Westpac Banking Corporation

Banking sector challenges: Westpac Banking Corporation’s (ASX: WBC) stock plunged 3.674 per cent on May 17, 2018 as the group traded ex-dividend and there seems to be some profit booking. However, the group delivered a decent performance across the business during first half of the year wherein Net Profit after tax increased by 7% to $4,198 Mn in 1HFY18 as compared to prior corresponding period. We maintain an “Expensive” recommendation on the stock at the current market price considering market volatility, intense competition, rise in credit defaults, and changes in regulatory policy and Royal Commission.

Treasury Wine Estates Limited

Challenges in China: The Treasury Wine Estates Ltd.’s (ASX: TWE) stock plunged by 6.2% on May 17, 2018 while the group has indicated for the sustainability of its operating model in China, to build a portfolio of brands, and of its disciplined approach to managing inventory levels with its customers. However, the group flagged for a supply glut with regards to some of its low-end products in China at the back of changes to the import verification requirements. It has been speculated that one distributor allegedly has three-year’s worth of stock on its hands, while TWE has disregarded the reports. The stock has been down 5.9% in last five days owing to the latest challenges. We believe it might be better to avoid the stock given the trading conditions and other challenges while TWE is trying to sort the issues out with the Chinese Government.

ALS Ltd

Update on Buy-Back Shares Event: ALS Ltd (ASX: ALQ) updated the market about the progress on several transactions under its ongoing buy-back event. The company intends to buy back shares with an aggregate consideration of US $175,000,000. Recently, the group bought back 450,781 shares via on-market trade for the consideration of $3,210,191.81. This buy-back event has been funded from existing cash balances and free cash flow and it will not impact any dividend policy. In addition to this, the group retains strong balance sheet and flexibility to pursue growth opportunities in future. During the first half of the year, the group recorded revenue growth of 13.9% to $366 Mn as compared to previous corresponding period. However, the net loss after tax attributable to equity holders of the company recorded at $8.9 million in 1HFY18 as compared to net profit of $48.7 million in 1HFY17. The company has experienced uncertain market conditions in the sectors serviced by the Coal and Industrial businesses.


Debt Metrics (Source: Company Reports)

Besides this, Macquarie Group Limited and its controlled bodies ceased to be a substantial holder of the group since March.  The Company disclosed to ASX that one of its director Raj Naran had a direct interest in the Company and acquired 19,000 ordinary shares via on-market trade. Furthermore, the company disclosed to the market that its another director Tonianne DWYER had an indirect interest in the company and acquired 4,200 ordinary shares through on-market trade. Meanwhile, the stock has risen 17.11% in past three months but was down by 3.6% on May 17, 2018 owing to volatility. The stock is trading at higher levels; thus, we maintain our “Expensive” recommendation on the stock at the current price.

 
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