Stocks’ Details

Woolworths Group Limited

Decent Q3 FY18 Sales Performance: Supermarket player, Woolworths Group Limited’s (ASX: WOW) stock edged up about 1 per cent on May 02, 2018 after the company released its third Quarterly sales report for the period ended 31 March 2018. The Group delivered decent set of sales results wherein the company recorded overall sales growth of 4.3% on year on year (YoY) basis to $14,244 Mn in Q3 FY18 from $13,660 Mn in Q3 FY17. Of which, Australia food business grew by 4.7% in Q3 FY18 as compared to previous corresponding period due to underlying transaction growth.  New Zealand Food recorded sales growth of 1.9% during the same period as against prior corresponding period (pcp) on the back of strong improvement in comparable transaction growth offset somewhat by lower items per basket during the same period. Endeavour Drinks' sales increased by 6.9% in the third quarter to $2,004 Mn on pcp basis. BIG W's sales increased by 3.2% to $770 Mn while comparable sales grew by 3.3%. On an Easter adjusted basis, comparable sales for BIG W’s declined by 1.2% due to impacted by the timing of New Year's Day and the shift in timing of the school holidays in New South Wales. Further, hotels' sales for the quarter registered YoY growth of 3.3% to $390 Mn in Q3FY18 while comparable sales grew by 3.9% on an Easter-adjusted basis. Hotel sales growth was driven by growth across all key categories of Gaming, Bars, Food and Accommodation with sales benefitting from the performance of refurbished venues. Petrol sales for the quarter declined by 0.3% to $1,215 Mn in Q3 FY18 which was largely in line with the prior year. Petrol’s sales were muted down due to a reduction in average fill size as a result of higher average fuel prices, up by 5.3% in Q3 FY18 as compared to pcp. According to the management, the business has now shifted from turnaround phase to transformation and is looking for a number of opportunities which will support to improve the business portfolio in upcoming years. In view of the above and WOW’s ability to grow better than Coles in terms of same store sales, we give a “BUY” recommendation on the stock at the current market price of $ 27.990.


3^rd Quarter Sales Figure (Source: Company Reports)
 

WAM Capital Limited

WAM Global IPO Exceeds Minimum on Offer Open: WAM Capital Limited (ASX: WAM) informed to the market that WAM Global Limited has exceeded the $16.5 million minimum offer proceeds in its strictly limited $550 million initial public offer capital raising that opened on May 02, 2018. WAM Global shares are expected to list on ASX market on June 22, 2018. On the WAM global business front, the objective of the business is to provide capital growth over the medium-to-long term, deliver a stream of fully franked dividends and preserve capital while providing shareholders with exposure to global equities. WAM Global will focus on undervalued international growth companies with a bias to small-to medium sized entities, utilise a portfolio based and index unaware investment methodology and preserve shareholders’ capital.


IPO - Important Dates (Source: Company Reports)

On the other hand, WAM capital intends to undertake a placement of the dividend reinvestment plan (DRP) shortfall at the price of $2.35 per share. The issuance of new shares at a premium to the company’s net tangible assets (NTA) will increase the NTA per share to the benefit of all shareholders. Moreover, Christ Stott, director of the Company, having an indirect interest in the Company recently acquired of 2,096 shares via issue of securities under dividend re-investment plan, as at 27 April 2018. Besides this, Kate Thorley, director of the company who has an indirect interest in the company also acquired 2,800 ordinary shares under on-market trade, as at April 20, 2018. We maintain our “HOLD” recommendation on the stock at the current market price of $ 2.390, given its dividend yield and upcoming developments.
 

Bank of Queensland Limited

Business on Track: Bank of Queensland Limited (ASX: BOQ) has presented at the Macquarie Conference highlighting its first half year results and business prospect for future. The group has improved lending growth on the back of commercial niche segments, as well as home loan growth through the Virgin Money, BOQ Specialist and BOQ broker channels. This led to a total lending growth that amounted to $671 Mn in 1HFY18 as compared to the contraction of $157 million in 1HFY17. Moreover, the group has delivered a 1HFY18 result with cash earnings of $182 Mn, representing a 4% increase on 1HFY17 and statutory net profit after tax of $174 million, an increase of 8% on 1H17. Besides this, the group’s balance sheet remains very strong with an increase in its Common Equity Tier 1 ratio (CET1) of three basis points to 9.42 per cent during the aforesaid period. BOQ group’s return on equity (RoE) increased to 9.9 per cent in the half year from 9.8 per cent in the previous corresponding period. We assume that the business is on right track and has potential to grow on the back of expanding product mix portfolio and focus on number of initiatives which are underway across the group that will bring the business closer to the customers.


Key Financials Highlight (Source: Company Reports)

On the other hand, the group has issued A$2,00,000,000 subordinated instrument (i.e., Tier 2 Subordinated Instruments) in the Australian domestic wholesale capital markets on May 01, 2018. Further, the proceeds from the issue of the Tier 2 Subordinated Instruments will be used for general business purpose. It will contribute towards Tier 2 regulatory capital to satisfy BOQ’s regulatory capital requirements and maintain the diversity of BOQ’s sources and types of capital funding. The issue of the Tier 2 Subordinated Instruments will not have a material impact on BOQ’s financial position. The proceeds of this $200,000,000 issue will increase BOQ’s expected Tier 2 capital ratio on a Level 2 basis by 68 basis points. Meanwhile, we maintain our “Hold” recommendation on the stock at the current price of $ 10.070 while the stock has fallen about 20% in last three months.
 

National Storage REIT

Splendid 1HFY18 Performance: National Storage REIT (ASX: NSR) delivered robust first half year performance wherein sales grew by 22% to $66,546,000 as against $54,359,000 in prior corresponding period. The sales spiked up due to solid storage revenue growth via increase in centre occupancy, rate per square and acquisition of additional centres during the aforesaid period. Profit before tax (PBT) grew substantially by 135.1% to $57,016 in 1HFY18 as compared to prior corresponding period. As a result of this, Profit after tax (PAT) increased by 153% and amounted to $59,813,000 in 1HFY18 as compared to previous corresponding period. Further, the acquisition of ten storage centres and a development site contributed to 7% rise in total assets under management to $1.254 billion and is consistent with the ongoing commitment to execute growth strategy in a highly fragmented industry. We expect that the group will continue to successfully execute its growth strategy in a highly fragmented industry, leveraging fully integrated, scalable operating platform to maximize shareholder returns.


Key Operational Metrics (Source: Company Reports)

On the other hand, NSR drives Revenue Per Available Square Metre (REVPAM) by balancing occupancy and rate per sqm growth on a centre and individual unit basis. Revenue management strategies continue to advance based on NSR’s multiple signal revenue management model and data analytics. Further, the organic growth has been supported by improvement in two major growth drivers i.e., occupancy and revenue per available square per metre (REVPAM), thus, we expect that this will continue to provide strong platform for overall growth in years to come. Meanwhile, the stock was up by 9.40% in the last three months as at May 01, 2018 and is trading at very high price to earnings ratio among its peer group. We maintain our “Hold” recommendation on the stock at the current market price of $ 1.625.

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