Weekly Report
Here’s your weekly update of news, analysis and research. The full reports can be read on the stock pages.
New Stock Reports
Pushpay Limited (PPH:NZ / PPH:AX) BUY (High-Risk): Keeping the Faith
PPH shares were down after what we saw as another decent result. 2019 full year revenue
guidance not enough to impress the market – as it was down slightly from their prior guidance.
Pushpay’s 2019 interim result suggests it is doing what it needs to get done, increasing
market share amongst medium to large church’s including adding the largest church in US
with an average weekly attendance of 51,900. Average Revenue Per Customer is up +34.2%,
contributing to revenue growth of +49%, and operating leverage helped deliver an improved
net loss of US$4.4m. Pushpay expects to deliver its first breakeven result in the month of
December. Despite what has been a difficult 2018 for the share price, operationally nothing
significant has changed in terms of the medium-term outlook.
ELDERS LIMITED (ELD:AX) BUY: Profiting in Drought
Shares in diversified agri-business ELD soared post its 2018 result. We are pleased with the
move as Elders has been one of our top agriculture picks on the ASX and we reiterated our
BUY in July this year, as we felt the shares were oversold on the back of Australian drought
worries. Elders managed to deliver underlying net profit after tax of $63.7m, which was up
+9% from last year but more importantly ahead management’s guidance of between $59m
and $63m. The result was driven by its retail division which continues to perform strongly
year on year, however partially offset by weaker agency performance due to declining cattle
prices. Elder’s 2018 result managed to somewhat brush off the impacts of the drought and
Elder’s CEO said the drought has created some attractive acquisition opportunities which
weren’t available earlier.
XERO LIMITED (XRO:AX) BUY: Xero Bounce Back
XRO shares were up on its 2019 interim result, despite reporting a net loss of $28.6m, which
was larger than the net loss of $19.6m reported in the same corresponding period last year.
The larger net loss was driven by one-off impairment charges and acquisition costs.
Operationally it was another solid result, as the accounting software provider added another
380,000 subscribers over the last 12 months, bringing the total number of subscribers to
1.579m. Operating revenue was up +37% from last year due to subscriber growth as well as
increased ARPU (Average Revenue Per User) as Xero add new features and exercise their
pricing power. Growth was stable in their established Australian and New Zealand markets;
as the United Kingdom was the standout with revenue up +56% on strong subscriber growth
and this has been outlined as Xero’s source of expansive growth over the near term.
SKYCITY ENTERTAINMENT (SKC:NZ / SKC:AX) BUY: Comfortable Bet Here
SKC shares jumped after the casino operator announced it has agreed to sell its struggling
Darwin casino. However, fell soon after as at an investor presentation announced it expects
further delays from its “challenging” New Zealand International Convention Centre project in
Auckland. Sky City Entertainment has agreed to sell its Darwin casino for A$188 million to
US-based Delaware North. We like the fact that Sky City has disposed of what has been a
very poor investment and can focus on its stronger assets and the $330m upgrade and
expansion of the Adelaide casino. At the same investor presentation, a trading update also
shows the group is performing well, particularly its International Business which is driving
revenue growth.
JAMES HARDIE (JHX:AX) BUY: Currency Play
Construction company JHX saw its shares fall sharply after reporting what was a decent 2019
first half result. However, it looks as though the market had higher expectations and investors
were not pleased with management’s guidance downgrade for 2019 full year adjusted
operating profit guidance of US$280m to US$320m on the back of a weakening Australian
market and less upbeat outlook on the US housing market. JHX said there has been volatility
with rising input costs tightening margins. We have been supporters of JHX given its exposure
to the US housing market recovery, which we see as a multi-year theme – and the current
share price slump could be an overreaction in our opinion. JHX being an Australian listed
company which earns a significant portion of its revenue offshore and reports in USD, is also
a clear benefactor of a weakening AUD.