Bank of Queensland Ltd

BOQ Details

Termination of the agreement to sell St. Andrew’s Insurance: Bank of Queensland Ltd (ASX: BOQ), an Australia’s leading bank, provides all kinds of personal and business services such as banking, insurance, loans and finance, etc. On 10 December 2018, the bank terminated the agreement to sell its St. Andrew’s Insurance to Freedom Insurance Group. The bank is expected to pay the interim dividend for ordinary shares on 22 May 2019 and dividend for BOQPE Capital Notes on 15 February 2019. During 2018, the Royal Commission set up by the Australian Government conducted various hearings related to the Group, the final report of which is due in February 2019.


FY18 Financial Highlights (Source: Company Reports)

During FY18,the bank reported a net interest margin of 1.98% which has improved over the past five years and is marginally above the industry median of 1.94%. The efficiency ratio of 54.8% has also improved and is marginally above the industry median of 52.0%.Although the bank's financial health has improved, still it is not up to the industry standards as can be seen through the Tier 1 Risk-Adjusted Capital Ratio reported at 10.99% in FY18 falling below the industry median of 11.13%.
The bank has ~401.79 million shares outstanding with the market cap of ~$4.15 billion, annual dividend yield of 7.35%, and a beta of 1.29x (5-Year, Monthly) as on 17 January 2019. It reported a same P/B multiple of 1.1x as compared to the industry median showing that the bank along with the industry is earning a good return on the assets.

Various hearings by the Royal Commission has led the overall banking industry to fall. But the stock has generated a positive yield of 7.37% over the past one month. Today, the stock was marginally up by 0.29% as compared to the previous close, currently trading at $10.370. It has created a new support level at $9.430. With the board working over streamlining bank’s structure, improving financial health, and decent P/B multiple, we maintain our “Buy” recommendation on the stock at the current market price of $10.370.

 
BOQ Daily Chart (Source: Thomson Reuters)
 

Westpac Banking Corporation

WBC Details
New Projects in the Pipeline:Westpac Banking Corporation (ASX: WBC), headquartered in Sydney, Australia, is one of the initial banks established in Australia. It provides all kinds of business, consumer, and institutional banking and wealth management services. The bank is planning to launch its multi brand operating system, Customer Service Hub, and New Westpac Mortgages in 2019. The bank has decreased its Committed Liquidity Facility (CLF) allocation from $57 billion in FY18 to $54 billion for FY19.


Ratio Snapshot for FY18 (Source: Company Reports)

During FY18,the bank reported a net interest margin of 2.13% which has improved over the past five years and is above the industry median of 1.94%. The efficiency ratio of 43.8% has also improved but is below the industry median of 52.0%.The bank's financial health has improved and is better than the industry standards as can be seen through the Tier 1 Risk-Adjusted Capital Ratio reported at 12.78% in FY18 falling below the industry median of 11.13%.
The bank has ~3.45 billion shares outstanding with the market cap of ~$89.64 billion, annual dividend yield of 7.23%, and a beta of 1.28x (5-Year, Monthly). It reported a higher P/B multiple of 1.4x as compared to the industry median of 1.1x indicating that the bank is earning a good return on the assets as well as its assets are undervalued.

The impact of the Royal Commission is also visible over here as well. But the stock has generated a positive yield of 5.48% over the past one month. Today, the stock was marginally up by 0.269% as compared to the previous close, currently trading at $26.070. With the new projects in the pipeline, board working over streamlining bank’s structure, improving and better than industry financial health, and decent P/B multiple, we maintain our “Buy” recommendation on the stock at the current market price of $26.070.


 
WBC Daily Chart (Source: Thomson Reuters)
 
 

Pendal Group Limited

PDL Details

Decent Financials:Pendal Group Limited (ASX: PDL) is a Sydney, Australia based global investment management company generating returns through active management.  The group reported a fall in FUM from $101.6 billion in September 2018 to $92.8 billion in December 2018. The license for J O Hambro trademark has been extended to 26 April 2019. The company paid a dividend of 52 cents in FY18 with a growth of 16% as compared to FY17.


FY18 Financial Highlights (Source: Company Reports)

Over the past five years,the margins of the company have improved. During FY18, the company reported EBITDA margin of 45.2% which was below the industry median of 62.1% whereas the net margin of 33.3% was above the industry median of 30.4%. The company is generating better returns for its shareholders than its peers as its ROE of 22.6% was above the industry median of 10.0% in FY18.The group has lower than industry EV/EBITDA and P/E multiple of 8.4x and 11.3x respectively as compared to the industry median of 10.0x and 13.5x, showing the stock to be undervalued.

The company has ~318.01 million shares outstanding with the market cap of ~$2.41 billion, an annualized dividend yield of 6.87% and a beta of 1.32x. During the past three months, the stock has generated a negative yield of 7.68%. Today, the stock was up by 0.661% as compared to the previous close, currently trading at the price of level $7.620. The Relative Strength Index is seen in a neutral position, and the price is currently trading near to the Simple Moving Average line of the Bollinger band. With decent margins along with lower EV/EBITDA and P/E multiplethan industry, we have a wait and watch stance on the stock at the current market price of $7.620 and we suggest to investors that they should wait for a few more trading sessions to get the better entry levels.

 
PDL Daily Chart (Source: Thomson Reuters)

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