Tag Archives: Telecom/Technology

article 3 months old

UK OK, But GBST Hits Downgrade Button

Weak conditions in the UK caused financial technology provider GBST to hit the downgrade button. Scrambling to adjust forecasts, brokers still consider the long-term outlook is secure.

-Revenue shortfall expected to be temporary and work pipeline solid
-Wealth management in the UK positive in the longer term
-Yet, concerns linger about the implied decline in the second half


By Eva Brocklehurst

Another weaker-than-expected outlook for FY17 has been offered, this time by financial technology provider GBST ((GBT)). The downgrade is attributed to four project deferrals in the UK, where weak operating conditions prevail, and a cancellation. The company has indicated it will not adjust its cost base in response, as it expects the revenue shortfall to be temporary, and the pipeline of work remains solid.

Given the company's inherent fixed cost leverage, compounded by its current elevated expenditure on R&D, the lack of services work has had a material impact on second-half profitability. Despite this, Deutsche Bank retains a Buy rating on valuation and expects momentum will improve materially in FY18. The stock is at five-year lows, despite solid revenue and client growth.

The company expects FY17 operating earnings (EBITDA) of $12m, materially below broker forecasts, with consensus previously around $19m. A minor positive, Deutsche Bank notes, is that the international capital markets division is expected to report an EBITDA profit in the first half, and this is a division that has been highly challenged over the past seven years.

Deutsche Bank makes material downgrades to FY18 expectations to reflect the trading update but still expects reasonable growth, driven by an improvement in services revenue. The broker remains attracted to the strong cash generating and capital-light business model.

Excessively Weak Guidance In Context of CoFunds Acquisition

RBC Capital Markets is cautious about the outlook given the company suggested the second half looks worse than the first half. The broker believes the guidance is particularly weak in the context of Aegon acquiring CoFunds. This was a significant deal for the company, which closed on January 3 after much delay.

The broker believes this explains a lack of work in the first half but significant work would have been expected some time in the second half. Guidance indicates this is not the case, as the segment will make a loss at the EBITDA level after R&D. RBC Capital Markets, not one of the eight stockbrokers monitored daily on the FNArena database, has downgraded to Underperform with a $3.00 target.

CLSA, also not one of the eight, downgrades to Outperform from Buy* with a $3.20 target. The broker notes the week guidance for the second half highlights a lack of leverage with clients and a reliance on lumpy services revenue, amplified by an uncertain macro environment in the UK.

The broker queries whether this is the first of more UK-related Brexit downgrades. Nevertheless, CLSA remains optimistic about GBST's long-term prospects and expects FY18/19 earnings to improve after completion of the Composer upgrade and the start of the CoFunds migration.

Problems Temporary?

Morgans also considers the problems temporary, driven entirely by unforeseen contract deferrals which hit at the same time as the company's peak IT development expenditure occurred, with the upgrading of Composer and the new Catalyst retail advisor product. In the short term, the broker notes there is no solution to the IT development cost issue as backbone system upgrades cannot be deferred.

IT costs are expected to remain high until the second half of FY18. The broker expects wealth management customer services revenue will build slowly, as customers can only defer system maintenance for so long before they hurt their own performance. The company is building a powerful global franchise as a supplier of core wealth management platforms and Morgans expects substantial long-term earnings growth. The broker retains an Add rating.

Earnings growth in Australian capital markets over the next five years looks challenging to UBS and structural headwinds remain a feature of the broker's base case for the segment. While conditions are subdued and additional investment and currency volatility will weigh on divisional earnings, the broker believes the longer term picture for UK wealth management is positive. The division continues to benefit from regulatory reforms which are driving a lift in advisor/D2C platforms.

Still, UBS is concerned about the extent of the implied second-half earnings decline in the UK. Continued weakness in the British pound is likely to have an impact on the company via offshore earnings translated back into Australian dollars and the potential for further project deferrals. UBS downgrades to Neutral from Buy, given the headwinds and uncertainty.

FNArena's database shows two Buy ratings and one Hold (UBS). The consensus target is $3.85, suggesting 23.9% upside to the last share price. This compares with $4.69 ahead of the update. Targets range from $3.40 (UBS) to $4.40 (Deutsche Bank).

* CLSA has a five level ratings system in which Buy is the top rating and Outperform a step below.

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article 3 months old

Aconex Cuts Swathe Through Expectations

Brokers slashed forecasts as software service provider, Aconex ((ACX)) substantially downgraded revenue expectations for FY17, raising questions regarding the reliability of its growth outlook.

-Near-term outlook curbed but brokers retain ratings given the potential
-Concerns over management's depth of engagement with clients
-Existing business growth seen slowing to around 10%

By Eva Brocklehurst

Construction management software service provider, Aconex ((ACX)), has delivered a blow to investor hopes, substantially downgrading revenue expectations for FY17. The downgrade raises questions regarding the company's growth profile, predictability and momentum in the US and UK markets. Brokers slash price targets.

The company has cut its FY17 revenue forecast to $160-165m and its operational earnings (EBITDA) forecast to $15-18m. These estimates are down -8% and -30% respectively at the mid points compared with prior guidance. A slower conversion of new clients in the US and UK, amid the political uncertainty, has been cited as the main cause of the downgrade.

Impact To Linger

Morgan Stanley expects the impact to linger but retains its Overweight rating given the earnings power inherent in the business. Still, the issues are whether this is a one-off, whether the 20% long-term revenue growth rate is achievable and whether the company is still truly a global story.

Morgan Stanley opts for lower growth in FY17, but does not believe the company has downshifted from a 20% growth profile for the longer term. The question for Morgan Stanley is: how can a business with 72% of revenue booked in from July 1 miss expectations twice (first time at AGM)? The broker understands the cumulative nature of any miss in earnings forecasts but suspects volatility in user-based agreements has increased.

The pressure on US and UK growth is not a competitive issue, in the broker's opinion, and the company's service remains a clear product of choice for the world's largest projects. The broker takes heed of two clues to a possible rebound in sales: weighted contract length and bookings growth. The company has indicated a higher proportion of long-term contracts, which should boost contract length and, if new work is longer dated, it should imply the slowdown in bookings would be less pronounced.

Deutsche Bank is concerned by the apparent lack of visibility by management in downgrading guidance that was less than three months old. This adds to existing concerns surrounding poor operating leverage and inconsistent cash flow. Although the reasons given for the weakness are plausible, the sudden nature of the shortfall raises questions for the broker around the depth of engagement the company has with its clients.

While the company's software is world-class, as is evidenced by the strong customer list and consistent channel feedback, Deutsche Bank believes the path to achieving a globally dominant product with strong recurring earnings remains uncertain. Moreover, confidence in management has been severely dented. Deutsche Bank retains a Hold rating, cutting its target to $4.50 from $6.80.

Conject Below Expectations

Macquarie also sticks with a Neutral rating. The broker notes the first half includes a full contribution from the Conject acquisition and commentary suggests the performance of this business has been below initial expectations, with revenue affected by changes to recognition policy and integration disruptions. Assuming flat revenues from Conject implies, the broker expects a slowdown in the existing business growth to around 10%.

The stock has fallen a long way but the broker continues to believe in the medium-term growth prospects, although concedes there is little valuation support even at current levels. Delivery of medium-term revenue growth targets and the significant margin expansion that is typical of software-as-a-service will be need to be demonstrated.

Near-term Catalyst Difficult To Find

A near-term re-rating is unlikely and a catalyst difficult to identify, Credit Suisse asserts, given the market is likely to be sceptical about the value of new enterprise agreements and management credibility has been reduced. The broker retains its Outperform rating despite the decline of 45% in the share price, continuing to envisage potential upside in the long-term at current levels. This is because the company has a first-mover advantage and a large addressable market.

The main change since the AGM in October, UBS observes, is the lower-than-expected performance in the Americas. The broker notes, at the time of the FY16 result, the 72% of FY17 revenue is contracted implied a further $49.3m of new revenue required to meet the mid point of prior guidance. Hence, the new guidance implies $35.8m is now required on a full year basis, which equates to a -27% decline in new revenue expectations.

Given the apparent slowdown in revenue expectations, UBS has reduced confidence in the FY18-19 guidance of 20-25% per annum growth and the EBITDA margin of 17-22%. The stock is not expected to outperform with such uncertainty. UBS retains a Hold rating and downgrades its target to $3.40 from $8.00.

Citi also downgrades its target sharply, to $4.95 from $8.69, but retains its Buy rating. The broker considers the market reaction excessive and there is a low probability of a further material downgrade. First half guidance implies robust second half expectations, which may prove challenging, and medium-term growth could be affected by shifting political landscapes and slower customer uptake.

Citi does point out that the company's visibility on the full year ordinarily increases at the first half result. For example in FY15 the company had 78% of FY16 contracted revenues, which increased to 97% at the first half result. Citi expects a similar outcome for FY17, although acknowledges the company's Connected Cost offer is not contracted, so visibility this year may consequently be slightly lower.

There are three Buy ratings and three Hold on FNArena's database. The consensus target is $4.05, suggesting 32.4% upside to the last share price. This compares with $7.72 ahead of the downgrade. Targets range from $3.40 to $4.95.

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article 3 months old

Alcidion’s IT Targets Hospital Efficiency

Alcidion is an emerging operator in the field of hospital IT, with technology that can help reduce deaths attributable to medical error. The stock price has doubled since it listed on ASX in February this year.

-Alcidion's Miya uses data feeds from disparate systems to actively monitor and detect emerging risk
-US health care providers obliged to make massive investments in new clinical information infrastructure
-Australian government now pushing hard to digitise hospitals


By Eva Brocklehurst

Alcidion ((ALC)) is a life sciences company and an emerging operator in the field of health information, with technology that can help reduce deaths by medical error. The stock has more than doubled its price since listing on the ASX in late February, driven primarily by commercial progress in various Australian hospitals.

Medical error is now the third leading cause of death in the US and Alcidion has technology that can help reduce these debts while making hospitals more efficient. NDF Research initiates coverage with a Speculative Buy rating.

The researchers place the base case at 12.2c per share and 26.3c per share as the optimistic case, using a discounted cash flow approach. The target of 20c sits at the mid point of the valuation range. Alcidion is expected to grow revenue to around $12m in FY18 from $5m in FY15. This is on the back of continued contract wins in Australia and the first installation in the US, which the company expects in FY18.

The company is anticipated to be profitable from FY18 and the researchers believe Alcidion's current cash reserves will be sufficient to fund the company through to profitability. The past eight years have witnessed a massive increase in health care IT spending globally, as healthcare systems seek efficiency gains from electronic health records, remote monitoring and mobile solutions.

Moreover, payors insist on such investments to manage the massive increase in the use of health care which is driven by an ageing population and higher levels of chronic illness. Health care IT spending on NDF estimates is now in the realms of US$110bn and growing at a rate of 3-4% per annum.

So, what is the company's critical system? The "Miya" is a clinical decision support system. Hospitals already have numerous IT systems which track patients in various ways but the relevant information is often in department silos, where staff have to work to pull together the numerous unconnected pieces of information. Miya, by contrast, uses electronic data feeds from the disparate systems to which the platform is connected, actively monitoring to detect emerging risk. Alerts are then sent to the right people at the right time.

The platform does not just integrate data it also analyses using "best practice" knowledge. The system is currently used in 11 hospitals around Australia, three in Victoria's Western Health network, four in hospitals operated by the Northern Territory Department of Health and in the Northern Integrated Care Service run by the Tasmanian health department. There are eight major modules, including patient flow, mobile, access, tracker, clinic, orders, intensive care and emergency department.

The company argues that whenever Miya is implemented it increases hospital efficiency and reduces operating costs. The company's example includes the implementation of the emergency department module in Northern Territory hospitals where the number of patients serviced within four hours more than doubled thanks to the technology.

Emergency departments across the NT witnessed pathology tests cost reduced by 5%, because less were ordered. A critical 7% of all tests that should have been read, and previously were not, now were read. This saves emergency department heads hours per day by not having to seek out that critical 7%. NDF believes the repeat business from NT and Victoria indicates that the product is generating customer loyalty.

In the US, the researchers note, hospitals and health care providers have been obliged to make massive investments in new clinical information infrastructure, simply to comply with the legislation of 2009. A typical approach scraps existing systems and installs a new one supplied by a single vendor. Yet NDF notes there are significant drawbacks with a single vendor solution including cost, potential for delays and the fact that best-of-breed systems are often scrapped.

Alcidion avoids the pitfalls in this regard as it allows hospitals to continue to operate best-of-breed solutions and simply install a supervisory system that unifies the disparate clinical information systems into a common platform. This lowers costs and has less implementation risk. Researchers also note that in Australasia, until recently, there was an under-investment in health information, despite world-class healthcare systems.

They now believe hospitals on both sides of the Tasman are starting to catch up and looking for small, local companies to help. The market opportunity just in Australia, with its 700 public hospitals and 620 private hospitals, is considered significant, as there are around 10m hospitalisations in a year.

The Australian government is now pushing hard to digitise hospitals and its Australian Digital Health Agency is tasked with building infrastructure, set up in January this year. This decision augurs well for companies such as Alcidion, with on the ground experience to help hospitals go digital.

In the US, meanwhile, the benefits of electronic health records are considered legion, such as the potential avoidance of contra-indicated products, ability to do community health surveys and an ability to save time during a doctor's visit. As a “carrot”, in 2009 the US government issued US$36.5bn in incentives for doctors to implement such systems, while the "stick" part involved reimbursement cuts for hospitals which were not making meaningful use of electronic records, starting at 1% in 2015.

This has ensured that, as of this year, 96% of US hospitals had electronic health records compared with only 12% in 2008. As a result, the researchers believe the brakes are really coming off health care IT and Alcidion is well-placed to take advantage of this.

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article 3 months old

NextDC Sell-Off Unwarranted

Data centre operator NextDC has been sold off sharply but brokers believe the company's position has been greatly misunderstood.

-Investors nervous about new wholesale supply coming to market
-Yet, content companies remain dependent on operators to aggregate services
-Has the share price fall made NextDC an acquisition target?


By Eva Brocklehurst

Data centre operator NextDC ((NXT)) has been sold off sharply in recent months and the stock is now at a compelling entry point, brokers believe. They assert that the company's position has been greatly misunderstood.

Morgans attributes a large portion of the slump in the share price to rising market interest rates, which lowers valuation. A second part to the problem lies with confusion over market dynamics. While the former is justified, the latter confusion is misplaced and creates a buying opportunity.

The broker points out that the company does not compete with the likes of Microsoft Azure, Amazon Web Services, Google Compute Engine or Alibaba Cloud. Rather, many of these names are customers and their success will continue contributing to NextDC's evolution. Microsoft, for example, generates around 90% of its total revenue from distributors, which add value by bundling services on top of the Microsoft offering.

The broker suspects investors are nervous about new wholesale supply coming to the market, yet international operators have always used a combination of co-location and wholesale, or owned, facilities. Despite content companies having their own facilities overseas, and in some cases in Australia, they remain dependent on operators to aggregate their services and put them close to the channel or end user.

At current levels Morgans believes investors are paying for the success in the build up of the company's base data centres and paying nothing for the new facilities.The broker looks back at 2014 and notes this was a good time to buy the stock, as investors panicked on hearing about pricing pressure from B grade facilities and it was later proved that the company's value proposition was unique.

The main risk to the share price relates to the rate of sales and whether this levels off, slows or accelerates, in the broker's opinion. Faster customer demand would lead to an appreciation of the share price because of a higher fill rate. Conversely, slower demand may disappoint relative to market expectations.

The business is very capital intensive, so the ability to access funding on an ongoing basis and utilise debt effectively is the main operational risk. The broker believes the company has the balance sheet capacity to handle substantially more debt and self-fund expansion through operating cash flow from the base buildings. Morgans upgrades to Add.

Deutsche Bank also observes NextDC has underperformed recently and this is driven by a sharp increase in risk-free interest rates which reflect the stock's perceived quasi-utility characteristics. Competition concerns, a lack of catalysts and significant recent equity issuance have exacerbated the outlook.

The broker expects competitive concerns are largely overdone and the sensitivity to increased rates is reduced after the recent de-rating of the stock. Deutsche Bank finds the valuation compelling, with NextDC trading at a 28% discount to its peers, on an ungeared asset basis.

This broker also contends new entrants to the market target customers with different data storage requirements such as backup data and they also possess higher risk profiles. Hence, the risk factor for the company is expected to be repriced more favourably over time.

The company has raised a significant amount of equity capital in the past year, which has increased exposure and allocation for existing equity holders. Deutsche Bank observes this produces fewer incremental, motivated purchasers of the stock to provide share price support. Coinciding with risk-free rates and competitive concerns, this contributes to the recent weak performance.

Deutsche Bank notes a significant amount of new capacity in absolute terms and the company does not generally announce anchor tenants, so the potential for positive catalysts for the new data centres remain somewhat limited over the next 12 months.

Citi follows a similar theme. The broker does not believe the proposed entry of AirTrunk into the Australian data centre market will have a material impact on NextDC. Demand is expected to absorb the potential expansion, and new supply is expected to be added incrementally and rationally.

The broker explains the current situation for NextDC as a converging of models. When the company listed it was providing secure facilities where retail customers could locate hardware/software infrastructure. Over time strong growth in cloud providers has meant the focus shifted towards a more balanced exposure between retail and wholesale customers. Around 60% of the company's FY14 revenue came from white space customers and Citi expects the wholesale/retail split to be around 50% currently.

One question the broker does ask is whether, given the recent share price fall, the stock is an acquisition target. Citi outlines two potential reasons to acquire NextDC and notes the global data centre industry has been consolidating. The first reason is global players that may be looking to expand their Australian footprint and the second is wholesale players looking to expand a retail offering.

There are six Buy ratings on FNArena's database. The consensus target of $4.49 suggests 48.3% upside to the last share price. Targets range from $4.01 (Morgans) to $4.90 (Macquarie).

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article 3 months old

Vocus Outlook Deepens Broker Concerns

The AGM update from telco Vocus Communications has weighed heavily on estimates and several brokers urge caution be applied to the stock.

-Heightened competition compounds earnings issues specific to Vocus
-Is the stock a target for private equity?
-UBS questions long-term sustainability of NBN economics


By Eva Brocklehurst

Telecommunications provider Vocus Communications ((VOC)) has been marked down in recent months as the sector has de-rated and the company's AGM update has now weighed heavily on estimates. Several brokers urge caution be applied to the stock.

The company has provided specific guidance for FY17 for the first time, which includes earnings of $430-450m, underlying cash profit of $205-210m and capital expenditure of $186m. The guidance is generally below expectations and attributed to weakness in the recent acquisition of Nextgen, because of slowing sales following the announcement of the transaction.

CLSA questions the quality of the earnings base, with 50% of underlying net profit made up of cost items that are recognised below the line. The guidance is also considered low quality. The broker notes capital expenditure may increase going forward if the company decides to go ahead with the new undersea cable. CLSA is also concerned about the changes to ARPU (average revenue per unit) disclosure, delivered, in its view, without a supporting explanation.

The broker also estimates that around 20% of Nextgen revenue is not contracted. Churn also remains a risk, as disgruntled ADSL customers, affected by outages which appear to be specifically related to Vocus-based services, may choose to go elsewhere. CLSA, not one of the eight brokers monitored daily on the FNArena database, moves to Underperform from Sell. Target is $4.55.

Morgan Stanley believes the stock offers the highest risk/return characteristics in the sector, as a heightened competition is compounded by some specifics relating to Vocus. The broker remains a believer in the revenue growth opportunities that are ahead to the company as a vertically integrated telecommunications business in the NBN (National Broadband Network) infrastructure.

Yet there are changes stemming from the AGM which require the broker to revisit its fundamental view. Increased competition and consumer/retail broadband are negative for margins, returns and the future growth trajectory, in the broker's opinion. The acquisition of Nextgen has also meant several key management and board departures. This adds volatility to equity holder returns, Morgan Stanley asserts.

The broker downgrades earnings expectations sharply, reducing its target to $5.00 from $9.55 and downgrading to Equal-weight from Overweight. The broker believes investors should adjust their valuation framework to apply either lower target multiples and/or a higher weighted average cost of capital for discounted cash flow-based valuations.

Shaw and Partners believes management is not on top of the business. The broker takes the company's suggestion that earnings will be skewed to the second half to mean that there is some risk to the numbers, and now assumes the low end of guidance.

This broker also finds it hard to reconcile the monthly recurring revenue for the corporate business in the first quarter compared with the preceding quarter. Sales growth is suspected to have slowed and some issues with staffing and culture are evident. Shaw and Partners, not one of the eight monitored daily on the database, has a Hold rating and $4.65 target.

So, what is there to like? Citi already assumed market expectations were too high and the sell-off in the stock has pulled it further into Buy territory. The broker acknowledges confusion regarding where growth is being achieved and the gap between reported and core earnings.

Credit Suisse believes the stocks price/earnings multiple of 12.7x for FY17 forecasts does not reflect the growth opportunity in the core corporate business. The main risks to operations relates to voice exposure in the former M2 business. The broker envisages potential for the company to become a target of private equity if the share price remains at depressed levels for an extended period and retains a Outperform rating.

While the Nextgen weakness was disappointing, in the company's defence the broker notes it has been going through a period of extended transition in ownership and the performance is expected to improve now the Vocus sales force can start selling the Nextgen network.

While consumer broadband subscriber growth had slipped, it was impacted by a Telstra ((TLS)) wholesale provisioning issue, which the company says has now been resolved. Credit Suisse also defends the company's accounting, noting disclosure has improved, with reported consumer broadband ARPU revised lower because of an error with the prior calculation.

Deutsche Bank retains a Buy rating on valuation grounds. The broker acknowledges that while the issues facing Vocus in isolation are not that significant, combined they suggest a level of caution should prevail regarding the operational performance.

The broker reduces revenue forecasts for the Australian consumer business, Nextgen, and the corporate and wholesale businesses. Additional costs are now forecast for migrating existing customers to the NBN. Capital expenditure assumptions are also increased FY17. The net impact is a reduction to Deutsche Bank's earnings per share estimates of 12-35%.

UBS, disappointed with the Nextgen performance, and the loss of a $17m fibre build contract, questions the long-term sustainability of NBN economics. The broker welcomes the additional disclosures by Vocus but envisages risks to both broadband profitability per subscriber during the NBN transition and gross costs.

The broker also notes declines in legacy voice could also be accelerating, as voice revenues are set to fall by another $30m in FY17. The broker considers the stock cheap when taking account of FY17 price/earnings and enterprise value/EBITDA metrics. Yet these ignore capital expenditure growth, maintenance costs and other cash impacts. However, longer term, the stock's free cash flow yield is more appealing although this also assumes the capital expenditure profile eventually normalises.

In this company's defence, UBS notes heightened NBN concerns may have meant the sector has lost its lustre but as Vocus is largely a re-seller it should not suffer the same degree of adverse impacts as other platforms, although there remains some risk to customer economics post NBN. Additionally, the second order impacts of the NBN are a concern for the broker, such as increased competition and accelerated declines in legacy products.

It is not entirely clear why some of the acquired business of Nextgen appears to be struggling while internally the company's sales continue to improve, but Morgans suggests a bottleneck in customer provisioning and, hence, the organic growth profile has slowed.

The company has taken a number of steps to address its sales problems and remains confident it can re-build momentum. Nevertheless, the broker believes it will take time for the earnings trajectory to stabilise and investor confidence to return. The business is complex and the broker suspects the investment market struggles with all the moving parts.

FNArena's database shows four Buy ratings and two Hold. The consensus target is $6.08, suggesting 39.2% upside to the last share price. This compares with $8.08 ahead of the AGM. Targets range from $4.46 (Morgans) to $6.85 (Citi).

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article 3 months old

MYOB Chasing Competition In The Cloud

Accounting software business MYOB is shaping up as a key player in the cloud but brokers are acutely aware that competition in that area is heating up.

-Accountants a key distribution channel and platform for growth in SME applications
-Potential for downward pressure on margins, as SaaS typically generates lower margins
-First mover advantage in the cloud ceded to Xero amid competition from new entrants


By Eva Brocklehurst

Accounting software business MYOB ((MYO)) is shaping up as a strong player in the cloud, with clear strategies to deliver long-term growth from the transition to online connected services. Cloud adoption is entering a new phase which should benefit the company and play directly to MYOB's key strengths, Ord Minnett believes.

The broker envisages the company will, in the medium term, maintain its market leadership position in accounting software, while delivering a high proportion of recurring revenue. The company's 2016 guidance includes revenue in line with its historical trends, an earnings margin of 45-50% and an R&D/sales ratio at the upper end of the 13-16% range.

Ord Minnett likes the company's approach to practice management, believing this will be the next battleground for accounting software vendors. The company has over a 60% share of accountant businesses, with a low risk, incremental cloud transition solution which fully integrates a client's existing desktop. MYOB now has around 400 engineers, with R&D expected to cost over $55m in FY17. Ord Minnett finds it hard to reconcile investor concerns that under Bain's majority ownership, MYOB has under-invested in its business.

Deutsche Bank also notes the emphasis on accountants, as this industry is considered to be important in influencing decisions by small to medium enterprises (SMEs) about purchasing accounting software, with 87% of these businesses naming their accountant as a key advisor. Field surveys indicate 69% of the accountants recommended MYOB product for clients.

Hence, the broker believes accountants remain a key distribution channel and a powerful platform for growth. The company's cloud-based Advanced product is now the main driver behind growth in enterprise solutions and contributed roughly half of sales in this area in the year to date. Advanced is expected to make up more than two thirds of sales in 2017. Deutsche Bank considers the stock's valuation attractive relative to both domestic and international peers and retains a Buy rating.

Credit Suisse recently initiated coverage on the stock with an Underperform rating. The broker accepts the company is a beneficiary of the shift to cloud-based services and estimates the domestic revenue of the three largest operators in the local market grew by 40% between 2013 and 2015. Still, competition will accelerate and is expected to put the company's market share at risk.

While MYOB has enjoyed a high margin by industry standards and relative to global peers, Credit Suisse currently models a flat margin profile and envisages potential for downward pressure, given software-as-a-service (SaaS) typically generates lower margins than traditional software. The broker finds the stock's valuation stretched relative to forecasts and believes the market may be pricing in a (unlikely) benign competitive environment. A sell-down of the Bain stake may also weigh on the stock.

UBS has questioned whether growth is becoming vulnerable, given a potential lift in bond yields. MYOB is a quality company, and has an incumbent position and recurring revenue which underpins its business, yet the broker considers its long-term profile depends very much on its penetration of the cloud and retention of market share.

Credit Suisse estimates MYOB has around 80% share of SME desktop accounting software users but this base has entered a terminal decline and the company is no longer actively pursuing SME desktop license sales.

In a relative sense the company is playing catch-up in the cloud and has ceded first mover advantage in online solutions to Xero ((XRO)). Credit Suisse notes that while MYOB has largely filled out its product suite and is having success with conversions, it remains well behind Xero in terms of share and net additions.

The broker estimates MYOB's share of the cloud accounting software market as of June 2016 was around 28% versus 58% for Xero. While closing the gap is not impossible and the broker acknowledges the company's strategy is sound, it will become increasingly more difficult as penetration of this market increases, given churn is low. The company also faces increasing competition from new entrants, as both Sage and Intuit have been actively promoting their online solutions in the Australian market and pricing aggressively.

The company has, historically, had a dominant position in accounting software for the SME and accounting practice segments. The three largest players in the domestic market are MYOB, Xero and Reckon. Revenue for these three increased by around 40% over 2013-2015. MYOB was listed on ASX in May 2015 following two periods of private equity ownership. Bain Capital retains a 59% stake.

FNArena's database shows three Buy ratings, two Hold and one Sell (Credit Suisse). The consensus target is $3.93, suggesting 12.5% upside to the last share price. Targets range from $3.20 (Credit Suisse) to $4.40 (Deutsche Bank).

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article 3 months old

Weekly Broker Wrap: Outlook, Strategy, OPEC And Airlines

Commodities and economic outlook; outlook for equities; OPEC production meeting; outlook for airlines; and Netcomm's NBN contract.

-Commodity boost to budget expected to be undermined by low wages growth
-Oz equities still considered reasonably attractive versus very low interest rates
-OPEC deal should be forthcoming, with surplus scenario likely if it fails
-Noticeable improvement in domestic airline passenger growth and yields


By Eva Brocklehurst

Commodities And Economic Outlook

A surge in the price of a number of Australia's key commodity exports since mid year has been widely flagged to provide a boost to the nation's economy. This includes the additional revenue to the federal government coming from increased tax receipts. The spot prices of three key commodity exports, iron ore, coking coal and thermal coal have risen sharply this year and, more generally, Commonwealth Bank analysts note, the Reserve Bank's non-rural commodity price index is up 17% since June.

Nevertheless, weak wages are expected to be a drag on budget revenues. Annualised wage growth for the September quarter was 1.6%, well below the 2016 budget assumptions of 2.5%. The analysts suspect this will reduce revenues and may offset the gains from higher commodity prices.

The CBA analysts suspect the size and relative strength of the NSW and Victorian economies means economic data presented at the national level is masking weakness throughout the rest of the country. Economic activity in the two biggest states, along with strong dwelling price growth in Sydney and Melbourne, is likely to mean the Reserve Bank prefers to stay on the sidelines in terms of its cash rate. This is despite the fact the rest of Australia could probably do with more easing of interest rate policy.

The analysts note that, during the mining investment boom, Australia was referred to as a "two-speed" economy, where relatively high interest rates and a strong Australian dollar weighed heavily on the rest of the country, while Western Australia, Queensland and Northern Territory experienced full-blown growth. Now this “two-speed” feature applies again, but this time it is NSW and Victoria driving demand and employment growth.

UBS expects the headwinds which have buffeted the economic outlook in the past few years, such as falling commodity prices and the drag from falling capital expenditure after the resources boom, will ease. As such, Australia's growth is forecast to strengthen to 3.0% in 2017, before easing to 2.8% in 2018. Through 2018 UBS expects growth to retrace as the booming housing construction cycle goes into reverse and the initial boost from public sector expenditure fades.

Growth is forecast to slow to 2.5% by the end of 2018. Inflation is expected to remain subdued and only return to the Reserve Bank's 2-3% target in the first half of 2018. UBS expects the RBA to keep the cash rate on hold before starting to normalise rates with a 25 basis point hike late in 2018 to 1.75%.

Equity Strategy

UBS considers a large and/or rapid drop from current levels is a key risk to factor in for equities in the coming year. Australian valuations appear moderately expensive in absolute terms but the market is still reasonably attractive compared with what are very low interest rates.

Australian earnings looks set to move back to positive growth in FY17 after two years of negative growth but, ex resources, trends appear still quite constrained, UBS observes. The broker remains relatively neutral on the banks, which appear reasonable value while the issue of their capital ratios is pushed out beyond 2017. UBS remains overweight resources.

Deutsche Bank believes the current price/earnings (PE) settings are about right and envisages earnings taking the market 4% higher over the next year. On the equity side, yield stocks have moved in line with bond yields and no longer look rich, with the broker noting the excess dividend yield that yield stocks offer is now close to the six-year average.

The broker likes some yield exposure at these levels and key picks include Telstra ((TLS) and Sydney Airport ((SYD)). In terms of the value trade the broker favours low PE stocks and key picks are Macquarie Group ((MQG) and Suncorp ((SUN)). Deutsche Bank remains a little concerned about domestic growth and expects reductions in official interest rates in 2017.

Australian dollar weakness and the prospect of better US growth leads the broker to include US exposure and key picks include Aristocrat Leisure ((ALL)), Amcor ((AMC)) and Incitec Pivot ((IPL)). In housing the broker sticks with a positive view and key picks include Fletcher Building ((FBU)) and Harvey Norman ((HVN)).


Macquarie believes agreement on production reductions by OPEC (Organisation of Petroleum Exporting Countries) has a 60% chance of success when the cartel meets on November 30, with a low US$50 price range for oil in the event of success and low US$30 on a failure to make a deal. Most OPEC members are at, or near, their production plateau levels, which the broker observes has not been the case since 2014, and should make a deal more palatable.

The form of a potential deal is far from settled. If OPEC fails to agree, Macquarie expects it will lose the power to jawbone the market and be on its way to dissolving, while members would be locked into a crude production race. Failure would force members to maximise production, resulting in large increases from Saudi Arabia, Iraq, UAE, and, eventually, Kuwait.

In this scenario the broker believes OPEC could quickly arrive at 34.5m barrels per day and create an oversupply for 2017 and part of 2018. In Macquarie's view, lower non-OPEC production would not be enough to offset OPEC growth as a result of the failure to obtain an agreement.


Ord Minnett observes a noticeable improvement in domestic passenger growth and yields in September, and what appears to be a more disciplined approach to international airfares to and from Australia by competing carriers. These developments have positive implications for Qantas ((QAN)) and Virgin Australia ((VAH)).

The number of passengers flying domestically grew 3% in September versus the previous September, and represent an improvement on the 2% growth in August and 1% growth in July. This confirms the broker's view that the July-August period was hurt by events such as the federal election.

The broker estimates yields in September in some key routes rose by 3-18% but, while these numbers are encouraging, cautions that average yields across the first quarter of FY17 were still down by 2-13%. In international routes passenger numbers grew by 6% in August, while average yields across the September quarter ranged from down 20% to up 10%.

Netcomm Wireless

Netcomm Wireless ((NTC)) has announced a contract with the National Broadband Network (NBN) for the roll out of its fibre technology (FTTdp or fibre-to-the-distribution point). This technology strikes a balance between the higher speed, but more expensive, FTTP (fibre-to-the-premises) and a technically inferior, but cheaper, FTTN (fibre-to-the-node).

FTTdp uses more fibre than FTTN as it extends to the kerb outside a property. The company's contract is for roll-out likely starting in FY18, which means production needs to start several months in advance.

This is a significant contract for earnings and, accordingly, Canaccord Genuity increases EBITDA (earnings before interest, tax, depreciation and amortisation) estimates by 27% for FY18, while FY19 is increased by 21%. Importantly, in the broker's view, the company is now well placed to win future similar contracts overseas.

Arguably, FTTdp is a bigger opportunity than fixed wireless because it addresses the issues in metro areas, where the majority of the company's target market resides. Canaccord Genuity increases its target to $3.50 from $3.20 and retains a Buy rating on the stock.

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article 3 months old

Is TechnologyOne Too Heady?

Enterprise software provider TechnologyOne continues to tick all the right boxes, although some brokers suspect the stock price is becoming a little heady.

-Stock considered high quality but valuation appears challenging
-Cloud expected to make up largest portion of revenue by 2020
-UK shifts to profitability, small acquisitions expected in FY17


By Eva Brocklehurst

Enterprise software provider TechnologyOne ((TNE)) continues to tick all the right boxes, although some brokers suspect the stock price is becoming a little heady.

The company produced a strong FY16 result, 1% above the top end of guidance, largely because of a lower tax rate. No guidance was provided but Morgans would not be surprised if the company guides to 10-15% profit growth at its AGM in February. The stock is considered high quality but the broker finds the valuation challenging.

Even a great business can be a poor investment if you pay too much, Morgans asserts. Price momentum is strong but this should eventually weaken and at that point the broker believes it will be time to exit the stock. The broker acknowledges that cheaper capital has pushed equity risk premiums lower but believes, even on relative grounds, the stock looks expensive.

The consulting division was the weak spot in the results but initial licence fees and annual licenses were up 20%, while cloud computing provides a robust long-term outlook for the company. Longer term, the company expects pre-tax profit margins will move back towards 30%, although commentary regarding potentially achieving 40% appears optimistic to Morgans. Operationally, the company appears in a strong position and the main risk relates to market sentiment, the broker suggests.

Asset manager Northern Trust differs, noting the company has some of the strongest operational dynamics in the region and a three-year average invested capital growth rate of 10%, as well zero debt. The company also has a long history of returning excess cash to shareholders and this should make for a compelling investment, particularly on weakness, in the firm's opinion.

Long-term dynamics are compelling, particularly in the licensing and cloud division. Cloud services have also exceeded Northern Trust's forecasts, with the original expectation of breaking even in 2017 now estimated as a $1m profit. The cloud division is expected to make up the largest portion of revenue for the company by 2020.

While the enterprise value to earnings valuation may appear higher on face value, the analysts believe recent broker upgrades in the last month have been on the basis of target valuation multiple upgrades, with very little earnings upgrades yet being incorporated into estimates. It goes without saying that Northern Trust, not one of the eight brokers monitored daily on the FNArena database, has a Buy rating.

The results provide further evidence of the company's strong track record and, given the benign organic growth environment facing many industrial stocks under coverage, UBS believes TechnologyOne warrants a premium valuation. Yet, with a view to the multiples on which the stock trades, UBS believes this is largely reflected in the current share price.

Macquarie is more upbeat and envisages considerable leverage will be realised once new products contribute to the bottom line over the next few years. The broker acknowledges the risks associated with migration to cloud services but believes a premium valuation is warranted, given the opportunity to up-sell clients to a higher value solution. Cloud services fees now total $16m in annual contracted value. Given the cloud revenue model Macquarie expects revenue to lag annual contract value by around 12 months.

The broker notes the UK business has also shifted towards profitability one year earlier than expected and has reached critical mass with 40 clients. With the company having secured preferred supplier status from the federal government the broker expects smaller agencies will now follow suit in FY17. Macquarie also expects the company to make small strategic acquisitions to add functionality to its cloud development in FY17.

The result was more mixed than Bell Potter expected, with revenue 2% higher and earnings 2% lower. The main reason for this at the earnings level was a higher-than-expected loss in the cloud segment, although this was mostly made up for by lower-than-expected amortisation and tax. The final dividend of 5.09c was in line, while the special dividend of 2.00c was below the broker's forecast.

Bell Potter downgrades forecasts for earnings per share in FY17 and FY18 by 2-3%, driven by reductions in margin forecasts because of increased marketing and corporate costs and lower profit forecasts from the cloud. The broker still expects growth in pre-tax profit of 17% in FY17 and 20% in FY18. Bell Potter, not one of the eight stockbrokers monitored daily on the FNArena database, retains a Hold rating and a $5.75 target.

The database shows one Buy rating and two Hold. The consensus target is $5.92, suggesting 3.5% upside to the last share price. Targets range from $5.71 (Morgans) to $6.30 (Macquarie).

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article 3 months old

Telstra Review Sparks Dividend Speculation

Telstra has sparked speculation among brokers as to what it intends with its capital allocation strategy review.

-Will the new strategy support the current dividend or involve a re-basing of the dividend lower?
-Strategic shift away from new growth businesses and a re-focus on domestic
-NBN earnings gap remains the key issue for most brokers


By Eva Brocklehurst

Telstra ((TLS)) will undertake a review of its capital allocation strategy over the next 6-12 months and expects to update the market at the first half result in February. The announcement, at an otherwise steady-as-she-goes AGM, provoked keen interest from brokers as they mull just what the outcome of the review might contain.

The company has also announced a strategic shift away from new growth businesses, meaning it will not, for the time being, make large-scale consumer investments in Asia. Part of the company's review of its capital allocation will include obtaining feedback from debt and equity stakeholders.

Telstra has previously identified that the National Broadband Network (NBN) will affect recurring earnings by $2-3bn between FY15 and FY22. FY22 is a key year because this is the first year which excludes one-off NBN payments and could likely be used as the base for the company's dividend policy. Telstra expects $3bn in strategic investments will drive a $500m improvement to earnings by FY21.

Deutsche Bank suggests investors will appreciate the company's willingness to canvass various options surrounding capital allocation. Yet, while the uplift from the $3bn investment sounds good in principle, the broker is cautious about the revenue benefits, given the telecommunications sector has not been successful at monetising increased data consumption and new services. The broker cites evidence in the relatively stable average revenue per unit (ARPU) in mobile and fixed data.

UBS forecasts recurring earnings to fall to $9.8m post the NBN completion, although assumes a one-year delay and that FY23 will be the first year which excludes any one-off NBN payments. The earnings improvement expected, combined with around $800m in productivity gains, fills around $1.3bn of the $2-3bn gap, in the broker's calculations.

Based on the broker's projected earnings profile and capital expenditure forecasts, Telstra could better sustain its earnings per share of around 31c if it deployed up to $2bn in excess cash flow for additional share buy-backs. UBS estimates the buy-backs could also reduce the annual dividend burden by $125m. The broker's current mobile forecasts assume capital expenditure normalises in FY24 to 14% of sales. However, if assumptions are increased to 16%, UBS estimates that only a 29c dividend would be sustainable.

Several brokers raise the hypothetical scenario of Telstra securitising recurring NBN payments, crystallising the value of long-term receipts in return for a lump sum payment. Telstra is entitled to recurring payments for leasing its infrastructure to NBN for 35 years from the date of the initial deal. Given these payments are also guaranteed by the federal government they could be viewed by some investors as a government backed annuity, UBS suggests.

Telstra could also deploy the proceeds for buy-backs which would reduce its nominal dividend load. UBS also suggests, hypothetically, if Telstra were to divest its recurring NBN payments, it could exacerbate issues around the NBN earnings gap and place pressure on the dividend profile. The broker wonders whether investors might, in that instance, de-rate the remainder of the stock.

Credit Suisse is of the opinion that the review will lead to fundamental changes to the company's capital management strategy. The main issue is to address the gap between the current 31c dividend and recurring earnings per share and the broker highlights the risk that the review leads to a re-basing of the dividend to a lower, more sustainable, level.

The broker concurs that Telstra could consider a relatively radical capital management strategy which involves securitising, effectively pulling forward future NBN infrastructure receipts. Telstra could then use the proceeds to either support the dividend or make a large one-off capital return, in order to smooth the transition to a lower underlying dividend.

At present, Credit Suisse maintains its dividend forecast for FY17-19 but looks to revise the longer-term forecast upon receiving clarity on the outcome of the review. The broker retains a Underperform rating, believing the key operating risk relates to high levels of competitive intensity across all the company's product lines.

Macquarie notes a retraction of the Asian consumer growth strategy is consistent with increased investment in the domestic business. Telstra will continue to pursue international expansion through global enterprise services and network applications and continue to expand its Asia-Pacific submarine cable network. The broker suspects the capital review may unlock some value to shareholders, but is sceptical it will transform the underlying earnings challenge for Telstra.

Macquarie agrees a key component could involve options to realise value from the NBN payments stream, in particular the $1bn in annual receipts, and possible solutions may involve the sale of some of the revenues contracted under the infrastructure services agreement, securitisation, and/or an in-specie distribution.

Macquarie envisages Telstra will be able to sustain its dividend, albeit with little margin for error given the challenges of the NBN earnings gap. The $1bn targeted for cost reductions will be spread out across the entire group and the broker expects this to be particularly important, allowing Telstra to defend its profitability in the low-margin NBN business.

Macquarie acknowledges filling the NBN earnings gap will require good execution in the number of areas, including mobile and productivity/cost reductions as well as turning around the negative contribution from new business ventures. The broker still envisages Telstra will offset most of the NBN impact, although underlying earnings could still fall to around $9.5bn by FY22.

On the other hand, the AGM commentary has underscored Citi's view that the NBN earnings gap is too big and will require the company to pull back on its dividends as it earnings fall. Citi retains a Sell rating alongside a $4.50 target.

Goldman Sachs welcomes the greater clarity around the capital expenditure program and, in continuing to view this as a largely defensive investment, believes there is less scope to drive incremental market share gains compared with previous investment programs.

The broker also notes a significant cost component and an increased focus on generating returns from existing subscribers by up-selling to higher price points and cross-selling. Goldman Sachs, not one of the eight brokers monitored daily on the FNArena database, retains a Neutral rating and $5.50 target.

The database contains five Hold ratings and three Sell. The consensus target is $5.03, suggesting 2.0% upside to the last share price. Targets range from $4.50 (Citi) to $5.55 (Ord Minnett). The dividend yield on FY17 and FY18 consensus forecasts is 6.4% and 6.5% respectively.

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article 3 months old

Weekly Broker Wrap: Jobs, Retail, Real Estate Listings, NBN And Equity Strategy

Employment numbers; consumer spending; slot manufacturers; real estate listings slowing; momentum in NBN share; is it too early to ditch yield stocks?

-Lower housing turnover foreshadowing weaker spending growth, Credit Suisse believes
-Aristocrat seen increasing share in North America, Ainsworth subdued
-Soft listings likely to have adverse impact on REA and Domain
-Telstra enjoying solid gains in NBN share, Vocus accelerating
-Bond yields unlikely to rise much and Deutsche Bank still values yield stocks


By Eva Brocklehurst


Commonwealth Bank analysts have examined monthly changes in employment, which show that annual employment growth has been propped up by two very big increases in October and November 2015. According to the Australian Bureau of Statistics, employment lifted by 49,000 in October and 65,000 in November. These very large monthly changes were both two standard deviation events, the analysts note.

While concerns abated about the reliability of the data with the passage of time, the analysts are reminded that these are now about to drop out of the annual calculations. They expect the annual pace of employment growth to slow to just 0.7% in November from 1.4% in September.

Such an outcome is expected to mean analysts and policy makers focus a little more on the pace of jobs growth and what this is likely to signal for output, inflation and rates.

Retail Consumption

Credit Suisse suggests, from its observations, that retail spending has stalled heading into the end of year despite official data that points to growth in labour income and solid gains in house prices. The broker believes the official data overstates the strength of the labour and housing markets and stagnation in consumer spending is consistent with an alternative view.

The broker observes a drop-off in housing turnover, even abstracting what is happening in house prices. Lower turnover foreshadows weaker spending growth, even if house prices do not fall. Credit Suisse suggests the Reserve Bank of Australia should pay more attention to the state of consumer spending. This is because the consumer still accounts for around 60% of GDP.

The broker's leading indicators point to slower spending growth in the foreseeable future, in part because labour and housing market conditions are softer than the official data suggests but also because turnover in housing is dropping away. Hence, Credit Suisse believes the RBA will need to cut rates further.

Slot Manufacturers

From a survey of the North American slot machine market in the September quarter, UBS notes that Aristocrat Leisure ((ALL)) added 815 leased games. The survey indicated that Aristocrat achieved 27% ship share in the quarter. This was 11% above its trailing 12-month ship share.

Ainsworth Game Technology ((AGI)) achieved 2.3% ship share in the quarter, 3% below its 12-month trailing average, which compares with 7% in the prior quarter based on the survey. The survey is consistent with the broker's view that Aristocrat is increasing its share in North America and provides further confirmation for Ainsworth's update regarding its soft quarter in the US.

Real Estate Listings

New listings in the national property market declined 3% in October, a slowing from the flat levels observed in September. This indicates a weak start to the second quarter and Deutsche Bank expects a continuation of this soft listing environment will have a further adverse impact on both REA Group ((REA)) and Fairfax Media's ((FXJ)) Domain. The broker lowers forecasts and price targets for both stocks to take this into account.

New listings growth in the capital cities was slightly lower than the national numbers, with Sydney continuing to show the most significant decline, down 16%. Melbourne was down 4%. The broker acknowledges this may simply be a reflection of a low point in the volume cycle rather than because of any structural factors.

UBS also notes a post-election rebound in residential new listing volumes still has not eventuated. This means there is downside risk to this broker's estimates for REA. Relative weakness in Sydney and Melbourne may impact overall yields for REA, given the higher absolute prices of depth products in these markets.

NBN & Telcos

From its observation of ACCC data, UBS gauges Telstra ((TLS)) continues to enjoy solid gains, with its share in the September quarter helped by the acceleration of the FTTN roll out. Vocus Communications' ((VOC)) share of NBN market growth is accelerating and UBS believes this reflects a strong portion of industry additions. As the company's NBN subscriber base builds, reducing churn will become an increasingly important driver of share growth, in the broker's view.

Shaw & Partners notes Telstra is defending its market share aggressively, adding 61% of NBN subscribers in the September quarter versus its market share of around 47%. Vocus is also doing well, the broker observes, adding 11.3% of subscribers versus its market share of around 7%. TPG Telecom's ((TPM)) quarterly additions are below its natural market share, the broker notes, although it is doing well in metro areas.

Goldman Sachs agrees that Telstra is growing its overall NBN share, now considered to be over 50%, while Vocus is building momentum. The broker highlights the fact that the latter's overall share is continuing to increase despite the company not looking to actively migrate existing subscribers to the NBN.

The broker also notes a relatively soft subscriber performance from TPG Telecom, offset by improved plan mix. Goldman believes up-selling to high-speed plans is important for the company's profitability in an NBN world. That said, TPG's iiNet looks to have had a soft quarter, with TPG's share in Western Australia declining by around 115 basis points to 38%.

Equity Strategy

Deutsche Bank believes it is too early to ditch yield stocks even though these have come under pressure in the past three months, coinciding with the rise in bond yields. The broker is not convinced yield stocks will fall further and believes it is appropriate to include a selection of these in portfolios.

The broker's US strategist highlights the still-substantial gap between dividend yields and bond yields. A hike to the US Federal Reserve's funds rates in December is considered likely, but the broker does not believe this automatically means bond yields should move higher.

In 2004 bond yields barely moved when the US Fed was raising rates, weighed down by a glut in global savings. Now the broker observes there is a glut of central bank liquidity. Money is leaving Europe and going to the US, which can keep a lid on long rates.

The broker notes a divergence with Australia, as the US Fed seeks to hike rates while the RBA is likely to cut. Deutsche Bank also detects some recent softening in the Australian economy, slower growth across retail sales, hours worked and credit. The broker does not envisage bond yields rising much, removing a catalyst for more under performance.

Yield stocks may even trade a little rich, given their scarcity value in offering a decent real yield. The broker's portfolio has a selection of Stockland ((SGP)), Telstra, Sydney Airport ((SYD)) and APA Group ((APA)).

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