Stocks’ Details

Commonwealth Bank of Australia

Changing dynamics: Commonwealth Bank of Australia (ASX: CBA) has lately revealed that the net margin stood at 2.15% in FY18 which is above the industry median (1.87%). Efficiency ratio increased by 260 bps to 44.7% in FY18 against FY17. While group’s underlying expenses have grown, margin performance was not that bad as expected. The group has already faced many challenges owing to regulatory scenario, and this seems to have been factored in the price. CBA has recently disclosed the market about CBA Instalments for WPLIYE series and CCLIYE series in which CBA Equity Products Group, is the Issuer of Instalment Warrants over ordinary shares in Woodside Petroleum Limited (WPL), and declared the record date as 24 August 2018 for entitlements to the $0.73478 (estimated), 100% franked dividend for the WPL Commonwealth Bank Instalments. In addition, CBA Equity Products Group, as the Issuer of Instalment Warrants over ordinary shares in Coca-Cola Amatil Limited (CCL), also declared the record date as 28 August 2018 for entitlements to the $0.21, 65% franked dividend for the CCL Commonwealth Bank Instalments.


FY18 Key Financials (Source: Company Reports)

Commonwealth Bank of Australia, a substantial holder of the Costa Group Holdings Limited upwardly revised its holding from 5.18% of interest to 6.19% of the voting power. Further, the group became the substantial holder of Flexigroup Limited by holding 5.01 percent voting rights. Meanwhile, the share price has fallen 6.24 percent in the past six months as at August 23, 2018 and is trading at a reasonable PE level of 13.24x. Hence, we give a “Buy” recommendation on the stock at the current market price of $70.890, up 0.198 percent on August 24, 2018.
 

CBA Daily Chart (Source: Thomson Reuters)
 

Tabcorp Holdings Limited

Well Positioned for Growth: Tabcorp Holdings Limited (ASX: TAH) delivered strong full-year results wherein total sales grew by 71.7 percent and amounted to $ 3,828.7 Mn in FY18 over the last year. It was largely driven by renewed licenses, new product launches, strong performance from Wagering & Media and Lotteries & Keno business. NPAT before significant items stood at $ 246.2 Mn in FY18, displaying solid growth of 37.6 percent on a Y-o-Y basis. Resultantly, RoE turned around to be positive and recorded 0.7% in FY18. In addition to this, the current ratio stood at 0.49x in FY18 while debt to equity ratio decreased from 1.12x to 0.48. It reflects a healthy balance sheet which will support to execute growth plans without affecting the financial performance of the company.


FY18 Financial Highlights (Source: Company Reports)

On the other hand, one of the directors, Justin Milne had an indirect Interests in the Company and acquired 10,600 ordinary shares via on-market purchase at an issue price of $4.71 per Ordinary Share. Moreover, David Attenborough who had a direct interest in the company had acquired 59,508 Restricted Shares through the partial consideration for the Merger Completion Award. Meanwhile, the stock climbed up 6.28 percent in the past three months but was down by 0.63 percent in the past one week as at August 23, 2018. Looking at robust financial performance and positive outlook, we maintain our “Buy” recommendation on the stock at the current market price of $ 4.790.
 

TAH Daily Chart (Source: Thomson Reuters)
 

Australian Finance Group Ltd

Strong Outlook:Australian Finance Group Ltd.’s (ASX: AFG) stock tumbled 2.795 percent on August 24, 2018 following the release of FY18 result, wherein net profit after tax was substantially down by 14.8 percent to $33.31 Mn in FY18 as compared to the prior year. It was mainly impacted by an initial recognition of the AFGHL trail book which included loans settled over the prior year. However, revenue increased by 2.3 percent and amounted to $619.27 Mn in FY18 against FY17. Based on mixed performance, the Board of Directors declared a fully franked final dividend of 5.7 cents per share, bringing the total dividend for FY18 to 22.4 cents per share inclusive of the special dividend that was paid in March 2018, representing a high dividend yield. It will be paid on 27 September 2018 with the record date of 3 September 2018. Besides this, AFG continues to generate consistent growth in sustainable quality earnings despite challenging regulatory and economic conditions. As on June 30, 2018, the company has bagged combined residential and commercial loan book of $145.4 billion with the distribution network of more than 2,950 brokers across Australia. It represents the strong volume growth on demand pickup and consolidation of new capacities which will ensure the future opportunities for AFG.


FY18 Financial Highlights (Source: Company Reports)

Meanwhile, the share price has risen 17.95 percent in three months as at August 23, 2018 and is trading at a reasonable PE level of 8.14x. At the moment, we put a “Hold” recommendation on the stock at the current price of $ 1.565, considering the aforesaid facts.
 

AFG Daily Chart (Source: Thomson Reuters)
 

Qantas Airways Limited

Decent FY18 Performance:Qantas Airways Limited’s (ASX: QAN) stock tumbled 2.757 percent on August 24, 2018 as there seem to be some sell-off while the group announced to pay $2500 bonuses to workers, but this is subject to signing new wage deals. The group lately released FY18 results wherein investors assumed that FY19 will be marginally impacted on its earnings growth because of rising fuel price and wages cost. However, for FY18, the company delivered decent performance and recorded Underlying PBT of $1,604 Mn, which is 14% more than the prior year, despite the fuel price volatility. Revenue increased by 6 percent and amounted to $17,060 Mn in FY18 against FY17. It was mainly driven by strong performance in the domestic flying businesses of Qantas and Jetstar during the period. Based on decent performance, the Board of Directors declared shareholder returns up to $500 million, comprising of the fully franked dividend of 10 cents per share to be paid on 10 October 2018 with a record date of 6 September 2018, as well as an on market buy-back of up to $332 million. In our view, the company has brighter outlook backed by strongly advanced ticket booking and continued focus on the transformation that provides confidence to substantially recover higher fuel prices in FY19 and maintain its strong growth ahead. It will be supported by capacity discipline and fundamental strengths of its dual-brand strategy in the domestic market, combined with margin advantage and fleet investment in the international market.


FY18 Financial Highlights (Source: Company Reports)
Meanwhile, the stock climbed up 13.96 percent in the past six months as on August 23, 2018 and is trading at the lowest PE level of 11.660 (indicating to be undervalued at current price) among the peer. Thus, we maintain our “Buy” recommendation on the stock at the current market price of $ 6.350.
 

QAN Daily Chart (Source: Thomson Reuters)

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