Australia and New Zealand Banking Group Limited
Australia and New Zealand Banking Group Limited (ASX: ANZ) with a market cap of $75.66bn is working towards the repositioning of the bank that will cater to fewer areas and bring efficient results from them. ANZ is in the process to establish itself as the bestbank in Australia and New Zealand for home owners and small businesses and is building its presence as the best bank in the world for clients driven by trade and capital flows across Australia, New Zealand and Asia.
Decent financial performance: Statutory Profit for the year was flat in FY18 and was close to $6.4 billion in FY17. Drop of around 4.7% in cash profit for ANZ’s continuing operations that excludes non-core items and the discontinued Wealth businesses was noted at $6,487 million during FY18. The common equity Tier 1 capital in FY18 was 11.4% as compared to 9.5% in FY17. 60% rise in reallocation of the capital to retail and commercial segment in Australia and New Zealand was reported in FY18 as compared to 45% in FY17. With its focus on making the products more simplified and reduce the cost, ANZ has decommissioned 140 products under its Australia division and total of 264 applications were decommissioned in FY18. ANZ’s result was driven by good cost management and strong organic capital generation; and underlying expenses were down by 0.3%.
Technically,the scrip has been in downtrend for the month of September and October with some sign of recovery in the current month of November. On a 3-month time frame with weekly interval, higher high formation is well indicated on the price charts. Relative strength index and Moving average and convergence indicator (MACD) consolidating in negative territory with sign of positive divergence on price charts indicate an upside trend.
The market cap of ANZ was recorded at $75.66bn, with P/E of 11.88x. The stock finds support around $24 and resistance around $28. ANZ’s rigorous focus on new technologies and investment in new digital banking division is expected to have better and improved customer experience, along with decent balance sheet and financial metrics. ANZ is expected to accelerate its cost savings in FY19 and there is a scope of returning to better capital position. We give a “Buy” on ANZ at the current levels of $26.01, with dividend yield of 6.08%.
Rural Funds Group
Rural Funds Group (ASX: RFF) with a market cap of $756.22mis focused on working towards its long-term strategy to achieve considerable earnings and distribution growth and diversify its portfolio to stand against climatic and seasonal variability.
Financially,RFF reported strong position for year FY18. Funds from operations grew by 12.7 cents per unit and the distribution growth target was maintained at 4% per annum with 10.03 cents per unit paid to the investors. The growth in distribution was well supported by the conservative payout ratio of 79% and a weighted average lease expiry of 12.4 years. Indexation, additional income from leases and the capital expenditure development supported the growth of AFFO (Adjusted funds from operations) which posted 26% rise in FY18. Earnings grew by 17.3 cents per unit with the growth supported by AFFO and revaluation of properties. 6.3% rise in the adjusted Net Asset Value up to $723.6m was reported in FY18 as compared to the previous corresponding period
Technically,the scrip has shown an upside move for the month October and is trading near the upper bollinger band. The market cap of RFF was recorded at $756.22m with P/E of 16.07x.
RFF’s recent purchase of the Dyamberin property for $13.4m (and $0.7m in stamp duty), which is to be leased to Stone Axe Pastoral for an initial term of 10 years with a rent review at year 5, is expected to benefit the group. Productivity gains with pasture improvement initiatives over 500Ha are targeted for FY20e. Strong financial performance along with new acquisition opportunities particularly in the cattle and the cotton sectors will help in the future growth and distribution segment. We give a “Hold” on RFF at the current levels of $2.29, in view of the dividend yield of 4.46%.
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