Select Industries to Progress on Trending International Export Statistics – 3 Stocks to Watch Out:

Significant Uptrend in International Export Value

Quick Look at Data on Related Industries

Encroaching into Retail and LNG Space to Identify Driving Factors

Key Risks and Challenges

Outlook

Considering the trending value of international exports, 3 ASX stocks are identified to showcase the momentum.

(1) Santos Limited (Recommendation: ‘Buy’ at AUD 7.050, Potential Upside: Low Double-Digit)

(M-cap: AUD  23.32bn, Annual Dividend Yield: 2.80%)

Company Overview: Santos Limited (ASX: STO) supplies natural gas in Australia and Asia. The company has a portfolio of high-liquefied natural gas (LNG), pipeline, and oil assets.

Trending Price Trajectory Amplifying Financials: In FY21, production increased to 92.1 mmboe*, up by 3%, while sales volume dipped by 3% to 104.2 mmboe. Despite the marginal change in sales volume, product sales revenue advanced by 39% to USD 4,713mn and consequently, underlying profit expanded by 230% to USD 946mn. The amplified fundamentals were supported by a significant increase in oil and LNG prices.

Setting New Records with High Average Realised Prices: For 1HFY22, STO delivered a record sales revenue of USD 3.8bn, up by 85% PcP, and a record high free cash flow of USD 1.7bn, up by 199% PcP. The record free cash flow level curtailed gearing to 22.5% as on 30^th June 2022. Average realised prices for LNG and Crude oil stood at USD 14.19/mmBtu* (1HFY21: USD 6.74/mmBtu*) and USD 116.28/barrel (1HFY21: USD 69.57/barrel), respectively.

Outlook:  STO stands on track to deliver merger integration synergies with USD 95mn in sustaining annual synergies achieved in the first six months of integration. USD 174mn of the initial USD 250mn on-market share buyback was executed by the end of 2QFY22.

*mmboe refers to million barrels of oil equivalent. mmBtu refers to million British thermal units.

(2) Temple & Webster Group Limited (Recommendation: ‘Speculative Buy’ at AUD 4.620, Potential Upside: Low Double-Digit)

(M-cap: AUD 566.99mn, Annual Dividend Yield: 0.00%)

Company Overview: Temple & Webster Group Limited (ASX: TPW) is an online homewares and furniture retailer with a range of 200k products from several suppliers.

Setting Record High Top-Line: In FY21, TPW clocked a record year for revenue, customers, and NPAT, setting a growth of +85% YoY to AUD 326.3mn, +62% YoY to 778k customers, and +165% YoY to AUD 14.0mn (on a normalised basis), respectively. The year remained positive cash flow with a 141% increase in EBITDA and a cash balance of AUD 97.5mn as of 30^th June 2021.

1HFY22 Financial Highlights: TPW continued to be Australia’s fastest-growing retailer with a sixth consecutive quarter of growth in revenue per active customer. 1HFY22 revenue shot up by 46% YoY, with EBITDA surging by 5.1% (above the FY22 target range of 2-4%). Fixed cost as a percentage of revenue stood at 8.7% relative to 7.8% in 1HFY21,owing to investment in key areas, for instance, logistics, tech, and customer care.

Outlook:  The company is focused on reinvesting cash flows in technology development, marketing, product range expansion, and overall customer experience. The objective stands to achieve economies of scale by expanding product sourcing, marketing activities, and logistics.

(3) Blackmores Limited (Recommendation: ‘Hold’ at AUD 79.270, Potential Upside: High Single-Digit)

(M-cap: AUD 1.49bn, Annual Dividend Yield: 1.36%)

Company Overview: Blackmores Limited (ASX: BKL) manufactures and supplies vitamin, herbal, and mineral supplements and natural skin and hair treatment products in Australia and New Zealand.

Improving Gross Margins Warranting Operational Efficiency: In FY21, BKL clocked a revenue of AUD 575.9mn, up by 1.3% PcP. Gross profit stood at AUD 301.0mn, up by 4.6% PcP, with gross profit margin up by 1.6ppts* to 52.3%. Group EBIT stood at AUD 45.8mn, up by 82.5% on PcP.

1HFY22 Financial Highlights: BKL revenue stood at AUD 346.0mn, up by 14.3% PcP or 14.9% uptick on a constant currency basis. The company continued executing its strategic cost-out and efficiency savings game plan. Gross profit stood at AUD 187.6mn, up by 19.4% PcP, with gross profit margin extended by 2.3ppts to 54.2% and as of 31^st December 2021, net cash stood at AUD 89.4mn with strong operating cash flow conversion.

Business Update: BKL is expected to announce its FY22 full-year results on 18^th August 2022.

Outlook: Total A&P investments are expected to range between AUD 10mn and AUD 15mn higher in H2FY22. Investments in supply chain capabilities have strengthened BKL and underpinned the ability to meet customer demand.

*ppts refers to percentage points

Comparative Price Chart

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance. 

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 08^th August 2022. The reference data in this report has been partly sourced from REFINITIV. 

Note 3: Investment decisions should be made depending on an individual’s appetite for upside potential, risks, holding duration, and any previous holdings. An ‘Exit’ from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above. 

Technical Indicators Defined: - 

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

Kalkine New Zealand Limited is authorised to provide general advice only. The information on this website does not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions.