Boral Limited

BLD Details

Resignation of the Chairman: Boral Limited (ASX: BLD) had recently announced that Dr. Brian Clark will retire as Chairman of the group and as a Non-executive Director on 30 June 2018 due to health reasons. However, Board of Directors appointed current Non-executive Director Ms. Kathryn Fagg to succeed Dr. Clark as the Chairman, effective 1 July 2018. BLD’s revenue grew by 40% to $2,937 million for the half year ended 31 December 2017 (H1 FY18) at the back of organic and innovation-based growth in plasterboard market in Asia, Australia, and the Middle East. EBITDA stood at $500 million, marking a significant growth of 50% against 1HFY17. NPAT increased by 44% and amounted to $214 Mn in 1HFY18. Based on solid performance, the Board of Directors declared an interim dividend of 12.5 cents per share (franking at 50%) which was paid on March 09, 2018, representing dividend rise of 4.2% as compared to previous corresponding period. This represents 68% of dividend payout ratio which is in-line with the group’s dividend policy of between 50% to 70% of earnings before significant items, subject to the company’s financial position.


1HFY18 Financial Highlights (Source: Company Reports)

As of now, we maintain our “Buy” recommendation on the stock at the current market price of $ 6.710, as the group continues to strengthen its core business and deliver synergies from the Headwaters acquisition while it regularly pays dividends.
 

BLD Daily Chart (Source: Thomson Reuters)
 

Commonwealth Bank of Australia

CBA Details

Long-term Strategy Continued: Commonwealth Bank of Australia (ASX: CBA) is a large-cap company with the market capitalization of 132.41 Bn as of July 24, 2018. Recently, the bank informed the market that it will demerge its wealth management and mortgage broking businesses. This initiative will create an independent wealth management business for both entity i.e., Colonial First State (CFS) and CBA, and enable it to enhance its focus on its core banking businesses in Australia and NZ and create a simpler, better bank. Hence, this will support to unlock value for both groups for their respective shareholders. Besides this, the group reported a statutory profit growth of 1.2 per cent in 1HFY18 and this amounted to $4,895 Mn in 1HFY18. Net interest margin was marginally up by 6 bps to 2.16 percent in 1HFY18 as compared to the prior corresponding period (pcp). As of now, the company has maintained a strong and resilient balance sheet which will provide the strong foundation to support customers and deliver returns for shareholders throughout the economic cycle.


Long-term Strategy Continued (Source: Company Reports)

Despite the industry setbacks related to the royal commission, we expect that the group will be reloaded with multiple growth catalysts in the long run at the back of increasing activity of home loan lending and business and retail banking in view of the current valuation. Hence, we uphold our “Buy” recommendation on the stock at the current market price of $ 75.170.
 

CBA Daily Chart (Source: Thomson Reuters)
 

Scentre Group

SCG Details

Strategic Acquisition: Scentre Group (ASX: SCG) is the country's largest listed retail landlord that has purchased a 50 per cent interest in Westfield Eastgardens in Sydney's south?east from the Saunders family's Terrace Tower Group for $720 million, representing a capitalization rate of 4.25%. The objective of this deal is expansion of the retail segment and a mixed-use development (including, commercial, accommodation and education facilities) thereby resulting in the overall growth of the company. The retail expansion needs both council approvals as the retail space is already close to the capacity and DA. If both are approved, the group has a potential for retail expansion and mixed-use development given its location within an area that is undergoing substantial renewal. On the financial front, the group in 2017, posted for 4.25% growth in the Funds from Operations (FFO) to $1.290 Bn, which represents 24.29 cents per security. The distribution is of 21.73 cents per security, which is an increase of 2%. Excluding the impact of transactions, FFO growth is approximately 4.9%. Net margin expanded by 7360 bps to 222.2% in 1HFY18 against the prior corresponding period. Based on robust performance in the first half, RoE substantially increased from 9.7% to 13.1% on the Year-on-Year basis. Meanwhile, the stock price was up by 9.77% in the past three months as at July 23, 2018 and is trading at a low PE level (5.38x) among its peer group. Hence, we maintain our “Buy” recommendation on the stock at the current market price of $4.260, considering the aforesaid acquisition which will provide affluent opportunity in years to come.
 

SCG Daily Chart (Source: Thomson Reuters)
 

Spark Infrastructure Group

SKI Details

TransGrid final regulatory determination is expected to be received in December 2018:Spark Infrastructure Group’s (ASX: SKI) distribution businesses provide cash flow certainty from their regulated assets to 30 June 2020 (SA Power Networks) and 31 December 2020 (Victoria Power Networks). While TransGrid’s regulatory determination for the period from 1 July 2018 to 30 June 2023 is broadly in line with expectations, the Australian Energy Regulator (AER) is satisfied that TransGrid’s forecast operating expenditures are efficient. It now provides the business with regulatory certainty for the next 5 years to maintain and develop the transmission system in response to the dramatic changes in the electric market that are occurring. SKI’s businesses also have strong investment grade capital structures (Victoria Power Networks A-, SA Power Networks A-/A3, and TransGrid Baa2). The final submissions are invited by 14 September 2018 before the AER’s final decision in December 2018, which will provide 5 years of cash flow certainty.  Besides this, the group had confirmed the FY18 distribution guidance of 16.0 cents per share, which is an increase of 4.9% on FY17. Given the potential, we maintain our “Buy” recommendation on the stock at the current price of $2.260.
 

SKI Daily Chart (Source: Thomson Reuters)

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