QBE Insurance Group Limited (ASX: QBE)

QBE Details

Launch and acceptance of Tender Offer for Senior Notes - QBE Insurance Group Limited is a Company with a resilient market position that is engaged in underwriting general insurance and reinsurance risks. QBE is undergoing a transformation to generate positive results in terms of significant savings, supply chain management and recovery initiatives. The group lately launched an invitation to holders of its Fixed Rate Senior Notes that are due in 2022 to tender for the purchase by QBE for cash of up to U.S.$100 million. The Group has decided a Purchase Price of U.S.$977.50 per U.S.$1,000 principal number of Notes and accepted to purchase an aggregate principal number of Notes equal to approximately U.S.$100 million. The aggregate principal amount of Notes, the subject of Offer made at or below the Purchase Price, exceeded the U.S $100 million, and in accordance with the terms of the Tender Offer, QBE has accepted Offers made at the Purchase Price on a pro-rata basis subject to a Scaling Factor of 18.035 per cent. Meanwhile, the Vanguard Group, Inc ceased to be the substantial holder of the Group since 15 June 2018. Under its buy-back program, the Company had bought back 9,098,292 shares (in June 2018) with $87,449,427.08 as the total consideration that lately got increased as at June 18, 2018. While operational efficiency has been impacted in FY17, QBE still targets the combined operating ratio in the range of 95.0 per cent - 97.5 per cent in 2018 and investment return in the range of 2.5 per cent - 3.0 per cent given the various initiatives undertaken by the group.


COR Performance (Source: Company Reports)

The stock price has been declining in the last one year and was down by 10.98 per cent in last six months but witnessed a slight recovery of 1.93 per cent in last five days. The stock moved upward by 2.21 per cent on 20 June 2018. We give a “Buy” recommendation at the current market price of $9.70 as the Company is making continuous efforts to achieve improvement in underwriting quality, pricing and claims.
 

QBE Daily Chart (Source: Thomson Reuters)
 

REA Group Limited (ASX: REA)

REA Details

Looking forward to profitable customer experiences via integration of Hometrack - REA Group, a multinational digital advertising business specialised in property, announced that the competition watchdog, ACCC (Australian Competition and Consumer Commission) has given green signal for the acquisition of Hometrack Australia Pty Ltd by realestate.com.au Pty Ltd. Hometrack Australia provides property data services to the financial sector. This transaction involved a purchase consideration of $130 million which will be funded from existing cash reserves and debt of $70 million. It is expected that this transaction will generate synergy benefit to REA once the Hometrack business is fully integrated into REA’s platforms as it is expected that Hometrack Australia will deliver revenue between $13 million to $15 million and EBITDA between $6 million to $ 7 million for their financial year ending on 30 September 2018. Meanwhile, one of its directors, Tracey Fellows acquired 12 ordinary shares from the market for a total consideration of $900.87. Moreover, the Group reported a revenue growth of 20 per cent (for nine-month period ending 31 March 2018) and amounted to $592 million and EBITDA growth from core operations of 21 per cent to $345 million.


Group’s Revenue Performance for HY18 (Source: Company Reports)
 
During past few months, the Group has experienced some exciting developments, including a rapidly growing portfolio of original content. In last six months, the stock price jumped up by 16.51 per cent and 1.25 per cent in last one month. We maintain our “Hold” recommendation at the current market price of $91.2 as the Group has been building a strong momentum of growth.
 

REA Daily Chart (Source: Thomson Reuters)
 

Origin Energy Limited (ASX: ORG)

ORG Details

Strong gas supply portfolio - Origin is the leading energy retailer having about 4.2 million customer accounts, with an approximately 6,000 MW of power generation capacity and is well placed to bring in low cost renewables. The Company redeemed in whole, the €500 million Capital Securities that are due in 2071 and in accordance with the terms of the securities which were issued by Origin Energy Finance Limited and listed on the London Stock Exchange at their first call date (16 June 2018). The Company issued 23,505 Fully Paid Ordinary Shares. Origin recently announced an activity that has the potential to significantly increase the gas reserves and production in the area, and hence HPR royalty income which is in addition to an increase in royalty revenue from the higher East Coast gas price and an oil price that is linked to LNG exports. It is expected that activity from exploration will be increased as the play progresses. The Company recently entered into an agreement to sell its metering business, Acumen, for $267 million to intelliHUB, a company that will be jointly owned by Pacific Equity Partners and Landis+Gyr. The long-term metering contract with Acumen that is enhanced by Landis+Gyr’s global expertise in digital meter technology supported Origin’s digital-first strategy of using data and insights to enhance the customer experience.


Company’s YTD customer activity (Source: Company Reports)

It is expected that Group’s Adjusted Net Debt will be below $7 billion in FY18. The stock price climbed up by 36.72 per cent in last one year. We give a “Hold” recommendation at the current market price of $9.84 as the Group is transitioning itself to a cleaner, smarter and a customer-centric energy future.
 

ORG Daily Chart (Source: Thomson Reuters)
 

Transurban Group (ASX: TCL)

TCL Details

Increasing Traffic Growth across Networks - Transurban is Australia’s largest toll road operator and it currently holds seven of the nine toll road concessions in NSW, including the M1, M2, M5 and M7 motorways. Transurban declared adistribution of 28.0 cents per stapled security for the six months ending 30 June 2018. Meanwhile, The Vanguard Group Inc, became the substantial holder of the Group by holding 111,240,857 shares and 5 per cent of the voting power since 13 June 2018. TCL has a clear strategy to become the partner of choice with governments providing effective and innovative urban road infrastructure and services utilising core capabilities. It has stable financials with FY17 Annual Average Daily Traffic (AADT) growth of 4 per cent and EBITDA margins of almost 70 per cent. It was observed that Debt market conditions continued to remain positive for Transurban’s debt refinancing pipeline as currently observed market interest rateswere below the Group’s average cost of debt. The Group’s major project, West Gate Tunnel Project is expected to be completed in 2022 and this will add value to the toll road giant’s performance.'


Average Annual Daily Traffic Growth (Source: Company Reports)

The stock was down by 6.39 per cent in the past six months and it is worth noting that the stock was up by 195.56 per cent in last 10 years (as at 19 June 2018). We recommend to “Buy” the stock at the current market price of $12.17 as it is expected that the Group will continue to perform well with better infrastructure landscape.
 

TCL Daily Chart (Source: Thomson Reuters)
 

OceanaGold Corporation (ASX: OGC)

OGC Details

Upgradation of the Production Guidance - OceanaGold Corporation is a mid-tier, high-margin, multinational gold producer with a decent organic growth pipeline. The group’s assets are spread across various locations such as Philippines, New Zealand and the United States. The Company increased its 2018 consolidated gold production guidance due to strong operating performance and improvements to the mine plan at the Didipio Operation. Initially, the Company was expecting that it will be producing 500,000 ounces and now it has revised the guidance to 540,000 ounces in FY2018. The Company had performed well in the first half and its operations have achieved better results than expected.


Return on Invested Capital (Source: Company Reports)

With the improvement to the mine plan, Didipio continues to outperform and present opportunities for further optimisation while ramp-up of the underground is progressing nicely. The stock price has been declining for one year and was down by 15.48 per cent and moved upward in last five days that is by 4.11 per cent (as at 19 June 2018). The stock price climbed up by 3.09 per cent as on 20 June 2018 after the Company upgraded its production guidance. We give a “Buy” recommendation at the current market price of $3.66, by looking at the initiatives it is taking towards its consistent strategy to deliver organic growth and trading level indicating a significant discount to many peers.
 

OGC Daily Chart (Source: Thomson Reuters)

 
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