Automotive Holdings Group Limited

Continued Setbacks in Automotive Retail Segment: Automotive Holdings Group Limited’s (ASX: AHG) stock tumbled 8.824 per cent on May 15, 2018 after the group announced that continued setbacks in automotive retail segment backed by regulatory changes have impacted the trading. According to the release, the company expects operating NPAT to be around $75 Mn for the full year. The management expects that the automotive division anticipates rise in margins in the second half of the year from the Group’s franchised dealerships and used car businesses that have been below the Company’s expectations. However, the performance of the Company’s Truck division remains strong on the back of higher demand in the market.  Besides this, the company announced the sale of the Refrigerated Logistics business to HNA International for an enterprise value of $400 Mn with completion scheduled to occur on or before 30 June 2018. Due to sale process and relatively long lead time to completion, the refrigerated logistics division has been impacted in second half of the year. The sale remains subject to approval from Australia’s Foreign Investment Review Board (FIRB), and satisfaction of other customary conditions precedent.


New Car Sales Volume (Source: Company Reports)

On the other hand, the Group has appointed former KPMG partner, Andrea Hall to the Board as anIndependent Non?Executive Director. Besides this, the Board Chairman Mr Robert McEniry has resigned from his directorship of the company effective immediately due to serious health issue. One of its Director Jane McKellar, having a direct interest in the Company acquired 1,436 ordinary shares through on-market trade, as at May 02, 2018. Meanwhile, the stock has fallen 7.86% in last one year and is currently trading near its 52-week low levels. We maintain our “Hold” recommendation on the stock at the current price of $ 3.100, while AHG aims to find support from revenue growth from the acquisition, stabilizing Western Australia market and stronger demand for trucks.
 

National Australia Bank Limited

Decent outlook for Long Run: National Australia Bank Limited’s (ASX: NAB) stock plunged 3.405 per cent on May 15, 2018, as the group traded ex-dividend and there seems to be some profit booking. The group delivered a decent performance across the business during first half of the year. In the 1HFY18, NAB posted total revenue of $9,093 Mn, marking a moderate growth of 2.5% on Year on Year (YoY) basis. The sales surged up due to business lending volume growth across the portfolio. Net interest margin grew by 5 basis point (bps), reflecting lower funding cost which was partially offset by the impact of the bank levy and housing lending competition and product mix changes. However, cash earning contracted at $3,289 Mn in 1HFY18, declined by 0.2% on year on year basis while statutory net profit after tax grew by 1.5 per cent to $2,583 Mn in 1HFY18 from $2,545 Mn in 1HFY17. Besides this, the asset quality improved with the ratio of 90+ days past due, and gross impaired assets to gross loans and acceptance ratio was down by 14 bps to 0.71 per cent in 1HFY18, and this was driven by continued improved conditions of New Zealand dairy customers. Further, we believe that the group has good potential to manage growth at the back of its brand name, sound financials, decent revenue and interest income growth, and the diverse set of products and services, despite the Royal Commission now surfacing some money laundry issues while the bank stated that it is generally vigilant on the transactions activities etc.


Asset Quality Trend (Source: Company Reports)

In last one year, the share price was down by 12.71 per cent as at May 14, 2018 and is currently trading near its 52-week low levels. We maintain a “Buy” recommendation on the stock at the current market price of $ 27.520.

 
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