ASX, Link Administration, MediBank and Santos - First Impressions from reporting

Bell Potter


ASX:  Higher levels of cash market and derivatives trading activity (stimulated in part by market reaction to the US election.) The dip in revenue from Listings business reflects the comparison with last year’s strong level of secondary capital raisings. (While the total amount of capital raised was down for the half-year, the number of new listings was up from 77 to 86.) | Revenue by key division:Listings and Issuer Services  down 2.1% to $103.3m; Trading Services up 5.0% to $96m - Derivatives up 4.9% to $133m; Equity post trade Services up 3.8% to $52.9m | Expenses up 6% to $90.1m vs 85.1m in pcp estimate.Net-Interest Income at $32.6m vs $28.8 pcp. | Outlook: “Global uncertainty –US trade and economic policy, Brexit, European elections supporting short-medium term market volatility. New trading platform, 24 hour OTC clearing and OTC client clearing enhancements providing contemporary technology and additional functionality•Consultation with stakeholders on CHESS replacement continuing –more work to do. DLT technology decision expected late 2017, enterprise-grade functionality development on track.”


Link Market Services:  Divisional Performance: Fund Administration Operating EBITDA up 51.1% to $63.9m, Margin 22% (initial benefits from Super Partners integration synergies together with revenue growth); Corporate Markets Operating EBITDA down 18.6% to  $22.4m, margin 23%; Information, Digital and Data Services Operating EBITDA up 4% to $24.7m, margin 24% | Net operating cash flow up 17% to $96.3m | Outlook: “We are pleased with the progress of the core activities of the Group and our disciplined approach to executing our five key strategic growth initiatives. Accordingly, we are carrying good momentum into the full financial year. Management’s priorities for the remainder of the year will be on delivering the next phase of Group margin improvement.“Link Group has a robust balance sheet and a business model which delivers strong operating cash flows. This allows us to both reward shareholders and to invest in our existing businesses. We are also well positioned to pursue attractive opportunities that enhance shareholder value and returns.”


MediBank:  Net investment income rose to $76.8 million (vs $18.6m pcp) due to relatively higher equity market returns, as well as stronger credit markets, which more than offset the lower cash rate. | Health insurance; Revenues were $3,118m vs consensus of $3,129m.  Actual revenues were up by 1.2% vs pcp, Gross margin was 16.9% down from 17.2% in the pcp.  The actual margin was 40bps ahead of consensus, Operating profit was $249.4m vs consensus of $251m and our forecast of $249m, the operating profit margin was 8.0% vs 8.8% in the pcp. | Complimentary services: Revenues were $279.3m v consensus of $278m, Operating profit of $17.3m vs consensus of $16m, the complimentary services result was also in line with consensus. | Outlook: The Board remains committed to a full year target payout ratio between 70 to 80% of annual underlying NPAT. Full year guidance for health insurance operating profit maintained at ~$490m.


Santos:  Reported net loss US$1047M VS Net loss US$1953m in pcp (impairment charge for GLNG of US$1,050m after tax) | The average realised oil price fell 14% to US$46.43 per barrel while the average LNG price was 33% lower at U S$6.03/mmbtu. | Unit upstream production costs US$ 8.45/boe-down US$1.9/boe on pcp | Capital expenditure down 51% to US$625m | Operating cash flow up 6% to $857m. | Outlook: In 2017, we will further refine our operating model to drive costs down, improve cash flow and reduce debt. We now have the strategy, assets, people and growth options to deliver on our future success and provide sustainable shareholder value.” Production and sales volume guidance remains unchanged at 55-60 mmboe and 73-80 mmboe respectively.


Bell Potter Securities is a leading Australian stockbroking, investment and financial advisory firm that provides a comprehensive offering of financial services to a diversified client base that includes individuals, institutions and corporations.

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