• No results found

Please feel free to contact your adviser to discuss any of these changes.

N/A
N/A
Protected

Academic year: 2021

Share "Please feel free to contact your adviser to discuss any of these changes."

Copied!
9
0
0

Loading.... (view fulltext now)

Full text

(1)

baillieu.com.au

Melbourne Office Phone +61 3 9602 9222 Fax +61 3 9602 2350

melbourne@baillieu.com.au Level 22, 35 Collins Street Melbourne Victoria 3000 Adelaide +61 8 7074 8400 Bendigo +61 3 4433 3400 Geelong +61 3 4210 0200 Gold Coast +61 7 5628 2670 Mildura +61 439 473 176 Newcastle +61 2 4037 3500 Perth +61 8 6141 9450 Sydney +61 2 9250 8900

Following the acquisition of E.L. & C. Baillieu Limited (EL&C Baillieu) by Ord Minnett, a number of changes have been made to EL&C Baillieu’s research content and methodology, effective from 1 December 2020. These changes will include a change of analyst for each report tagged as ‘Private Client Research’ and issued under the Ord Minnett banner.

Additionally, changes have been made to the rating system. Under the previous rating system, EL&C Baillieu research had three rating options, being Buy, Hold and Sell. Under the new system, this will increase to six – Speculative Buy, Buy, Accumulate, Hold, Lighten and Sell.

As was the case with the old rating system, recommendations will be based on the total return of a stock – nominal dividend yield plus capital appreciation – and have a 12-month time horizon. However, there will be changes to the metrics in which the recommendations are based. We outline these below, with the previous metrics detailed. These changes will only apply to new reports issued from 1 December 2020.

The above changes will in some instances result in more significant changes to ratings (e.g. Buy to Sell). Such changes are necessary as they will be based on the analysis of a “new” analyst.

It is also worth noting that the new risk assessment will be classified as Lower, Medium or Higher, compared to the previous system of Low, Medium, High or Speculative. The risk assessment refers to the relative assessment of an individual stock’s risk based on an appraisal of its disclosed financial information, historical volatility of its share price, nature of its operations and other relevant quantitative and qualitative criteria. Risk is assessed by comparison with other Australian stocks, not across other asset classes such as Cash or Fixed Interest.

Rating New rating description Previous rating description

SPECULATIVE BUY We expect the stock’s total return (nominal yield plus capital appreciation) to exceed 20% over 12 months. The investment may have a strong capital

appreciation but also has high degree of risk and there is a significant risk of capital loss.

Not applicable

BUY The stock’s total return (nominal dividend yield plus capital appreciation) is expected to exceed 15% over the next 12 months.

The stock’s total return is expected to increase by at least 10-15 percent from the current share price over the next 12 months.

ACCUMULATE We expect a total return of between 5% and 15%. Investors should consider adding to holdings or taking a position in the stock on share price weakness.

Not applicable

HOLD We expect the stock to return between 0% and 5%,

and believe the stock is fairly priced.

The stock’s total return is expected to trade within a range of ±10-15 percent from the current share price over the next 12 months.

LIGHTEN We expect the stock’s return to be between 0% and negative 15%. Investors should consider decreasing their holdings.

Not applicable SELL

We expect the total return to lose 15% or more. The stock’s total return is expected to decrease by at least 10-15 percent from the current share price over the next 12 months.

(2)

Second-quarter FY21 production report

Recommendation

Buy

Risk

Medium

Target price

$52.00

Previous

$53.00

Last price

$46.30

25.00 30.00 35.00 40.00 45.00 50.00

Jan-20 Apr-20 Jul-20 Oct-20 A$

Price Performance

BHP share price (A$) S&P/ASX 200 (rebased)

BHP Group (BHP) released its second-quarter FY21 production report. The results

were broadly in line with Ord Minnett’s estimates for iron ore, which saw a 281Mtpa

shipment rate, with copper ahead, while coal and petroleum missed our numbers.

We make the following observations:

1. BHP flagged net debt at the bottom end of the US$12–17bn guidance range

versus Bloomberg consensus of US$8.7bn and our forecast of US$8.3bn prior

to reporting. The difference related to working capital buildup, higher operating

expenses, lower achieved prices and a number of one-off charges.

2. FY21 production guidance remained unchanged at 276–286Mt for the Western

Australia Iron Ore (WAIO) operation, Escondida guidance has been narrowed,

with the bottom end higher, and the other divisions remain essentially

unchanged. Costs in coal, however, are above guidance in the first half due to

weather and low production rates.

3.

BHP’s achieved iron ore price of US$103.8 per tonne (t) in the December half

was in line with our US$104.5/t forecast. Hard coking coal at US$106/t, however,

was well below our US$128/t estimate.

Overall, we have lowered our EPS forecast by 8% for FY21 after factoring in a number

of charges listed by the company. We maintain a 70% dividend payout ratio for the

first half, although our DPS estimate has fallen to US83c from US98c as a result of

our earnings downgrade.

Despite the softer first-half cash flow outcome, we remain attracted to BHP’s valuation

metrics, noting a price to net present value (P/NPV) ratio of 0.89x, an FY22E enterprise

value to operating earnings (EV/EBITDA) multiple of 5.4x and a 6% dividend yield.

We maintain our Buy recommendation on BHP, while we trim our target price

to $52.00 from $53.00.

Quarterly production –

BHP pointed to net debt of around US$12bn, materially

higher than our US$8.3bn estimate prior to reporting. The cash flow gap is related

partly to lower achieved prices and production in coal, a number of one-off charges

– such as a US$400m hybrid repurchase and US$250m in COVID-19-related costs

– along with a working capital buildup. BHP also flagged a US$1.2bn impairment

for NSW Energy Coal, split roughly 50/50 in terms of tax losses and asset value.

FY21 guidance –

Importantly, iron ore shipment guidance remains at 276–286Mt

for FY21, while stronger-than-expected Escondida output has seen BHP lift the

bottom end of guidance by about 30,000t to 0.97–1.03Mt and maintain the 1.2Mtpa

over five years target. Coal volumes are expected to be caught up in the second

half following a weak start, despite the current lack of metallurgical and thermal

coal sales to China.

Ord Minnett view –

We were disappointed by the higher-than-expected net debt

outcome, although some of the working capital buildup should unwind next period.

Overall, we believe the stock continues to screen cheap, offering good returns. We

are also attracted to the macro-economic backdrop that could see synchronised

(3)

2

Private Client Research

Ord Minnett Private Client Research

Price Performance YTD 1m 3m 12m Abs 9.1% 7.3% 29.0% 12.3% Rel 6.1% 5.8% 19.2% 17.0%

Company Data Shares O/S (mn) 5,337 52-week range ($) 47.55-24.05 Market cap ($ mn) 190,165.90 Exchange rate 1.30 Free float(%) 99.7%

3M – Avg daily vol (mn) 7.07

3M – Avg daily val ($ mn) 216.8

Volatility (90 Day) 28

Index ASX 100

BBG BUY|HOLD|SELL 12|2|1

Key Metrics (FYE Jun)

US$ in millions FY20A FY21E FY22E FY23E Financial Estimates

Revenue 42,931 52,624 54,006 54,661

EBITDA 22,071 30,953 32,202 32,385

Adj. EBITDA 22,071 30,953 32,202 32,385

Adj. EBIT 15,874 24,202 24,940 24,706

Adj. net income 9,060 14,223 15,081 14,787

Net income 7,956 12,773 15,081 14,787

Adj. EPS 1.79 2.81 2.98 2.92

BBG EPS 1.82 2.53 2.35 2.18

Net debt 12,044 7,421 4,935 (676)

Cashflow from operations 15,706 21,417 23,117 23,805

Investing cashflow (7,616) (7,317) (7,630) (5,847)

FCFF 9,522 15,765 16,923 18,693

Margins and Growth

Revenue growth (4.9%) 22.6% 2.6% 1.2%

EBITDA growth (4.7%) 40.2% 4.0% 0.6%

Adj. EPS growth (4.3%) 57.0% 6.0% (1.9%)

Ratios

Adj. tax rate 33.3% 31.9% 31.2% 31.5%

Net debt/EBITDA 0.5 0.2 0.2 NM ROCE 14.5% 21.5% 21.4% 20.4% ROE 19.0% 27.4% 26.6% 25.0% Valuation FCFF yield 5.3% 8.7% 9.4% 10.4% Dividend yield 3.4% 5.5% 5.8% 5.8% EV/Revenue 4.3 3.4 3.3 3.1 EV/EBITDA 8.3 5.8 5.5 5.3 Adj. P/E 19.9 12.7 12.0 12.2 P/ BV 3.8 3.2 3.1 3.0

Summary Investment Thesis and Valuation

We rate BHP Buy, with the stock offering compelling

valuation metrics, exposure to high quality expandable

assets that are well positioned on the cost curve, and a

strong balance sheet.

Our Dec-21 price target is based on our NPV estimate,

rounded up to the nearest $1. Our NPV is based on a

sum-of-the-parts DCF valuation using a 9.2% discount

rate, rounded to the nearest dollar. The discount rate is in

line with that of our coverage universe.

Performance Drivers

(4)

Charting the Focal Points

(calendar year periods shown)

Iron ore

Figure 1: WAIO total production vs. total sales (annualised Mwt)

Source: Company reports, Ord Minnett – Calendar year periods

Another strong quarter of production and shipments

although down slightly QoQ. There has been rain in

December suggesting the upcoming wet season could be

heavier than prior years.

Copper

Figure 2: Copper production – BHP share (000t)

Source: Company reports, Ord Minnett – Calendar year periods

Copper production was steady QoQ, as COVID-19

continues to impact staffing levels at South American

operations. BHP has been warning of an impact to

volumes but so far there hasn’t been any noticeable

impact (grades are likely to fall next half).

Coal

Figure 3: Coal – BHP share (Mt)

Source: Company reports, Ord Minnett – Calendar year periods

Coal production fell QoQ. Met coal production was

impacted by poor weather. Thermal coal guidance was

revised down after a 91-day strike at Cerrejon.

Petroleum

Figure 4: Petroleum production (total) – BHP share (mmboe)

Source: Company reports, Ord Minnett – Calendar year periods

Petroleum production fell QoQ on hurricane impacts in

the Gulf of Mexico partially offset by the increased

contribution from Shenzi after BHP increased its stake in

November.

270 273 303 294 279 276 275 309 291 281 230 240 250 260 270 280 290 300 310 320 4Q19 1Q20 2Q20 3Q20 4Q20

Iron ore production - 100% (Mtpa) Iron ore shipments (Mtpa rate)

277 253 246 271 275 179 172 168 142 152 0 100 200 300 400 500 4Q19 1Q20 2Q20 3Q20 4Q20

Payable metal in concentrate Cathode production

6. 1 5. 8 5. 7 4. 7 3. 6 10 .9 9. 2 11 .6 9. 7 9. 5 0 2 4 6 8 10 12 14 4Q19 1Q20 2Q20 3Q20 4Q20

Thermal coal (Mt) Metallurgical coal (Mt)

0 5 10 15 20 25 30 4Q19 1Q20 2Q20 3Q20 4Q20

Natural Gas Liquids (mmboe) Natural gas (mmboe) Crude oil and condensate (mmboe)

(5)

4

Private Client Research

Ord Minnett Private Client Research

Quarterly summary

Table 1: Quarterly production highlights

Production summary 4Q19 1Q20 2Q20 3Q20 4Q20 OMLe QoQ YoY vs OML

Petroleum (mmboe) 28 25 26 27 24 25 -11% -16% -6%

Copper (000t) 455 425 414 413 428 412 4% -6% 4%

Pilbara production (Mt) – 100% 68 68 76 74 70 72 -5% 3% -2%

Pilbara shipments (Mt) – 100% 69 68 77 73 71 72 -4% 2% -2%

Pilbara production (Mtpa rate) – 100% 267 276 303 294 279 286 -5% 5% -2%

Pilbara shipments (Mtpa rate) – 100% 273 278 309 291 281 286 -4% 3% -2%

Metallurgical coal (Mt) 10.9 9.2 11.6 9.7 9.5 10.8 -2% -13% -12%

Energy coal (Mt) 6.1 5.8 5.7 4.7 3.6 5.0 -23% -41% -28%

Source: Ord Minnett estimates, company data.

Changes to forecasts

We have incorporated the quarterly result, with key changes to earnings and

valuation highlighted in the table below.

Table 2: Changes to forecasts (underlying earnings)

FY21 FY21 Change Change FY22 FY22 Change Change

Old New US$m % Old New US$m %

Revenue (inc. EAU NPAT) 54,700 53,947 -753 -1% 55,340 55,498 157 0%

Costs -22,745 -22,993 -248 1% -23,365 -23,295 70 0%

EBITDA 31,955 30,953 -1,001 -3% 31,975 32,202 228 1%

D&A -6,750 -6,752 -1 0% -7,300 -7,263 38 -1%

EBIT 25,204 24,202 -1,003 -4% 24,675 24,940 265 1%

Underlying earnings 15,506 14,223 -1,283 -8% 15,095 15,081 -14 0%

Capex & exploration -7,512 -7,522 -10 0% -8,266 -8,252 13 0%

Net debt 5,048 7,421 2,373 47% 2,387 4,935 2,548 107%

NPV ($ps) 53.07 52.24 -0.83 -2%

(6)

Investment Thesis, Valuation and Risks

BHP Group

(Buy; Price Target: $52.00)

Investment Thesis

We rate BHP Buy, as we think the stock offers compelling valuation metrics,

exposure to high-quality expandable assets that are well positioned on the

cost curve, and a strong balance sheet.

Valuation

Our Dec-21 price target is based on our NPV estimate, rounded off to the

nearest $1 (our estimate changes drive the change in target price). Our NPV

is based on a sum-of-the-parts DCF valuation using a 9.2% discount rate,

rounded to the nearest dollar.

Source: Ord Minnett estimates.

Risks to Rating and Price Target

Downside and upside risks include: 1) adverse or more favourable outcomes

in commodities, currencies, production and capex relative to our forecasts;

2) changes to tax, legislation and other operating conditions; and 3) a

divergence in the relative performance of petroleum vs mineral prices.

Current DCF US$m A$m A$ps

Petroleum & Potash 23,293 31,273 6.18

Copper 42,162 56,607 11.19 Iron ore 114,372 153,556 30.36 Coal 23,582 31,661 6.26 Nickel 539 723 0.14 Total Operations 203,947 273,819 54.14 Net cash/(debt) (5,921) (7,950) (1.57) Corporate costs (1,226) (1,646) (0.33) Exploration 0 0 0.00 Total Valuation 196,800 264,224 52.24

(7)

6

Private Client Research

Ord Minnett Private Client Research

BHP Billiton (BHP) Financial Summary

Profit & Loss (US$m) 2019A 2020A 2021E 2022E 2023E Valuation Summary US$m A$m £m

Revenue, other inc., NPAT from EAU 45,080 43,196 53,947 55,498 56,066 Current mkt capitalisation 166,688 215,805 122,089

Operating expenses (21,915) (21,125) (22,993) (23,295) (23,681) EV 178,420 230,994 130,682

EBITDA 23,165 22,071 30,953 32,202 32,385

Depreciation and amortisation (6,093) (6,197) (6,752) (7,263) (7,679) CEO Mike Henry

EBIT 17,072 15,874 24,202 24,940 24,706 CFO Peter Beaven

Net interest (956) (818) (1,440) (826) (693) Chairman Ken MacKenzie

NPBT 16,116 15,056 22,762 24,114 24,013

Tax expense (5,771) (5,015) (7,264) (7,529) (7,576) WACC 8.8% 8.8%

Minorities (879) (981) (1,274) (1,504) (1,650)

Underlying NPAT 9,466 9,060 14,223 15,081 14,787 Current DCF US$m A$m A$ps £m £ps

Extraordinary Items (1,160) (1,104) (1,450) - - Petroleum & Potash 23,293 31,273 6.18 17,997 3.56

Reported NPAT 8,306 7,956 12,773 15,081 14,787 Copper 42,162 56,607 11.19 32,577 6.44

Iron ore 114,372 153,556 30.36 88,371 17.47

Shares outstanding (m) 5,058 5,058 5,058 5,058 5,058 Coal 23,582 31,661 6.26 18,221 3.60

Reported EPS (cents) 164 157.3 252.5 298.2 292.4 Nickel 539 723 0.14 416 0.08

Normalised EPS (cents) 187 179.1 281.2 298.2 292.4 Total Operations 203,947 273,819 54.14 157,582 31.16

Normalised EPS grow th 12% (4%) 57% 6% (2%) Net cash/(debt) (5,921) (7,950) (1.57) (4,575) (0.90)

Corporate costs (1,226) (1,646) (0.33) (947) (0.19)

DPS (cents) 235 120 197 208 205 Exploration 0 0 0.00 0.00 0.00

DPS grow th 99.2% (48.9%) 64.2% 5.6% (1.4%) Total Valuation 196,800 264,224 52.24 152,060 30.06

DPS/EPS payout 126% 67% 70% 70% 70% P/NPV 0.89 x 0.70 x

Cashflow (US$m) 2019A 2020A 2021E 2022E 2023E Key Ratios (Jun YE) 2019A 2020A 2021E 2022E 2023E

Cashflow from operations 17,871 15,706 21,417 23,117 23,805 PE (Ltd) 19.2 20.1 12.8 12.0 12.3

Capex (6,250) (6,900) (6,632) (6,762) (5,587) PE (Plc) 15.4 16.1 10.2 9.7 9.9

Exploration (873) (740) (890) (1,490) (890) EV/EBITDA (x) 7.8 8.3 5.8 5.5 5.3

Total capex & exploration (7,123) (7,640) (7,522) (8,252) (6,477) Dividend yield (Ltd) 6.5% 3.3% 5.5% 5.8% 5.7%

Free cashflow 10,066 7,540 12,570 15,486 17,958 Dividend yield (Plc) 8.2% 4.2% 6.8% 7.2% 7.1%

Investing cashflow s 2,607 (7,616) (7,317) (7,630) (5,847) FCF yield (Ltd) 5.5% 4.2% 6.9% 8.5% 9.9%

Dividends (11,395) (6,876) (6,929) (11,330) (10,520) FCF yield (Plc) 6.9% 5.2% 8.6% 10.6% 12.3%

Financing cashflow (20,528) (9,752) (11,359) (13,000) (12,347) ROE (Norm NPAT/Avg. Equity) 17% 17% 25% 25% 23%

Change in cash (50) (1,662) 2,741 2,486 5,611 ROA - EBIT / (assets - cash) 20% 17% 25% 27% 27%

ROIC (EBIT/Assets) 17% 15% 22% 22% 21%

Balance Sheet (US$m) 2019A 2020A 2021E 2022E 2023E ROCE 17% 17% 25% 26% 26%

Cash 15,613 13,426 16,167 18,653 24,264 EBITDA / net interest 24.2 27.0 21.5 39.0 46.7

Property plant & equipment 68,041 72,362 72,843 72,342 70,251 Net Debt / EBITDA 0.4 0.5 0.2 0.2 n/a

Assets 100,861 104,783 111,111 112,671 116,050 Gearing - net debt/equity 18% 23% 12% 8% (1%)

Debt 24,828 27,048 24,748 24,748 24,748 Gearing - net debt/ (net debt + equity) 15% 19% 11% 7% (1%)

Liabilities 49,037 52,537 50,812 50,909 50,857 EBITDA margin 51.4% 51.1% 57.4% 58.0% 57.8%

Equity 51,824 52,246 60,299 61,762 65,193 Effective tax rate 36% 33% 32% 31% 32%

Net debt / (cash) 9,446 12,044 7,421 4,935 (676)

Production (BHP share) 2019A 2020A 2021E 2022E 2023E

Iron ore (Mt) 238 248 253 259 262

Half year (US$m) 2H19 1H20 2H20 1H21E Total petroleum (Mboe) 121 109 102 107 109

Revenue 23,057 22,629 20,567 25,456 Copper (kt) 1,689 1,724 1,633 1,767 1,990

Operating expenses (11,072) (10,545) (10,580) (11,358) Coal - hard coking (Mt) 42 41 41 44 44

EBITDA 11,985 12,084 9,987 14,097 Coal - thermal (Mt) 27 23 21 24 24

Depreciation and amortisation (2,666) (3,043) (3,154) (3,300) Nickel (kt) 87 80 92 84 84

EBIT 9,319 9,041 6,833 10,798

Net interest 22 (467) (351) (1,044) Price assumptions 2019A 2020A 2021E 2022E 2023E

NPBT 9,341 8,574 6,482 9,753 AUD/USD 0.72 0.67 0.74 0.77 0.76

Tax expense (3,113) (2,871) (2,144) (3,211) Iron ore (US$/t CFR China) 80 93 130 114 105

Minorities (494) (517) (464) (606) Oil (Brent - US$/bbl) 69 52 50 54 58

Normalised NPAT 5,734 5,186 3,874 5,936 Gas (US$/mcf) 2.99 2.09 2.58 2.94 3.07

Normalised EPS (cents) 113 103 77 117 Copper (US$/lb) 2.79 2.57 3.34 3.55 3.52

Hard coking coal (US$/t) 203 144 131 157 158

Thermal coal (US$/t) 99 65 72 83 81

Divisional EBIT (US$m) 2019A 2020A 2021E 2022E 2023E Nickel (US$/lb) 5.64 6.35 7.47 8.23 8.43

Petroleum 2,220 748 294 817 1,056

Copper 2,587 2,590 4,176 5,897 6,938 Divisional EBIT split 2019A 2020A 2021E 2022E 2023E

Iron ore 9,397 12,924 19,960 16,690 15,040 Petroleum 13% 4% 1% 3% 4%

Coal 3,400 811 (86) 1,544 1,672 Copper 15% 15% 17% 23% 28%

Nickel & Potash (40) (238) 173 311 324 Iron ore 54% 77% 81% 66% 60%

Group & unallocated (492) (961) (316) (320) (325) Coal 19% 5% 0% 6% 7%

Total EBIT 17,072 15,874 24,202 24,940 24,706 Nickel & Potash 0% -1% 1% 1% 1%

(8)

BHP Group

US$ in millions, year end Jun

Profit And Loss FY19 FY20 FY21E FY22E FY23E Valuation Summary $m ps Revenue 45,139 42,931 52,624 54,006 54,661 Current mkt capitalisation 247,082.50 46.30

Revenue growth (1.5%) (4.9%) 22.6% 2.6% 1.2%

COGS (21,685) (20,881) (21,347) (21,443) (21,958) Price Target 52.00

EBITDA 23,165 22,071 30,953 32,202 32,385 Capital growth to price target 12.3%

EBITDA growth (3.9%) (4.7%) 40.2% 4.0% 0.6%

EBITDA margin 51.3% 51.4% 58.8% 59.6% 59.2% Trading Multiples FY19 FY20 FY21E FY22E FY23E

Amortisation 0 0 0 0 0 PE Pre-abnormals 19.0 19.9 12.7 12.0 12.2

Depreciation (6,093) (6,197) (6,752) (7,263) (7,679) PE Reported 21.7 22.7 14.1 12.0 12.2

EBIT 17,072 15,874 24,202 24,940 24,706 EV/EBITDA 7.8 8.3 5.8 5.5 5.3

EBIT growth 5.6% (7.0%) 52.5% 3.0% (0.9%) EV/EBIT 10.6 11.5 7.4 7.1 6.9

EBIT margin 37.8% 37.0% 46.0% 46.2% 45.2%

Net Interest (956) (818) (1,440) (826) (693) Key Ratios FY19 FY20 FY21E FY22E FY23E

Pre-Tax Profit 16,116 15,056 22,762 24,114 24,013 Dividend Yield 6.6% 3.4% 5.5% 5.8% 5.8%

Tax (5,771) (5,015) (7,264) (7,529) (7,576) Franking 100.0% 100.0% 100.0% 100.0% 100.0%

Tax Rate 35.8% 33.3% 31.9% 31.2% 31.5% Return on Assets (%) 8.9% 8.8% 13.2% 13.5% 12.9%

Minorities (879) (981) (1,274) (1,504) (1,650) Return on Equity (%) 18.3% 19.0% 27.4% 26.6% 25.0%

Abnormals (post tax) (1,160) (1,104) (1,450) 0 0 ROIC (%) 16.0% 15.4% 22.4% 22.3% 21.6%

Reported NPAT 8,306 7,956 12,773 15,081 14,787 Leverage FY19 FY20 FY21E FY22E FY23E Normalised NPAT 9,466 9,060 14,223 15,081 14,787 Gearing (Net Debt / Equity) 0.2 0.2 0.1 0.1 NM

Growth 6.0% (4.3%) 57.0% 6.0% (1.9%) Gearing (ND / (ND + E)) 15.4% 18.7% 11.0% 7.4% (1.0%)

Net Debt / EBITDA 0.4 0.5 0.2 0.2 NM

End of Period Shares 5,058 5,058 5,058 5,058 5,058 EBIT Interest Cover (x) 17.9 19.4 16.8 30.2 35.6

EFPOWA 5,058 5,058 5,058 5,058 5,058

Reported EPS 1.64 1.57 2.53 2.98 2.92 Balance Sheet FY19 FY20 FY21E FY22E FY23E

Normalised EPS 1.87 1.79 2.81 2.98 2.92 Cash 15,613 13,426 16,167 18,653 24,264

Growth 11.5% (4.3%) 57.0% 6.0% (1.9%) Receivables 3,462 3,364 4,531 4,371 4,318

Investments 87 84 84 84 84

DPS 2.35 1.20 1.97 2.08 2.05 Inventories 3,840 4,101 5,524 5,329 5,265

Growth 99.2% (48.9%) 64.2% 5.6% (1.4%) Other Current Assets 371 496 496 496 496

DPS/EPS payout 143.1% 76.3% 78.0% 69.8% 70.1% Total Current Assets 23,373 21,471 26,802 28,933 34,428

Net PPE 68,041 72,362 72,843 72,342 70,251

Cash Flow Statement FY19 FY20 FY21E FY22E FY23E Total Intangibles 675 624 624 624 624

EBITDA 23,165 22,071 30,953 32,202 32,385 Other Non Current Assets 8,772 10,326 10,842 10,772 10,748

Net Interest (Paid)/Recd (903) (840) (1,395) (818) (772) Total Non Current Assets 77,488 83,312 84,309 83,738 81,623

Tax Paid (5,940) (5,944) (6,105) (7,954) (7,617) Total Assets 100,861 104,783 111,111 112,671 116,050

(Inc)/Dec in Working Capital 10,107 4,387 (4,756) (2,035) (5,546)

Other Operating Items (6,635) (2,834) 6,648 2,808 6,885 Creditors 6,717 5,767 6,342 6,438 6,387

Operating Cash Flow 17,871 15,706 21,417 23,117 23,805 Current Borrowings 1,661 5,012 5,012 5,012 5,012

Total Current Liabilities 12,339 14,824 15,399 15,495 15,444

Net Capex (6,092) (6,730) (6,632) (6,762) (5,587) Non Current Borrowings 23,167 22,036 19,736 19,736 19,736

Net Acquisitions 10,576 265 (480) 0 0 Non Current Provisions - - - - -

Other Investing cashflows (1,877) (1,151) (205) (868) (260) Other Non Current Liabilities 10,297 12,919 12,919 12,919 12,919

Investing Cash Flow 2,607 (7,616) (7,317) (7,630) (5,847) Total Non Current Liabilities 36,698 37,713 35,413 35,413 35,413

Total Liabilities 49,037 52,537 50,812 50,909 50,857

Inc/(Dec) in Borrowings (2,514) (1,690) (2,900) 0 0

Equity Issued (5,408) (143) 0 0 0 Equity 2,136 2,163 2,163 2,163 2,163

Dividends Paid (11,395) (6,876) (6,929) (11,330) (10,520) Reserves 2,285 2,306 7,550 4,453 3,465

Other Financing Cashflows (1,211) (1,043) (1,530) (1,670) (1,826) Retained Profits 42,819 43,467 46,276 50,837 55,255

Financing Cash Flow (20,528) (9,752) (11,359) (13,000) (12,347) Outside Equity Interests 4,584 4,310 4,310 4,310 4,310

Net Cash Flow (50) (1,662) 2,741 2,486 5,611 Total Shareholders Equity 51,824 52,246 60,299 61,762 65,193

Adj.Net Debt 9,446 12,044 7,421 4,935 (676)

(9)

Please contact your EL&C Baillieu Adviser for further information on our document.

Guide to EL&C Baillieu Recommendations

Our recommendations are based on the total return of a stock – nominal dividend yield plus capital appreciation – and have a 12-month time horizon.

SPECULATIVE BUY We expect the stock’s total return (nominal yield plus capital appreciation) to exceed 20% over 12 months.

The investment may have a strong capital appreciation but also has high degree of risk and there is a significant risk of capital loss.

BUY The stock’s total return (nominal dividend yield plus capital appreciation) is expected to exceed 15% over the next 12 months.

ACCUMULATE We expect a total return of between 5% and 15%. Investors should consider adding to holdings or taking a

position in the stock on share price weakness.

HOLD We expect the stock to return between 0% and 5%, and believe the stock is fairly priced.

LIGHTEN We expect the stock’s return to be between 0% and negative 15%. Investors should consider decreasing their

holdings.

SELL We expect the total return to lose 15% or more.

RISK ASSESSMENT Classified as Lower, Medium or Higher, the risk assessment denotes the relative assessment of an individual

stock’s risk based on an appraisal of its disclosed financial information, historical volatility of its share price, nature of its operations and other relevant quantitative and qualitative criteria. Risk is assessed by comparison with other Australian stocks, not across other asset classes such as Cash or Fixed Interest.

EL&C Baillieu Offices

Adelaide Ground Floor 226 Greenhill Road Eastwood, SA 5063 PO Box 171 Fullerton SA 5063 Tel: +61 8 7074 8400 Fax: +61 8 8362 3942 adelaide@baillieu.com.au Bendigo Level 1 103 Mitchell Street Bendigo VIC 3550 PO Box 84 Bendigo, VIC 3552 Tel: +61 3 4433 3400 Fax: +61 3 4433 3430 bendigo@baillieu.com.au Geelong 16 Aberdeen Street Geelong West VIC 3218 PO Box 364 Geelong, VIC 3220 Tel: +61 3 5229 4637 Fax: +61 3 4229 4142 geelong@baillieu.com.au Gold Coast Suite 202, Level 2 Eastside Building 6 Waterfront Place Robina, QLD 4226 Tel: +61 7 5628 2670 Fax: +61 7 5677 0258 goldcoast@baillieu.com.au Newcastle Level 1 120 Darby Street Cooks Hill, NSW 2300 PO Box 111 The Junction, NSW 2291 Tel: +61 2 4037 3500 Fax: +61 2 4037 3511 newcastle@baillieu.com.au Perth Level 9 216 St Georges Terrace Perth, WA 6850

PO Box 7662, Cloisters Square Perth, WA 6850 Tel: +61 8 6141 9450 Fax: +61 8 6141 9499 perth@baillieu.com.au Sydney Level 40 259 George Street Sydney, NSW 2000 PO Box R1797 Royal Exchange, NSW 1225 Tel: +61 2 9250 8900 Fax: +61 2 9247 4092 sydney@baillieu.com.au

Melbourne (Head office)

Level 22 35 Collins Street Melbourne VIC 3000

PO Box 48, Collins Street West Melbourne, VIC 3000

Tel: +61 3 9602 9222 Fax: +61 3 96022350 melbourne@baillieu.com.au

Disclosure: Ord Minnett Limited ABN 86 002 733 048 (Ord Minnett) holds AFS Licence Number 237121 and E.L. & C. Baillieu Limited ABN 74 006 519 393 (EL&C Baillieu) holds AFS Licence Number 245421. Ord Minnett and EL&C Baillieu are ASX Group Participants, Participants of Chi-X Australia Pty Ltd and are wholly owned subsidiaries of Ord Minnett Holdings Pty Limited ABN 32 062 323 728. Ord Minnett and EL&C Baillieu and their associated entities, directors and employees may have a material interest in, and may earn brokerage from, any securities referred to in this document, or may provide services to the company referred to in this report. Further, Ord Minnett, EL&C Baillieu and/or their affiliated companies may have acted as manager or co-manager of a public offering of such securities in the past three years or may provide or may have provided corporate finance services to the companies referred to in the report.

This document is not available for distribution outside Australia, New Zealand and Hong Kong and may not be passed on to any third party or person without the prior written consent of Ord Minnett.

Disclaimer: Ord Minnett and EL&C Baillieu believe that the information contained in this document has been obtained from sources that are accurate but has not checked or verified this information. Except to the extent that liability cannot be excluded, Ord Minnett, and EL&C Baillieu and their associated entities accept no liability for any loss or damage caused by any error in, or omission from, this document. This document is intended to provide general financial product advice only, and has been prepared without taking account of your objectives, financial situation or needs, and therefore before acting on advice contained in this document, you should consider its appropriateness having regard to your personal circumstances. If any advice in this document relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement prospectus or other disclosure material for that financial product before making any decision. Investments can go up and down. Past performance is not necessarily indicative of future performance.

Analyst Certification: The analyst certifies that: (1) all of the views expressed in this research accurately reflect their personal views about any and all of the subject securities or issuers; (2) no part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein. This report has been prepared by Ord Minnett. EL&C Baillieu is authorised to provide the advice contained in the research report to other persons subject to the condition that it makes no material changes to the advice contained herein.

Ord Minnett, EL&C Baillieu and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should consider any potential conflicts of interest that could affect the objectivity of this report and should this report as only a single factor in making their investment decision. This document is current as at the date of the issue but may be superseded by future publications. You can confirm the currency of this document by checking Ord Minnett’s internet site.

For summary information about the qualifications and experience of the Ord Minnett research service, please visit http://www.ords.com.au/our-team-2/ For information regarding Ord Minnett Research’s coverage criteria, methodology and spread of ratings, please visit http://www.ords.com.au/methodology/ For information regarding any potential conflicts of interest and analyst holdings, please visit http://www.ords.com.au/methodology/

The analyst has certified that they were not in receipt of inside information when preparing this report, whether or not it contains company recommendations. Any reports in this publication tagged as ‘Private Client Research’ have been authorised for distribution by Simon Kent-Jones, Head of Private Client Research at Ord Minnett. Any other reports in

Figure

Figure 1: WAIO total production vs. total sales (annualised Mwt)
Table 2: Changes to forecasts (underlying earnings)

References

Related documents

UPnP Control Point (DLNA) Device Discovery HTTP Server (DLNA, Chormecast, AirPlay Photo/Video) RTSP Server (AirPlay Audio) Streaming Server.. Figure 11: Simplified

The PROMs questionnaire used in the national programme, contains several elements; the EQ-5D measure, which forms the basis for all individual procedure

effects of cocaine on dopamine neuron firing in awake and anesthetized rats.. Locomotor effects of acute and repeated threshold doses of amphetamine and methylphenidate:

For the poorest farmers in eastern India, then, the benefits of groundwater irrigation have come through three routes: in large part, through purchased pump irrigation and, in a

This is just a special case of the general rule: to insert or delete a node inside a list, you need a pointer to the node just before that position, so you can change its .next

Power Electronics Evaluation Unified Controller Board, with Signal Splitter and Hardware Authentication Module, used in Cybersecure Power Router prototype.. The total system

Upon post-growth thermal treatment at 1298 K the films grown by the three-step method with the optimized interlayer deposition temperature of 873 K exhibited lower compressive

The use of asymmetric float glass laminates incorporating a thinner disrupting outer surface was found to reduce subsequent depth of penetration by as much as 52% compared to