Pinnacle Investment Management Group Limited

Annual General Meeting to be held on 31^st October 2019: Pinnacle Investment Management Group Limited (ASX: PNI) is a leading Australia-based multi-affiliate investment management firm whose mission is to establish, grow and support a diverse stable of world-class investment management firms. The market capitalisation of the group stood at ~$810.38 million as on 16^th October 2019. Recently, the group informed the market that the Annual General Meeting will be held on 31^st October 2019.

Updates on FUM: The FUM (or funds under management) of PNI’s thirteen Affiliates on 30th June 2019 was $54.3 billion, reflecting an increase in FUM of $16.3 billion or 42.9% on a YoY basis, comprising FUM ‘acquired’ of $6.8 billion, net fund inflows of $6.5 billion and market movements/investment performance of $3.0 billion. The following picture shows the growth in the company’s gross FUM, which might attract the attention of market participants:

 
Gross FUM Growth (Source: Company Reports)

Stock Recommendation:  The company has reported a CAGR growth of 29.08% in its revenue in the span of last five years, i.e., from FY15 to FY19; thus, it can be said that the company is possessing decent capabilities to garner revenues. It has a decent return to equity ratio of 22.2%, which is higher than the industry median of 6.2%, showing that the company is delivering decent returns to its shareholders. On the stock’s performance front, it produced returns of -3.70 % and -4.11% in the time period of one month and three months, respectively. Currently, the stock is trading close to its 52-week low level of $3.800 with PE multiple of 24.18x. Hence, considering the aforesaid facts couple with decent fundamentals and current trading levels, we give a “Buy” rating on the stock at the current market price of $4.660 per share, up 5.192% on 16th October 2019.
 
 

Suncorp Group Limited

 
AMA to Acquire Suncorp’s Capital S.M.A.R.T and ACM Parts Business:Suncorp Group Limited (ASX: SUN) is engaged in the provision of insurance, banking and wealth products and services to retail, corporate and commercial customers in Australia and New Zealand. The market capitalisation of the group stood at ~$16.81 billion as on 16^th October 2019.
 
Suncorp Group Limited has signed a binding agreement with AMA Group to sell Capital S.M.A.R.T Group (Capital S.M.A.R.T), which is Suncorp’s market leading smash repair business in Australia and New Zealand, for an enterprise value of $420 million which represents an FY19 EBITDA multiple of 20x.The sale consideration would be in the form of upfront cash proceeds and retention of 10% interest in the business.
 
Financial Performance for FY19: The company reported decent numbers for full year, with cash earnings of $1.115 billion and net profit after tax of $175 million. The result was impacted by the after-tax non-cash loss on the sale of the Australian Life Insurance business. The company has declared a fully franked final dividend of 44 cents per share, taking the full year dividend to 70 cents per share, with payout ratio of 81.2%.Insurance Australia, which is the company’s largest division, delivered a profit after tax of $588 million, which was impacted by major events that includes Townsville floods in January & February 2019 and Sydney hailstorm in December 2018.


FY19 Financial Highlights (Source: Company Reports)

Stock Recommendation: The company’s stock has given a return of 0.79% and -0.11% in the last three months and six months, respectively. Currently, the stock is trading at a price to earnings multiple of 98.450x on TTM basis, which is higher than the industry average of 16.2x. Currently, the stock is trading near to its 52-week higher level of $14.155 per share. Hence, in view of aforesaid facts and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $13.710 per share, up 2.851% on 16^th October 2019.

 

QBE Insurance Group Limited

Buy-back Update:QBE Insurance Group Limited (ASX: QBE) is an international general insurance and reinsurance company, which is engaged in underwriting general and reinsurance risks, investment management and management of the economic entity’s share of the NSW and Victorian workers’ compensation scheme. The market capitalisation of the group stood at ~$16.29 billion as on 16^th October 2019.

 
On 4 October 2019, the group announced the cancellation of 1,062,294 QBE shares as part of the on-market share buyback and the issue of 269,880 bonus share plan shares.After the cancellation of shares for the buyback and the issuance of bonus share plan shares, total number of shares on issue is 1,311,910,587. On 11 October 2019, the group notified that it has bought back 1,80,54,579 shares for the total consideration of $22,00,43,085.85.
Changes in Senior Management: QBE has appointed Todd Jones as the CEO North America, succeeding Russ Johnston who has decided to seek opportunities outside of QBE. As per CEO, Pat Regan, Mr Johnston has helped in QBE’s North American operations, in the period of significant change. Earlier, Mr Jones was the Head of Global Corporate Risk and Broking at Willis Tower Watson, and prior to that, he was the CEO of Willis North America. He has also held several senior roles at AON in North America.

1HFY19 Financial Highlights: The group reported a statutory net profit after tax of $463 million, up by 29% from $358 million in the prior period. The group reported cash profit after tax of $520 million, up by 35% from $385 million in the prior period, and the cash profit return on equity was 13.4%, up from 9.6% in the prior period.The company’s financial performance for the half-year reflects a significant improvement in attritional claims experience across all divisions combined with materially stronger investment returns. These got partly offset by an expected increase in the net cost of large individual risk and catastrophe claims following the successful renegotiation of the group’s reinsurance program.


1HFY19 Results Snapshot (Source: Company Reports)

Stock Recommendation: The company’ stock has given a return of 5.25% and -2.44% in the last three months and six months, respectively. Currently, the stock is trading at a price to earnings multiple of 22.590x on TTM basis, which is higher than the average P/E multiple of the insurance sector of 16.2x. As per ASX, it is trading close to its 52-week high price of $13.160. Hence, considering the aforesaid facts and current trading levels, we give a “Hold” rating on the stock at the current market price of $12.620 per share, up 1.61% on 16^th October 2019.

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