Stocks’ Details

Australia and New Zealand Banking Group Limited

Improvement in APRA Level 2 CET 1 Ratio:Australia and New Zealand Banking Group Limited (ASX: ANZ) provides banking and financial products and services. The company recently updated that it has issued 112,089 options to employees for retention/incentive purposes. In another recent update, the company notified that Ken Adams has been appointed as the Company Secretary in place of Joint Company Secretaries, Bob Santamaria and John Priestley.

Dividend: The bank recently announced a dividend of AUD 1.5305 per security on ANZPD - CAP NOTE 6-BBSW+3.40% PERP NON-CUM RED T-09-21, to be paid on 02 March 2020.

Sale of Stake in Joint Venture: In mid-August, the company notified the exchange that it has completed the sale of 55% stake in Cambodian joint venture ANZ Royal Bank to J Trust. The bank has a presence in 14 different Asian markets.

Update on June Quarter: During the quarter, the company reported total provision charge of $209 million, which was broadly flat in comparison to 1H19 quarterly average. In May 2019, the company completed the sale of OnePath Life to Zurich. In addition, the company completed Tier 2 capital issue of AUD$1.75 billion in July 2019, pursuant to APRA’s requiring D-SIBs, including ANZ, to increase the total capital by 3% of risk-weighted assets (RWA) by January 2024. Gross impaired assets during the quarter went down to $1,972 million, from $2,022 million in March 2019.


Gross Impaired Assets (Source: Company Reports)

Stock Recommendation: The stock generated returns of 4.41% over a period of 6 months. At the end of June 2019, the Group APRA level 2 Common Equity Tier 1 ratio was reported at 11.8%, representing an increase of around 30 basis points. Home loan applications volumes improved in July 2019 with actions taken for clarification of credit policy and reduction in turnaround time of approvals. The above actions will be beneficial for home loan FUM growth. In addition, the company simplified its business through the sale of stake in Cambodia JV ANZ Royal Bank. Based on the above factors, we give a “Hold” recommendation on the stock at the current market price of $27.830, up 0.506% on 19 September 2019.
 

Washington H Soul Pattinson & Company Limited

Major Investments Impacted by Regulatory Issues:Washington H Soul Pattinson & Company Limited (ASX: SOL) is engaged in the ownership of shares, coal mining, gold and copper mining, property investment and consulting.

Financial Highlights: In FY19, group regular profit after tax amounted to $307.3 million, down 7.2% on prior corresponding period. Group profit after tax stood at $247.9 million, down 7.1% on prior corresponding year. The company’s net asset value stood at $5.5 billion, rising 0.6% on the previous year. Net regular cash from operations increased by 18.1% to $169.6 million. During the year, total dividend stood at 58 cents per share, rising 3.6% in comparison to prior corresponding period.


FY19 Key Highlights (Source: Company Reports)

During the year, regular profit was driven by another strong result from property activities, an increase of 63.3% in income from investments, property portfolio increasing by 157.1% and financial services portfolio rising by 28.2%. The positive contribution from the above factors was, however, offset by few factors, including a lower contribution from TPG Telecom and increased regular after tax loss from Round Oak Minerals.

Dividend: For the full year ended 31 July 2019, the company declared a fully franked final dividend of 34 cents per share, representing an increase of 3.0% on previous year. The dividend will be paid on 9 December 2019.

Outlook: Although, the company’s portfolio is expected to deliver continued growth, high asset prices and peak economic conditions pose a challenge to the business. The company believes in investing in sectors with long-term attractive investment fundamentals, including financial services, retirement living opportunities and agricultural investment.

Stock Recommendation: The stock of the company generated negative returns of 22.95% over a period of 6 months. During the year, Brickworks’ land and property division produced strong earnings growth. However, the company’s major investments continue to be impacted by regulatory issues. While Brickworks is impacted by higher gas and energy prices in Australia, TPG is seeking approval for its merger with Vodafone. On approval of the merger, the company expects the combined entity to pay higher dividends to shareholders. Given the backdrop of the above factors, we have a wait and watch stance on the stock at the current market price of $22.780, up 2.198% on 19 September 2019.
 

Dicker Data Limited

FY19 Profit Guidance to be Reviewed:Dicker Data Limited (ASX: DDR) is primarily engaged in wholesale distribution of computer hardware, software and related products. The company recently announced that it will be paying a special dividend of 5.0 cents per share on 4 October 2019. The announcement came in as a result of the released profit of over $12 million, on sale of the company’s property asset at 230 Captain Cook Drive, Kurnell. This will bring the total dividends paid in FY19 so far, to 22.0 cents per share with an additional interim dividend to be paid in December 2019.

Performance Highlights: During the half year ended 30 June 2019, the company reported total revenue amounting to $851.9 million, up 18.7% on prior corresponding period. Revenue in Australia increased by 17.8% and that for New Zealand increased by 36.1%. During FY18 and 1H19, the company acquired 10 new vendors that contributed incremental revenue of $18.8 million in the first half. Net profit after tax increased by 50.5% in comparison to the prior corresponding period.


Financial Summary (Source: Company Reports)

Plans in Pipeline: During the second half, the company will work on the growth of recently launched division – Dicker Data Financial Services (DDFS). With managed service providers being the fastest growing partner segment, the company will continue to work on addressing the needs of the segment. In addition, construction tender process for a new distribution centre is underway. The expected cost for the build is estimated to be approximately $55 million.
FY19 Guidance: Profit for FY19 is expected to be $51.4 million, which will be reviewed after the results for Q319 are finalised.

Stock Recommendation: The stock of the company generated returns of 144.85% over a period of 1 year and is currently trading close to its 52-week high level of $7.850.In 1H19, the company reported strong revenue growth and improvement in gross margin in comparison to the prior corresponding period. As per the guidance provided for FY19, the company will review the profit guidance due to a higher representation of US-based vendors and some uncertainty in the global economy. Considering the uncertainty regarding profit guidance, high returns on stock in 1-year and the current trading levels, we suggest investors to keep a close eye on the development and hence, have a watch stance on the stock at the current market price of $7.670, up 4.071% on 19 September 2019 and wait for better entry levels.

 
Comparative Price Chart (Source: Thomson Reuters)

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