NIB Holdings Ltd

NHF Details

Completion of $60 million institutional placement: NIB holdings Ltd (ASX: NHF) continued to see the latest surge in stock price with a 4.9% rise on September 22, 2017 at the back of successfully completing its fully underwritten $60 million institutional placement for the acquisition of GU Health for $155.5 million. The Placement received strong demand from both existing institutional shareholders and new investors, and was significantly oversubscribed. The final issue price for the Placement is $5.65 per share, representing a discount of 2.1% to the closing price on 19 September 2017 of $5.77 and approximately 10.6 million new ordinary shares will be issued on 25 September 2017, with the issue and quotation of the new securities expected to occur on 26 September 2017. The new shares will rank equally with existing shares on issue.

GU Health is Australia’s only established specialist corporate group health insurer, servicing over 34,000 policyholders across more than 260 corporate clients. For FY17, GU Health generated a premium revenue of $193.5 million. The $155.5 million purchase price implies an acquisition multiple of approximately 15.0x FY18E adjusted pro forma NPAT pre-synergies and the transaction expected to be immediately EPS accretive. Meanwhile, NHF had reported NPAT growth of 30.9% for the year ended 30 June 2017 while the total group underlying revenue was of $2.0 billion (up 7.0%). The stock rallied over 26.4 % in the last one year (as of September 21, 2017) and is trading at high levels. We maintain an “Expensive” recommendation on the stock at the current price of $ 5.97

BT Investment Management Ltd

BTT Details

JOHCM to directly pay for external research: Recently, BT Investment Management Ltd.’s (ASX: BTT) stock surged up 2.4% on September 22, 2017, at the back of improving sentiments. The group’s wholly owned subsidiary and active asset management company J O Hambro Capital Management (JOHCM) recently announced that it will directly pay for external research used by its fund management teams when the reforms to the EU's Markets in Financial Instruments Directive (known as MiFID II) come into effect on 3^rd January 2018.

Meanwhile, BTT’s Funds under Management (FUM) were up $3.2 billion for the quarter ended 30 June 2017. During the quarter, JOHCM saw $1.1bn in net inflows led by ongoing demand by US clients for the International Select fund (+$0.9bn) and the Global Opportunities strategy in the institutional channel (+$0.3bn). While European funds in the OEIC’s experienced inflows of +$0.3bn, there were outflows in UK (-$0.2bn) and global (-$0.2bn) OEIC’s. BTIM Australia saw outflows of $0.4bn resulting from institutional redemptions and the run off in the legacy book. Institutional flows were positive in cash (+$0.2bn) and Australian equities (+$0.1bn) while there were outflows in fixed interest (-$0.2bn) and global equities’ strategies (-$0.4bn). The stock has moved up 26.9% in the past one year (as at September 21, 2017) and currently trading at high levels. We maintain an “Expensive” recommendation at the current price of $ 11.14

Scottish Pacific Group Ltd

SCO Details

Revenue driven by Bibby, GE and Suncorp client portfolios: For FY17, Scottish Pacific Group Ltd (ASX: SCO) has reported 8.2% yoy (year on year) growth in net revenue at $100.4m, led by the first full year contribution of the acquired Bibby, GE and Suncorp client portfolios and was driven by a strong second half FY17. SCO posted FY17 PBIT of $41.7m, NPAT of $25.3m and NPATA of $29.4m. Notably, scale benefits and synergies drove an increase in the PBIT margin to 41.5% from 36.1% in FY16. Increasing average client size contributed to growth, with Average Exposure of $871m in June 2017, up from $633m in June 2016. In addition, new business enquiries jumped 70% on FY16 with increases from directly sourced new clients and bank referrals. On the other hand, the company’s debtor finance loan book grew at 11.3% in FY17, while maintaining margins and conservative risk parameters.

SCO will continue enacting on its growth initiatives, including increasing new business enquiries and growing the direct origination capabilities of the business. The company will continue to invest in its Online New Business Portal to capture new audiences and drive additional volumes. The results for FY17 substantially achieved guidance and importantly FY18 starts with a loan book volume, well up on last year. The stock has declined over 28% in the last one year (as of September 21, 2017) and is trading at lower levels. Given the improving revenue outlook and synergies driving the performance, we give a “Speculative Buy” recommendation on the stock at the current price of $ 2.85

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