Washington H Soul Pattinson & Company Ltd (ASX: SOL)

SOL Details

Addition to S&P/ASX 200 Index: As per the latest S&P Dow Jones Indices’ announcement, Washington H Soul Pattinson has been added to S&P/ASX 200 Index, effective at the open of trading on September 18, 2017. This led to a share price surge of 1.7% on September 01, 2017. In July 2017, Brickworks (ASX: BKW) welcomed the Federal Court of Australia’s rejection of Perpetual’s claim that Brickworks has engaged in oppressive conduct, including by reason the existence of its cross-shareholding structure with Soul Pattinson. SOL announced that the Federal Court of Australia dismissed the challenge by RBC Investor Services Australia Nominees Pty Limited as nominee for RBC Investor Services Trust in its capacity as custodian for Perpetual Investment Management Limited (Perpetual) against the company. The favourable judgment to WHSP follows a public agitation campaign by Perpetual involving multiple flawed proposals, over several years. During this period, Perpetual made a significant profit on its investment in WHSP by selling down its position from over 12% to less than a substantial holding. SOL stock has moved up 15.8% on year-to-date basis while it is up 8% in the last six months (as at August 31, 2017) and currently trading at high levels. We give an "Expensive" recommendation at the current price of $ 18.00


SOL Daily chart; (Source: Thomson Reuters)

Ingenia Communities Group (ASX: INA)

INA Details

Reported EBIT above guidance: For the year ending 30 June 2017, Ingenia Communities Group (ASX: INA) reported an underlying profit of $23.5 million, an increase of 16.3% on the previous financial year. Statutory profit grew 8.6% year on year (yoy) to $26.4 million, impacted by the $7.6 million loss recorded on the sale of the majority of the group’s Deferred Management Fund retirement assets in October 2016. Group revenue is up 40.0% to $149.9 million, and operating cash flow of $30.3 million is up 44.3% on FY16, reflecting strong growth in rental cash flows and additional new home settlements. Both EBIT and new home settlements were above guidance with EBIT of $32.1 million (compared to $30 million forecast) and new home settlements of 211 (versus a target of 190). Moreover, these results were driven by the strong contribution from an expanded asset base and the benefit of growing sales volumes.

Further, the company is witnessing the benefit of past four-years’ investments in a large, high quality portfolio of lifestyle communities located primarily in keenly sought after metropolitan and coastal locations. Future growth has been secured through a valuable capital city and coastal land bank. This development pipeline is underpinned through substantial cash flows from large rental portfolio, which comprises over 4,000 homes and more than 2,000 holiday sites.


EBIT and Income Generating Sites (Source: Company Reports)
 
The company reported a record sale in FY17 supported by major projects in attractive locations and an expanded in-house sales and development team. A further increase is expected with 260 – 280 settlements targeted in FY18 and 350+ in FY19. The expected increase in sales and addition of new assets and rental contracts may underpin EBIT guidance in the range of $42-46 million for FY18. Risks relating to regulatory requirement for retirement villages do prevail; however, INA expects to have a limited impact on lifestyle communities as such. Given the reasonable growth in challenging business scenario with improving momentum, we give a “Speculative Buy” recommendation on the stock at the current market price of $ 2.55


INA Daily chart; (Source: Thomson Reuters)

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