Market volatility continued last week with the ASX riding a roller coaster as coronavirus fears spread. The S&P/ASX 200 Index (ASX: XJO) plunged to below 5,000 points on Friday before staging a dramatic recovery to finish the day up 4.4%. Travel shares were punished as governments worldwide introduced further travel bans, but many investors took advantage of the dip to buy up quality ASX shares.
Here we take a look at the ASX 200 shares that fell the most last week.
oOh!Media Ltd (ASX: OML)
Ooh!Media shares fell 35.1% last week to finish the week at $1.55 as concerns about the impact of coronavirus on advertising spend took hold. oOh!media operates a network of more than 37,000 billboards in public locations including airports, train stations, bus stops, retail centres, and universities.
With public movement slowing due to the spread of coronavirus, oOh!media’s assets stand to lose out on views. Outdoor advertising is likely to suffer as lower foot traffic means lower audience levels. Additionally, clients may slow advertising spend as the economic impacts of the virus take hold.
oOh!media released its full-year FY19 results in February which revealed a 32% slide in net profit after tax (NPAT), which fell to $27.2 million. Declining business and consumer confidence resulted in a decrease in overall advertising spend, leading to the company downgrading earnings guidance in August to earnings before interest, tax, depreciation and amortisation (EBITDA) of $125 – $135 million, down from $152 – $162 million. In the end, oOh!media reported underlying EBITDA of $139 million.
Revenue increased marginally, up 1% to $649.6 million, in line with the broader market. An adverse revenue mix change impacted profits, however, with a lower contribution from the higher-margin Road segment.
oOh!media has relatively high debt levels, with $355 million in debt as at 31 December, 2.6 times underlying EBITDA. While within its banking covenants, the company has said it wants to reduce leverage to 2.0 by the end of 2020. The question is whether this will be possible given the current clouds over its earnings outlook.
Gold Road Resources Ltd (ASX: GOR)
Gold Road Resources shares dropped 34.9% last week to end the week at 94 cents. Shares in the ASX miner fell throughout the week, but prior to that had climbed 62% since December to a high of $1.77 in late February.
Australia’s newest gold miner released an investor presentation in February which declared it would be ramping up to full production in early 2020. All-in sustaining costs (AISC) of production are expected to be at the lower end of the industry in 2020 at around $1,100 – $1,200 per ounce.
Gold Road Resource’s Gruyere gold mine has 3.72 million ounces of ore reserve and is expected to produce 300,000 ounces in average annual gold production over an 11-year mine life. The first gold was produced from Gruyere last June with commercial production achieved in September.
In 2019, the mine produced 99,130 ounces, at the upper end of guidance of 75,000 – 100,000 ounces. AISC of $1,102 per ounce also met guidance of $1,050 – $1,150 per ounce. Gold Road Resources sold 49,565 ounces in 2019 at an average price of $2,038 an ounce.
The Gruyere mine is expected to produce 250,000 – 285,000 ounces in 2020, proceeds of which will be used to pay down the miner’s debt. Gold Road Resources had $42.4 million in debt as at 31 December 2019, which it expects to fully payback in 2020.
Credit Corp Group Limited (ASX: CCP)
Credit Corp Group shares fell by 31.9% last week to finish the week at $18.80. One of the largest debt collection companies in the market, Credit Corp was trading at a higher price to earnings ratio than its peers prior to last week’s fall in the share price.
There was no news out of Credit Corp last week, however, it is safe to say the market has soured on its future prospects. If a recession hits, which certain economists think is likely, Credit Corp may have a harder time collecting on the debt it has bought. The company also operates in the consumer lending space, and prospective customers may be less inclined to borrow where the economic outlook is uncertain.
In the first half, Credit Corp delivered a 20% increase in revenue which reached $190.9 million. NPAT of $38.6 million was reported, up 15%, and a dividend of 36 cents per share was paid, steady on 1HFY19.
Credit Corp purchased debt collection and debt purchasing operator Baycorp in August for $65 million. The Group reports that the acquisition is on track with integration ahead of schedule. The acquisition contributed to an 18% increase in total collections during the first half, with the face value of Australian and New Zealand payment arrangements at a record level of $1.4 billion.
The consumer loan book grew by 13% to $230 million during 1HFY20. Total settlements were 14% higher than the prior corresponding period with new customer settlements 8% higher. Credit Corp Group reported that it was on track to deliver up to 18% growth in NPAT in FY20.
Qantas Airways Limited (ASX: QAN)
Qantas shares dived 31.8% last week to close at $3.18. A victim of the sharp decrease in travel due to coronavirus, the airline has had a horror week with a staff underpayment scandal emerging.
Qantas has entered into a court-enforceable undertaking with the Fair Work Ombudsman after it incorrectly paid staff between June 2011 and June 2019. The airline has already paid more than $7 million back to employees in corporate and administrative functions who were impacted.
The airline also announced further cuts to its international flights, reducing capacity by almost a quarter over the next six months. The spread of coronavirus into Europe and North America has resulted in a significant drop in forward travel demand, with Qantas reacting by reducing capacity until mid-September.
In order to maintain connectivity, the airline plans to use smaller aircraft and reduce the frequency of flights rather than exiting routes altogether. Only two of Qantas’ largest aircraft, the A380, are flying, with eight grounded and a further two undergoing scheduled maintenance.
Qantas was unable to provide guidance on full-year performance due to the uncertainty around the developing coronavirus situation. In order to maintain its financial position, however, it has cancelled the $150 million off-market share buyback announced in February.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has recommended oOh!Media Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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