In today’s daily we have covered stock research on Suncorp (Expensive).

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S&P 500 was down 2.31 points or 0.12%on Thursday and closed at 1957.53.  U.S. stocks ended slightly lower on Thursday after the president of the Federal Reserve Bank of St. Louis said interest-rate increases should come sooner rather than later. Consumer spending, which accounts for about 70 percent of the economy, climbed 0.2 percent in May after being little changed in April, Commerce Department figures showed. 

Some of the stocks that gained were Alcoa as the largest US aluminum maker agreed to buy UK aerospace components manufacturer Firth Rixson. Iron Mountain increased nearly 20% after its board approved the conversion of the company into a real estate investment trust. Tokyo’s Nikkei 225 increased 0.3% and Seoul’s Kospi index increased 0.7%. Gold fell 0.3% to $1315 an ounce.


S&P 500 Daily Chart (Source – Thomson Reuters)
 
S&P ASX 200was up by 62.3points or 1.15%on Thursday and closed at 5464.3 points.Iron Ore holdings (IOH) has announced that port lease agreements have been executed with Dampier Port Authority for the development of the port at Cape Preston East. Medical Developments International (MVP) has received approval from the Medicines Control Council in South Africa to market and sell its inhaled analgesic product “Penthrox” for pain relief from trauma and surgical procedures.

Transurban (TCL) has announced that it has reached the financial close on the acquisition of  Cross City Tunnel assets and motorway concession. Air New Zealand carried 990,000 passengers during the month of May, 3.1% more than the same period last year. Iluka  (ILU) resources has confirmed that it has made an approach to Kenmare Resources of U.K for a possible combination of both the companies.



ASX 200 Daily Chart (Source – Thomson Reuters)




The top gainers on ASX 200 were:-



Stock of the Day – Suncorp Group (SUN)
 
With the group growth target now at 4-6% ( largely skewed toward gross written premiums growth in General Insurance and lending growth in banking), the valued add to the bottom line in the next few years will be driven by margin management and efficiencies. This is no different to the major banks where utility type models are still able to generate better returns through economies of scale.


SUN Dividend (Source – Company Reports)

SUN has brought together 850 data analysts, modellers and IT specialists in its newly formed shared services function, Suncorp Business Services (SBS). The formation of this unit and SUN’s Business Intelligence Program is integral to the delivery of SUN’s projected A$265m in simplification benefits by FY16. Thereafter it is hoped that further business intelligence efficiencies along with supply chain savings can deliver further as yet quantified cost benefits.


SUN Product Split (Source – Company Reports)

Suncorp Life aims to build a rate of return on new products above the cost of capital in the next 12 months. This should reduce the product payback period from nine to six years. Key to this is driving down acquisition costs, with the focus on growth via the low cost direct channel. Independent Financial Advisers (IFA) growth is largely expected to be flat. At the moment direct distribution is relatively equally split between online , inbound calls and proactive lead chasing.


SUN NPAT (Source – Company Reports)

SUN represents exceptional value in terms of a quality core bank with rising core market shares and underlying general insurance margin of at least 12% from process/efficiency gains that should lift core group return on equity above 10%. SUN has enhanced its reputation since the floods in terms of processing claims and has robust capital position with further capital initiatives possible. We believe the stock is expensive at its current price and would review the stock at a later date.
 

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