Westpac Banking Corp
Sailing through the challenges while FY 18 cash earnings are expected to be low: Westpac Banking Corp.’s (ASX: WBC) stock has fallen 11.16% in three months as on October 16, 2018 after Royal Commission identified slipups made by the bank. As a result, WBC will respond fully to the Interim Report as part of the submission process. The bank has introduced several reforms, that include remuneration structures, the approaches to deal with the customer issues and removing grandfathered commissions attributable to BT products. Moreover, WBC projects that its Cash earnings for FY18 will be reduced by an estimated $235 million on the back of continued work to resolve customer issues and from provisions related to recent litigation. WBC has increased the provisions for customer refunds related with certain advice fees charged by the Group’s salaried financial planners due to more detailed analysis going back to 2008. The bank has increased the provisions for refunds to customers who may have received inadequate financial advice from WBC planners. The bank has also made additional provisions to resolve legacy issues as part of the Group’s detailed product reviews. WBC has made provisions for costs of implementing the three remediation processes. However, WBC is well placed to meet APRA’s unquestionably strong capital benchmark. Meanwhile, WBC stock is trading at the price of level $26.61, and has resistance at $28.20 and support at $26.03. WBC stock is also trading at a low P/E of 10.69x. As of now, we give a “Buy” recommendation on the stock at the current price of $ 26.610 while it has a high dividend yield and capability to manage the challenges.
Magellan Global Trust
Fund Expected to continue to perform well as US economy is getting stronger: Magellan Global Trust’s (ASX: MGG) stock surged 7.41% on October 17, 2018. As per September fund update, the company’s top holdings consist of blue chip companies of USA, that include stocks of Facebook, Alphabet (Google), Visa, MasterCard and Apple. MGG has invested in all of these top businesses and has outperformed the MSCI World Net Total Return Index (AUD) since inception a year ago by 1.2% after all fees. The portfolio stocks are expected to continue to perform as US economy is getting strong. US stocks have reached to great heights in September as the companies reported strong earnings growth. As per Financial research and data company FactSet, 80% of S&P 500 companies announced earnings per share for the second quarter that has beaten the analysts’ estimates. Further, in September, the Fed raised the US cash rate by a quarter point to between 2% and 2.25% and, as expected, signaled for another five rate increases into 2020. Meanwhile, MGG stock has fallen 1.22% in three months as on October 16, 2018 and is trading at a low P/E of around 10x. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $ 1.740.
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Top 10 Holdings (Source: Company Reports)
Cooper Energy Ltd.
Decent Performance in the September Quarter 2018: Cooper Energy Ltd.’s (ASX: COE) stock rose 2.17% on October 17, 2018 with positive sentiments continuing on the stock. The company for September quarter, posted 51% rise in sales revenue to $21.8 million due to higher prices for oil and gas and higher gas production. The quarterly revenue grew 7% from the prior quarter. The production increased 6% to 0.37 MMboe from previous quarter’s 0.35 MMboe. Gas production rose by 13% to 1.88 PJ for the September quarter than the previous quarter comparative on the back of increased output from Casino Henry after the workover of the Casino-5 well in April 2018. However, overall production declined by 14% on year on year basis. Gas production for the September quarter fell 11% than the previous corresponding period as both Casino Henry and Minerva contributed comparatively lower output. The company’s cash at the end of September fell to $203.8 million from $236.9 million at the beginning of the quarter. Cash held in escrow also decreased from $20.2 million at the beginning of the quarter to $5.8 million due to payments for the offshore drilling program. Moreover, the company has completed Sole’s production wells and the company is now laying the pipeline to connect Sole to the Orbost Gas Plant. COE is currently some 9 months from project completion and the transformative uplift in production and cash flows this will bring. Additionally, for FY 19, Casino Henry gas is fully contracted. COE stock is trading at the price of $0.47, and has resistance at $0.495 and support at $0.40. The COE stock has risen 6.98% in three months as on October 16, 2018. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $0.47, while we expect more momentum to be witnessed.
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September 2018 Quarter Performance (Source: Company Reports)
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