TOP STOCKS FOR NOVEMBER 2015

National Australia Bank Ltd

         NAB Dividend Details
 
Boosting capital position and focusing on core business: National Australia Bank Ltd (ASX: NAB) enhanced its Common Equity Tier 1 (CET1) ratio by 137 basis points to 10.2% as at 30 September 2015, against March 2015, boosted by rights issue proceeds.Moreover, Nippon Life Insurance might offer a deal in the range of 200 billion and 300 billion yen or US$2.5 billion, to buy 80% of National Australia Bank’s insurance operation, which would further boost NAB’s its capital position. The bank reported a decent FY15 performance with statutory net profit rising by 22.7% year on year (yoy) to $6.36 billion as well as improved its asset quality during the period, wherein its total charge for Bad and Doubtful Debts fell by 5% yoy to $823 million due to decrease in Australian Banking and UK Banking.
 

National Australia Bank performance (Source: Company Reports)
 
NAB is further investing over 300 million in NAB Wealth for the next four years and focusing on customer relationships. With the stock falling over 15.87% in the last six months (as of October 03, 2015), we view this as an attractive opportunity to enter the stock given its cheaper valuations with a P/E of 11.9x. NAB also has an outstanding dividend yield of over 6.58%. We reiterate our BUY recommendation on the stock at the current stock price of  $29.91
 
 
 

BHP Billiton Ltd

        BHP Dividend Details
 
Improving assets: BHP Billiton Limited (ASX: BHP) is enhancing its assets and further acquired 100% working interest in nine blocks in the Western Gulf of Mexico Lease while 17 are still subject to regulatory approval. The group is developing four major projects worth of US$7.0 billion in Petroleum, Copper and Potash as of September 2015 quarter. BHP is also strengthening its balance sheet and recently priced Eur 2.0 billion of subordinated fixed rate reset notes across two tranches, GBP600 million of subordinated fixed rate reset notes and USD 3.25 billion of subordinated fixed rate reset notes across two tranches, to cover its debts. The operational review for the September quarter revealed that BHP intends to maintain its production guidance across all businesses, while the petroleum capital expenditure of US$2.9 billion for FY16 is now 6% lower from the prior guidance of US$3.1 billion. BHP reported 7% surge in the total iron ore production for the September 2015 quarter to a record 61 Mt while petroleum and copper production was slightly hit. BHP is also pursuing potential oil plays in the Beagle sub-basin in Western Australia and the Western Gulf of Mexico, and has sought approval for the extension of operational permits for Cerro Colorado until 2023.
 

September quarter production highlights (Source: Company Reports)
 
Meanwhile, BHP stock fell over 23.81% in the last six months (as of November 03, 2015) partly due to commodity prices volatility and demerger of South32 related costs. However, the group has built solid asset portfolio and focusing to achieve cost efficiencies to offset commodity price pressure.  The group also has a solid dividend yield of 7.32%. We reiterate our BUY recommendation on the stock at the current price of  $23.47
 
 
 

Flight Centre Travel Group Ltd

         FLT Dividend Details
 
Long term potential: IATA has projected 4.1% compounding annual growth in passenger numbers globally through to 2034, offering solid addressable market to Flight Centre Travel Group Ltd (ASX: FLT). Accordingly, FLT is positioning itself to target the market successfully and has recently agreed to acquire 51% interest in AVMIN, a Brisbane based firm to enhance its leisure and travel portfolio. The group delivered a revenues increase of 6.8% yoy to $2.4 billion for the FY15, driven by major total transaction value improvement by 9.7% yoy to $17.6 billion.
 

Performance by Region (Source: Company Reports)
 
The group expects a decent underlying PBT growth of $380million and $395million for the fiscal year of 2016, which is a modest 4% to 8% yoy growth. FLT shares rallied over 4.64% (as of November 03, 2015) in the three months driven by better than estimated full year results. FLT is also trading at reasonable P/E of 14.68x and has a dividend yield of around 4.1%. We maintain BUY recommendation for the stock at the current price of  $37.69
 
 
 

Crown Resorts Ltd

             CWN Dividend Details
 
Improving performance: Crown Resorts Ltd (ASX: CWN) reported a 14% yoy increase in its Australian resorts revenues (normalized) during fiscal year of 2015 with VIP program play revenues surging by 41.8% on a yoy basis. However, the group’s bottom line (NPAT normalized) fell by 17.9% yoy with the ongoing negative impact from Melco Crown, which is expected. On the other hand, Macau remains a major gaming market and any favorable government measures to boost Macau economy would support overall Crown’s performance. Moreover, the group estimates some support from the Studio City launch as well. Crown also recently acquired a 20% investment holding in Nobu, which is a US-based hospitality and restaurant group.
 

NPAT Performance (Source: Company Reports)
 
Crown stock recovered over 10.26% in the last four weeks (as at November 03, 2015) and we believe this positive momentum to continue and accordingly give a BUY recommendation at the current price of  $11.90
 
 
 

SEEK Ltd

       SEK Dividend Details
 
Expanding penetration: SEEK Limited (ASX: SEK) reported a sales revenue growth of 20% on a year over year basis in fiscal year of 2015 as the group’s investments paid off despite tough market conditions. SEEK delivered EBITDA rise 15% from continuing operations, while total dividends rose by 20% yoy in FY15. SEEK has expanded its geographic penetration through acquisitions as well as by increasing its stake in its existing business (via One Africa Media, OCC Mundial and JobStreet).
 

SEEK Limited AU placements share (Source: Company Reports)
 
SEEK stock corrected over 24.23% during this year to date, but surged over 6.25% in the last four weeks alone (as of November 03, 2015). We remain bullish on the stock and give a BUY recommendation at the current price of  $13.53
 
 
 

XERO FPO NZ

XRO Details
 
Solid subscriber’s growth:XERO FPO NZ (ASX: XRO) touch app downloads surged 82% on a yoy basis to 470,000 and also generated a revenue growth of 77% to $123.9 million in FY15 as compared $70.1 million in FY14. The group’s overall subscriber base in Australia and New Zealand achieved 400,000 subscribers in September 2015, which is an increase of 44% against 277,000 subscribers in September 2014. Xero’s focus on the US is reflected in the regions outstanding customers’ growth of 300% during the second half of the year. Xero forecasts its subscription revenue to be more than NZ$200 million for 2016 fiscal year (according to June 2015 FX rates). Xero stock rallied over 15.72% in the last four weeks (as of November 03, 2015), and we reiterate “BUY” recommendation at the current price of  $16.57
 
 
 

Insurance Australia Group Ltd

          IAG Dividend Details
 
Focusing on core business:Insurance Australia Group Ltd (ASX: IAG) reported an Insurance profit decline to $1.1 billion in the fiscal year of 2015 against $1.6 billion in the fiscal year of 2014 as itsnet natural peril claims exceeded the allotted value. However, the group’s strategic relationship with Berkshire Hathaway is expected to protect its earnings volatility and capital requirements for the next ten years. IAG is also targeting to boost its Asia pacific markets including India via efforts such as rising its stake in State bank of India, and acquiring PT Asuransi Parolamas for insurance license in Indonesia. Moreover, the group recently clarified that it would not be making any further investments in China. IAG stock recovered over 12.17% in the last four weeks (as at November 03, 2015) as the group issued a positive outlook in next fiscal year and expects insurance margin to be in the range of 14% to 16%, including a 2% contribution from the Berkshire Hathaway agreement.We give a “BUY” recommendation at the current levels of  $5.59
 
 

Australia and New Zealand Banking Group Ltd

                   ANZ Dividend Details
 
Maintaining Momentum: Australia and New Zealand Banking Group’s (ASX: ANZ) statutory profit increased by 4% yoy to NZ$1.77 billion during fiscal year of 2015, driven by improving market share in lending and deposits as well as continuing improving productivity. The group’s Customer deposits improved by 11% on a yoy basis. On the other hand, the group’s Impairment for bad and doubtful debts surged by 20% yoy to $1.2 billion during the period while its NIM plunged to 2.04% against 2.13%. Therefore, ANZ stock fell over 6.09% in the last five days alone (as of November 03, 2015) and declined over 17.38% in the last three months, impacted by its weaker performance. However, we believe that this subdued performance was as expected given the challenging market conditions.
 

FY15 performance highlights (Source: Company Reports)
 
The group delivered a growth in lending by 8% during FY15 as it increased the home loans and business lending above the market. Moreover, ANZ is trading at attractive valuation with a cheaper P/E of 9.94x and has a strong dividend yield of 6.7%. We maintain our BUY recommendation at the current levels of  $26.87
 
 

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