Transurban Group

Robust Financials helped Transurban Group in FY 2018: Transurban Group (ASX: TCL) ended FY 2018 garnering the toll revenues amounting to $2,249 million which implies the YoY growth of 8% because of the higher toll prices and traffic growth. The company witnessed the substantial increase in the profit from the ordinary activities post tax which, in FY 2018, amounted to $468 million representing the whopping growth of 124% on the YoY basis.

Transurban Group’s core capabilities (Source: Company Reports)

The company has been entering into the partnerships with the governments. It is also in the process of signing major development projects with respect to diverse regions so that the transport routes can be developed, and the congestion can be taken care of. Moving forward, the primary drivers of the company’s revenues could be increased traffic volumes, and business opportunities which might be available in the market which are targeted as well as are capable of improving the company’s technology so that fresh projects can be built. However, the primary factors which could weigh on the business fundamentals of the company are maintenance of the social license which is required to carry out the operations, lower traffic volumes as well as non-availability of the technical infrastructure.

What Transurban Group Has in Mind: Moving ahead into FY 2019, Transurban plans to increase its distributions.As per the management, the company would be shelling out 59.0 cents per share implying a 5.4% growth on the YoY basis. The company has its complete focus on delivering shareholders value with the help of distributions and, as the time passes by, it plans to shell out around 100% of the FCF or free cash flow in the form of distributions. Apart from the optimistic outlook for the distributions, the company also expects that FY 2019 would be experiencing the advancements in regard to the development projects amounting to $10 billion.
Performance of Transurban from the technical standpoint: On the daily chart of Transurban Group, RSI or Relative Strength Index, a momentum indicator, has been utilized and the default values have been considered for the purposes. As per the observation, the stock price is near the oversold region which reflects that the stock is losing its bearish strength and might move upwards moving forward. As a result, we maintain “Buy” rating on the stock at the current market price of A$10.900 while the stock is being resilient at the time of a heavy market downturn.

Scentre Group

Decent Performance:Scentre Group (ASX: SCG) generated revenues amounting to $1,282.2 million in 2H 2018 implying a rise on the YoY basis. In 2H 2017, the company generated $1,203.7 million. This YoY growth was witnessed primarily because of the increases from all the sources of revenues i.e. property revenue, property development, and construction revenues as well as property management revenue.

Scentre Group’s cash from operations and cash used in investing activities (Source: Company Reports)

The company generated cash flow amounting to $641.8 million in H2 2018 from the operations which represent a rise on the YoY basis. In 2H 2017, the company’s cash flows from operations amounted to $568.5 million. The rise was witnessed primarily because of higher receipts from the operations. The company’s cash used in investing activities amounted to $379.9 million in 2H 2018 reflecting a rise on the YoY basis.
A Brief Outlook on Scentre Group:The management of the company is confident about the progress which it has been witnessing in regard to the customer-focused strategy as well as to take action on the customer feedback. The company has improved its portfolio by leveraging the development programs and it witnessed the robust improvement in regard to active redevelopments amounting to $1.8 billion in New Zealand as well as Australia. According to the management of Scentre Group, the FFO or fund from operations is expected to witness a growth of around 4% in the twelve months ending December 31, 2018. The management also expects to shell out 22.16 cents per share in the form of distributions for 2018.

Technical Overview:MACD and Relative Strength Index or RSI has been applied on the daily chart of Scentre Group by using the default values. As per the observation, the MACD line is about to cross the signal line and is expected to move upward. Also, using RSI, it was found that 14-day RSI has reached the oversold zone which indicates that the stock would rise from the current level. Hence, we maintain the “Buy” rating on the stock at the current market price of $ 3.860.
 

Challenger Limited

Targeting better fundamentals: Challenger Limited (ASX: CGF) posted life sales amounting to $5.6 billion which reflects the YoY growth of 12%. The company’s annuity sales amounted to $4.0 billion. However, its other life sales amounted to $1.6 billion. The company generated net income amounting to $822 million in FY 2018 which implies the rise on the YoY basis. In FY 2017, it generated $766 million. The company’s expenses amounted to $268 million in FY 2018 while in FY 2017 they were $256 million.

Challenger Limited’s net income and expenses (Sources: Company Reports)

What to Expect from Challenger Moving Forward: The management of Challenger limited is having an optimistic outlook for the company. The company would be increasing the allocation towards the retirement incomes as they are stable as well as secure. The company expects to introduce fresh lifetime products. The company believes that it would provide superior as well as relevant investments to the clients as it plans to introduce ActiveX ETF. The company also plans to optimize the return on equity or ROE as well as asset allocation. It expects to witness growth in the range of 8-12% with regards to normalized NPBT and is also targeting the ROE of 18%. Despite the shortcomings, the group has been able to maintain its dividends well.

Technical Overview: On the daily chart of Challenger Limited, relative strength index or RSI has been applied by using default values. The 14-day RSI is about to reach the oversold zone which reflects that the stock price is expected to pick up. Thus, we give a “Buy” rating on the stock at the current market price of $ 10.44, which is trading at low levels, down 22% this year to date, and focuses on annuities that are crucial for retiring population.
 

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