Daily briefing_31jan12.indd

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CSG Limited
As at 30 January 2012
Australian Equities Market: The Australian share market ended down slightly as investors
took profi ts amid uncertainty surrounding Monday’s EU summit and nervousness over the
outcome of negotiations between Greece and its bond holders. The All Ordinaries fell 14.1
points.
The S&P/ASX 200 weakened 15.7 points. Woolworths (-$0.32) said it has appointed Christine Cross, David Mackay and Michael Ullmer as non-executive directors. Transurban (-$0.07) said Chief Executive Chris Lynch will step down in July after more than four years at the company. Leighton Holdings (-$0.28) said a joint venture with Belgium’s BESIX SA has won a $260m This document consists of a number
development contract for the Chevron-operated Wheatstone gas export project in Western of Research reports (“Research
Australia. Monadelphous Group (-$0.10) said it has received construction contracts together reports”) that have been prepared by
worth more than $180m from Rio Tinto and Chevron Corp. Coalspur Mines ($0.01) said that Morningstar/Aegis Equities Research
Pty Limited. Euroz Securities Limited
its proposed C$1.23bn Vista mine in Canada may produce 24% more coal than previously (“Euroz”) does not guarantee or take
thought, as the company moves to lock in project fi nancing with offtakers. OneSteel (-$0.02) responsibility for the accuracy or
said it will receive a $64m advance from the federal government under the government’s appropriateness of any information
or statement of opinion set out in the
Research reports.
Monadelphous Group said it has received construction contracts together worth more than Subject to the matters set out at the
$180m from Rio Tinto and Chevron Corp. The contracts take the value of new work secured end of this document, Euroz does not
by Monadelphous this fi nancial year to more than $1.5bn, Monadelphous said in a statement. take responsibility for, or guarantee the
The company said it will build a potable water supply system in Western Australia’s Pilbara accuracy or the appropriateness of any
region for Rio Tinto that will deliver 10 gigalitres a year. Work is due to begin this quarter information or statements of opinion
that have been extracted from the
and is set for completion in the fi rst half of next year, it said. The second contract is for the Research reports.
construction of a CO2 injection pipeline and well sites on the Gorgon Project, on Western Australia’s Barrow Island. Monadelphous said the work will include seven kilometres of This document has been provided to you
underground pipeline, fi ve well sites and associated facilities. Work will begin immediately for your general information and does
not take into account your objectives,
and is set for completion in the fi rst quarter of 2013, it said.
fi nancial situation and needs and must
not be relied upon by you as general or
Australian Bond Market: Australian government bonds fell across the yield curve.
personal fi nancial product advice that
has been provided to you by Euroz. If you
Australian Dollar: Hopes of a near-term deal to fi x Greece’s debt dilemma faded Monday,
require any advice regarding any aspect
pushing the Australian dollar lower through the Asian trading session. The Australian dollar of the information and statements
of opinion set out in this document,
particularly as to whether you should
base an investment decision upon the
information or statements of opinion set
out in this document, please contact your
fi nancial adviser.
Authorised to provide fi nancial services Acrux Limited (ACR) - Acrux Announces Marketing Approval Granted for Ellavie in
Switzerland
Acrux announced that Swissmedic, the Swiss agency for therapeutic products, has granted a marketing authorisation in Switzerland for Ellavie, the Company’s estradiol spray for treating menopause symptoms. The Company’s estradiol spray is approved for marketing in the United States and Sweden, with marketing applications under review by regulatory authorities in South Korea and South Africa. The approval in Sweden enables the Company to seek marketing approvals in other European countries under a Mutual Recognition Procedure. The Company is currently engaged in commercial discussions with potential marketing and manufacturing partners for the estradiol spray in the European Union and in Eastern Europe.
Air New Zealand (AIZ) - Air New Zealand Announces CEO Resignation
Air New Zealand announced it will have a new Chief Executive Offi cer in 2013. Chairman John Palmer reported that CEO Rob Fyfe confi rmed this will be his last year as CEO of the Company after almost a decade at Air New Zealand. Mr Fyfe reported his decision to leave Air New Zealand on 31 December 2012 coincides with the end of his term as Chairman of Star Alliance and will also see him complete four years as a Board member of the International Air Transport Association.
Ardent Leisure Group (AAD) - Ardent Leisure Group Announces Sale and Leaseback of
Main Event Freeholds
Ardent Leisure Group announced the successful completion of the sale and leaseback of two freehold properties in Texas, United States. The sale and leaseback of the Main Event Entertainment properties at Frisco and Lubbock generated gross proceeds of US$17.5m, approx. US$2.9m above the 30 June 2011 book value. The proceeds of the sale are expected to reduce the Group’s gearing in the short term and will ultimately be utilized as the Group pursues growth opportunities within the Bowling, Health Clubs and Main Event divisions to take advantage of attractive property deals.
CSG Limited (CSV) - CSG Announces New Managing Director
CSG announced that Denis Mackenzie has stepped down as MD and the Board has appointed Julie-Ann Kerin as the Company’s new MD, effective 31 January 2012. Ms Kerin has been Group General Manager of the Technology Solutions division of CSG for the past four years. She has more than 20 years’ experience in software and services companies spanning Australia, Asia, Europe and the US. Her extensive background includes senior executive roles in both private and public companies. It is intended that Denis will re-join the business on 1 July in a part time executive role focused on corporate and business development and will be invited to rejoin the Board at that time.
CSG Limited (CSV) - CSG Provides First Half Performance Market Update
CSG announced that further to its announcement of 21 December 2011 it now believes, based on preliminary and unaudited accounts, that the Company’s reported NPAT for the half year ended 31 December 2011 will be in the range of $9m - $11m. This is after one off costs associated with the proposed transaction during the fourth quarter of calendar 2011 of $2.1m before tax. This process was disruptive across the Company’s businesses which together with challenging trading conditions impacted on the Company’s fi nancial performance in the latter part of the half year. The Board is expecting an improved performance in the second half.
All information and advice is confi dential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of Euroz Securities Limited or any member or employee thereof. Refer to full disclaimer at the end of this document.
Dart Energy Limited (DTE) - Dart Energy Provides December 2011 Quarterly Activities
Report
Dart Energy provided its December 2011 quarterly activities report, reporting on the creation of an unconventional gas business through Greenpark transaction and restructure of arrangements with BG Group; the formation of Dart Int’l Shale, with over 400,000 acres of shale gas prospective acreage in the U.K. and continental Europe; heads of terms agreed for two additional gas sales agreements - one additional in the UK and the fi rst in NSW, Australia; and drilling campaign continued with 35 wells including 15 pilot wells during 2011 in all regions of operations. The Company also reported a strategic restructuring process well is underway; the appointment of CEO & non-executive directors for Dart Energy Int’l; and Dart Energy’s cash position at the end of the quarter was approx. $112.4m.
Dart Energy Limited (DTE) - Dart Energy Reports Negative Cash Flow of $28.51m for
the December 2011 Quarter
Dart Energy reported negative cash fl ow of $28.51m for quarter ended 31 December 2011. Operating cash fl ow for the period was $(13.77m). Payments for exploration and evaluation were $(6.96m). Investing cash fl ow was $(14.72m). Financing cash fl ow was $(23,000). Cash in hand at the end of the quarter was $112.55m. Fletcher Building (FBU) - Fletcher Building Announces Formica Buys Remaining 50%
Shareholding in Homapal
Fletcher Building announced that its Formica business has reached agreement to acquire all of the shares in Homapal Plattenwerk, a manufacturer and distributor of metal and specialty laminates, for Euro 30m (NZ$48m). Formica has been a 50% shareholder - and the largest customer - of the Germany-based company since 1983. The transaction is scheduled to be completed on 2 April, 2012. The Company reported that full ownership of Homapal will increase Formica’s presence in Germany, one of the world’s largest laminate markets and where Homapal already has a strong market position.
Gunns Limited (GNS) - Gunns Announces Extension of Financing Facilities
Gunns confi rmed that the terms for an extension to 31 December 2012 of its syndicated debt facility (currently $340m) and primary working capital facilities, have been agreed with its primary banking syndicate. Documentation of the extended syndicated debt facility has been executed by all ten banks which comprise the syndicate, with the board decision of one lender (at its request) to be provided by mid February 2012. This is consistent with the internal approval protocols of that lender. The facility balance is expected to be progressively reduced in the course of the 2012 year, as the company completes asset sale processes currently in progress and fi nalises the Bell Bay pulp mill project investment.
GWA Group (GWA) - GWA Group Provides Trading Update 30-Jan-12 09:57
GWA Group provided a trading update based on unaudited fi nancial accounts for the six months to December 2011. Revenue was slightly down on the corresponding period last year and trading EBIT is in the $44m to $46m range. An underlying decline in revenue of approx. 11% for like for like businesses has been offset by revenue from Gliderol, which was acquired in January 2011. NPAT will be impacted by restructuring costs and the results from discontinued operations during the half year. Each of these items will have a loss after tax in the range of $7m to $8m. The Company also reported on restructuring and discontinued operations; and Brivis evaporative cooler rework.
All information and advice is confi dential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of Euroz Securities Limited or any member or employee thereof. Refer to full disclaimer at the end of this document.
Monadelphous (MND) - Monadelphous Group Releases Contracts Update
Monadelphous Group announced it has secured water and transmission pipeline construction contracts in WA with a combined value of approx. $180m. The fi rst is for Rio Tinto’s Coastal Waters Project at Bungaroo Valley in the Pilbara region of WA. The contract comprises the construction and installation of a potable water supply system. Work is expected to commence in the fi rst quarter of the 2012 calendar year and is scheduled to be completed in the fi rst half of the 2013 calendar year. The second contract, awarded by Chevron Australia, is for the preparation and construction of a CO2 injection pipeline and well sites on the Gorgon Project, Barrow Island, WA. The latest contracts take the total value of new work secured by the Company in the 2012 fi nancial year to more than $1.5bn.
OneSteel (OST) - OneSteel Announces Steel Transformation Plan Advance
OneSteel reported it has welcomed the announcement made by the Federal Government that it will provide a $64m advance to the company under the Steel Transformation Plan (STP). Under the STP, OneSteel was eligible to apply for an advance of up to $64m to undertake activities that enhance the competitiveness and economic sustainability of the company’s Australian steel manufacturing business. Payment of the advance is expected within 30 working days and will be recorded as income in the company’s fi nancial statements for the 2012 fi nancial year.
Primary Health Care (PRY) - Upgrade due to price change
As a result of recent share price weakness we upgrade PRY from Reduce to HOLD.
Transurban (TCL) - Transurban Group Announces Notice of Intended Resignation of
Chief Executive Offi cer
Transurban Group announced Mr Chris Lynch’s notice of his intention to resign as CEO and as a Director with effect from July 2012. The Company reported it has had a comprehensive succession plan in place for some time giving rise to an identifi ed pool of internal CEO candidates. The Company also has a well informed, well researched view of the external market against which any internal candidates will be tested. A prompt decision will then be made Security Description
Franking
Australian Foundation Investment Company Limited (AFI) All information and advice is confi dential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of Euroz Securities Limited or any member or employee thereof. Refer to full disclaimer at the end of this document.
Share Price Performance
Earnings Summary
Yr to June
Yield Franking ROE
Rep $M Adj $M
All Ords x
Earnings continue to deteriorate and MD departs
Key Information
1H12 NPAT is expected to be between $9-11m after one-off costs of $2.1m pre-tax relating to the recent takeover proposal. Allowing for these costs adjusted NPAT will be between $10.5- 12.5m, well down on the $18.4m earned in 1H11 and more in line with the poor 2H11 result of $11m. In the wake of the shock downgrade there have been a number of management Market Statistics
changes including the departure of Managing Director Denis Mackenzie and elevation of Group General Manager Technology Solutions to the MD role.
Following the poor 2H11 result we expected earnings to recover in 1H12 with the start of the delayed South Australian government contracts and reasonably good equipment sales in New Zealand. We also expected Australian Print Services to show some signs of stability. CSV indicated Technology Solutions and Print Services New Zealand performed according Performance against indices (%)
6 Months 12 Months
to expectations but the disruptions from the takeover process had a more signifi cant impact on Print Services Australia. We suspect there is more to it than just this and would not be surprised if the Canon acquisition is still not performing to expectations. The replacement of Denis Mackenzie as Managing Director follows a string of disappointments over the past year including underperformance of the Canon acquisition, the surprise capital raising in April 2011 and this latest downgrade. Transparency has also been poor and we hope this will improve with a new MD and CFO in place. We slash our FY12 NPAT forecast from $36.9m to $24.6m and FY13 from $40.6m to $28.3m. We change our business risk rating from High to Speculative.
Recommendation Impact
With little fi nancial information in the announcement we downgrade our recommendation to Avoid pending release of full 1H12 results on 22 February. This is not a stock for conservative investors.
Recommendation Key
ACCUMULATE: Modestly undervalued
Refer to back page for further detail. All information and advice is confi dential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of Euroz Securities Limited or any member or employee thereof. Refer to full disclaimer at the end of this document.
Profi t & loss summary
2012F 2013F
Ratio analysis
2012F 2013F
Cashfl ow summary
2012F 2013F
Per Share
2012F 2013F
2012F 2013F
For the full report please contact your advisor.
Balance sheet
2012F 2013F
All information and advice is confi dential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of Euroz Securities Limited or any member or employee thereof. Refer to full disclaimer at the end of this document.
Share Price Performance
Earnings Summary
Yr to June
Yield Franking ROE
Rep $M Adj $M
All Ords x
Initial Impressions: Underlying strength evident
Key Information
RMD delivered a stronger than expected result for the December 2011 Quarter. Revenue grew 9% to $333m, while net income increased 8% to $62.9m. Due to the ongoing share buy-back program, EPS growth was stronger at 14%. The company spent $104.1m buying Market Statistics
back shares. As usual it did not declare a dividend. At the end of the quarter net cash was almost US$500m. The bottom line benefi ted from a lower tax rate, but higher intangible amortisation reduced profi t. Adjusted for these, NPAT rose 6.1%, while diluted EPS increased 11.9%. The gross profi t margin weakened from 60.8% to 59.8%. Without currency impacts the margin would have strengthened slightly. In the September Quarter revenue rose 12% against pcp, or 8% on a constant currency basis, but net income decreased 11% largely due to adverse exchange rate movements.
Performance against indices (%)
6 Months 12 Months
Growth in mask sales continued to be very strong, a testament to RMD’s innovation. It was encouraging to see fl ow generator sales growth in America return to positive at 4%. RMD should remain relatively (though not entirely) insulated from any reductions in Western health budgets as the economic benefi ts of its products are indisputable. We are likely to increase valuation by around 5%, largely to refl ect time value of money.
Recommendation Impact
Sleep apnoea is a huge medical problem that can go unnoticed and untreated. RMD is helping lead the charge on sleep apnoea and should benefi t from strong growth for the long run by serving this huge potential marketplace. If RMD continues to up the innovation ante with new product introductions, including new airfl ow generators, masks and nasal pillows, it should remain an infl uential leader in this market for the foreseeable future. Operating margins are impressive, typically exceeding 20%. A zero dividend policy boosts EPS growth rates. The balance sheet has net cash. We think growth-oriented investors should consider Recommendation Key
buying shares of this narrow moat fi rm at a reasonable price.
ACCUMULATE: Modestly undervalued
Refer to back page for further detail. All information and advice is confi dential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of Euroz Securities Limited or any member or employee thereof. Refer to full disclaimer at the end of this document.
Profi t & loss summary
2012F 2013F
Ratio analysis
2012F 2013F
Cashfl ow summary
2012F 2013F
Per Share
2012F 2013F
2012F 2013F
For the full report please contact your advisor.
Balance sheet
2012F 2013F
All information and advice is confi dential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of Euroz Securities Limited or any member or employee thereof. Refer to full disclaimer at the end of this document.
Recommendation KeyMorningstar/Aegis Equities Research Pty Limited’s recommendations are anchored on each analyst’s estimate of a company’s fair value, which is what the analyst thinks the business is worth on a per share basis. Our analysts arrive at this value by forecasting how much excess cash – or ‘free cash fl ow’– the fi rm will generate in the future, and then adjusting that total for both timing and risk. Cash generated next year is worth more than cash generated several years down the road, and cash from a stable business is worth more than cash from a cyclical or uncertain business. Stocks trading at meaningful discounts to our fair value estimates will receive positive recommendations. For high quality businesses, we require a smaller discount than we do for mediocre ones, for a simple reason: we have more confi dence in our cash fl ow forecasts for strong companies, and therefore in our fair value calculations. The future is inherently uncertain, and that uncertainty is greater for some companies than it is for others. If a stock’s market price is signifi cantly above our fair value, it will receive a negative recommendation, no matter how wonderful we think the business is. Even the best company is a poor investment if an investor overpays for its shares. Each stock is given a recommendation of Buy, Accumulate, Hold, Reduce or Sell based on share price discount or premium to fair value. We also use Avoid for stocks that are not investment grade. Under Review is occasionally used where the analyst required additional time to revise the recommendation. It is ordinarily used for a few days only.
ACCUMULATE Modestly
Appropriately priced, neither buy nor sell Copyright & Distribution
TImothy Bunney- Dealers Assistant +61 8 9488 1461 The material contained in this communication (and all attachments) is prepared for the exclusive use of clients of Euroz Securities Ltd (ACN 089 314 983) (“Euroz”) only. Euroz is the holder of an Australian Financial Services Licence (AFSL 243302) issued by the Australian Securities and Investments Commission (“ASIC”) and is a participant of the Australian Securities Exchange Group (“ASX Group”). The information contained herein is confi dential and may be legally privileged. If you are not the intended recipient no confi dentiality is lost nor privilege waived by your receipt of it. Please delete and destroy all copies, and contact Euroz on (+618) 9488 1400. You should not use, copy, disclose or distribute this information without the express written authority of Euroz.
Disclaimer & Disclosure
Euroz and its associates declare that they deal in securities as part of their securities business Peter Schwarzbach - Institutional +61 8 9488 1492Ben Statham and consequently may have a relevant interest in the securities recommended herein (if any). This may include providing equity capital market services to their issuing company, hold a position in the securities, acting as principal or agent, or make a market therein and as such may effect transactions not consistent with the recommendation (if any) in this report.
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You should not act on any recommendation issued by Euroz without fi rst consulting your investment advisor in order to ascertain whether the recommendation (if any) is appropriate, having regard to your investment objectives, fi nancial situation and particular needs. Nothing in this report shall be construed as a solicitation to buy or sell a security, or to engage in or refrain from engaging in any transaction.
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Source: http://www.euroz.com.au/files/research/3882/Daily%20Briefing_31Jan12.pdf