Fat Prophets > Australasian Equities
June 19, 2021 •

Speedbump Shares in master franchisee – and largest franchisee outside the US – Domino’s Pizza Enterprises (ASX.DMP) continued to be under greater pressure after the release of a ‘strategy update’ wherein management will streamline operations but also exit some unprofitable markets. To be fair, this move was not a complete surprise given the inflationary and other cost pressures coupled with increasing competition post-COVID reopening. However, DMP’s value comes from being a solid defensive exposure in a portfolio given that we’re…

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Core
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Mobile bill pain for consumers is Telstra’s gain Telstra shares have been strong gainers year-to-date, extending gains from 2022 thanks to several factors, spearheaded by positive financial traction and the increase in dividends. In our view, there is significant optionality for the monetisation of the InfraCo business, although we may have to wait until late 2023 or beyond for a decision here. With mobile price increases on the way and all the signs of a more rational pricing market in…

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Core
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Prices Take Some Back Rio Tinto has revealed a reversal in its numbers for 2022, following falls in underlying and statutory earnings, and across all its reporting lines. While the balance sheet continues to be a key standout feature it was regeared but remains pristine. Shareholders saw the annual dividend near halve while no special was paid. The following table shows a summary of Rio Tinto’s key 2022 reporting lines (EBITDA – earnings before interest taxation depreciation amortisation): Source: Rio…

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Pineapple on the Pizza On the release of 1H23 results Domino’s Pizza’s share price has declined sharply. We digest the results and review our recommendation. The Daily view of DMP highlights the breakaway gap towards the major support level of $49.60, current price movements remain within the multi month consolidation range between $49.60 and $75.0. From the beginning when Domino’s pioneered the phone app for ordering pizza they have remained on a consistent expansionary mission to increase store fronts across…

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A new beast Woodside Energy (Woodside) has reported its operational numbers for 2022 and for the first time included the annual numbers for BHP Petroleum. The change is profound, with comparatives for the year reflecting this and supports our belief the acquisition is a major game changer for Woodside. Certainly, records fell in 2022 with overall production and product offerings reporting substantial changes while revenues added to the list. Pleasingly, Woodside reported a beat on an adjusted 2022 guidance. The…

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Speculative
high

Good Leverage Evolution Mining (Evolution) released its December 2022 quarter operational results, and in doing so has revealed a good performance. Evolution levered into a higher gold price by lifting gold production and reining in unit operating costs. Guidance for 2023 was maintained. Mine cashflows for the quarter were well supported by a higher realised gold price and better operational performance. A snapshot of the balance sheet shows the structure remains very sound as of 31 December 2022. Gold production…

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Core
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Budding value emerging amid uncertainty Shares of Elders have fallen significantly since hitting multi-year highs in the first half of 2022. The correction has been a function of uncertainty about margin pressures on the horizon after strong prior financial performance and then in November, the shares tumbled more than 20% when Elders announced that the well-respected CEO Mark Allison’s planned retirement. We believe the share price correction has been overdone and remain content to hold the stock. Several areas of…

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Speculative
high

Take-up Entitlement Sandfire Resources (Sandfire) announced on 18 November 2022 that it was raising up to A$200 million, by way of an accelerated non-renounceable entitlement offer to shareholders. Sandfire is raising capital to ensure a strong balance sheet and fund ongoing growth initiatives. The following image shows the locations of Sandfire’s global operations: Source: Sandfire Sandfire has successfully completed the institutional component of its entitlement, raising a total A$147 million at an issue price of A$4.30 per share and a…

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A good vintage The premiumization trend has been underway for quite a while now and even as a cost-of-living squeeze unfolds for many in Australia and around the world, the results from premium and luxury brands we have seen around the world in recent weeks/months, along with experience in past cycles provide us with some confidence that management expectations at Treasury Wine Estates for resilient demand at the higher-end are justified. The shares have performed robustly year-to-date even amid broader…

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Core
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Don’t hang up Telstra increased its dividend for the first time in seven years following the successful completion of T22 program and continuing strong momentum in its underlying business. The Daily view of Telstra indicate price has traded above the 20 day and 200 day moving averages, with the current movement towards the high of the range further gains could be expected. Speaking at the full year results presentation, now retired Telstra CEO Andy Penn said Telstra’s T22 strategy had…

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Strong Performance Shares in ANZ have staged a strong recovery in the past weeks, we review another strong result from the bank with profit before credit impairment and tax up 7% for FY-22 with a strong 16% in the 2H. Cash Profit from continuing operations finalized at $6,515 million, some 5% higher. The daily chart for ANZ indicates a strong movement higher from the Q2 2022 $21.0 low with the price moving higher over the $24.40 level. The recent retest…

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Core
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3Q22; given the environment a good result Rio Tinto (Rio) has just reported its third quarter operational results to 30 September 2022, revealing generally firmer production results across many of its product offerings. The operational result meant 2022 guidance remained unchanged, except for copper, while iron ore was guided toward the lower end of the range. The following table shows a summary, by product offering, of Rio’s operational results for the September quarter 2022: Source: Rio Tinto Overall, we rate…

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Building profits Shares of James Hardie Industries have continued to advance year-to-date, extending the strong rebound after last March’s pandemic induced sell off and hitting fresh new highs. We view the rise as justified as the core US housing market continues to look robust and James Hardie has continued to pick up market share, with more likely to come. Under CEO Jack Truong, the operational and financial performance has continued to impress, with cost-out manufacturing initiatives combined with strong sales…

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Speculative
high

3Q21; gold production off for the quarter Evolution Mining has released its March quarter 2021 activities update, revealing a weak operational performance for the quarter. Evolution reported lower headline gold production for the quarter, but silver and copper production rose. Operating costs came in on the high side for the March quarter. A fall in the gold price delivered lower cash flow numbers, but the balance sheet remained in good shape. Production guidance for 2021 remained unchanged, while Evolution expects…

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Speculative
high

On track to hit the top end of 2021 guidance Sandfire Resources has released its third quarter operational results, reporting a fall in its headline production numbers for the quarter and a rise in costs. Production guidance for 2021 was maintained, with Sandfire’s expectation of reporting toward the top-end of the range and it did provide an upgrade on cost guidance numbers for 2021. A snapshot of the balance sheet revealed no debt and a swag of cash. The following…

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Core
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A good package for the times Amcor, the world’s biggest consumer packaging firm, recently reported solid numbers for its nine months update, surprising to the upside and lifting its EPS guidance range for the fiscal year. Amcor also increased its quarterly dividend a tad compared to a year ago and we like its considerable pricing power, with company generally able to pass on raw material cost increases to customers with only a modest delay. We believe this position it well…

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