Magellan Financial Group Limited

Robust Momentum in average FUM in FY 2018: Magellan Financial Group Limited (ASX: MFG) had earlier come forward and announced the results for FY 2018. The company encountered robust momentum in the revenues as, in FY 2018, the revenues stood at $428.70 million reflecting the rise of 30% on the back of 27% rise witnessed in the total management fees revenues because there was 29% growth with regards to average funds under management in FY 2018. The company’s average funds under management were supported by net inflows, robust investment performance as well as Airlie acquisition which was done in March 2018.


MFG’s Revenues (Source: Company Reports)

Magellan Financial Group had total FUM of $70.7 billion at the end of December 2018 which implies a fall from the FUM at the end of November 2018 of $72.1 billion. In December 2018, the company witnessed net inflows amounting to $41 million consisting net retail inflows amounting to $90 million as well as net institutional outflows amounting to $49 million. Further, the group happens to be in the decent position with regards to the important margins. Its net margin stood at 47% in FY 2018 which is higher as compared to the industry median of 30.3% primarily reflecting the strength in the company’s revenues as compared to the broader industry. Moreover, the company’s EBITDA margin stood at 78% in FY 2018 which is higher when compared to the industry median of 61.9%.

Healthy Balance Sheet: As depicted by the presentation of Magellan Financial Group, its Board is of the view that the company possesses a robust balance sheet. They also stated that there are multiple organic opportunities of growth and the company has sufficient capital which could help it in tapping these initiatives. The company’s Board had also made a revision with respect to the dividend policy so that the pay-out ratio can be increased. MFG enjoys a debt-free status with a current ratio of 5.51x which is higher than the industry median of 1.51x.

Stock Recommendation:On the daily chart of Magellan Financial Group, Exponential Moving Average or EMA has been applied and default values were used for the purposes. After careful observation, it was observed that the stock price has crossed the EMA and had trended upwards after the crossover. This reflects that the stock might witness bullish momentum. Meanwhile, the share price has risen 5.15% in the past three months (as at 1 February 2019) and is trading towards a higher level. Based on the aforesaid factors and current trading scenario, we, therefore, maintain our “Hold” rating on the stock at the current market price of A$28.370 per share.

Westpac Banking Corporation

Plans to Work with Policy Makers: On February 4, 2019, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry had released the final report. The top management of Westpac Banking Corporation (ASX: WBC) had stated that the recommendations which have been developed via the inquiry would be guiding decision making with respect to the financial services. The bank stated that they would be considering the recommendations and would be accounting the response from regulators as well as policy makers. The top management added that they have already adopted steps so that some matters can be addressed which are being referred in the report which includes its approach towards dealing with respect to customer complaints as well as leading industry in moving away from grandfathered commissions.

WBC’s Second Half Witnessed Challenges: As depicted by Westpac Banking Corporation’s media release for FY 2018, the bank’s results showcase the tough conditions as they have witnessed increased regulatory, compliance as well as funding costs. Moreover, there have been higher competitive pressures, especially in H2.  The bank stated that they are possessing robust balance sheet throughout the dimensions related to capital, asset quality as well as liquidity. The bank’s digital transformation program as well as service-led strategy have also ramped up. The bank’s business bank division witnessed 8% growth on the YoY basis in FY 2018 with regards to the cash earnings on the back of fall in the impairment charges as well as decent growth in the small business sector.     

Cash Earnings (Source: Company Reports)

Stock Analysis and Outlook: Westpac Banking Corporation had stated that are making deployments towards technology so that the services to the customers can be improved as well as doing business with WBC becomes easier.  The bank stated that they would be working towards supporting the customers in the long-term. On the daily chart of WBC, Exponential Moving Average has been applied and default values were used for the purposes. After careful observation, it was observed that the stock price is moving towards the EMA and soon a crossover might occur. If this crossover occurs, the stock might witness bullish momentum moving forward.  

Based on the above-mentioned factors, we maintain our “Buy” rating on the stock at the current market price of A$24.870 per share (up 1.18% on 4 February 2019).
 

AMP Limited

Appointment of Non-Executive Director: Not so long ago, AMP Limited (ASX: AMP) had come forward and made an announcement related to the appointment of Non-Executive Director. As per the release, the company had placed Ms. Andrea Slattery would be joining the Board as Non-Executive Director.  In Q3 FY2018, AMP’s Australian wealth management had total AUM of $132.6 billion which implies the rise of A$579 million as compared to Q2 FY2018 because the favourable investment markets offset the weakness in the cashflow.


Australian wealth management (Source: Company Reports)

What to Expect from AMP Moving Forward: Recently, AMP Limited had given an update with regards to expected earnings as well as final dividend for FY 2018. The company is expected to post underlying profit amounting to approximately A$680 million while there are expectations that the company would post profit attributable to the shareholders amounting to around A$30 million.  After considering H2 FY2018 performance, the associated capital impacts as well as operating environment uncertainties, the company stated that it might declare final dividend amounting to 4 cents per share.  

Stock Recommendation: On the daily chart AMP Limited, Exponential Moving Average or EMA has been applied and default were used for the purposes. After careful observation, it was noticed that the stock price had crossed the EMA and had trended in the downward direction after crossover. This signifies bearish momentum. However, Relative Strength Index or RSI was also applied, and default values were used. After observation, it was observed that the 14-day RSI has reached the oversold region, and soon a rebound is expected. Thus, it might bullish momentum.

Considering the above-mentioned factors, we advise market players that they need to closely watch the stock at the current market price of A$2.210 per share (down 1.339% on 4 February 2019).   
 

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