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Reporting Season’s Winners and Losers

Reporting Season’s Winners and Losers

As the current reporting season draws to a close, we’ve come up with our list of the market’s best (and, by default, less-than-best) performers.

There are three elements of a bull market. The first phase is the P/E expansion as the market climbs a wall of worry. Tick. The second stage is earnings growth (which our list of winners and losers appears to suggest is underway). Tick. The third stage is known as the blow-off phase, where people start paying silly prices amid a fear of missing out. We haven’t yet had that third stage, but I believe we are well into the second – and I’m tempted to believe we might see the blow-off phase sometime before or during 2016.
As we head towards reporting season’s closure, it’s worth reviewing those companies that are doing well and guiding for better times ahead. A rising tide lifts all boats and it’s only when the tide goes out do you see who was swimming naked (thank you Messrs. Kennedy and Buffett). It’s therefore worth referring to the list of winners as being companies whose shares prices may at least have some fundamental support to justify the heady gains they have made in only a few weeks and months.


Company ASX code Reason
Seek SEK Standout this reporting season. Underlying NPAT growth of 29%. Business now a true international growth story.
Sirtex Medical SRX 18.7% increase in dosage sales for the Dec ’13 qtr
Ainsworth Game Technology AGI Guiding investors to an expected 50% increase in PTP for H1FY ’14
Commonwealth Bank CBA Underlying NPAT up 17% but well and truly in the price. Australia’s most expensive and arguably best-run bank
CSL Limited CSL (Healthcare) Underlying EPS up ~13% and guiding for growth in the second half
Ansell ANN (Healthcare) Underlying earnings up ~15% largely due to acquisitions given core business is barely growing
Credit Corp Group CCP Recorded 18% earnings growth for H1, versus prior guidance of 10%
JB Hi-Fi JBH Positive LFL sales growth of 2.8% in H1 and total sales growth of 6-8%. Should translate to 10% earnings growth
Woolworths WOW Sales growth of 6% for H1FY ’14
Wesfarmers WES Underlying NPAT growth of 6% driven by 4-5% sales growth – WOW sales result was stronger.
G8 Education GEM Acquisition of 63 childcare centres on 4x EBIT for $104.7m, taking total to 296. 70/30 D/E funded
ANZ Banking Group ANZ Dec ’13 qtr profit up 13% YOY, on lower bad debts
Carsales.com CRZ Rev +10%, NPAT up 17% over prior half. Continues to dominate; top automotive classifieds website
REA Group REA Rev +30%, NPAT up 37% over prior half. Continues to dominate; top real estate classifieds website
Domino’s Pizza DMP Rev +89%, NPAT up 28.2% over prior half. Result somewhat distorted by acquisition of Domino’s Japan
IINet IIN (Telecommunications) Underlying NAPT up 19%. Continued consolidator in space – result includes acquisition of Adam internet
Fairfax Media FXJ Underlying NAPT up 71% on continued cost reductions, predominantly asset sales to repay gearing
Rio Tinto RIO Underlying NPAT up 10% largely on cost reductions, reducing CAPEX. Revenue was flat
BHP Billiton BHP Similar story to RIO (almost identical) – earnings up 18% on cost cutting. Revenues largely flat
Sonic HealthCare SHL Underlying earnings up 18%. Large proportion of earnings are in USD – currency tailwind + growth in core business
Challenger CGF (Annuities/funds management) Strong investment performance and product demand driving strong inflows, hence underlying earnings up 11%
SAI Global SAI Underlying earnings up 12% – benefited from lower currency, some organic revenue growth and cost growth being contained.
Company ASX code Reason
Super Retail Group SUL Revenue up 6% to $1.1b for H1, however leisure division saw LFL sales growth of only 1.6%.  Margin compression meant limited earnings growth to approx. $61.5m
The Reject Shop TRS H1 sales growth of 17.7% to $385.5m but significant margin compression saw EBITDA growth of 6% to around $36.75m
Logicamms LCM EBITDA guidance of $3m and $11-$13m for H1 and FY ’14, respectively. Compares with $4.3m and $14.1m for PCP. Timing of contract awards and margin pressure. Good hydrocarbon growth and $9m net cash
Bradken BKN H1 profit down 185 to $38.1m. Takeover of balance of Austin engineering. DPS cut to 15c from 20c
Forge Group FGE Withdrawn financial support; administrators appointed. Diamantina and West Angelas Power Station contract losses from CTEC acquisition (January 2012) showed finances out of control. Board negligent?
Cochlear COH H1 revenue down by 5% to $371m on a 14% reduction in volume. ASP up 11%. EBIT down 54% to $49.4m
Goodman Fielder GFF H1 revenue up by 5% to $1.13bm but NPAT down 9% on higher inputs costs, increasing competition and capital intensiveness – all impacting margins
Emeco Holdings EHL (Mining services) Underlying NPAT down 164%
Boart Longyear BLY (Drilling/mining services) Underlying loss of 94m. Utilisation rates fallen off a cliff, business highly indebted
Swick Mining SWK (Drilling/mining services) Same as BLY – utilisation rates also down significantly
MacMahon Holdings MAH (Mining services) Underlying NPAT 24% down. Severe margin pressures
Treasury Wine Estates TWE (Beverages) Underlying NPAT down 44%. Has some of the best known brands in Australia which are not selling well overseas
United Group UGL (Mining services) This once market darling saw earnings contract again, this time by just 2%, however its outlook is not favourable hence a negative share price reaction
Imdex Limited IMD (Mining services/drilling supplies) Underlying NPAT down 93%
Coca-Cola Amatil CCL (Beverages) Underlying earnings down 10%. Business faces competition from overseas imports, hence margin pressure
Ausenco AAX (Mining services) Underlying NPAT down 84% – just completed a hugely dilutive capital raising to pay benefits to long-term staff they had to let go



Roger is the Founder and Chief Investment Officer of Montgomery Investment Management. Roger brings more than two decades of investment and financial market experience, knowledge and relationships to bear in his role as Chief Investment Officer. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Roger, I have followed your analysis and comments on McMillan Shakespeare since August 2013. I note you have not made any comment since they reported on the 19th February. I would be interested to hear your current view on this company.

  2. I would just like to thank the Montgomery team for their wonderful insights. For the first time in a long time I am looking at my 15 stock portfolio with calm, assurance and excitement. Many of my stocks have been purchased on the back of Montgomery team commentary, skaffold guidance and company investigation. I hear endless chatter and noise from many analysts on a daily basis through various business channels. Where once their noise would make me second guess, I now ignore the endless opinions on offer. Thank you Montgomery team. Keep up the valuable insights which are very much appreciate.
    Gary B

  3. Daniel Rosenthal

    I noticed FlexiGroup (FXL) was omitted from the winners list?
    I thought their report was pretty darn solid
    Could you please shed some light on these guys, perhaps in a blog post?
    Kindest regards,

  4. Thanks for the list Roger, some great companies in the winners list and some obvious ones in the losers (along with some companies who wouldn’t be used to being called “losers”).

    Your comments regarding the stages of the bull market is very interesting, there is no doubt there are some prices which are at quite significant premiums or at the top of what i would call the “reasonable price range” being a level where i can at least see some type of fundamental (albeit extremley optimistic) support for such a price.I don’t think “silly” prices are too far away though at least in specific sectors.

    Once again Roger, thankyou to yourself and all your team for providing us with your thoughts. I am sure we speak for all when i say how much it is appreciated.

    You might also be happy to know that you might get a few orders for your book coming through. My lecturer on Monday night and someone who i think you have done some work with previously mentioned your name and brought up yor books webpage and quite a few were taking down notes.

  5. Hi Roger

    Your clarity of thought always impresses. Just focussing on the winners, the most impressive are those with great results from improved income more than those that have cut costs- this is where SEK,CRZ and REA have really impressed and BHP,RIO have impressed less. I notice shareholders clamouring for more dividends, buybacks etc from the latter but not the former.

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