Genworth Mortgage Insurance Australia Limited

 

GMA Details
 
FY19 NPAT Increased by 58.7% on y-o-y Basis:Genworth Mortgage Insurance Australia Limited (ASX: GMA) is a leading provider of Lenders Mortgage Insurance (LMI) across the Australian residential mortgage lending market.  
 
FY19 Operational Highlights for the Period ended 31 December 2019: GMA came up with its full-year results, wherein the company reported gross earned premium of $368.4 million, up 3.4% on y-o-y basis on account of seasoning of recent book years as well as the effect of policy termination initiatives during FY19. Net profit after tax, during FY19, stood at $120.1 million, as compared to $75.7 million in FY18. The business witnessed a 6.5% lower outward reinsurance expense of $70.2 million from FY18, majorly led by Genworth’s Bermudian entity transaction in 1H18, and lowered reinsurance coverage on the traditional LMI business. Net claims incurred stood at $150.9 million, up 3.4% on y-o-y basis, due to surge in reserving of $20.9 million. GMA announced a fully franked final ordinary dividend of 7.5 cents per share.
 
 

FY19 Income Statement Highlights (Source: Company Reports)
 
Guidance:As per FY20 guidance, the business expects net earned premium to grow within the range of -5% to +5% from FY19. Full-year loss ratio is expected within the range of 45% to 55% while ordinary dividend payout ratio is expected within 50% to 80% of Underlying NPAT.
 
Stock Recommendation:The stock of GMA is trading at $3.745 with a market capitalization of $1.61 billion. The stock made a 52-week low and high of $1.947 to $4.125, and currently, the stock is trading at the upper band of its 52-week trading range. The stock has delivered exuberant returns of ~35.72% and ~97.24% in the last six months and one year, respectively. The stock is trading at a price to book value (P/BV) of 1.0x on trailing twelve months basis as compared to the industry (Insurance) average 2.0x. FY19 financial metrics reflected the core strength of the business, performed as per the guidance provided by the company. The business expects a recovery in consumer confidence in the housing market across all major capital cities. Considering the aforesaid facts and recent price movements, we give a "Hold" recommendation on the stock at the current market price of $3.800, down 2.813% as on 05 February 2020.

 
GMA Daily Technical Chart (Source: Thomson Reuters)  
 

Mirvac Group

 

MGR Details
 
Higher Pre-Sales at $1.3 Billion: Mirvac Group (ASX: MGR) operates as an investment management company and invests in the real estate segment. On 04 February 2020, the company announced the permanent appointment of Michelle Favelle as Group Company Secretary.
 
Q1FY20 Operational Highlights for the Period ended 30 September 2019: MGR declared its quarterly highlights, wherein the company posted retail sales of $3,467 million, representing comparable moving annual turnover sales growth of 2.6% and comparable specialty sales growth of 2%. The company reported occupancy rate at 99.1% while executed 99 leasing deals across ~14,000 square metres, with leasing spreads remaining positive. During the quarter, the company entered a contract to acquire an 18-hectare site at Milperra, NSW which provides a prospect to develop ~350 homes. During the period, the business launched its affordability experiment in Perth, WA, which will see a family live in an energy-efficient terrace home for 12 months.The business reported a high level of residential pre-sales of $1.3 billion during the quarter. Thebusinessachieved comparable specialty sales efficiency of more than $10,000 per square metre at an occupancy cost of 15.6%.
 

Q1FY20 Sales Highlights (Source: Company Reports)
 
 
Valuation Methodology: Price to Book based Valuation
 

Price to Book Value based Valuation(Source: Thomson Reuters)
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation:The stock of MGR is quoting at $3.44 with a market capitalization of $13.81 billion. The stock made a 52-week low and high of $2.39 to $3.525 and currently, the stock is trading at the upper band of its 52-week trading range. The stock has delivered positive returns of ~9.35% and ~6.36% in the last three months and six months, respectively. The business is constantly enhancing the experiences of its retail customers which tailored to the unique communities of each of the urban centres. The business indicates a clear sign of improvement in the Sydney and Melbourne cities along with established housing markets with lifts in loan approvals constant with the upsurge in auction market activity. Considering the aforesaid facts, we have valued the stock using a price to book based relative valuation method. For the purpose, we have taken peers like Goodman Group (ASX: GMG), Scentre Group (ASX: SCG), Dexus (ASX: DXS), etc., and arrived at a target price which is offering a single-digit downside (in % terms). Hence, we give an ‘Expensive’ rating on the stock at the current market price of $3.44, down 1.994% as on 05 February 2020. 

 
MGR Daily Technical Chart (Source: Thomson Reuters) 

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