Chart Update, page-843

Sabine

The reason why in recent days I have posted more frequently than usual is that being afflicted by a seasonal lurgy, I have spent much of my idle hours contemplating my share portfolio.

In the witching hours of this morning, I decided to look at NWH's financial report for H1FY19 to see what should be excluded to normalise the numbers to make them useful for portending the future. It transpired that my earlier decision to select 16c EPS for FY19 has not changed, other than that I now have a higher level of confidence in it.

NRW reported revenue (including revenue generated by associates) of $521.107m, and a statutory revenue of $494.041m. The $27.066m difference is a reversal of revenue allocated to those associates. Consequently, we should use the Statutory Revenue, and the NPAT derived from that was $28.202m, or 5.7% of Statutory Revenue.

A footnote tells us that the amortisation expense excluded Golding amortisation of acquisition intangibles. Consequently, we do not have to adjust (normalise) NPAT for that.

Depreciation expense was $23.604m, but value received from disposals was $7.136m. The percentage of $23.604m less $7.136m to Statutory Revenue is (23.604-7.136)/494.041 = 3.33%, so it is a significant percentage relative to the NPAT/Revenue 5.7% mentioned earlier. I decided to stick with that 5.7% for FY19, and as I have not yet got around to revisiting FY20 and FY21, I have delayed pondering what that NPAT margin should be in future. I do not expect it to decline for a few years.

So what NPAT can we expect for FY19? $1.100m x 5.7% = $62.7m. $1.100m is the still-current Management guidance, but NWH could surprise to the upside in terms of the net effect of revenue x NPAT margin, so we could, for the want of a number, have an NPAT of $68.4m – that is, $1.200m x 5.7%. If you divide these to guesstimate NPATs by 400m shares, you will get an estimated EPS of 15.675 cents and 17.1 cents respectively, so an estimate of 16c is as good as any.