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Company456.docxCompany 4: South32 Ltd
- S32.AX is considered a value stock with a P/E ratio of 24.5, P/B ratio of 0.92 and Dividend yield of 5.95% as the Group have low P/E and P/B ratios while having a high Dividend yield compared to the index.
Ratio Analysis
|
|
Current Ratio |
Inventory Turnover |
Operating Profit Margin (%) |
ROE (%) |
Debt-Equity |
|
2015 |
1.68 |
3.8 |
(8.6) |
(15.2) |
0.09 |
|
2016 |
1.94 |
3.9 |
(24.8) |
(15.8) |
0.10 |
|
2017 |
2.48 |
4.2 |
25.8 |
12.5 |
0.10 |
|
2018 |
2.90 |
4.2 |
22.8 |
12.7 |
0.09 |
|
2019 |
2.01 |
2.6 |
12.2 |
3.7 |
0.09 |
|
Industry Median |
1.75 |
4.6 |
18.8 |
12.2 |
0.11 |
Current Ratio
Current ratio began with 1.68 in the financial year 2015 and increased steadily to 2.90 in the year 2018. Similarly, we can deduce that currents assets have increased with the ratio during this period. Liquidity position of the Group since 2015 has made solid improvements. However, there was a noticeable fall in the current ratio in year 2019. The fall mainly came from the decrease in cash and cash equivalents where the cash equivalents is US$1406m in year 2019 as compared to US$2970m in year 2018. As shown in the graph above, the industry has a median of 1.75 and when comparing the benchmark with the South32’s current ratio of 2.01 in 2019, we can conclude that the company is in a stable position to cover their current liabilities with current assets.
Inventory Turnover
Inventory turnover for the year 2015 is 3.8 followed by a slow increase in trend in the later years. However, operating efficiency was rapidly dropped in the year 2019 showing a turnover of 2.6. This signifies weak sales or possibly excess inventory. During this year, there was 57% increase in production at Illawara Metallurgical Coal which prompted inventories to be re-established. As inventories increased, it would take a longer time for the inventories to be sold and consumed given its large volume. Additionally, there were falls in commodity prices due to various macroeconomic uncertainty causing revenue to be affected.
Operating Profit Margin
In the graph above, operating profit margin were both negative in the financial years 2015 to 2016. However, the margin made tremendous improvement in the year 2017. This was followed by the continued decrease till the year 2019 with a margin of 12.2%. A major reason for the decline in operating profit margin is the decline in sales revenue. However, considering the fall in commodity prices in 2019 affecting the Brazilian iron ore exports, this may be reasonable. Although this amount fell short of the industry median of 18.5%, this value is not too far off as 12.2% of the Group’s revenue is available to cover non-operating costs. In June 2019, South32 expects operating costs at Illawara operations to be sequentially higher in the 2nd half of fiscal 2019 following moves to longwall mining at its Appin and Dendrobium mines in the March quarter. The increase in operating costs may be another reason for the fall in operating profit margin.
https://publications.industry.gov.au/publications/resourcesandenergyquarterlyjune2019/index.html
ROE
Debt-Equity Ratio
Technical Analysis
From half of the 2nd quarter of 2015 to the 1st quarter of 2016, we see a downward trend. From the start of this period, South32 Ltd was issued Baa1 and P-2 issuer ratings from Moody. This was followed by a decreasing moving average line indicating falling prices.
Supported by heavy trading volume, major restructuring plans, non-cash charges and reduction of employees was carried out near the 2nd quarter of 2016. Here, the 50-day MA line crosses above the 200-day moving line signifying a ‘buy’ signal followed by an upward trend. This rising trend continued until the 2nd quarter of 2019.
Near the 1st quarter of 2019, a ‘sell’ signal occurred as the 200-day MA line briefly cross over the 50-day MA line. This decline was possibly influenced by the events surrounding the Cerro Matoso Litigation.
The 50 day MA line raised slightly but again declined under the 200-day MA line afterwards.
https://www.miningmonthly.com/markets/international-coal-news/1289730/ratings-assigned-south32
https://www.moneymorning.com.au/20180411/why-bhp-billitons-share-price-climbed-2-56-todayasxu.html
Company 5: RIO Tinto Ltd
- RIO.AX is considered a value stock with a P/E ratio of 8.10, P/B ratio of 2.07 and Dividend yield of 6.14% as the Group have low P/E and P/B ratios while having a high Dividend yield compared to the index.
|
|
Current Ratio |
Inventory Turnover |
Operating Profit Margin (%) |
ROE (%) |
Debt-Equity |
|
2014 |
1.70 |
2.9 |
25.0 |
14.2 |
0.54 |
|
2015 |
1.52 |
3.7 |
10.4 |
(2.1) |
0.62 |
|
2016 |
1.61 |
3.9 |
19.2 |
12.0 |
0.45 |
|
2017 |
1.66 |
3.9 |
34.7 |
21.9 |
0.34 |
|
2018 |
1.91 |
3.9 |
43.4 |
30.9 |
0.29 |
|
Industry Median |
1.75 |
4.6 |
18.8 |
12.2 |
0.11 |
Current Ratio
Inventory Turnover
Operating Profit Margin
ROE
Debt-Equity Ratio
Technical Analysis
Company 6: Scentre Group
- SCG.AX is considered a value stock with of P/E ratio of 9.31, P/B ratio of 0.9 and Dividend yield of 5.93% as the Group have low P/E and P/B ratios while having a high Dividend yield compared to the index.
|
|
Current Ratio |
Fixed Asset Turnover |
Net Profit Margin (%) |
ROE (%) |
Debt-Equity |
|
2014 |
0.83 |
25.12 |
83.1 |
11.2 |
0.83 |
|
2015 |
0.20 |
111.59 |
95.2 |
16.0 |
0.70 |
|
2016 |
0.36 |
108.89 |
119.9 |
16.1 |
0.65 |
|
2017 |
0.18 |
87.11 |
171.3 |
20.1 |
0.58 |
|
2018 |
0.25 |
67.65 |
87.1 |
9.9 |
0.65 |
|
Industry Median |
0.45 |
65.99 |
86.8 |
10.2 |
0.41 |
Current Ratio
Fixed Asset Turnover
Net Profit Margin
ROE
Debt-Equity Ratio
Technical Analysis
