In this daily reporting season update, we provide first impressions on key takeouts from companies reporting today, including Stockland (SGP), CSL (CSL), Woodside Petroleum (WPL), Computershare (CPU), Origin Energy (ORG), Seek (SEK), Dexus Property Group (DXS), Sonic Healthcare (SHL), Iluka Resources (ILU) and Westfield Corp (WFD) with links through to more detailed reports.
Adjusted Funds from Operations of $687m, up 10.3% on FY16. Funds from operations per security up 7.4% to 33.4 cents. NTA up 5.8% to $4.04 (current price $4.38). Total Commercial Property comparative growth 3.4%: Retail up 3.5%, Logistics up 3.6%, Office up 2.3%. Commercial Property occupancy: Retail occupancy 99.5%, Logistics occupancy 99% and Office occupancy 91.4%. Residential Community over 6600 lot settlements, op profit up 17.4% to $270m. Retirement Living op profit up 11.1% to $63m.
Outlook: “Targeting FY18 FFO per security growth of 5 - 6.5%, with growth skewed to 1H18, assuming no material change in market conditions. FY18 distribution per security growth of 4%, 26.5 cents, within target range of 75-85% of FFO. Portfolio remains well positioned for sustainable long term growth and value creation”.
Business Units sales (In cc terms): CSL Berring up 12% to US$6023m: sales for Immunoglobulins grew 14%; Haemophilia up 4%, Specialty up 20%, Albumin up 7%. Seqirus (Influenza) up 23% to US$900m. Net operating cash flow up 6% to US$1247m.
Outlook: NPAT cc growth guidance of +11-16% y/y, implying FY18 NPAT of US$1,480m - 1,550m in cc terms. CSL also guided to cc revenue growth of ~8%. No share buyback is foreshadowed in FY18 and $45m is remaining on buyback. FY18 CapEx of US$900m-$1bn.
Woodside Petroleum (WPL)
Production 42.2 MMboe, Average realised prices up 10% to US$43/boe. EBITDA of US$1371m largely in-line with our estimate US$1391m. Reduced half-year unit production costs of US$4.90/boe, 6% lower than H1 2016 and 2% lower than FY 2016 year unit production costs of US$5.2/boe, 38% lower than 1H 2015. Operating cash flow up 3% to US$1235m. Exploration discovery: WPL has made a gas discovery (Pyi-Thit 1) in Myanmar Southern Rakhine Basin, close to existing Shwe Yee Htun discovery.
Outlook: WPL still guiding to about 15% production growth from 2017 to 2020. WPL has not mentioned CY17 production guidance (last stated as 86 - 93mmboe vs our est 84.7mmboe). Capex guidance (~US$1.3bn) is unchanged.
Mortgage Servicing Rev: FY17 mortgage servicing revenue was up 16% to US$257.2m in the US, and up 201% in constant currency terms in the UK to US$280.6m. Cost control: CPU performed strongly on costs, with BAU opex up 0.3% on pcp and the cost savings program delivering ahead of schedule. CPU has announced a new buyback of up to A$200m.
Outlook: CPU's FY18 management EPS growth guidance of 7.5% in constant currency is below our analyst’s expected 10 - 15% (which excludes the ~1.5% drag from the Karvy sale). Reasons include a higher tax rate, lower than expected incremental cost savings in FY18, accelerated plans and costs for UKAR, and the Voucher Services drag.
Origin Energy (ORG)
Reported Loss A$2.2bn was below our estimated loss of A$2.4bn. Divisional EBITDA: Energy Markets up 12% to $1492m. Integrated Gas up 186% to $1104m. Net operating cash flow up 13% to $1.38 bn. Adjusted Net Debt by end-FY17 of A$8.1bn was well below ORG’s target of <$9bn, and a beat vs our forecast of A$8.8bn on stronger Operating cash flow.
Outlook: Energy Markets Underlying EBITDA for FY2018 is expected to be $1.7 billion to $1.8 billion, representing a 14 to 21 per cent increase on FY2017. Integrated Gas is expected to achieve production of 245 to 265 PJ in FY2018, reflecting an increase of 7 to 16 per cent on FY2017. Earnings contribution from Lattice Energy is expected to be driven by production of 76 to 86 PJe for FY2018.
Divisional Performance: ANZ Employment revenue up 14% to $313.1m, EBITDA up 11% to $197.9m due to 4% vol growth, 2% av price increase, 3% ad vol mix. Seek International revenue up 6% to $629.3m and EBITDA down 3% to $187m (Key International assets EBITDA growth: Zhaopin steady, Brazil Online down 8% and Asia steady). Seek Education revenue up 9% to $109.4m and EBITDA up 9% to $37.4m, EBITDA margin 34%. Net operating cash flow down 16% to $280.4m.
Outlook: Company guiding to flat NPAT despite expecting revenue growth of 20-25% in FY18. EBITDA growth of approximately 10% (FY18 vs FY17).Reported NPAT in the range of A$220m to $230m before deducting investments in early stage growth options of approximately A$25m to A$30m. Included in FY18 Reported NPAT guidance is an impact of A$18m2 relating to share based payments and depreciation & amortisation.
Dexus Property Group (DXS)
Office portfolio occupancy 97.2%; Industrial Portfolio occupancy 96.5%. Return on equity 18.2%. NTA $8.45 as compared to $7.53 June 16 (current price $9.53). Trading: In FY17 Dexus delivered $47.2 million of trading profits, net of tax, from the sale of three properties, including 105 Phillip Street, Parramatta which also secured approximately 60% of FY18 trading profits.
Outlook: “Our market guidance14 for the 12 months ending 30 June 2018 is to deliver distribution per security growth of 4.0 - 4.5%.”
Sonic Healthcare (SHL)
Segment EBITA - Pathology up 3% to$47m: 2% below our expectation, Radiology up 9% to $52m: 9% above our expectation, IPN & Other ($2m). Net operating cashflow up 4% to $736.3m.
Outlook: Sonic guided to FY18 cc underlying EBITDA growth of 6-8%, or ~$951m, (from A$889m in FY17). SHL guided to tax rate of 25% and net int. expense cc growth of 10 - 15%. CapEx is expected to be significantly lower on completion of major projects in FY17.
Iluka Resources (ILU)
Reported net loss $82m (due largely to the $106 million post tax ($151 million pre-tax) impairment of the Hamilton mineral separation plant (MSP). Z/R/SR production up 35% to 453.1kt and sales up 43% to 453.84kt. Dividend of A6cps was higher than our A3cps estimate (pcp was A3cps) reflecting the strong cash flow generation in 1H17 – as disclosed in the quarterly net debt had reduced to A$305m implying a gearing ratio of 23%.
Outlook: Iluka has increased its full year production guidance following revisions to mineral separation plant settings. Iluka now expects full year 2017 production of 795kt compared to 720kt previously. This includes an increase in expected zircon production to 310kt (from 275kt) and rutile to 280kt (from 240kt), while expected synthetic rutile production is unchanged at 205kt. Sales are expected to be evenly weighted across H1 and H2.
Capital expenditure guidance has been reduced to $135 million in 2017 from $260 million guided in January 2017, predominantly reflecting timing of spend on the Cataby project.
Westfield Corp (WFD)
Annual specialty sales were up 2.2% on the prior year with Flagship portfolio specialty sales up 3.3% to $892 psf. Comparable NOI growth 3.5%. (Flagship comparable NOI growth 4.5%, Regional NOI growth 0.5%). Portfolio was 93.9% leased. Speciality sales growth: Flagship 3.3% and Regional 0.2%.
Outlook: WFD reconfirms its FFO forecast for the 2017 year of between 33.8 cents and 34.0 cents per security, representing pro-forma growth of between 3.0% and 3.5%.The distribution forecast for the 2017 year is 25.5 cents per security.
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