Brief Equities Bottom-Up: XL Axiata Results Show a Strong Turnaround Underway in Indonesia and more

In this briefing:

1. XL Axiata Results Show a Strong Turnaround Underway in Indonesia
2. Fortis Healthcare: OK Results and a Cost-Cutter CEO
3. New J. Hutton Exploration Report (Week Ending 15/02/19)
4. Sell Bombardier: Core EBIT Fell, Core Cashflow Is Negative, Covenants Maybe Under Stress

1. XL Axiata Results Show a Strong Turnaround Underway in Indonesia

Xl Axiata’s  (EXCL IJ) 4Q18 results triggered a very strong rally last week that continues this week. The market has been very concerned about competitive pressures in Indonesia and extremely low data prices. We believe that Indonesia is now past the worst and there is evidence that data pricing is starting to rise modestly. That is delivering a powerful tail wind for Indonesian telcos in 2019, with XL Axiata likely to report several very strong quarters.

XL Axiata now reporting strong sequential revenue growth (% QoQ)

2. Fortis Healthcare: OK Results and a Cost-Cutter CEO

Fortis Healthcare (FORH IN) ‘s hospital business continued to improve in FQ3 while the lab business remained stable. This Insight briefly focuses on the highlights of the results and their implications. The hiring of a CEO out of Narayana Hrudayalaya (NARH IN) signals continued (and likely intensified) focus on efficiency to improve profitability. 

We continue to think that Fortis is a promising turnaround story. Refer to the Insight Stream for the history of this situation.

3. New J. Hutton Exploration Report (Week Ending 15/02/19)

• Gold Road Resources (GOR AU) continued strong BUY
• Mineral Resource increased 2% to 6.61Moz
• 2019 attributable production guided at 50–60koz Au
• AISC est. between A$1,050 to $1,150/oz, is realistic
•  Using $1,300/oz attributable 2019 EBIT will be between US$7.5-15m
• 2020 attributable EBIT of 150k/oz conservative $A54m
• Price/EBIT ratio now 10.9 to 16.8 (previous est. 8 to 9.1)
• Expand AIM & ASX coverage to 397 companies from next week
• Gold Road Resources (GOR AU), Azumah Resources (AZM AU), Millennium Minerals (MOY AU), Metals X Ltd (MLX AU), De Grey Mining (DEG AU) , Resolute Mining (RSG AU), Andromeda Metals (ADN AU)  

4. Sell Bombardier: Core EBIT Fell, Core Cashflow Is Negative, Covenants Maybe Under Stress

Core EBIT fell: FY2018 EBIT and cashflow were inflated by one-off gains.

Core cashflow remains negative: Bombardier Inc (BBD/B CN) is still unable to fund its annual US$1bn+ capex budget from core operating cashflow.

Covenants maybe under stress: We are very concerned that the consolidated capital structure presented to investors is very different to the structures used in their debt covenants.