TOP 3 ASX DEFENSIVE STOCK TO BUY DURING DEEP CORRECTION

 Transurban Group(TCL)

Transurban Group (ASX: TCL) is an Australia-based toll-road operator. The Company builds and operates toll roads in Melbourne, Sydney, and Brisbane, as well as in Greater Washington, United States and Montreal, Canada. It is also engaged in research and development of tolling and transport technology. Its segments include Melbourne, Sydney, Brisbane, and North America. Melbourne segment includes CityLink and West Gate Tunnel. Sydney includes Lane Cove Tunnel, Hills M2 Motorway, Cross City Tunnel, and Interlink M5 Motorway. Brisbane segment includes its interests in Logan Motorway, Gateway Motorway, Go BetweenBridge, Clem 7, Legacy Way and AirportlinkM7. North America includes 95 Express Lanes, 495 Express Lanes, and A25. It operates approximately 17 toll roads in Sydney, Melbourne and Brisbane, Australia, as well as in the Greater Washington Area and Montreal in North America. (Profile source: Reuters)

From the Company Reports   

Transurban 1H20 Results

Transurban Group (ASX: TCL) on 11 February 2020 announced its 1H20 Results.

(Graphic Source – Company Reports)

1H20 highlights:

  • Average daily traffic (ADT) grew by 2.3% Proportional toll revenue increased by 8.6% to $1,396 million 
  • Proportional earnings before interest, tax, depreciation and amortisation (EBITDA) and before significant items increased by 9.5% to $1,094 million
  • FY20 distribution guidance reaffirmed at 62.0 cents per security (cps)
  • 1H20 distribution of 31.0 cps, fully covered by free cash flow $927 million
  • Statutory profit of $162 million
  • Underlying cost growth of 2.0% reflecting cost discipline and recent investments providing scale benefits
  • 381,000 hours average workday travel-time savings from July to December 2019
  • Substantial progress to supply up to 80% of electricity needs for Brisbane and Sydney operations from renewable sources
  • Road Injury Crash Index tracking at 3.90 for 1H20, the lowest score since we introduced the RICI in FY14 with Transurban roads up to 68% safer than alternatives
  • The West Gate Tunnel Project D&C contractor has purported to terminate the D&C subcontract and also noted their intention to continue works on the site. Transurban does not consider the D&C subcontract has been validly terminated and, as such, the contract remains valid
(Graphic Source – Company Reports)

Key network activities 

Sydney  

  • Proportional toll revenue increased by 10.8% to $569 million
  • ADT increased by 2.2% to 839,000 trips, with growth impacted by softer economic conditions and weaker housing construction activity
  • EBITDA excluding significant items increased by 11.0%
  • Average workday traffic increased by 2.1% and average weekend/public holiday traffic increased by 2.0%
  • Car traffic increased by 2.8% and large vehicles decreased by 3.7% WestConnex acquisition remains ahead of the investment case

Melbourne  

  • Proportional toll revenue increased by 3.7% to $424 million
  • ADT increased by 1.1% to 867,000 transactions, with growth impacted by softer economic conditions and weaker housing construction activity
  • EBITDA increased by 2.1%
  • Average workday traffic increased by 0.6% and average weekend/public holiday traffic increased by 2.2%
  • Car traffic increased by 0.7% and large vehicles increased by 3.0%
(Graphic Source - Company Reports)

Brisbane

  • Proportional toll revenue increased by 6.6% to $217 million
  • ADT increased by 3.6% to 424,000 trips
  • EBITDA increased by 12.4%
  • Average workday traffic increased by 3.0% and average weekend/public holiday traffic increased by 4.3%
  • Car traffic increased by 3.7% and large vehicles increased by 3.1%
  • Construction of network operations centre underway to consolidate all Transurban’s traffic control rooms in Brisbane into a single facility

North America  

  • Proportional toll revenue increased by 16.2% to $186 million
  • ADT increased by 6.2% to 156,000 trips
  • EBITDA excluding significant items increased by 24.7% Average workday toll revenue on the 95 Express Lanes increased by 17.1%. The average dynamic toll price was USD9.32 
  • Average workday toll revenue on the 495 Express Lanes increased by 3.3%. The average dynamic toll price was USD5.67
  • A25 off-peak toll prices increased by 14% effective September 2019 after ADT surpassed the necessary threshold
  • Rolling 12-month peak direction traffic of 3,131 vehicles per hour on the A25

Chief Executive Officer Scott Charlton highlighted Transurban’s successful project delivery effort over the past 18 months, with five major projects completed and a further two expected to reach completion in mid-2020.

Transurban, along with its construction partners, has made substantial progress in delivering its project pipeline with the 395 Express Lanes in the US most recently opening in November.

Mr. Charlton said that alongside project delivery, Transurban had been investing in organisational capability and enhancing the customer experience leaving it wellpositioned for emerging opportunities.

Financials

The company currently offers an annual dividend yield of 4.16%. The company has a P/E ratio of 181.0. The EPS stands at $0.081. The stock has a market cap of $40.1 billion and a Share volume of 2.74 billion. The stock has a 52-week price range of $12.43-$16.44 (Data Source – Company Reports).

Veye’s Take

Transurban has delivered a statutory profit of $162 million. It had an average daily traffic growth of 2.3 percent and a proportional toll revenue increase of 8.6 percent to $1,396 million. The company’s proportional earnings before interest, tax, depreciation, and amortisation (EBITDA) growth of 9.5 percent to $1,094 million excluding significant items, and distribution of 31.0 cents per security for the period. Compared to the corresponding period, Toll’s revenue increased 10.0 percent from $1,298 million to $1,428 million. Population growth is putting demands on cities across the world and, for many, traffic congestion is impacting living standards and productivity.  Transurban delivered successfully over the past 18 months, with five major projects completed and a further two expected to reach completion in mid-2020. The company had been investing in organisational capability and enhancing the customer experience leaving it well-positioned for emerging opportunities. The company’s earnings have grown significantly by 34% per year over the past 5 years. TCL’S dividends per share have been stable in the past 10 years. Its dividend payments have increased over the past 10 years. The stock has strong support at $14.23. Veye recommends a “Buy” on “Transurban Group” at the current price of $10.65


Sonic Healthcare Limited (ASX: SHL)

Financial Results for The Half Year Ended 31 December 2019

Sonic Healthcare Limited (ASX: SHL) on 19 February 2020 reported a statutory net profit for the half-year to 31 December 2019 of $254 million, on revenues of $3.3 billion.

(Graphic Source – Company Reports)

Summary

  • After seven months of trading, the Company is on track to achieve the full-year earnings guidance issued in August 2019 (6-8% underlying EBITDA growth, Constant Currency, excluding impact of AASB 16 Leases).
  • Underlying EBITDA growth for the half year of 14% (to A$548 million) actual currency (excluding the impact of AASB 16 Leases); 11% Constant Currency.
  • Revenue growth of 15% to A$3.3 billion.
  • Solid organic revenue growth of ~5% (Constant Currency).
  • Net profit growth of 14% to A$254 million (growth 15% excluding AASB 16).
  • Margin accretion in both laboratory and imaging operations.
  • Aurora Diagnostics acquisition performing to expectation.
  • Progressive dividend policy maintained, increase of 1 cent (3%) to 34 cents for the FY2020 Interim Dividend.

Sonic’s CEO, Dr. Colin Goldschmidt, said that Sonic Healthcare had reported record results for the half-year, enhanced by the impacts of the Aurora Diagnostics acquisition completed in January 2019. The Aurora business had performed well since the acquisition, in line with its expectations, and cost and revenue synergies were in train. The results for the half again demonstrated the predictable, reliable nature of Sonic’s business, with the company on track to deliver the earnings growth guidance set in August 2019. (Data Source – Company Reports)

Veye’s Take

Sonic Healthcare reported record results for the half-year with margin accretion in both laboratory and imaging operations. The company is on track to achieve guidance after 7 months of trading. Sonic Healthcare has a balance sheet which provides significant financial flexibility. Progressive dividend policy maintained with an increase of 1 cent (3%) to 34 cents for the FY2020 Interim Dividend. It is well set for future growth. The stock is indicating a bullish RSI with strong volumes signalling the potential for a further move upwards. Veye maintains a “Buy” recommendation on “Sonic Healthcare Ltd” at the current price of $22.35

 

Fisher & Paykel HealthcareCorporation Limited

Fisher & Paykel Healthcare Corporation Limited (ASX: FPH) designs, manufactures and markets medical device products and systems for use in respiratory care, acute care, surgery and the treatment of obstructive sleep apnea. The Company’s segment includes North America, which includes all activities controlled by entities or employees based in the United States and Canada; Europe, which includes all activities controlled by entities or employees based in the United Kingdom, France, Germany, Sweden, Turkey and Russia, and Asia-Pacific, which includes all activities controlled by entities or employees based in Australia, Japan, India, China, South Korea, Taiwan, and Hong

Kong, and Other segment includes New Zealand, Latin America, Africa, the Middle East, and other countries. (Profile source: Reuters)

From the Company Reports

Fisher & Paykel Healthcare provides FY20 trading update

Fisher & Paykel Healthcare Corporation Limited on 17 March 2020 announced that it had further updated its revenue and earnings guidance for the financial year ended 31 March 2020.

(Chart source: TradingView)

The full-year guidance update provided in February, based on an NZ: US exchange rate of 64 cents, was for operating revenue to be approximately $1.2 billion and net profit after tax to be approximately $260 million to $270 million.

Since then, the NZ dollar has weakened against most currencies. Assuming an NZ:US exchange rate of approximately 61 cents and an NZ:EU exchange rate of approximately 55 cents for the rest of the financial year, the company expects full-year operating revenue to be approximately $1.24 billion and net profit after tax to be within the range of approximately $275 million to $280 million.

Fisher & Paykel Healthcare updates revenue and earnings guidance on stronger Hospital and Homecare sales

Fisher & Paykel Healthcare Corporation Limited on 21 February 2020 announced that it had updated its revenue and earnings guidance for the financial year ended 31 March 2020.

The full-year guidance previously provided in November, based on an NZ: US exchange rate of 64 cents, was for operating revenue to be approximately $1.19 billion and net profit after tax to be approximately $255 million to $265 million.

Coronavirus impact

Mr. Lewis Gradon, Managing Director and CEO said the company has received inquiries about possible impacts to the company’s supply chain resulting from coronavirus. Fisher & Paykel Healthcare does not have a manufacturing facility in China; however, some of its suppliers of raw materials are based in China.

Fisher & Paykel Healthcare launches new Evora™ compact nasal mask for sleep apnea

Fisher & Paykel Healthcare Corporation Limited on 3 February 2020 announced the launch of F&P Evora™, a new nasal mask for the treatment of obstructive sleep apnea (OSA).

(Graphic Source – Company Reports)

F&P Evora is a compact nasal mask that sits comfortably under the nose. The mask features CapFit™ headgear, which is designed to be put on like a baseball cap in one simple and intuitive movement. In a clinical trial*, 98 percent of participants described Evora as “simple to take off and put on in the dark,” and 95 percent of respiratory therapists found the mask “simple to fit.”

Evora also features a ‘floating’ seal, which sits inside stability wings. These technologies work together to allow for freedom of movement during sleep while keeping the mask comfortably in place.

Evora offers OSA patients the performance benefits of a nasal mask, with the streamlined design and minimalism of a nasal pillow mask, said Lewis Gradon, Managing Director and CEO of Fisher & Paykel Healthcare. Its unique and innovative features make fitting the mask much easier for the patient and the respiratory therapist. Strong Half Year Result for Fisher & Paykel Healthcare: Net Profit Up 24%

Fisher & Paykel Healthcare Corporation Limited on 27 November 2019 announced its financial results for the half-year ended 30 September 2019. Net profit after tax was $121.2 million, up 24%, and operating revenue was $570.9 million, 12% above the first half last year

(Graphic Source – Company Reports)

In the Hospital product group, which includes humidification products used in respiratory, acute and surgical care, operating revenue increased 19% to a record of $353.6 million. This represented 17% growth in constant currency, during an extended flu season in the United States. Products in the Hospital group made up 62% of the company’s operating revenue.

In the Homecare product group, which includes products used in the treatment of obstructive sleep apnea (OSA) and respiratory support in the home, operating revenue rose 2% to NZ$214.7 million, or a decline of 1% in constant currency.

Gross margin increased by 26 basis points to 67.1% compared to the first half last year, with benefits from product mix offsetting the additional start-up costs of the company’s second Mexico manufacturing facility.

(Graphic Source – Company Reports)

Overview of key results for the first half 

  • 24% growth in net profit after tax to a record of $121.2 million.
  • 23% increase in interim dividend to 12 cps (2019: 9.75 cps).
  • 12% growth in operating revenue to a record $570.9 million, 9% growth in constant currency.
  • 19% growth in Hospital operating revenue, 17% growth in constant currency.
  • 23% constant currency revenue growth for new applications consumables; i.e. products used in non-invasive ventilation, Optiflow nasal high flow therapy, and surgical applications, accounting for 63% of Hospital consumables revenue.
  • 2% growth in Homecare operating revenue, 1% decline in constant currency.
  • 1% decline in constant currency revenue in OSA masks. Investment in R&D was 9% of revenue, or $54 million. ​

Veye’s Take

Fisher & Paykel Healthcare’s half-year Net profit after tax was $121.2 million, up 24%, and operating revenue was $570.9 million, 12% above the first half last year. It had a strong start to the 2020 financial year, mainly driven by the Hospital product group, which delivered an operating revenue growth of 19 percent. FPH’s respiratory humidifiers and consumables are directly involved in treating patients with coronavirus. The company has seen an increase in demand globally and thus ramped up its manufacturing output. At the same time, FPH benefited from stronger sales in its Homecare product group and a weakening of the NZ dollar. There were better-thanexpected sales in its Homecare product group combined with continued strong growth in the Hospital product group. This includes an increase in demand from China related to the COVID-19 coronavirus outbreak. The stock has been moving in an uptrend for four months now. After the fall last week, the stock soon reversed and has formed an inverse head & shoulder pattern. The stock can have good growth potential as the company continues to innovate to improve care and develop new applications for its technologies. Veye recommends a “Buy” on “Fisher & Paykel Healthcare Corporation Limited” at the current price of $25.95

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