Should you buy these six stocks priced below $40?

Caltex Australia Ltd

CTX Details
Buyback program could offer some support: Caltex Australia Ltd (ASX: CTX) reported a 12.3% fall in revenues to $8.5 billion while the net profit fell 15% to $318 million for the first half of 2016. But, investor’s need to note that the group reported its profit in the range of $310 - $330 million as guided by the management earlier. The profit was impacted due to fall in refining margins, which dropped down 37% to US$10.10/bbl. On the other hand, during the last six months, the company has completed $270 million off market buy back. The company has planned capex of $370 - $400 million for fiscal year of 2016, and declared an interim dividend of 50 cents per share and guided for payout ratio of 40-60%. There are speculations that the company has interest in Woolworths’ $1.6 billion-plus petrol station portfolio.


 Refiner margin (January -August) update (Source: Company Reports)

Even though realized CRM fell to USD 9.84/bbl as of August 2016, against USD 16.73/bbl in the prior corresponding period (pcp), the group is making efforts to offset this pressure by enhancing their production to 4,084 ML during the period from 3,353 Ml in pcp. We believe the stock is a “Hold” at the current market price of $35.02


CTX Daily Chart (Source: Thomson Reuters)

National Australia Bank Ltd

NAB Details
Partnership and alliance update:National Australia Bank Ltd (ASX: NAB) has completed the sale of 80% of Life Insurance business to Nippon Life Insurance Company for $2.4 billion and will retain 20% ownership. NAB also has partnered with Nippon Life for a 20-year distribution agreement to provide life insurance products through its distribution networks. The bank has paid an interim dividend of 99 cents per share, and currently has a lucrative dividend yield. In September 2016, the company has issued $150,000,000 fixed rate subordinated medium term notes due 2026 and $650,000,000 floating rate subordinated medium term notes due 2026. Meanwhile, NAB, Canadian Imperial Bank of Commerce and Bank Leumi Le-Israel Ltd formed an alliance to develop technologies to enable a faster and cheaper digital banking. NAB stock started recovering over 11.55% in the last three months (as of October 03, 2016) and we rate the stock as a “Buy” at the current market price of $28.13


NAB Daily Chart (Source: Thomson Reuters)

Westpac Banking Corp

WBC Details
Controlling costs:Westpac Banking Corp (ASX: WBC) has paid a dividend of 94 cents reflecting a good dividend yield. Furthermore, WBC has been speculated to have invested over $16.5 million in rising fintech company uno in a bid to win a portion of the estimated $2 billion in fees that bank pays annually to mortgage brokers. Westpac is planning to close 19 rural branches around New Zealand to cut costs and ramp up technology and automated services, to focus on online banking. On the other hand, WBC stock has been under pressure by falling over 10.8% this year to date (as of October 03, 2016) due to rising bad debts coupled with investors concerns over the dividends. We believe the pressure in the stock would continue in the coming months and give an “Expensive” recommendation at the current market value of $30


WBC Daily Chart (Source: Thomson Reuters)

Magellan Financial Group Ltd

MFG Details
Better than estimated funds under management: Magellan Financial Group Ltd (ASX: MFG) reported a rise in funds under management (FUM) to $42,459 million in August 2016 from $41,481 million in July 2016. MFG invested heavily in in-house institutional business development and retail distributional teams as compared with its peer companies.

 
Funds under Management (Source: Company Reports)

For FY16, revenues increased from $284.9 million to $333.8 million in the prior corresponding period (pcp) while net profit was at $198.4 million from $174.3 million in pcp. The company declared dividend of 38 cents continuing its dividend policy of 75%-80% payout. We rate the stock as a “Buy” at the current market price of $22.07


MFG Daily Chart (Source: Thomson Reuters)

Xero Ltd

XRO Details
Rise in subscription revenues: Xero Ltd (ASX: XRO) reported over and above its targeted subscription revenues for FY16 at $258 million (as compared to the target of $250 million). The company reported a 51% rise in subscriber base while ARPU increased by 7%. Xero’s operating and investing cash outflow was at $88.6 million. The rise in subscription base and increase in price in Australia, New Zealand and United Kingdom enabled company to achieve the revenue target. XRO’s EBITDA margin improved by 17 basis points in the last twelve months. We recommend the stock a “BUY” at the current market price of $18.64

XRODaily Chart (Source: Thomson Reuters)

Woodside Petroleum Ltd

WPL Details
Strategic agreement with BHP Billiton: Woodside Petroleum Ltd (ASX: WPL) entered into an agreement to acquire half of BHP Billiton’s Scarborough area assets in the Carnarvon Basin, located at offshore Western Australia. The acquisition has been said to include a 25% interest in WA-1-R and a 50% interest in WA-62-R (together contain the Scarborough gas field), and a 50% interest in WA-61-R and WA-63-R (containing the Jupiter and Thebe gas fields). Accordingly, Woodside would pay BHP Billiton an amount of US$250 million on completion of the transactions and a contingent payment of US$150 million upon a positive final investment decision to develop the Scarborough field. 


Material Resource Base (Source: Company Reports)

Woodside reported a net profit of US$340 million for H1FY16, underpinned by production of 45.9 mmboe for H1FY16, which is 9% higher than H1FY15. Operating revenue for the period was US$1.9billion. Portfolio realized average LNG prices of US$7.66/ MMBTU. We recommend a “BUY” on the stock at the current market price of $29.06
 

WPL Daily Chart (Source: Thomson Reuters)
 

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