Stocks’ Details

Telstra Corporation Limited (ASX: TLS)

Signs of respite: Telstra seems to be on the track to revival with market turning positive on the stock. The revised FY18 guidance based on the nbn delays on sales of hybrid fibre co-axial technology had taken a toll on the stock while the group expects to benefit from the latest nbn updates and delays in terms of full roll-out schedule. Further, the NBN decision to reduce the charged paid by the retail providers including Telstra while enhancing the capacity for each user connected to the network puts forth a slight positive case. Meanwhile, the group was contented with the ACCC decision of not opposing the proposed merger of Fox Sports and Foxtel after finding that the transaction would not be substantially lessening the competition. The group also stands strong on delivering the revised dividend guidance for FY18. Looking at the overall scenario and a price slip of 14.6% in last six months (as at January 17, 2018), we recommend a “buy” on the stock at the current market price of $3.62
 

Dicker Data Limited (ASX: DDR)

Expansion Efforts in domestic market: Late last year, Dicker Data was appointed as a Distributor of Buddy Platform and of CCP Technologies for the Australian market. Through this partnership, the group will be able to deliver tangible insights and improved business outcomes to a wide variety of their end-users across multiple segments with minimal implementation of overheads. DDR’s reach in Australia will significantly increase the opportunity to expand in 2018. There has been an addition of the new vendors to the group’s base and strong demand from the cloud market is expected to add value. The group has been lately appointment as a distributor of Juniper Networks for the Australian market and will have access to Juniper’s product portfolios.DDR expects to complete construction of the new distribution centre, which is currently estimated to cost $55m, during CY18. By looking at the dividend trend, it pays quarterly distributions that are fully franked and dividend amount is expected to be enhanced in FY18 based on the performance profile. The stock price has increased by 24.5% in the past six months (as at January 17, 2018), and we recommend to “Hold” the stock at the current market price of $3.04
 

Future Outlook (Source: Company Reports)
 

Australia and New Zealand Banking Group Limited (ASX: ANZ)

Settlement on 3^rd party frauds: Recently, ANZ announced for filing joint court submissions with the Australian Securities and Investment Commission (ASIC) on an agreed settlement for a number of cases where car finance brokers or the dealers were engaged in the suspected fraud while submitting the loan applications on behalf of customers to Esanda between 2013 and 2015. Moreover, ANZ acknowledged that it did not take any reasonable steps to verify the customers financial situation in relation to 12 loan contracts in circumstances where there was no reason to doubt the information which was being provided by the third-party intermediaries. ANZ has agreed to pay a $5 million fine as a part of settlement and $390,000 for ASIC’s cost but it is subject to court’s approval. So ANZ is working closely with ASIC and taking steps to strengthen its ability to prevent and to detect fraud by the third parties.

While the group is encountering challenges including the above and royal commission, the efforts on business simplification, FY17 robust performance with 12% rise in statutory profit and 18% rise in cash profit, and 68% of profits paid as dividends speak for the healthy fundamentals. ANZ has attained 10.6% as its Common Equity Tier One Capital ratio that already satisfies APRA’s unquestionably strong 2020 target. The expectation of an enhanced share buy-back in 2018 can be another catalyst. We give a “Buy” recommendation on this dividend payer at the current price of  $28.53
 

Boral Limited (ASX: BLD)

Well Positioned in Global Markets: Boral Limited is well positioned on the East-Coast markets where conditions seem to be strong. BLD has a strong balance sheet and cash flows while its gearing ratio increased from 2016 from 20% to 30% in 2017 and net debt increased from A$893 m in FY16 to A$2,333 in FY17 owing to the acquisition moves. However, the group expects a significant growth in EBIT in FY18 from the full year contribution of Headwaters which will be yielding US$30-35m of 1-year synergies. It expects Meridian Brick JV to contribute an earning uplift from market growth and synergies. USG Boral’s profit will grow at a high single-digit growth rate while Boral Australia will perform decently despite an increase in energy cost (expected to be in the range of $15-$20 million).The stock is trading at an above average market multiple in terms of forward earnings; however, the long-term potential, infrastructure boom and improved housing scenario in key markets, can provide more momentum. We have a “Buy” recommendation at the current price of $ 7.62
 

Market Share Trend (Source: Company Reports)
 

Scentre Group (ASX: SCG)

Long-term Growth: While Scentre’s dividend is not franked, the group aims to continue with good distributions to the shareholders. The group has maintained its FY18 guidance for full year growth in funds from operations of approximately 4.25% while distribution guidance has been set at 21.73 cents per security. The group had commenced its $160m of redevelopment at Westfield Kotara along with $50m of redevelopment at Tea Tree Plaza and all of its active developments are progressing well. Customer visitation from Chermside has been on an uptrend. SCG opened the $80 million (SCG share: $40m) cinema and restaurants expansion at Westfield Whitford City in September and aims to benefit from all of these developments.Given the long-term potential and dividend sustainability, we maintain a “Buy” on SCG at the current price of $4.10
 

Westpac Banking Corporation (ASX: WBC)

Focus on creating a great service Company: Westpac recently notified about amending distribution payable patterns on the Westpac Vanilla Instalment Equity Warrants over the securities in IOZ that have been increased from 0% franking percentage to 68.21% franking percentage.Meanwhile, the group has a relatively low risk profile due to its loan book positioning and low earnings dependence on treasury and markets income. Its statutory profits were $7,990 m which were up by 7% with 3% rise in earnings. Further, an increase in investor home loan interest rates might help the bank. Whilst its shares could still climb up a bit at the back of efforts on providing good service to the customers, the upside potential looks limited. The group expects some slow-down in lending and deposits in 2018 compared to 2017. Further, credit standards’ tightening might pose further challenges. While the dividend yield is sound, the stock looks“Expensive” at the current price of $30.95
 

Spark New Zealand Limited (ASX: SPK)

Enhanced customer base: Spark New Zealand had lately appointed Pip Greenwood as its independent non-executive director replacing Mark Verbiest. It also announced that 100,000 customers have been added to its wireless broadband product and the company was to commence a trial ‘portable’ option over summer so that it could allow about 100 customers to use their home broadband on holiday. Significant investment in the Spark mobile network is expected to allow it to fundamentally change the services being offered. Spark is the first major New Zealand telecommunications provider to trial portable wireless broadband. Growth in mobile (6% revenue growth in FY17) and wireless broadband (increase in broadband customer base to 84,000) with management’s vision on making SPK the lowest-cost operator in the market, makes the stock setting for a steady performance going forward. We give a “Hold” on SPK at the current price of $3.28

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