Are these 4 Big Stocks Cheap Enough to Punt On – QBE, WPL, WOW and FLT?

QBE Insurance Group Ltd

QBE Details

S&P affirmed the group’s financial strength rating & outlook revised to “stable”:Standard and Poor’s has affirmed QBE Insurance Group Ltd.’s (ASX: QBE) A- issuer credit rating (ICR) with A+ ICRs and financial strength ratings on QBE’s core operating companies. Moreover, S&P has revised its rating outlook to “stable” from “positive” on QBE and its core operating companies. This shows that the company’s topline and underlying earnings will rebound in 2018 and 2019, due to the lower attritional claims, an improved expense base and the progressive benefits flowing from further remediation of its North American, Asia Pacific and Latin American Operations. While, for FY 17, QBE expects to post combined operating ratio (COR) of around 104%, above the target COR range of 100 - 102% projected previously, the group aims to have FY18 COR range of 95.0-97.5% and the net investment return of around 2.5-3.0%. Further, reinvigorated leadership of the group (Pat Regan as Group CEO and Vivek Bhatia as CEO for the Australia and New Zealand operations) is expected to drive the business recovery along with support coming in from favorable insurance rates, better economic conditions in the U.S. and Europe, group’s cost management and balance sheet scenario. On the other hand, QBE stock has fallen 4.71% in three months as on February 08, 2018, and is trading at a low P/E. Given the price levels and long-term view, we put a “Buy” recommendation on the stock at the current price of $10.43
 

QBE Daily Chart (Source: Thomson Reuters)
 

Woodside Petroleum Limited

WPL Details

2018 Production Guidance: Woodside Petroleum Limited (ASX: WPL) in the fourth quarter, has posted higher quarter-on-quarter sales revenue of $939 million due to stronger realised prices and production of 21.9 MMboe. The company has delivered record fourth-quarter Pluto LNG production, commenced Wheatstone LNG production and has achieved 100% reliability at Pluto LNG and Okha FPSO. Moreover, WPL expects the stronger oil prices witnessed in the fourth quarter to flow through to higher realised LNG prices in the first quarter of 2018. For 2018, WPL expects a significant increase in annual LNG production with higher Wheatstone contribution in 2018 and projects cash flow neutral at $35 a barrel. WPL’s production guidance for 2018 is 85 – 90 MMboe. For 2018, the investment expenditure is expected to be in the range of $1,550 million to $1,600 million. Thus, despite significant free cash flow generated over 2017, capital guidance over 2018 is not any different year on year.


2018 Production Guidance (Source: Company Reports)
 
Further, the Ngujima-Yin FPSO (floating production storage and offloading, Vincent oil) was said to leave station from May 2018 for modifications ahead of the projected Greater Enfield production from mid-2019. Given the scenario, Pluto is expected to provide some way for growth, however, pricing pressure needs to be eased out a bit. Meanwhile, WPL stock has fallen 7.2% in last one month as on February 08, 2018. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $31.40
 

WPL Daily Chart (Source: Thomson Reuters)
 

Woolworths Group Ltd

WOW Details

Tracking well on business prospects: With a fall of 2.8% in last five days along with a market downtrend, Woolworths Group Ltd (ASX: WOW) has been resilient in comparison to many other stocks (for instance Wesfarmers has plunged 7% in last five days owing to volatility and significant items highlighted for 2018 half year result). Further, the group has been witnessing better like for like sales than peers such as Wesfarmers’ Coles in FY18 year to date. WOW had particularly reported strong sales performance so far in FY 18 with good trading momentum and progress against the strategic priorities in all of the businesses. Earlier, WOW had updated the market about ACCC’s opposition to BP proposed acquisition of WOW’s fuel business. As per ACCC, the acquisition would substantially lessen the competition in the retail supply of fuel and would result in higher fuel prices at the Woolworths sites if BP acquires. On the other hand, IMF has notified that it will not proceed with its previously announced conditional funding of the shareholder class action against WOW. Meanwhile, WOW stock has risen 3.02% in three months as on February 08, 2018 and we give a “Buy” recommendation on the stock at the current price of $26.87
 

WOW Daily Chart (Source: Thomson Reuters)
 

Flight Centre Travel Group Ltd

FLT Details

Positive FY18 outlook: Flight Centre Travel Group Ltd. (ASX: FLT) is expected to flourish a bit more at the back of positive earnings momentum driven by pricing backdrop, efficiency efforts and growth in online, along with 3-5yr PBT targets. FLT’s first half of 2018 underlying PBT is expected to be in the range of $120 million to $135 million, which represents 6% to 19% growth on the $113.2 million underlying PBT recorded during the first half of last year. Therefore, for FY 18, underlying PBT is expected to be between $350 million and $380 million, which represents 6.2%-15.6% growth on last year.
 

Transformation Update (Source: Company Reports)
 
Moreover, the international businesses currently will be the company’s key growth drivers for 2018, with the EMEA and North America businesses currently on track to surpass their 2017 contributions, when together they posted 30% of group profit and almost 35% of group TTV. Asia, that is now largely a corporate operation, has returned to profit, albeit modestly during the first quarter. “Other” Segment is on track to make a more significant contribution with a larger DMC network in place and the tour operators in particular set to deliver stronger profits after a challenging 2017. New Zealand business is doing good, particularly in corporate travel, while the Australian corporate business is also tracking well. However, in Australia, the first half profit is expected to be slightly down on last year, while the company is making important system changes within the business. On the other hand, FLT has appointed Colette Garnsey as a non-executive director. Meanwhile, FLT stock has risen 9.18% in three months as on February 08, 2018. We have a “Hold” position on the stock at the current price of $49.92
 

FLT Daily Chart (Source: Thomson Reuters)

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