Stocks’ Details
 

Pendal Group Limited

Strong Business Model: Pendal Group Limited (ASX: PDL) is a global asset management company with a market capitalisation of $1.86 Bn as on 11^th May 2020. Recently, the company has released its results for 1H FY20, reflecting the strong business model of PDL, which is fueled by diversification of PDL in markets, strategies, geography, and currencies. Cash NPAT for the period stood at $86.6 million, reflecting a yoy rise of 2%. PDL also experienced continued growth in annuity-style base management fees. Average funds under management for the period stood at $98.9 billion with a rise of 2%.


Key Financials (Source: Company Reports)

Future Aspects: In 2H FY20, the company is likely to have lower FUM as compared to 1H FY20 due to the impact on global equities markets. The company is committed to its long-term growth initiatives, and it is focused on evolving its product capabilities in ESG / RI while investing in its operating platform.

Valuation Methodology:Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The company possesses a strong balance sheet, zero debt and positive cash flows. The company is well placed to tackle COVID-19 pandemic with the support of its financial strength, operational resilience, and robust business model. The company has declared interim dividend amounting to 15.0 cents per share. We have valued the stock using the P/E multiple based illustrative relative valuation method andarrived at a target price with an upside of high single-digit (in percentage terms). Therefore, considering the financial strength, operational resilience and performance in 1H FY20, we give a “Hold” recommendation on the stock at the current market price of $6.050 per share, up by 5.217% on 11^th May 2020.

Bell Financial Group Limited

Decent Growth in Top-line and Bottom-line: Bell Financial Group Limited (ASX: BFG) provides financial services such as stockbroking, investment and advisory. The market capitalisation of the company stood at $375.27 Mn as on 11^th May 2020. The company recently announced that its wholly-owned subsidiary, “Third Party Platform Pty Ltd” has been admitted as an ASX Clear Participant, which came into effect on 4^th May 2020. During FY19, the company reported revenue amounting to $254 million with a rise of 16% and net profit after tax for the period amounted to $32.4 million, reflecting a rise of 33% over pcp.


Financial Summary (Source: Company Reports)

Robust Cash Position: The company has a strong balance sheet and cash position. BFG continues to address all its regulatory capital and liquidity requirements.

Stock Recommendation: The gross margin of the company stood at 96.9% in FY19, which is higher than the industry median of 94.8%. Net margin of BFG noted at 12.9% in FY19, reflecting YoY growth of 1.7%. This implies that BFG has improved its capabilities to convert its top-line into the bottom-line. BFG has EV/Sales multiple of 1.5x as compared to the industry median (Financials) of 4.7X on TTM basis. The stock of BFG is trading at a price to cash flow multiple of 8.0x against the industry median (Financials) of 10.2x on TTM basis. Hence, in light of the decent improvement in key margins, strong balance sheet and cash position, we maintain a “Hold” rating on the stock at the current market price of $1.160 per share, down by 0.855% on 11^th May 2020.
 

Genworth Mortgage Insurance Australia Limited

Robust Business Fundamentals: Genworth Mortgage Insurance Australia Limited (ASX: GMA) provides lenders mortgage insurance in Australia. The market capitalisation of the company stood at $845.65 Mn as on 11^th May 2020. The company recently released its results for Q1 FY20, which reflects the strong fundamentals of its business. During the quarter, GMA experienced higher volume growth in its core Lenders Mortgage Insurance (LMI) business, as well as improved claims, mainly in Western Australia and Queensland. New insurance written for the period went up by 18.5% to $6.4 billion, which indicates a recovery in the housing market and low-interest rate. Statutory net loss after tax for Q1 FY20 amounted to $125.6 million due to COVID-19 impacts. 


Financial Metrics (Source: Company Reports)

Well-Positioned to Support Customers: The company is well-placed to support customers through economic uncertainty and recovery with its strong business fundamentals, leading market position and capital strength & flexibility.

Valuation Methodology:Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The company is well-capitalised with a prescribed capital amount (PCA) coverage ratio of 1.78 times. We have valued the stock using the P/E multiple based illustrative relative valuation method andarrived at a target price with an upside of lower double-digit (in percentage terms). Thus, considering the strong business fundamentals, leading market position and capital strength & flexibility, we give a “Speculative Buy” recommendation on the stock at the current market price of $2.180 per share, up by 6.341% on 11^th May 2020.

Money3 Corporation Limited

Well Prepared to Deal with Disruptions: Money3 Corporation Limited (ASX: MNY) provides secured automotive loans. It also provides secured and unsecured personal loans. The market capitalisation of the company stood at $275.15 Mn as on 11^th May 2020. The company is well prepared to deal with any disruptions which are expected to come due to COVID-19. MNY has executed robust business continuity measures in order to maintain the resilience of its business operations and protect the health and well-being of its staff. The below picture gives an overview of financial results for FY20 YTD:

 
Financial Performance (Source: Company Reports)

Withdrawal of Guidance: Considering the uncertainty from COVID-19 pandemic, the company has decided to suspend its earnings guidance for FY20.

Valuation Methodology:Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company is well-financed with a strong cash balance of $43 million (as at 27 April 2020), and it is continuing to grow with prudent loan origination. The company had drawn an additional $40 million on its existing debt facilities in Australia. We have valued the stock using the P/E multiple based illustrative relative valuation method andarrived at a target price with an upside of lower double-digit (in percentage terms). For the purpose, we have taken peers like Collection House Ltd (ASX: CLH), Credit Corp Group Ltd (ASX: CCP), Pacific Current Group Ltd (ASX: PAC), etc. Thus, considering the company’s strong cash position and its position to deal with disruptions, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.670 per share, up by 12.458% on 11^th May 2020.

 
Comparative Price Chart(Source: Refinitiv, Thomson Reuters)

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