Are these 5 Stocks trading at a discount – BAP, API, GMA, REA and GXL?

Bapcor Ltd

BAP Details
 
FY 18 is a year of consolidation:Bapcor Ltd.’s (ASX: BAP) stock rose 0.88% on April 16, 2018, and lately, the company concluded the divestment of discontinued operations after signing an agreement for the sale of its New Zealand based business, TBS Group Pty. Ltd. The sale price of TBS is NZ $35.0M on a cash free, debt free basis and the completion of the deal is expected to occur mid-April 2018. However, $2.5M of the sale proceeds is deferred until September 2018 and is subject to certain conditions.
 

1H 18 Financial Performance (Source: Company Reports)
 
Moreover, the company has now finalized the divestments of Hellaby Footwear and Contract Resources, which occurred in the first half of FY18. The divestment program is related to the Hellaby Holdings Ltd.’s acquisition that was made in January 2017; and is of assets disclosed as discontinued operations. Additionally, BAP has targeted to open its first Asian store by May 2018 and at least 5 have been slated for 2018. The company expects 30% NPAT growth in FY18 compared to FY17. As a result, BAP stock has risen 1.42% in three months but fell 2.73% in the past one month, as on April 13, 2018. Overall, FY18 is considered to be a year of consolidation for the company and we give a “Speculative Buy” on the stock at the current price of $5.76.
 

BAP Daily Chart (Source: Thomson Reuters)
 

Australian Pharmaceutical Industries Ltd  

API Details
 
Full year 2018 NPAT will be marginally ahead of FY17: Australian Pharmaceutical Industries Ltd.’s (ASX: API) stock rose 1% on April 16, 2018 while the company expects improvement throughout the second half of FY18. However, API’s 2018 half-year profit is expected to be down 9% compared to the prior corresponding period, because of soft retail conditions by its Priceline Pharmacy network. API expects its half year 2018 net profit after tax (NPAT) to be approximately $26.5 million. However, the company expects that its full year NPAT will be marginally above that of FY17. Moreover, overall network sales, including dispensary for the financial year to date is up 2% but the like-for-like front-of-store sales in its network had fallen 2.4 per cent for the period. Additionally, the dividend payment for the first half is expected to be in line with the prior corresponding period. API has confirmed that its balance sheet and cash flow position is strong. On the other hand, API stock has fallen 3.24% in three months as on April 13, 2018 and is trading at a reasonable P/E. API is looking for smaller, scalable acquisitions that leverage the company’s established retail and business expertise. Therefore, as of now, we give a “Hold” recommendation on the stock at the current price of $1.51, ahead of its interim results to be released on April 19, 2018.
 

API Daily Chart (Source: Thomson Reuters)
 

Genworth Mortgage Insurance Australia Ltd

GMA Details
 
Identified several strategic initiatives: Genworth Mortgage Insurance Australia Ltd.’s (ASX: GMA) stock has fallen 21.02% in three months as on April 13, 2018 as the company in FY17 reported for 19.4% fall in the underlying net profit after tax (excluding mark-to-market movements in the investment portfolio) of $171.1 million. In 2017, the market dynamics have been challenging with reduced high LVR lending as a proportion of total mortgage originations. As a result, new insurance written (NIW) had declined 10.2% to $23.9 billion and gross written premium (GWP) fell 3.4% to $369.0 million. This decline reflects changes in the customer portfolio during the year, changes in business mix and the impact of the premium rate actions taken in 2016. Further, the total revenue, as measured by NEP, fell 18.2 per cent to $370.5 million, due to the $37.3 million impact of the 2017 earnings curve review and lower earned premium from current and prior book years. However, GMA has identified a few strategic initiatives that concentrate on improving the company’s underwriting efficiency, enhancing the product offerings and leveraging the data and partnerships along the mortgage value chain. Meanwhile, GMA stock is trading at a low P/E. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $2.37.
 
 

GMA Daily Chart (Source: Thomson Reuters)
 

REA Group Limited

REA Details
Australian business grew strongly in 1H 2018:REA Group Limited’s (ASX: REA) stock has risen 3.20% in three months as on April 13, 2018 but fell over 5% in last one month, while the company delivered 21% growth in the revenue to $406.8m for 1H 2018. This is driven by a 21% increase in the Australian business, achieved in a market of lower new dwelling commencements. The growth rate also improved due to the inclusion of Financial Services revenue for the first time, which started strong with more than 5.3 million calculator engagements since launch and the first settlements of realestate.com.au home loans. The company for 1H 2018 has reported 21% increase in EBITDA to $242.8m.
 

1H 18 Financial Performance (Source: Company Reports)
 
Additionally, for the full year 2018, excluding the impact of Financial Services, REA expects that the rate of revenue growth will exceed the rate of cost growth. However, this will not be the case in the third quarter, on the back of different expense timing compared to the prior corresponding period and the impact of an earlier Easter. As a result, the EBITDA growth rate for the third quarter will be lower. However, looking at the long-term potential, we give a “Hold” recommendation on the stock at the current price of $ 76.360.
 

REA Daily Chart (Source: Thomson Reuters)
 

Greencross Limited

GXL Details
 
Appoints Lucas Barry as Chief Financial Officer: Greencross Limited’s (ASX: GXL) stock fell by 1.32% on April 16, 2018 while the company has recently appointed Lucas Barry as its Chief Financial Officer. On the other hand, GXL for 1H 2018 has reported 9% growth in the revenue to $433.3 million driven by 4.5% Group LFL sales growth and network expansion. Online, in-store GP clinics and specialist and emergency are also the major drivers of growth in revenue. GXL’s Australian online sales during 1H 2018 have risen by 92% to $9 million and represent 3.4% of Australian retail sales. The company’s NPAT grew 9% to $23.2 million and underlying NPAT is up 11% to $24.4 million for 1H 2018. Moreover, GXL business is performing in line with plan in FY18 YTD and the company remains comfortable with market consensus for the full year result. Additionally, till date in the second half, GXL has opened 2 in-store clinics and has completed 1 vet acquisition, which is expected to contribute to annualized EBITDA of 1 million. However, GXL stock was under pressure on the speculation of increased competition with the arrival of Amazon in the retail space as Amazon launched its Australian platform. Meanwhile, GXL stock is trading at a reasonable P/E and we give a “Buy” recommendation on the stock at the current price of $5.23, given the potential of the group based on its in-store veterinary clinic roll out.
 

GXL Daily Chart (Source: Thomson Reuters)

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