e. growth in funding its development pipeline) or co-investment in its funds and or make accretive acquisition opportunities.
Expectations of continual and prolonged lower interest rate environment globally (albeit potential rate hikes in the US) should benefit GMG’s three key segments in Investments, Development and Management.

Key Risks

Any negative changes to cap rates, net property income.
Any changes to interest rates/credit markets.
Any development issues such as delays.
Adverse movements in multiple currencies for GMG such as BRL, USD, EUR, JPY, NZD, HKD and GBP.
Any downward revaluations.
Poor execution of M&A or development pipeline.
Key man risk in CEO Greg Goodman.

1H22 Results Highlights

Operating profit of $786.2m was up +27.9% on pcp and Statutory NPAT of $2.0bn was up +92.3% primarily due to significant gains in fair value on investment properties in partnerships.
Group NITA was up +15% to $7.69 and operating EPS of 41.9cps was up +27% on pcp.
Group operating profit performance was driven by all three segments – Property investment earnings $234m up +19.3%, Management earnings $258.2m up +17.8% and Development earnings $562.8m up +41.7%.
Balance sheet retained a strong position at the end of the period, with gearing of 7.3% and 18.7% on a look-through basis. The Company has $2.0bn in liquidity available.
Development work in progress (WIP) increased +19.8% to $12.7bn from 30 Jun-21, with the number of developments up to 81 (from 56 in pcp) and average development period for projects in WIP up to 22 months (from 18 months in pcp). Supply chain issues have not significantly impacted GMG, with management noting – “Goodman has managed COVID-related disruptions to minimize impact. Despite increases in construction costs, driven by supply, chain, labor and material shortages, Goodman has maintained strong margins and has a yield on cost of 6.7%.” Good momentum in the segment with management expecting “more than 30%” earnings growth for FY22.
Management earnings were up +17.8% on pcp driven by revaluations gains, development completions and acquisitions. External AUM up +32% to $64.1bn. Performance fees for the period of $73.6m was up +9.9% on pcp, with management noting – “…the performance and activity levels of the partnerships continues to be strong, so the full year transactional and performance fee revenue is now expected to be over $170m. Overall, the full-year management revenue is expected to be up by nearly 20% over FY21. Fee revenue as a percentage of average stabilized assets under management will be around 1% this year, which is within the range of what we expect over time. So, we believe the scope exists for the continuation of growth in management income over the long term.”

Company Profile

Goodman Group Ltd (GMG) own, manage, develop industrial, warehouse and business park property in Australia, Europe, Asia and Americas. GMG actively seeks to recycle capital with development properties providing stock for ownership by either the trust or third party managed funds, with fees generated at each stage of the process.

(Source: Banyantree)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Dividend Stocks

Engie is Well Positioned to Benefit from the Power Prices Rally

Post author By lvc-admin
Post date March 15, 2022
No Comments on Engie is Well Positioned to Benefit from the Power Prices Rally

Business Strategy and Outlook:

Engie is one of the three largest integrated international European utilities, along with Enel and Iberdrola. Under the tenure of previous CEO Isabelle Kocher, the firm sold EUR 16.5 billion of mostly commodity-exposed assets– E&P, LNG, and coal plants–to focus on regulated, renewables, and client-facing businesses. This strategy lowered the weight of activities that typically have volatile cash flows and no economic moats. After she was ousted by the board in early 2020, the firm shifted its strategy to reduce the weight of these activities and sell stakes in noncore businesses. That drove the sale of Engie’s 32.05% stake in Suez to Veolia at an attractive price and of its multi-technical subsidiary Equans to Bouygues for EUR 7.1 billion. The latter is part of an EUR 11 billion disposal plan by 2023. On the other hand, Engie will increase annual investments in renewables from 3 GW to 4 GW between 2022 and 2025 and 6 GW beyond.

Regulated gas networks, mostly in France, account for around one third of the group’s EBIT. Contracted assets comprise thermal power plants in emerging markets, especially the Middle East and Latin America, with purchased power agreements, or PPAs, securing returns on capital. Remaining merchant exposure is made up of gas plants across. Europe, Belgian nuclear plants and French hydropower assets. Gas plants are well positioned as the share of intermittent renewables increase. Nuclear and hydropower provide exposure to European power prices although Belgian nuclear plants will be shut by 2025. Taking that into account, the valuation sensitivity to EUR 1 change in power prices is EUR 0.16 per share, 1% of our fair value estimate. With net debt/EBITDA of 2.4 times, Engie has one of the lowest leverages in the sector. Still, the 2019 dividend of EUR 0.8 was canceled because of pressure from the French government, which has 34% of the voting rights, and the coronavirus impact. Still, the dividend was reinstated in 2020 and the 2021 dividend of EUR 0.85 is above the precut level. We project a 2021-26 dividend CAGR of 5% based on a 69% average payout ratio.

Financial Strength:

Economic net debt including pension and nuclear provisions amounted to EUR 38.3 billion at end-2021, implying a leverage ratio of 3.6. It is projected that the economic net debt to decrease to EUR 37.1 billion through 2026. Thanks to the EBITDA increase, economic net debt/EBITDA will decrease to 3.2 in 2026, averaging 3.1 between 2021 and 2026, comfortably below the company’s upper ceiling of 4. After the COVID-19-driven cancellation of the 2019 dividend of EUR 0.80 per share, Engie paid a EUR 0.53 dividend on its 2020 earnings implying a 75% payout.

For 2021 results, the company will pay a dividend of EUR 0.85, implying a 70% payout in line with the 65%-75% guidance range over 2021-23. Ninety-one percent of debt was fixed-rate at the end of 2021. Meanwhile, 83% of the company’s debt was denominated in euros, 11% in U.S. dollars, and the balance in Brazilian real.

Bulls Says:

Engie’s strategic shift announced in July 2020 should be value-accretive as evidenced by the sale of its stake in Suez and of Equans.
In the long run, the group could convert its gas assets into hydrogen assets.
The group is well positioned to benefit from rising power prices in Europe thanks to its French hydro dams.

Company Profile:

Engie is a global energy firm formed by the 2008 merger of Gaz de France and Suez and the acquisition of International Power in 2012. It changed its name to Engie from GDF Suez in 2015. The company operates Europe’s largest gas pipeline network, including the French system, and a global fleet of power plants with 63 net GW of capacity. Engie also operates a diverse suite of other energy businesses.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.