Stocks’ Details

NATIONAL STORAGE REIT (ASX: NSR)

Strong FY18 Performance - National Storage REIT (ASX: NSR) has posted strong FY2018 results with operating income up by 19% at $76.4 million compared to 64.4% in the previous year. Profit after tax for the company came in at $145.8 million, up 41% compared to FY17. Australia’s largest self-storage provider saw its revenue growth primarily on the back of rising same-center revenue per available square meter to $220. In New Zealand, across its 13 owned centers with 68,000 sqm of NLA, National Storage witnessed the occupancy rate going up by 84.7% compared to 78.2% in June 2017. REVPAM rate was at $151/sqm (June 2017: $130/sqm). The company has taken several strategic initiatives including Agreement with the Stockland (ASX: SGP), Capital Partnership in New Zealand and expanding development pipeline. Of which, the Stockland agreement would help NSR to reduce the development risk and focus on the core storage operations; and, the partnership with Capital partnership will support to free up the major portion of the capital which the company can use for management, acquisition, development of the current and future assets.


The stock has generated return of 12.04% on YTD basis and continues to ascend. There is no significant sign of weakness in the price. We maintain ‘HOLD’ on the stock at the closing price of $1.710, while the group updated the market about its retail entitlement offer.
 

WAM CAPITAL LIMITED (ASX: WAM)

Portfolio performance drives growth - WAM Capital Ltd posted 82% increase in the Operating Profit after tax at $125.4 million compared to $68.9 million reported in FY2017. Growth in operating profit can be attributed to the strong investment portfolio performance, growing at 15.0%. The Capital investment portfolio of the company has generated a return of 17.5% p.a. over the past 19 years, outperforming the market by 9.0% p.a. Company’s strong financial performance was reflected in the Earnings per share which came in at 19.30 cents per share compared to 11.78 cents, year ago.


CIP performance (Source: Company reports)

Strong investment portfolio performance and consistent dividend policy of the company is in line with the investor’s expectations. NTA before taxes increased 12.0% for the year suggesting that the realizable value of the company has gone up. Conservative balance sheet, continued Capital Investment portfolio performance and high cash weighting would drive the growth for the company going ahead.

The stock price witnessed an impressive run over the years and has generated YTD return of 3.75%. The stock has already given the breakout and is sustaining above that level. In the coming months, we expect the price to rise further from the current levels. Relative strength indicator has cooled down from the overbought region indicating opportunity for the investors to stick. We maintain ‘HOLD’ rating on the stock at the current market price of $2.49.
 

WESTPAC BANKING CORPORATION (ASX: WBC)

Industry wide issue impact NIM - Net interest margin of the bank has dropped over past few months, impacted by higher wholesale funding cost and consumers option for the low rate principal and interest loan against high rate interest only mortgage. The Net interest margin of the bank did recede, but the case does not hurt Westpac alone. Most of the major banks have seen their NIM dropping due to volatility in the global interest rate and market conditions. The bank has also seen increase in its home loan Book compared to other major banks. The latest news on increase in variable interest rate by WBC has impacted the Australian dollar as well. Meanwhile, cash earnings for H12018 grew 6% higher than H12017 at $4,251 million. Bank has reported sound credit quality with stressed assets to total committed exposures decline 1bp from 31 March 2018 to 1.08%. Total loans surged $34.4 billion or 5% compared to the H12017. Westpac has improved its credit policies to assess the way it determines the household spending of the people who apply for loans.

Stock has taken a hit with the recent drop in the NIM and revelation of poor lending method. The stock has been in the broader consolidation phase over past three years. During this time, it has respected the crucial support level of $26.97. We believe that the bounce back in the price may be witnessed based on the bank’s strategic moves, while stock price hovers around the support level. We recommend ‘Buy’ rating on the stock at the current market price of $28.88.
 

   CONTANGO INCOME GENERATOR LIMITED (ASX: CIE)

   Strong Portfolio performance - Investment Portfolio of the Contango Income Generator Ltd (ASX: CIE) has performed well over 12 months and since Inception, generating the return of 7.02% and 8.94% respectively. The company is looking to increase the proportion of equity in its portfolio to around 95%. This would help Contango to realize its target of increasing the level of dividends and franking in the future.


Portfolio Performance (Source: Company Reports)

Before falling below the support level of about $0.935, the stock has largely remained in the consolidation phase; and retraced from the high of $0.95 to the low of 0.88. Additionally, relative strength indicator is placed well above the oversold zone, recovering from the latest fall. We believe that the current levels present an opportunity for entry. We recommend ‘Speculative Buy’ on the stock at the current market price of $0.935.
 

MAGELLAN GLOBAL TRUST (ASX: MGG)

Existing FUM ramp up - Magellan Global Trust (ASX: MGG) posted FY 2018 after tax profit of $268.9 million, an increase of 37% from the previous year. The growth in the revenue was also been captured in the bottomline numbers with Earnings per share coming in at 122 cents per share, an increase of 7% against the reported EPS in FY2017. For Magellan, performance of its investment portfolio for the existing clients added maximum to the revenue. Around 72% of the total growth in management, services and performance fee was from the existing FUM.


Revenue Growth Drivers (Source: Company Reports)

Recent increase in the dividend payout ratio suggests that the company has adequate capital to maintain a strong balance sheet as well as siphon in the funds for product development and new ventures.
The stock has given breakout from the resistance level of $1.63 and since moved higher on decent volume. A minor correction at the current levels is witnessed, which could be an opportunity for the investors to take fresh position who missed the earlier rally in the stock. We recommend a ‘BUY’ rating on the stock at the current market price of $1.70.

 
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