REA Group Limited (ASX: REA)

Acquisition of Hometrack Australia approved by ACCC - REA Group, a multinational digital advertising business specialised in property, announced that the competition watchdog, ACCC (Australian Competition and Consumer Commission) has given green signal for the acquisition of Hometrack Australia Pty Ltd by realestate.com.au Pty Ltd, as announced on 1 May 2018. This acquisition will be completed soon and will allow realestate.com.au to deliver more property data and insights to consumers and customers than ever before. Hometrack Australia is a provider of property data services to the financial sector. The purchase consideration for this transaction was $130 million which will be funded from existing cash reserves and debt of $70 million. This kind of transaction will deliver synergy benefit to REA once the Hometrack business is fully integrated into REA’s platforms as it is expected that Hometrack Australia will deliver revenue between $13 million to $15 million and EBITDA between $6 million to $ 7 million for their financial year ended 30 September 2018. In last six months, the stock prices jumped up by 13.45 per cent and 12.43 per cent in last one month. The stock slipped by 3.98 per cent as on 30 May 2018 with a change in market sentiment. We maintain a "Hold” recommendation at the current market price of $87.29, given REA’s profitable business, potential to acquire other earnings accretive businesses, and long-term potential.


Revenue, EBITDA and Margin Trend (Source: Company Reports)
 

Australia and New Zealand Banking Group Limited (ASX: ANZ)

A sale transaction that will simplify ANZ’s Business– While the political concerns in Europe led the global stocks down with financial sector being impacted the most, ANZ was also seen to slip by 1.84% on May 30, 2018. On the other hand, ANZ, which is one of the Big 4 Banks of Australia, has agreed to sell OnePath Life NZ Limited for NZ$700 million to Cigna Corporation, a specialist insurance business that has been providing insurance protection to New Zealanders for 100 years. Cigna is a global health service company with 95 million customers around the world and more than 40,000 employees worldwide. It has been in the partnership with ANZ for more than 20 years. This transaction reflected a slight premium to embedded value and is expected to generate a gain on sale of around NZ$50 million which increased ANZ Group’s Level 1 and Level 2 CET1 ratios by ~5 basis points and ~15 basis points, respectively. Its ANZ New Zealand’s Investment Management business was not part of the sale. This sale included a 20-year strategic alliance for Cigna to provide insurance solutions for ANZ bank customers and is in line with the ANZ’s strategy to simplify its business. This transaction is subject to regulatory approval and it is expected that it will be completed in FY19.


Average Risk Weights (Source: Company Reports)

As per this arrangement, ANZ will continue to provide life insurance services to its customers but now these insurance policies will be manufactured and managed by a world-class insurance provider, Cigna. The Banking Group issued USD1,250,000,000 2.05% Covered Bond which is due in May 2020 (Series 2015-1, Tranche 1) (ANZHAT) and the next interest payment date will be 27 November 2018 and the period for interest payment has started from and will include 27 May 2018 but will exclude 27 November 2018. Since the start of the year, the shares have been declining by 3.01 per cent and were down by 3.75 per cent in last three months. The stock started recovering in the past one month and rose up by 3.28 per cent. We recommend to “Buy” the stock at the current market price of $27.21 as this transaction could be a game-changer for the business and could lead to simplification of the business which will make the Group more attractive. The group recently also decided to sell its stake in Cambodian JV ANZ Royal Bank. ANZ also indicated about its intention of buybacks and these may prove to be beneficial for the shareholders.

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