Investment Matters

Company News: Emeco

AGM season is in full swing.  Two of your investments provided outlooks for FY-19 as part of their AGM presentations:

Emeco provided a positive update in regard to FY-19 trading to date, including "high levels of activity and demand for fleet from our customers".  Furthermore, they stated that "we expect our fleet’s operating utilisation to further increase throughout FY19, particularly in the second half".  Contract tenures (lengths) are increasing, which we believe is a positive indication regarding future demand.  The company also discussed its growth pillars of higher utilisation, higher rates, and improving operational efficiencies (such as component life management, and EOS, a fleet monitoring and management technology).

***

Pact continues to experience pressures as noted in their FY-18 results.  The outlook presented in the AGM was for FY-19 EBITDA (earnings before interest, tax, depreciation and amortisation) of circa $245m.  Although this is higher than FY-18 ($237m), it is lower than previous FY-19 guidance of between $270m - $285m.  Acquisitions have allowed FY-19 earnings to grow, but underlying that, input costs (including resin) and specifically the delay in recovery of these costs through higher prices to customers, are impacting the business.  The company is expecting a stronger H2 than H1 (the current half). 

Pact is on a favourable valuation, with a good dividend yield (circa 9% historical including franking).

- Fleur Graves