Stocks’ Details

James Hardie Industries Plc

Robust Q1FY19 Performance: James Hardie Industries Plc (ASX: JHX) is a mid-cap company with the market capitalization of $9.67 Bn as of August 13, 2018. Recently, the group disclosed its Q1FY19 results wherein topline grew by 28 per cent and amounted to US$651.0 Mn in Q1FY19 as compared to the prior corresponding period (PCP). It was mainly driven by the higher realization and volume growth of its product mix in North America Fiber Cement and Asia Pacific Fiber Cement segment during the same period. The group’s adjusted net operating profit recorded a growth of 29 per cent to US$79.9 Mn in Q1FY19 as compared to the prior corresponding period. Based on the favorable underlying performance of the operating business units and the favorable movement in asbestos adjustments, NPAT marked a splendid growth of 58 per cent to US$90.6 Mn in Q1FY19 against PCP. As a result, diluted EPS stood at 20 cents per share in Q1FY19 from 13 cents per share in Q1FY18. Further, the management expects that the company will continue to see the steady growth in the US housing market for the full year and expects EBIT margin for North America Fiber Cement segment to be at the higher end of its guidance range of $20% to 25% for the fiscal year 2019. As of now, the stock is trading at 52-week higher level, hence we maintain our “Expensive” recommendation on the stock at the current market price of $ 21.830, considering volatility in the U.S. housing market.


Q1FY19 Financial Highlights (Source: Company Reports)
 

Aventus Retail Property Fund

Decent Outlook: Aventus Retail Property Fund’s (ASX: AVN) stock tumbled 1.802 per cent on August 13, 2018 following the recent release of full-year result wherein its net profit for the year was down by 15 per cent to $136 Mn as compared to the prior year. It was mainly impacted by higher finance cost and rise in portfolio transaction cost during the same period. Additionally, AVN recorded FY18 FFO of $89 Mn or 18.1 cents per unit, representing growth of 2.3% over the prior corresponding period. Valuation uplifts and divestments have reduced the gearing of the fund to 35.6% as of 30 June 2018, within the target range of 30% - 40%. In the meantime, its revenue for FY18 rose 26 per cent to $165 million after it purchased the Castle Hill Super Centre and Marsden Park Home (centre) in NSW, which added over $30.2 Mn in revenue to the group’s total result. These additional revenues were partially offset by the disposal of Shepparton Home on 21 December 2017 and Tweed Hub on 28 February 2018.


Key Achievements (Source: Company Reports)

On the other hand, the group has agreed to pay $143 Mn for its management functions to be internalized plus $5 Mn to acquire the existing net assets of APG which represents an EBIT multiple of 9.3x and a fee waiver adjusted EBIT multiple of 8.6x. It owns and will manage interests in its portfolio of 20 LFR centres valued at $1.9 Bn and employs 60 plus professionals across investment management, asset management, and corporate services. The aforesaid proposal is subject to several conditions including its unitholder approval scheduled for 25 September 2018. Meanwhile, the stock price has risen 1.37 per cent in the past three months (as at August 10, 2018) and traded at reasonable P/E level of 5.810x. Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $2.180, considering decent outlook ahead.
 

Macquarie Group Limited

Update on Issued Ordinary Capital and Convertible Securities: Macquarie Group Limited (ASX: MQG) has recently provided an update on Issued Ordinary Capital and Convertible Securities for the month of July 2018 wherein the group did not issue any new fully paid ordinary shares and recorded MGL ordinary shares of 340,382 738 as at 31 July 2018. Further, during the month of July 2018, pursuant to the Macquarie Group Employee Retained Equity Plan, there were 3,024 unlisted Deferred Share Units granted. Besides this, the other movements in the number of DSUs and unlisted Performance Share Units including forfeitures, exercises, and adjustments, the company recorded the total number of DSUs on an issue at 3,404,733 while the total number of PSUs on issue was 1,113,487. There were also a further 11,295 Tristone Exchangeable Shares on an issue, resulting from the exercise of retention options previously held under retention agreements with key former Tristone employees. Looking at the future performance, the group expects FY19 to be broadly in line with FY18 while its financial position with capital surplus of $3.4 billion and bank CET1 ratio of 10.3% have been within the regulatory requirements. Meanwhile, the share price has risen 20.78 per cent in the past six months as at August 10, 2018 and traded close to the higher level. Hence, we maintain our “Expensive” recommendation on the stock at the current market price of $ 122.480, and it is better if one can wait and watch for further correction from the current price level.
 

Magellan Financial Group Limited

Lifted dividend payout ratio from the range of 75%-80% to 90%-95%: Magellan Financial Group Limited (ASX: MFG) has recently posted its full-year results wherein topline increased by 34 percent and amounted to $452.6 million in FY18 as compared to the last year. Profit after tax after MGG net offer costs and amortization grew by 8% to $211.8 Mn in FY18 against the prior year. As a result, diluted EPS came at 122 cents per share, marking a decent growth of 7% on Y-o-Y basis. Based on the solid performance of the company, the Board of Directors revised its dividend policy and lifted the payout ratio in between 90% and 95% of the fund’s management business net profit after tax from the previous payout of the range of 75%-80%. This indicates about a 20% rise in the dividend payout ratio as compared to the previous payout ratio range. This revised dividend policy came after the board review of its ongoing capital requirements of the Group as the Board found strong balance sheet position with sustainable cash flows which are enough to support the business and its numerous organic growth opportunities going forward.


FY18 Financial Highlights (Source: Company Reports)

However, the Board of Director declared the fully franked Final Dividend and Performance Fee Dividend of 90.0 cents per share and it will be payable on August 27, 2018. There is an increase in FUM from A$50.6 Bn as of 30 June 2017 to A$69.5 Bn as at 30 June 2018 and this reflected a growth of 37.4 per cent (Y-o-Y). Meanwhile, the stock price has risen 15.80 per cent in the past one month as at August 10, 2018 and traded close to a higher level ($28.400). Based on foregoing, we give a “Hold” recommendation on the stock at the current market price of $27.960.
 

Stock Price Change Comparative Chart (Source: Thomson Reuters)

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