Stocks’ Details

Australia and New Zealand Banking Group Limited

NII growth Y-o-Y: As per the recent release by Australia and New Zealand Banking Group Limited (ASX: ANZ), there has been announcement of a dividend of AUD 1.9197 with respect to its security “ANZPF - CAP NOTE 6-BBSW+3.60% PERP NON-CUM RED T-03-23” with the payment date on September 24, 2019 and ex-date of September 13, 2019. The total dividend distribution rate for the same is 1.8698% per annum.

Q1FY19 Income Statement (Source: Company Reports)

The bank’s net interest income grew by ~4.96% Y-o-Y to NZ$824.0 million. The operating income decreased to NZ$1,025 million in Q1FY19 as compared to NZ$1,107 million in Q1FY18, decrease by ~7.5%, primarily from lower other operating income.

Focus going forward: The bank has a focus on cost and capital management and with exposure to international trade and commercial banking place ANZ in a good position for the future.On the back of the progress of transformation and simplification agenda, the bank is in a strong position to navigate the difficult conditions.  

The stock generated a return of 6.42% over the past 3 months. Considering the strong balance sheet and decent results amidst challenging environment, we expect that ANZ might attract the attention the market participants.

Thus, we maintain our “Buy” recommendation on the stock at the current price of A$26.030 per share.


 
ANZ Daily Chart (Source: Thomson Reuters)
 

Treasury Wine Estates Limited

Strongest organic growth ever: Treasury Wine Estates Limited (ASX: TWE) announced an ordinary dividend of AUD 0.180 to be paid on Friday 5 April 2019, and the ex-date for the same was on 7 March 2019. The company posted EBITS of $338.3 million reflecting a rise of 19% and there was growth across all regions. It is targeting financial metrics which are consistent with investment grade credit profile.

1HFY19 Financial Performance (Source: Company Reports)

Strong EBITS guidance: The company gave guidance on reported EBITS growth of ~25% in FY19. It added that the prospects for growth in Asia is attractive and expansion of distribution and growing market share with respect to imported wine category would be supporting the future prospects. The company is anticipating EBITS growth rate of around 15%- 20% for FY 20.  

Considering the improved operating performance, coupled with decent guidance of the company, we maintain our “Buy” rating on the stock at the current market price of $14.930 per share as it trades at close to its 52-week low price, proffering decent opportunity to buy the stock at the current juncture.


TWE Daily Chart (Source: Thomson Reuters)
 

WAM Capital Limited

Decent Portfolio Performance in February Month Amidst Volatile Reporting Session: The investment portfolio of WAM capital (ASX: WAM) increased in February by 3.8% versus a 6.1% return generated by S&P/ASX All Ordinaries Accumulation Index. It was mainly supported by the core holdings reported robust results during a volatile reporting session. The company deployed cash in 33 new companies reducing the investment portfolio’s cash level from 42.4% in January to 32.7% at the end of the month. Long term performance remains good with the 3 years return of 10.8% while, since inception, WAM has delivered a return of 16.6% pa against the benchmark return of 8.3%.


Investment Portfolio Performance (Source: Company Reports)

WAM Capital Limited has recently announced that Wilson Asset Management Group, a substantial holder of Myer Holdings Limited has increased its voting power from the erstwhile 5.46% to the current 6.69%.

WAM Capital reported an operating profit before tax of $166.9 million for the full year compared to $88.9 million, up 87.6% reflecting solid investment portfolio performance over the period.

What to Expect From WAM: The company enters the 2019 financial year with a conservative balance sheet, a high cash weighting, no debt and a flexible and proven investment approach with the patience and expertise of an experienced investment team. The company will continue to seek opportunities irrespective of market conditions, having achieved outperformance through various market cycles.

The stock generated 3.24% over the past 3 months and, on the 6 months basis, it posted a -10.44% return. WAM is having an annual dividend yield of 6.95% which can be considered at decent levels. Based on the foregoing, we maintain our “Buy” rating on the stock at the current price of A$2.230 per share.


 WAM Daily Chart (Source: Thomson Reuters)
 

Challenger Limited

Growth in AUM against prior corresponding period: Challenger Limited (ASX: CGF) has further progressed its strategic relationship with MS&AD Insurance Group Holdings Inc. to support Challenger’s strategic growth in Australia and internationally. CGF will commence a quota share reinsurance of US dollar denominated annuities issued in the Japanese market by Mitsui Sumitomo Primary Life Insurance Company Limited, a subsidiary of MS&AD, and is expected to commence from 1 July 2019.

CGF’s assets under management stood at $78.4 billion at the end of 1H FY 2019 reflecting a rise of 2% on prior corresponding period. The company is retaining a robust capital position.


1HFY19 Key Metrics (Source: Company Reports)

Resilient outlook: Growth in Australia’s superannuation system is underpinned by mandatory contributions, which are scheduled to increase from 9.5% of gross salaries currently to 12.0% by 2025. The superannuation system is forecast to grow from $2.8 trillion to over $10 trillion by 2035. For 2019, the company expects normalised net profit before tax of between $545 million and $565 million.

Considering that the stock is trading closer to its 52-week low, we believe this to be a decent level to enter the stock at CMP of $8.280 per share (up 3.113% on 29 March 2019) and the company’s strong capital position coupled with decent annual dividend yield further supports our view. We, therefore, maintain our “Buy” rating on the stock at the current market price of A$8.280 per share.


 
CGF Daily Chart (Source: Thomson Reuters)
 

Lendlease Group

Strong cash conversion against EBITDA: Lendlease Group (ASX: LLC) gave a presentation at Credit Suisse Asian Investment Conference in which it stated that it would be focused towards integrated model that leverages more than one operating segment across the diversified portfolio and towards its three segments i.e. development, construction and investments.

Cash Conversion (Source: Company Reports)

Diversified project pipeline: The company has a development pipeline of $74.5 billion. It has a revised portfolio management framework and targeting enhanced risk adjusted returns. The company focuses on leveraging its competitive advantage via the integrated model, urbanisation projects and investments platform.

Moreover, with respect to investments segment, it has strong capital partner relationships, fund and asset management platforms. This segment has $3.6 billion of investments, $34.1 billion in FUM and $26.6 billion in AUM.

Considering the robust project pipeline and its focus on leveraging its competitive advantage, we expect that the company might be benefitted.

As a result, we maintain our “Buy” recommendation on the stock at CMP of $12.380 as it trades at close to 52-week lower level, triggering decent opportunity to buy the stock at the current juncture.


 
LLC Daily Chart (Source: Thomson Reuters)
 

Scentre Group

A Look at Key Update: Scentre Group (ASX: SCG) priced €500 million ($800 million) of ten-year fixed rate guaranteed notes with a coupon of 1.45% under its Euro Medium Term Note Programme on 19 March 2019.The proceeds of the issue will be used to repay borrowings under the Group’s revolving credit facilities and for general corporate purposes.


FY18 Key Metrics (Source: Company Reports)

In the 12 months to December 2018, the company’s funds from operations stood at $1.34 billion representing 25.24 cents per security, up by 3.9% from the prior year and dividend stood at 22.16 cents per security, up by 2% from the previous year.

FFO growth expectations going forward: The Group forecasts FFO growth for the 12 months ending 31 December 2019 of approximately 3%. The distribution for 2019 is forecasted to be 22.60 cents per security, an increase of 2%.

The stock generated a return of 6.46% over the past one month, signifying a decent return over the short period.Considering the strong financial position in FY18 with a gearing ratio of 33.9% and an interest coverage ratio of 3.5x, we presume that the company might attract the attention of market players. Hence, we maintain our “Buy” recommendation on the stock at current price of A$4.110 per share.


 
SCG Daily Chart (Source: Thomson Reuters)
 

Reliance Worldwide Corporation Limited

RWC stands tall in profitability margins: Reliance Worldwide Corporation Limited (ASX: RWC) reported an increase in its net sales by ~50% pcp to $544.2 million in H1 FY 2019. This was due to solid revenue performance across all three segments i.e. Americas (+21%), Asia Pacific (+7%) and EMEA (+425% including John Guest sales post acquisition).

RWC Sales Metrics (Y-o-Y) (Source: Company Reports)

What to expect from the company:It is expected that ‘John Guest’ growth might accelerate in the H2 FY 2019. The production costs might reduce due to the processing of low-cost copper (brass bar) in the second half.As per the reports, the company expects the end user demand to remain strong in key markets especially in the UK and the USA.

The company stated that its engineering and R&D capabilities support its long term strategy and that its expansive distribution network throughout key markets happens to be a primary strength.

Stock Recommendation:RWC’s share generated negative YTD return of 2.93%. Considering the good fundamentals and positive outlook, we expect that it might attract market players moving forward. Hence, we maintain our “Buy” rating on the stock at the current market price of $4.310 per share (up 1.412% on 29 March 2019).


 
RWC Daily Chart (Source: Thomson Reuters)
 

LiveTiles Limited

Partnership with Microsoft leading to the strong pipeline:Information Technology Company, LiveTiles Limited (ASX: LVT), reported an increase in its revenue from ordinary activities by 198% pcp to $5,677,075 in H1 FY 2019. The annualised recurring revenue (ARR) grew by 232% (y-o-y) to $22.9 million. This was due to an increase in paying customers from 445 in 2017 to 598 in 2018. Its loss attributable to members increased by 285% pcp to $22,769,721 in H1 FY 2019.


H1FY19 P&L Statement (Source: Company Reports)

What to expect from the company:It is expected that the company will deliver strong revenue growth in FY 2019, which would be driven by the Company’s investment in sales and marketing, the recent launch of the Company’s AI products, co-marketing initiatives with Microsoft and the increasing momentum of the N3 partnership. LVT aims to organically grow ARR from $30.9 million as on December 31, 2018 to at least $100 million by June 30, 2021.

Stock Recommendation:LVT’s share generated positive YTD return of 45.59%. The company is expected to leverage its partnership with Microsoft in generating strong pipeline and reduce operating cost to boost its bottom-line.However, in the past six months, it posted -6.60% return and in three months, the returns were 55.69% which indicate that the stock is volatile. Hence, we maintain our “Speculative Buy” rating on the stock at the current market price of $0.495 per share (up 4.211% on 29 March 2019).  


 LVT Daily Chart (Source: Thomson Reuters) 

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