Stocks’ Details
 

Pendal Group Limited

H1FY20 Results Highlights: Pendal Group Limited (ASX: PDL) is a global asset management company focused on delivering superior investment returns for its clients through active management. As on 5 June 2020, the company’s market capitalisation stood at ~$2.1 billion. For the first half of FY20, the company reported Statutory net profit after tax of $54.8 million and Cash net profit after tax of $86.6 million. Further, the company reported Average FUM of $98.9 billion, up 2% on pcp. The half-year results were affected by the unprecedented Covid-19 pandemic, which has impacted client sentiment, economies, flows and markets in March 2020.


H1FY20 Results (Source: Company Reports)

Dividend Update: For H1FY20, the company declared a dividend of 15 cents per share, down by 25% on pcp, mainly due to uncertainty of the future potential impact on markets and client sentiment. The dividend represents a payout ratio of 56%. The dividend has an ex-date of 21 May 2020, record date of 22 May 2020, and payment date of 1 July 2020.

Resilient Business: The company is focused on investing for growth and diversification. It is to be noted that the diversification of business allows the company to perform resiliently during market cycles. The company’s resilience is also supported by the range and type of funds it manages. Recently, PDL reduced its shareholding in OFX Group Limited to 6.43% from the previous holding of 7.49%.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company is currently in a decent financial position with a cash balance of $123.9 million (as on 31 March 2020) and no debt in its balance sheet. We have valued the stock using a Price to Earnings multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). Considering the aforesaid facts, the company’s decent financial position, its resilient business, and expected upside in the valuation, we give a “Hold” recommendation on the stock at the current market price of $6.40, down by 1.538% on 5 June 2020. 

Orora Limited

Returning ~$600 million to Shareholders: Orora Limited (ASX: ORA) is mainly involved in providing an extensive range of tailored packaging solutions and displays. On 8 May 2020, the company announced its intention to return ~$600 million to shareholders by 30 June 2020, via a capital return of $150 million and a special dividend of $450 million. The return has been determined after taking into consideration several factors including COVID-19 related uncertainty, tightening liquidity in debt markets and the terms of Orora’s debt facilities, retaining Orora’s strong balance sheet, as well as preserving flexibility to pursue potential growth opportunities. Key dates related to capital return are mentioned below:


Key Dates (Source: Company Reports)

Details of Special Dividend: The Board has determined to return $450 million to shareholders by paying a special dividend of 37.3 cents per share (50% franked). The special dividend has an ex-date of 19 June 2020, record date of 22 June 2020 and payment date of 29 June 2020.

Outlook: Moving forward, the company will continue to invest in efficiency, growth and innovation as well as integrate recent acquisitions and finalise the sale of the Fibre business. The company expects challenging market conditions to persist for the remainder of FY20. The negative impact from COVID-19 in H1FY20 is estimated at around $25 million, predominantly in the North American businesses which supply and service retail, entertainment, convenience and manufacturing segments.

Recently, Sumitomo Mitsui Trust Holdings, Inc. (SMTH) increased its holding in the company to 6.50% from the previous holding of 5.19%.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company’s long-term fundamentals are supported by its recent acquisitions, its investment in growth and innovation and its strong balance sheet. In the past six months, the stock of ORA has declined by 14.38% on ASX. We have valued the stock using EV/Sales multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Pact Group Holdings Ltd (ASX: PGH), Orica Ltd (ASX: ORI), and Incitec Pivot Ltd (ASX: IPL). Considering the company’s long-term fundamentals, its recent decision to return capital to shareholders, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $2.740, up 0.366% on 5 June 2020.  
 

Janus Henderson Group Plc

March 2020 Quarter Update: Janus Henderson Group Plc (ASX: JHG) is a leading global active asset manager that provides a broad range of investment solutions to investors to help them achieve their long-term financial goals. In the first quarter of FY20, the company reported AUM of US$294.4 billion, down by 21% on the previous quarter, due to the COVID-19 pandemic’s effect on both the global markets and investor sentiment. However, the company remained profitable during the quarter, as it generated $164.5 million in adjusted operating income and $0.60 in adjusted EPS for Q1FY20.


Quarterly Performance (Source: Company Reports)

Dividend Update: For Q1FY20, the company declared a dividend of US$0.36 per share, in line with the previous quarter. The payment date for the dividend was 3 June 2020.

Covid-19 Update: During the current Covid-19 situation, the company’s number one priority is to ensure that it maintains business resilience while providing a safe work environment for its employees and continuing to deliver for its clients. Despite significant market declines around the world, the company is generating positive cash flow and has a strong balance sheet.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months,

Stock Recommendation: The company has excellent business fundamentals, including the strength of its investment teams, the ability to attract and retain top talent and its strong financial foundation. We have valued the stock using Price to Earnings multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). Considering the aforesaid facts, the company’s excellent business fundamentals, resilient cash flow performance, and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $34.820, up by 3.232% on 05 June 2020. 

 
Comparative Price Chart(Source: Refinitiv, Thomson Reuters)

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