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FY18 PBT is on track as per estimates: Dicker Data Limited (ASX: DDR) is a leading Value-Added Distributor company across Australia with the sale of $1.3 billion in FY17. In addition to this, the group has a specialty in servicing the mid-market and SMB communities with a specific focus on presales capabilities, value-added services, and emerging hybrid end to end technology solutions. From the analysis standpoint, the group posted decent first half-year performance wherein revenue from ordinary activities was up by about 13.5 percent against 1HFY17, while Net profit after tax increased by 24.9% and amounted to about $16.2 million against $13.0 million of the prior corresponding period (PCP). On CAGR basis, the company posted consolidated revenue growth of 9.0 percent over 7 consecutive halves (i.e., 1H FY15 to1H FY18) while PAT recorded CAGR growth of 8.7 percent over the same period. In the 6 months to June, pre-tax profit was on track and the group expects profit before tax of $42.5 Mn in FY18. Its RoE stood at 13.7% in 1HFY18 which is higher than the peer group (6.6%), representing the group efficiency to generate higher profit with the shareholders invested capital.

Financial Highlights (Source: Company Reports)
As of now, the industry is going through the major transformation and evolving faster than ever, therefore, the company needs to keep evolving to differentiate and offer a unique value proposition to both vendors and reseller partners which will translate into growth opportunity in years ahead. Meanwhile, the stock price was up by 20.40 percent in the past one year but down by 4.14 percent in the past five days as at September 14, 2018. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $ 3.010.
 

National Storage REIT

Completion of Entitlement Offer:National Storage REIT (ASX: NSR) has recently completed the retail component of its 5 for 37 pro-rata accelerated non-renounceable entitlement offer of new ordinary stapled securities in NSR at a fixed price of $1.66 per New Security. Trading of the New Securities is expected to commence on a normal settlement basis on the ASX on 17 September 2018. Through this event, the company has raised capital of approximately $37 Mn, representing issued of 22.24 million New Securities. The company will use this fund to replenish National Storage REIT’s balance sheet, reducing gearing level to ensure sufficient headroom for growth and longer-term financial flexibility to continue its sector consolidation strategy and pursue further growth identified strategic initiatives. The entitlement offer was strongly supported by retail security holders with the take-up rate, including additional New Securities applied for in excess of entitlements, at approximately 45%.


FY18 Financial Highlights (Source: Company Reports)

On the other hand, FY18 adjusted IFRS PAT of $145.8 Mn is an incline of 40.6% on YoY basis. It was mainly driven by the strong storage revenue growth of 18% to $124.6 million during the period. NSR continues to be well positioned for growth in FY19 through the implementation of several strategic initiatives and the execution of its acquisition and development pipeline across Australia and New Zealand. Based on its strategic movement, the company has provided underlying EPS guidance of 9.6 – 9.9 cps for FY19. Additionally, NSR for FY 19 expects underlying EPS in the range of $62.5 – $64.5 Mn. Meanwhile, the stock climbed 10.41% in the past three months as at September 14, 2018 and traded at 52-week higher level of $1.771. Based on the foregoing and trading level, we maintain our “Hold” recommendation on the stock at the current market price of $1.730.
 

Rural Funds Group

Appointed CompanySecretary to the Board:Rural Funds Group (ASX: RFF) is a small cap company with the market capitalization of circa $728.63 Mn as of September 17, 2018. Recently, the group announced that Mrs. Andrea Lemmon has resigned from her position as RFM Company Secretary and will leave RFM in October 2018 after 21 years of service. In turn, Ms. Emma Spear has been appointed as Company Secretary of RFM, effective from 31 August 2018. On the financial front, adjusted funds from operations (FFO) increased 26% to $32.32 Mn in FY18 on YoY basis. It was mainly driven by the stronger Property revenue growth partly offset by higher interest expense. During FY18, free cash outflow and gearing were slightly higher, due to the earlier-than-expected deployment of capex. Besides this, RFF’s strategy is to generate stable income and capital growth by owning, and where appropriate, improving the productivity of farms. Guidance reiterated for FY19 FFO at 13.2 cents per unit and DPU at 10.43 cents per unit.

FY18 Key Metrics and FY19 estimates (Source: Company Reports)

Meanwhile, the share price has risen 10.89% in the past one month as on September 14, 2018 and traded at a relatively higher PE of 15.50x among its peer group. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $2.180.
 

Aventus Retail Property Fund

FY19 FFO Guidance: Aventus Retail Property Fund (ASX: AVN) has guided to FY19 FFO of 18.2 cents per unit if the internalization is approved. Moreover, the company recorded FY18 FFO of $89 Mn or 18.1 cents per unit, representing a growth of 2.3% over the prior corresponding period. According to the management, it’s been another strong year for the portfolio achieving solid organic rental growth, high occupancy, and attractive development returns. Based on decent performance, distributions per unit for the year ended 30 June 2018 accounted at 16.3 cents per unit. This represents a payout ratio of 90% of FFO, within the Fund’s distribution policy of 90% - 100% of FFO. Occupancy for FY18 remains strong at 98.7% with low incentives.

Consistently High Occupancy (Source: Company Reports)

On the development front, the company continued its development activities and spent $32 Mn in FY18 which is in-line with its strategy to add value, increase GLA, improve the shopping experience and enhance investor returns. The major development project completed during the year was Tuggerah Super Centre adding approximately 10,000 sqm of GLA to a centre anchored by Bunnings, Spotlight and The Good Guys. Additionally, the company has provided development spend guidance for FY19 to be around $40 million. Meanwhile, the share price has fallen 5.98 per cent in the past one year (as at September 14, 2018) and traded at the reasonable P/E level of 8.0x. Hence, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $2.190, considering decent outlook ahead.
 

Australia And New Zealand Banking Group

Update on ASIC civil action related to 2015 Institutional Equity Placement:Australia and New Zealand Banking Group Limited (ASX: ANZ) has recently released its report on ASIC civil action in relation to 2015 Institutional Equity Placement in which Australia Securities and Investments Commission has initiated civil penalty proceedings against ANZ alleging that the bank has failed to comply with its continuous disclosure obligations. The issue dates to 2015 and is related to an underwritten institutional placement in August 2015. ANZ has already disclosed in June that it is under an active investigation conducted by ASIC wherein the Australian watchdog launched a criminal cartel case against the bank. According to ASIC, ANZ was bound to advise the market that the joint lead managers i.e. Deutsche Bank, Citi, and JP Morgan held up 25.5 Mn shares of the placement. ANZ would defend the allegation stating that the total shares in question are below 1% of the issue at the time and were taken up by the managers because the boon suggested that placement was covered at 103%. The beleaguered Bank further stated that it had no knowledge of the norms wherein the listed company needs to disclose the shares taken up by the underwriters in an equity placement. Besides this, ANZ chief risk officer Kevin Corbally stated that the disclosures made by ANZ are in tandem with the ASX disclosure obligations along with market practices. Therefore, ANZ would defend the matter and does not have anything more to say at present. The criminal cartel law suggests that an individual if found guilty can face up to 10 years imprisonment or fines up to $420,000. Companies, on the other hand, would have to part ways with 10% of annual turnover, or thrice the profit made by the action.

On the financial front, the company reported a low Net Interest margin of 1.93% in 1 H FY18 compared to 2.00% in the previous comparable period. However, the bank has managed to maintain its statutory Profit after Tax for the 1H FY2018 at $3.32 Bn, up 14% PCP. The banking sector in Australia has been in a tight spot from quite some time now with biggest banks such as ANZ coming under criminal prosecution for the alleged cartel conduct. Based on foregoing, we give a “Hold” recommendation on the stock at the current market price of 28.40.


 
 
Comparative Price Movement Chart (Source: Thomson Reuters)

 
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