ASX Earnings Running Sheet

Fortescue Metals Group (FMG)

First half numbers of FY15

Metals
Source: Bloomberg

Results:

- Net profit  $331million in line with the consensus estimates of $329.3m. However, the range of estimates were vast, with the lower end at $213 million top end at $400m.

- Total sales $4.86 billion missed estimates of $4.91 billion

- FMG’s interim dividend was cut to 3 cent versus estimates of 10 cents

- Underlying EBITDA declines 55% compared to the corresponding period at $1.44 billion

- Maintains shipping guidance of 155-160mt for fiscal yr 2015

What it means

The headline figures from Fortescue Metals do look weak and no doubt there are concerns around how it will continue to manage the current situation and the sliding iron ore price. However, this result is more about the commitments put in place at the quarterly update. FMG maintained its commitment to cost controls and reigning in capex.

Although there is still a long way to go on this front; analysts now estimates all in sustaining cost are around US$53 a tonne on the numbers presents. This means FMG is pulling out better margins than expect however the longer term estimate on iron ore is for a lower price. FMG likely to trade higher on the number but significant head winds remain.

Bendigo and Adelaide Bank (BEN)

First half numbers of FY15

Results:

- Underlying cash earnings $217.9million a 17.2% increase on the previous period however below the consensus figure of $222.3 million and was under the lowest estimate of $218 million

- Net interest margins increase one basis point to 2.24% compared to previous period

- Interim dividend was in line at 33 cents

- Capital requirement was also in line with expectations

What it means

Solid results on the headline figure however the breakdown was weak. Business lending will be championed with growth of 19.7% compared to the industry average of 7.1% however its bread and butter home loan lending growth was abysmal at 3.2% compared to the industry standard of 7.2%. Expenses were higher on staff cost and bad and doubtful debts while lower than last year was still elevated. Retail deposits were also softer than expected and will impact net interest margins in the second half. Considering BEN has run up so hard so fast – this result is not likely to drive it higher. Take profit.

Rio Tinto (RIO)

Full year 2014 numbers

Results:

- Net debt falls to US$12.5 billion from US$22.8 billion

- Underlying net profit US$9.3 billion versus consensus estimates of US$8.9 billion

- Dividend upped to US$2.15 versus expectation US$2.12 a share

- Production guidance broadly maintained – copper lowered slightly

What it means

Rio's resolve to reduce debt is certainly paying off. It's providing cash returns in the shape of a share buyback, as well as a larger than expected dividend, while also delivering real cost savings. The full year results certainly detail how well Rio has delivered on its pledge from 18 months ago to reduce debt levels. The cleaner balance has a very solid foundation, now that gearing is targeted at around 20% to 30%. Guidance has been maintained and Rio is showing that even in the lower priced environment, it is a cash business rather than a debt business. That should mean the cash returns seen in FY14 will be maintained for a few more years to come.

Transurban Group (TCL)

First Half numbers of FY15

Results:

- Statutory net loss of A$354 million due to Queensland Motorway and City Cross acquisitions

- Underlying net profit $13.1

- Proportionate revenue up +35.4% year-on-year and smashed estimate

- Toll revenue up 9.8% with acquisition bolt ons up 36.7%

- Upgraded guidance on its dividend to 39.5 cents

- Proportionate EBITDA 636 million up 37.4%

- Saw a 37% rise in toll revenue in January 2015

What it means

Transurban goes from strength to strength. Its strategic acquisitions are producing very strong growth figures, while the macro environment will also be supportive with lower petrol prices which will promote usage. Lower interest rates will reduce interest repayment on the debt needed to purchase Queensland Motorway and City Cross. Toll margins are also increasing and revenue mix from Sydney and Melbourne is now 46% and 42% respectively, showing it is insulated from domestic issues. Results show the high multiple is justified and is likely to continue to outperform.

CSL Limit (CSL)

First Half number of FY15

Results:

- Net income of $692.2 million was soft.  (Up only 1.1% on the previous period compared to the market estimates $720.3 million)

- Cut full year net profit guidance to 10% from 12% growth

- Saw Behring division up only 5% versus company expectations of 7%, as volume growth of 11% was damped by margins falling 190 basis points on completion and price mix from Europe

- Dividend 58 cent unfranked estimates where for 60 cents

What it means

The soft results are disappointing. However, the fact volume growth was present - but offset by sales in low priced markets - suggest its FY16 and FY17 guidance will likely be achieved as the albumin sale in China and Kcentra sale in US ramp up. Wound healing serums in Japan are also likely to reverse in the medium term. However, adverse FX headwind from the Swiss Franc and increased competition and could see CSL stagnating in the interim.

Telstra Corporation (TLS)

First half numbers of FY15

Results:

- Net profit crossed $2 billion for the first time coming in at A$2.09 billion. (A 21.7% increase, smashing the consensus read of A$2.03 billion)

- Compositionally results were strong: Mobile growth 9.6% with margins up 40%

- Dividend upped by 0.5 cent to 15 cents (consensus estimates 15.5 cents)

- 366,000 domestic retail clients added in the first half, taking total clients serviced to 16.4 million

- Cash on balance sheet to $4.8 billion – amassing a war-chest for likely M&A

What it means

Very strong numbers from Telstra. Growth in the domestic market was well ahead of expectations, particularly in mobile and broadband, maintaining FY15 guidance. However, TLS stated once more at the results briefing that EBITDA growth will remain flat. Dividend growth was healthy, however, and showed that the company is moving away from its seven year strategy of assured yield and towards a growth profile, having seen several strategic acquisitions in Asia in the back-half of 2014. With this in mind, TLS will likely hold at $6.50, as the H1 results justify a premium. However, it is unlikely to push to $7 in the next month or so, as the dividend growth isn’t enough to push more hot funds into Telstra.

Commonwealth Bank of Australia (CBA)

First half numbers of FY15

Results:

- Solid cash earnings up 8% to A$4.62billion a beat on consensus earnings of A$4.54billion

- Net interest margin 2.12% in line with estimates a two basis point fall on the previous period.

- Interim dividend of A$1.98 a share consensus was $1.95% implied yield 4.52%

- Return on Equity best of the big four at 18.7% as are capital requirements at 9.2%

- Bad and Doubtful Debts (BDD) 41 basis points a tick higher than estimated

- Home loan growth, while solid at 6.4%, was 0.4% weaker compared to the previous half and softer then estimated

What it means

The company fundamentals remain extremely solid. The results were typical Commonwealth Bank of Australia and shows why it has sector-leading sustainable return on tangible equity multiple. However, competition is clearly on the rise and with the largest price to book valuation and a P/E premium to peers, it looks more than fairly valued. The dividend is no longer as attractive as it once was with net yield sitting at 4.5% – would look to take profit above $90.

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