MFF Capital Investments Limited

MFF Details
Strong Portfolio Composition Supported MFF in November 2018: MFF Capital Investments Limited (ASX: MFF) stated that the company’s monthly NTA per share (approximately) stood at $2.824 on the pre-tax basis at the end of November 2018. In the press release which was issued by the company, it was mentioned that the views regarding the future performance as well as the results which were published by the company’s portfolio companies in the month of November reflect strong business positions as well as they also represent prospects related to the profitable growth.


MFF’s Portfolio at the end of November 2018 (Source: Company Reports)

The payment processors like Visa and Mastercard represent a decent amount of proportion in the portfolio of MFF and the performance of these companies is sensitive to the global macro conditions as these companies witnesses robust momentum when there is higher consumer confidence. However, in the present scenario, the performance of the IT stocks (which are also in the company’s list of portfolio companies) is primarily dependent upon the geopolitical measures.

Growth in key ratios of MFF: In the important ratios of MFF Capital Investments, there has been decent amount of growth on the YoY basis in FY 2018. The gross margin of MFF stood at 98.2% in FY 2018 representing a rise as in FY 2017 it was 95.9%. The company has also witnessed an improvement in the net margin from 66.6% in FY 2017 to 68.4% in FY 2018. The management of MFF Capital Investments stated that MFF has managed to end FY18 with robust financial flexibility as well as balance sheet.

Global Macro Factors Would Affect MFF’s Performance: MFF Capital Investments has made deployments towards the equities and the company has maintained its focus towards equities of those companies which are not domiciled in Australia. This trend would remain as it is moving forward. Over the long-term, the company’s performance is expected to witness favourable momentum primarily because of the settling of the geopolitical tensions. If the geopolitical worries settle down, the portfolio companies of MFF like, Visa and Mastercard, as well as some IT stocks, would be positively impacted which would help MFF. 

From the technical standpoint, Moving Average Convergence Divergence or MACD indicator has been applied on the daily chart of MFF Capital Investments and default values have been considered. As per the observation, the MACD line has crossed the signal line and is moving upwards thus, reflecting the bullish momentum. As a result, we maintain our “Buy” rating on the stock at the current market price of A$2.710 per share.


 
MFF Daily Chart (Source: Thomson Reuters)
 
 

Qantas Airways Limited

QAN Details

Favourable Momentum in Revenues Supported QAN in Q1 FY 2019: Qantas Airways Limited (ASX: QAN) managed to generate total revenues amounting to $4.41 billion in Q1 FY 2019 which implies the YoY growth of 6.3%. The performance of the company is sensitive to the fluctuations in the fuel prices. The favourable performance of the revenues partially offsets the increase which was witnessed in the non-fuel costs like the unfavourable impacts which were witnessedbecause of the weaker Australian dollar as well as increased commissions which have been shelled out to the travel agents.However, the total capacity of the group witnessed the decline of 0.3%.


QAN’s Key Financial Metrics (Source: Company Reports)

However, in FY 2018, the robust momentum in the revenues as well as in demand supported the company in tackling the higher fuel prices. During the same period, the company’s EPS witnessed positive momentum on the back of share buy-back (on-market).

What Key Metrics Have to Say: There has been an improvement in the ratios like gross margin and net margin of Qantas Airways in FY 2018 on the YoY basis. In FY 2018, the company’s gross margin stood at 56.7% in FY 2018 while in FY 2017 it was 55.7%. However, the company’s net margin has also improved marginally from 5.3% in FY 2017 to 5.7% in FY 2018. The improvements in the key ratios YoY helps in getting the attraction of the investors and increases the confidence levels with respect to the expected performance of the company.

Positive Macro Conditions to Support QAN Moving Forward: In the chairman’s remarks which were delivered in October 2018, it was mentioned that the management is positive for global demand in regard to the aviation especially with respect to the increasing middle class in the Asia region. The management also reflected favourable views in regard to the deployments towards Qantas Group Pilot Academy. It stated that, as a result of this deployment, the company would be able to have a talent pipeline.

In the trading update related to the Q1 FY 2019, the company stated that, in FY 2019, it would be able to deliver minimum $400 million with respect to transformation benefits. In the H2, the company might witness substantial cost improvements.

On the technical analysis front, on the daily chart of Qantas Airways, Moving Average Convergence Divergence or MACD has been applied and the default values have been considered. As per the observation, the MACD line has crossed the signal line and it is also moving upwards. Therefore, the crossover can be treated as a bullish one. As a result, we give a “Buy” rating on the stock at the current market price of A$5.940 per share.


 
QAN Daily Chart (Source: Thomson Reuters)
 

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