Stocks’ Details

Incitec Pivot Limited

Strong revenue growth: Global leading resource & agriculture company, Incitec Pivot Limited (ASX: IPL) has completed a review of its Single Super Phosphates (SSP) manufacturing operations in Victoria. The Portland SSP manufacturing facility will close in May 2019 and the operations will be consolidated to the Geelong SSP manufacturing facility. The total cost relating to the closure and subsequent consolidation of operations to Geelong is anticipated to be approximately A$13 million, consisting of A$9M in cash costs and A$4M in non-cash costs.  The company will include these costs in the full year FY19 results.

FY18 Group Performance (Source: Company Reports)

The revenue of the company is up by 11% to $3,856.3 million in FY18, with Net Profit After Tax (NPAT) after minority interests of $207.9 million in 2018. NPAT excluding Individually Material Items (IMIs) of $347.4 million increased $28.7 million when compared to 2017 NPAT.

What to Expect From IPL: As a result of the dry weather across pasture, summer and winter cropping regions in Eastern Australia, distribution sales in the first half of FY19 are currently down approximately 200,000 tonnes versus the prior corresponding period (pcp), and it seems unlikely at this stage that there will be any substantial recovery of those lost volumes in the second half.  The impact of these lower volumes on first half FY19 EBIT is expected to be approximately A$20M compared to the pcp. It will announce its first half FY19 results on Monday, 20 May 2019.

In FY 2018, the company’s EBITDA margin stood at 20.2% which is higher than the industry median of 17.2%.

Meanwhile, the stock has fallen 21.23% in the past six months and is trading close to its 52-week lower levels, proffering a decent opportunity for accumulation. Therefore, with the decent growth in revenue and profit Y-o-Y coupled with higher EBITDA margin in FY18, we recommend a “Buy” rating on the stock at the current market price of $3.200 per share.
 

Bendigo And Adelaide Bank Limited

Lower ROE Against Previous Period: Australian retail banker, Bendigo And Adelaide Bank Limited (ASX: BEN), has updated about the change in director’s interest where Marnie Baker, having a direct interest in the company, acquired 5,447 ordinary shares at $9.73 per share. From the analysis standpoint, the after-tax statutory profit of the bank stood at $203.2 million in 1HFY19, up by 0.2 percent as compared to 2H FY 2018. However, it is down from $231.7 million in 1HFY18. The common equity tier 1 capital ratio increased by 14 bps since June 2018, and the retail deposit balances stood at $52.3 billion in 1H FY 2019 which implies a rise of 3.2% from June 2018. The ROE is down to 7.94% in the reported period down by 19 bps from 2H18.
 

Financial Performance 1HFY19 (Source: Company Reports)

What to Expect From BEN: The operating environment is extremely competitive, and the bank expects this to continue. It will focus on achieving its vision to be Australia’s bank of choice. The bank aims to grow the number of customers that choose to bank with them as it focuses on accelerating revenue growth.

Meanwhile, the stock generated a negative YTD return of 5.43%. Therefore, considering the competitive operating environment moving forward coupled with the fall in RoE and looking at the current trading level, we have a “wait and watch” stance on the stock at the current price of A$9.860 per share (down 0.605% on April 04, 2019).
 

CYBG PLC

Strongly Capitalized With Higher CET1 Ratio: Financial service provider, CYBG PLC (ASX: CYB), confirmed that they have made good progress with the Virgin Money integration programme, and the trading for the quarter to 31 December 2018 was in line with the Board’s expectations. The acquisition of Virgin Money got wrapped up on 15 October 2018.
 

Customer Balances  (Source: Company Reports)

The Q1 mortgage growth stood at 1.5% to £60.0bn which was driven by a strong pipeline and good customer retention.The Q1 SME growth was 1.2% to £7.6bn with approximately £600 million of drawdowns underlining the strength of the Group's SME strategy and strong demand from customers.

However, the net interest margin remained lower than FY18 due to continued pricing pressure in the UK mortgage market.The common equity tier 1 ratio stood at 14.5% approximately 60bps lower than the pro forma 30-Sep-18 ratio mainly because of ordinary dividend and AT1 distributions, and exceptional charges.

NIM Guidance: Amidst highly uncertain political situation in the UK, CYBG PLC remains focused on unlocking the opportunities from the Virgin Money acquisition and delivering its margin and cost guidance for FY 2019. Assuming a broadly stable pricing environment, the NIM of the group is expected to be 165-170 bps for FY19. Moreover, the group expects to deliver a minimum of £150 million of annual net run-rate cost synergies by the end of FY21 compared to £120 million previously announced.

The CET 1 ratio of CYBG PLC stood at 14.5% at the end of 31 December 2018 and it is strongly capitalised. The company has witnessed good progress with respect to cost reductions. As a result, we recommend a “Buy” rating on the stock at the current market price of $3.870 per share (up 2.926% on 4 April 2019).


 
Stock Price Comparative Chart (Source: Thomson Reuters)       

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