Insurance Australia Group Limited

IAG Details

Profit Booking: Insurance Australia Group Limited’s (ASX: IAG) stock plunged 3.191 per cent on July 03, 2018 post media news on the group that is expected to face AMP like scenario under investigations through royal commission in the month of September. More astounding is the revelation that group’s general counsel and company secretary, Chris Bertuch has taken a leave of absence from the ASX-listed insurer and the market anticipates that he will never return. However, the market became aware of Ms. Rebecca Farrell's acting status on June 1st, when the group issued an ASX announcement about a change in company address which was signed by Ms. Farrell. IAG has otherwise posted decent profit growth of 23.5 per cent to $551 Mn in 1HFY18 as compared to prior corresponding period. This was primarily driven by rate hike in commercial and consumer line, and volume growth in the motor division. Further, the group’s capital position remains strong with a Common Equity Tier 1 (CET1) ratio of 1.19 against the target benchmark of 0.9-1.1. Furthermore, the Group is expecting low-single-digit growth in gross written premium for FY18 on an insurance margin in the range of 15.5%-17.5%.


Margin Trends – 1H17-1H18 (Source: Company Reports)

Moreover, the group also disclosed its distribution payment of AUD 1.21850 with dividend distribution rate of 6.7592 % per annum for IAGPD - CAP NOTE 3-BBSW+4.70% PERP NON-CUM RED T-06-23 and it will be paid on September 17, 2018 with the record date of September 07, 2018. Meanwhile, the share price rose by 16.53 per cent in the past six months as at July 02, 2018 and currently trading close to 52-week high. Hence, we maintain our “Sell” recommendation on the stock at the current market price of $ 8.190, considering the positives (such as sale of Asian assets) already factored in the price and the investors seem to be moving towards profit booking in view of the remaining potential in the stock along with pending investigation.
 

IAG Daily Chart (Source: Thomson Reuters)
 

InvoCare Limited

IVC Details

Another Strategic Acquisition to propel Growth: InvoCare Limited (ASX: IVC) has entered into a conditional sales agreement to acquire the business and assets of Lester & Son based in Albury-Wodonga, Victoria.  With this news, the share price climbed up 1.314 per cent on July 03, 2018. The purpose of this agreement is to provide an opportunity for InvoCare to build on its expansion plans into regional markets by acquiring the leading funeral business on the New South Wales/Victorian border. The acquisition includes the purchase of two fully equipped funeral homes complete with mortuaries. This also included separate crematorium facility. Further, the group intends to fund the following transaction from its existing financing facilities and it is expected to be complete by the end of July 2018, following the fulfilment of certain key conditions. This acquisition can generate positive synergies for years ahead.


Geographic Footprints (Source: Company Reports)

On the other hand, Macquarie Group Limited and its controlled corporate bodies became a substantial holder of the group since June 25, 2018 with 5.0% of voting power. Besides this, IVC disclosed to ASX that one of its directors, Richard Hugh Davis had a direct interest in the Company, disposed 10,000 ordinary shares via on-market sale at an issue price of $13.42 per share. Meanwhile, the stock price has fallen 14.32 per cent in the past six months and was up by 3.09 per cent in the past one month as on July 02, 2018. The stock looks “Expensive” at the current market price of $13.880 looking at its trading level, while the company has decent outlook at the back of various synergistic acquisitions.
 

IVC Daily Chart (Source: Thomson Reuters)
 

Magellan Financial Group Limited

MFG Details

Executive Remuneration Update: Magellan Financial Group Limited (ASX: MFG) reported growth of 1.74 per cent in total funds under Management from April 2018 to May 2018 and the same sits at $67,354 Mn. MFG has recently informed to the market about replacement Executive Employment Agreement which has been negotiated and agreed between Magellan Asset Management Limited and Mr Hamish Douglass. According to the release, Mr. Douglass’ fixed remuneration has been revised to a fixed dollar amount of $2,500,000 per annum from the previous amount which was calculated as a percentage of 1.5% of the average 3-year pre-tax profits of the funds management business. His variable compensation has been revised from 100% to 200% of the fixed remuneration. There is also a cap on the maximum total annual remuneration of $7,500,000 for the next three years as compared with no cap previously.


Funds Under Management for May (Source: Company Reports)

Over the six months, the company announced two strategic acquisitions i.e., with Frontier Partners in the United States and Airlie Funds Management, aiming to diversify and strengthen its retail funds management business in Australia and add significant focus to its institutional distribution activities in North America. RoE stood at 12.1% in 1HFY18 while the current ratio substantially increased from the last six months to December 31, 2017. Meanwhile, the stock has fallen 10.06 per cent in the past six months and moved up by 4.59 per cent in the past one month as at July 02, 2018. At present, the stock is trading over its 52-week low level; hence, we maintain our “Buy” recommendation at the current market price of $23.730, considering long-term potential into the business.
 

MFG Daily Chart (Source: Thomson Reuters)
 

Suncorp Group Limited

SUN Details

Decent Outlook: Suncorp Group Limited (ASX: SUN) has recently presented its business prospects at the Macquarie Conference and highlighted about FY18 activity and guidance for FY19 wherein the group continues to focus on making it easier, simpler, and faster for customers to have their financial needs met. In the release, the group stated that it anticipates top-line growth of 3% to 5% for FY19. This will mainly be supported by the strategic initiatives and targeted growth in selected product classes leading to a cash ROE of 10% with support from other efforts and targets. It will be potential to see the benefits from SUN’s cost savings program, while the group will maintain its dividend payout ratio in between 60% and 80% of cash earning.


Trend of Retail Lending Portfolio (Source: Company Reports)

On the other hand, the group disclosed its distribution payment of AUD 0.99660 with dividend distribution rate of 3.9974 % per annum for SUNPG - CAP NOTE 3-BBSW+3.65% PERP NON-CUM RED T-6-24 and it will be paid on September 17, 2018 with the record date of September 03, 2018. Moreover, the group further disclosed another distribution payment of AUD 1.07510 with dividend distribution rate of 4.3124 % per annum for SUNPF - CAP NOTE 3-BBSW+4.10% PERP NON-CUM RED T-06-22 and it will be paid on September 17, 2018 with the record date of September 03, 2018. Meanwhile, the stock price was up by 7.42 per cent in the last one month and SUN is trading at slightly high levels. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $14.570, considering decent outlook on the back of aforesaid facts.
 

SUN Daily Chart (Source: Thomson Reuters)

 
Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.