Stocks’ Details
 

a2 Milk Company Ltd (Australia)

Facing few headwinds: The shares of a2 Milk Company Ltd (ASX:A2M)surged about 128% in the last six months (as of November 03, 2017) driven by thepast performance momentum and recent CFDA registration sought on the infant formula. Primarily, Synlait obtainedthe registration which would enable continuation of exports of the group’s China label infant formula in China. This registration capped the concerns relating to the group’s business in China; and post this approval, the group has been positive about the ongoing expansion in China. On the other hand, the heavy rally of the stock in the past months has placed it at higher levels. A2M stock however, is lately seen slipping over 6% in last five days, as at November 03, 2017; and this seems to be owing to profit booking while few shareholders have reduced their stake. The group is also witnessing some competitive threat given the improving performance by peers. Further, few risks appear to hover around margin compression owing to increasing milk input costs and product mix movements. Looking at the trading scenario, the stock seems to be overvalued at the current price of $7.15
 

Macquarie Group Ltd

Concerns over capital markets and assets under management performance: Macquarie Group Ltd.’s(ASX:MQG) stock touched close to $100 with the uptick in its first half of 2018 result entailing a net profit rise of 19% year on year (yoy) to $A1,248 million while net operating income rose 3% yoy to $A5,397 million. Their Annuity-style businesses’ combined net profit contribution enhanced 28% yoy for the first half of 2018 while International income represented 62% of the overall income. The group has a capital surplus of $A4.2 billion while the Bank’s CET1 ratio improved to 11.0%. Their earnings per share (EPS) surged 19% yoy to $A3.70 during the period. MQG enhanced their Annualized return on equity (ROE) to 16.7%, against 14.6% in prior corresponding period. Management approved on-market buyback of up to $A1 billion, subject to market conditions. They declared an interim ordinary dividend of $A2.05 per share (45% franked), against interim ordinary dividend of $A1.90 (45% franked) in the first half of 2017. But the dividend is a decrease from $A2.80 (45% franked) in the second half of 2017. Moreover, the group’s capital markets facing businesses’ combined net profit contribution fell 18% yoy and by 25% against 2H17. Assets under management (AUM) as of 30 September 2017 fell 2% to $A473.6 billion, as compared to $A481.7 billion as at 31 March 2017, impacted by net asset realizations in Macquarie Infrastructure and Real Assets (MIRA) coupled with unfavorable currency movements in Macquarie Investment Management (MIM). For second half of 2018, the group expects a weak performance against first half of 2018 as substantial performance fees were already recognised in first half. We believe investors can leverage the recent rise seen in the last few months, given the stock being in an overvalued zone at the current price of $99.40
 

Assets under Management Performance (Source: Company Reports)

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