Stocks’ Details

Magellan Financial Group Limited

MFG’s Employee Share Purchase Plan: Magellan Financial Group Limited (ASX: MFG) manages funds with the objective of offering international investment funds to high net worth and retail investors in Australia and New Zealand, and institutional investors globally. The market capitalisation of the company stood at A$9.32 billion as on 20^th September 2019. The company has issued 87,167 fully paid ordinary shares at a price of $51.06 per share for shares issued under MFG’s employee share purchase plan. The issue price was calculated as the weighted average sale price of MFG’s shares for the 5 trading days over the period from 30^th August 2019 to 5^th September 2019.

Net Inflows of Funds: In the month of August, there was a net inflow of $315 million of funds, which included net institutional inflows of $153 million and net retail inflows of $162 million. The following picture provides an overview of total FUM of the company:

 Funds Under Management Update (Source: Company Reports)

Dividends: MFG had a positive financial year, and the average FUM increased by 28% to $75.8 billion and adjusted NPAT increased by 35% to $364.2 million.For six months ended 30 June 2019, the Board of Directors declared a total dividend of 111.4 cents per share, franked at 75%. The dividend payment comprises of a final dividend of 78 cents per share and a performance fee dividend of 33.4 cents per share.
Successful Completion of Institutional Placement: MFG has successfully completed its fully underwritten $275 million institutional placement. About 4.98 million new Magellan ordinary shares will be issued to institutional investors at the price of $55.20 per new share.It represents a discount of 6.0% to the dividend adjusted last traded share price of $58.72 on 12^th August 2019 and a discount of 4.5% to the dividend adjusted five-day VWAP of $57.78 on 12^th August 2019.

Stock Recommendation:On the stock performance front, it produced returns of 0.87% and 44.43% in the past three months and six months, respectively. The stock is trading slightly towards its 52-week high of A$62.600 per share with PE multiple of 24.64x and an annual dividend yield of 3.53%. Therefore, considering the above-stated facts and current trading levels, we give an “Expensive” recommendation on the stock at the current market price of A$52.500 per share (up 2.619% on September 20, 2019) and suggest investors to wait for better entry levels.
 

Westpac Banking Corporation

Company’s CFO to Retire In 2020: Westpac Banking Corporation (ASX: WBC) is one of the leading banks in Australia and it provides broad range of banking, financial and related services. The market capitalisation of the bank stood at A$103.2 billion as on 20^th September 2019. Westpac Group CEO, Mr Brian Hartzer, announced that Peter King, CFO, has decided to retire in 2020 after a career of 25 years. Mr King has been the CFO of the company since 2014 and prior to this, his current role was Deputy CFO.

ASIC To Appeal Westpac Responsible Lending Federal Court Decision: ASIC has filed an appeal with the Full Federal Court of Australia against the decision of the Honourable Justice Perram regarding ASIC’s allegation against Westpac for contraventions of responsible lending provisions of the National Consumer Credit Protection Act 2009.

WBC confirmed that it had received a class action filed against its subsidiary companies, BT Funds Management Limited (BTFM) and Westpac Life Insurance Services Limited (WLIS) in relation to aspects of BTFM’s BT Super for Life cash investment option. The claim has been filed by Slater and Gordon on behalf of Ms Tracy Ghee.

Financial Highlights: WBC reported results for 1H19 in which its Statutory net profit was down by 24% to $3,173 million. Despite the challenging period, the balance sheet remained strong across all dimensions of asset quality, capital and liquidity. While the cash earnings were lower, CET1 capital ratio of 10.64% has enabled the group to maintain its interim dividend at 94 cents per share. It equates payout ratio of 98%.


 CET1 Ratio (Source: Company Reports)


Dividends per share (Source: Company Reports)

Stock Recommendation: The bank produced returns of 4.38% and 11.92% in the time period of three months and six months, respectively. Currently, the stock is trading close to its 52-week high level of $29.970 with P/E multiple of 14.350x and an annual dividend yield of 6.34%. Hence, in view of aforesaid facts and current trading levels, we maintain our “Hold” rating on the stock at the current market price of A$29.660 per share (up 0.304% on 20^th September 2019).

 
Comparative Price Chart (Source: Thomson Reuters)

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