Woodside Petroleum Limited (ASX:WPL)

WPL Details

Volatility in Oil Prices - Woodside Petroleum Ltd (Woodside) is an oil and gas company and is engaged in hydrocarbon exploration, evaluation, development, production and marketing. According to the management, most of the development projects are well on track and domestic gas production is expected to be commenced in H2 FY18. During the quarter, the company has completed the acquisition of an additional 50% interest in the Scarborough gas field. Further, the group has recently revealed an update on its Wheatstone Project wherein it has successfully started Train 2 liquefied natural gas (LNG) production at its onshore facility near Onslow, Western Australia.


Liquidity and Gearing Trend (Source: Company Reports)

According to the announcement, Wheatstone's two trains are important additions to the six trains on the Burrup Hub in WA as these will enable WPL to achieve the targeted production of 100 Million Barrels of Oil Equivalents (MMboe) by 2020. Recently, oil futures were near multi-year highs, with Brent crude at US$77.61 and WTI at US$74.14.  Since one year the stock was moving in an upward direction (risen up by 20.78 in last three months and 7% in last one month as on 10 July 2018).The stock is trading very near to its 52-week high price that is $36.55. We recommend to “Hold” the stock at the current market price of $36.15 by looking at the volatility in oil prices.
 

WPL Daily Chart (Source: Thomson Reuters)
 

Suncorp Group Limited (ASX:SUN)

SUN Details

Disciplined lending practices - Suncorp Group Limited provides general insurance, banking and life insurance and superannuation products and related services to the retail, corporate and commercial sectors. The Group has confirmed that it will reward mitigation methods, through its award-winning Cyclone Resilience Benefit and will evaluate home improvements under the Flood Resilient Homes Program and adjust insurance premiums accordingly after consultation with the homeowners. Due to rise in competition within the industry, the company’s operating targets are unchanged. In order to do this, the group is still targeting a banking cost to income ratio of around 50 per cent, subject to regulatory reform costs, and its Net Interest Margin will be around 1.80 per cent to 1.90 per cent for FY19.


Portfolio Composition (Source: Company Reports)

Recently, The Vanguard Group, Inc. became the substantial holder of the Group since 6 July 2018 by holding 64,954,283 securities and 5 per cent of the voting power in the Company. The Experts feel that the merger of Bank of Queensland and Suncorp Group will create value in the market. Meanwhile, the stock price was up by 1.91 per cent in the past five days and by 6.7% in last one month, as on 10 July 2018 and SUN is trading at slightly high levels. Hence, we put a “Hold” recommendation on the stock at the current market price of $14.89 keeping in mind the interest rate scenario.
 

SUN Daily Chart (Source: Thomson Reuters)
 

Macquarie Group Limited (ASX:MQG)

MQG Details

Investment in Cash Equity Business - The Company is internationally diversified and is operating in corporate finance, treasury and commodities, equity markets and funds management. Recently, it was confirmed that acquisition of Macquarie ordinary shares required for the 2018 profit share and promotion awards under the Macquarie Group Employee Retained Equity Plan (MEREP Awards) was completed and a total of approximately $A454 million of Macquarie ordinary shares were purchased. Total fee and commission income of $A4,670 million for the year ended 31 March 2018 increased by 8 per cent from $A4,331 million in the prior year largely due to higher performance fees from MIRA-managed funds and assets outperforming their respective benchmarks.


Overview of Funding Sources and Funding Assets (Source: Company Reports)

The Group recently announced the appointment of three senior contributors to its Cash Equities business within the Commodities and Global Markets Group and it reflected an increase in the investment to strengthen and diversify the Cash Equities business. The operating leverage in September 2017 was (1.5) as compared to (2.9) in March 2018.In the meanwhile, the Group became the substantial holder of Sirtex Medical Ltd on 5 July 2018 by holding 3,518,459 securities and 6.30 per cent of the voting power in the Company. There is a chance that MQG might face a deposit funding constraint on its organic lending growth strategy. On the other hand, the stock price has been climbing up on ASX since the time it has got listed on ASX (was up by 39.56 per cent in one year and over 8% in last one month as on 10 July 2018). One can avoid investing in this stock as of now at the current market price of $121.99 and wait for an appropriate investment opportunity.
 

MQG Daily Chart(Source: Thomson Reuters)
 

QBE Insurance Group Limited (ASX:QBE)

QBE Details

Geographical Spread of Operations - QBE Insurance is an international property and casualty insurance company based in Australia, but it only writes about 24 per cent of its annual gross earned premiums in its home country. QBE is now targeting to achieve the combined operating ratio (COR) in the range of 95.0 per cent - 97.5 per cent in 2018 and investment return in the range of 2.5 per cent - 3.0 per cent given the various initiatives undertaken by the group. The focus is now on continued transformation and growth. Premium rate strength of over 4 per cent was noted for the first quarter, again led by Australia & New Zealand Operations, and positive rate movements in North America and Europe, while the Asia Pacific is under a comprehensive plan of action.


COR Performance (Source: Company Reports)

The Group performed well in the first half and generated a substantial cash profit, a dividend of 22 Australian cents per share which represented a pay-out of 61 per cent which was consistent with its dividend policy of paying “up to 65 per cent of cash profits”.  The stock price was rising in last three months that is by 2.20 per cent and 4.6% in last one month, as on 10 July 2018. We recommend to “Buy” the stock at the current market price of $9.79 that is near to its 52-week low price ($9.28) given the changing but positive scenario for the insurer.
 

QBE Daily Chart(Source: Thomson Reuters)

 
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