2 dividend-payers that slipped on ASX – Suncorp Group and Automotive Holdings Group

Suncorp Group Ltd (ASX: SUN)

SUN Details

Update on new programs: Suncorp Group Ltd edged slightly lower on ASX on September 21, 2017 as the group provided an address from its CEO along with a market update. The group’s FY17 NPAT of $1,075 million represented a 3.6% increase over 2016; and the good top line growth, disciplined management of margin, and a sensible balance between reducing overheads and investing in the future led a healthy foundation for time ahead. SUN’s Insurance business also achieved an underlying result well ahead of the prior year 2016. The group has been able to mitigate the impact of major events like Cyclone Debbie, to a great extent in FY17 with the help of reinsurance programs; and has extended those arrangements into FY18. The generous dividend payments and ability to come-up with better products among peers can help Suncorp flourish further. Given this, the group has shed light on its two significant programs of work that include Business Improvement Program (aiming to digitise the customer experience, optimise sales and service, end-to-end process improvement, claims redesign and smarter procurement) to deliver net benefits of $10 million, $195 million and $329 million over the next three years, and acceleration of the Marketplace to deliver benefits faster. The group has also signalled to increase the dividend payout ratio for the period in view of the additional one-off investment associated with the programs. SUN will revert back to the 60-80% target range in FY19. We give a “Hold” recommendation at the current price of $ 12.59 

Suncorp’s Marketplace Acceleration (Source: Company Reports)

Automotive Holdings Group Ltd (ASX: AHG)

AHG Details

Trading ex-dividend: Automotive Holdings Group Ltd.’s stock plunged 1% on September 21, 2017 as the group traded ex-dividend. Last month, the group announced its annual results for the twelve months ending 30 June 2017 with revenue growth of 8% to $6,080 million. On the other hand, net profit after tax (NPAT) dropped 38% to $55 million at the back of one?off costs associated with the Refrigerated Logistics transformation program, restructuring of the company’s operations, and cost down initiatives as highlighted in the May trading update. The group has still been consistent with its dividend policy of paying 65% to 75% of operating profit. Despite the shortcomings in automotive segment, the group expects a modest improvement in operating performance in 2018 and is putting efforts on cost reduction. The group expects to benefit from continued strong performance of dealerships in New Zealand, roll-out of easyauto123 fixed price used car warehouse model and ongoing improvement in Refrigerated Logistics. With above things in place, the group is expected to overcome the impact of regulatory changes to FY2018 insurance income in the Automotive division. We give a “Buy” recommendation on the stock at the current price of $ 3.43

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