Genworth Mortgage Insurance Australia Ltd (ASX: GMA)

Housing market situation impacted the rating: Genworth Mortgage Insurance Australia’s stock edged slightly lower on September 14, 2017 while the group had recently announced the outcomes of rating agency reviews. Fitch Ratings and Standard & Poor’s (S&P) have affirmed the insurer financial strength ratings (IFSR) of Genworth Financial Mortgage Insurance Pty (GFMI). Moody’s Investors Service (Moody’s) has revised down its unsolicited IFSR. Robust standalone credit profile, solid operating performance, strong capital ratios and conservative investment approach led Fitch Ratings affirm the ‘A+’ IFSR on GMA while maintaining the outlook at stable. S&P also affirmed the ‘A+’ IFSR and maintained the outlook at negative noting standalone credit profile, business risk profile and strong capital and earnings. On the other hand, Moody’s has revised its unsolicited IFSR on GFMI from ‘A3’ with a negative outlook to ‘Baa1’ with a stable outlook. This seems to be coming at the back of rising level of risks in the housing market. At the moment, the ratings update led to have raised few concerns across the market. GMA had also reported its NPAT to be down 34.7% to $88.7 million for the half-year ended 30 June 2017. There was a decline in gross written premium of 4% against last year. Ordinary dividends per share also dipped 14.3%

House Prices Scenario (Source: Company Reports)

Meanwhile, Genworth Mortgage is progressing well with its buy-back program and has a stable balance sheet with cash and fixed interest rate portfolio of $3.5 billion.

Vocus Group Ltd (ASX: VOC)

May face class action: While Vocus’ stock edged a little higher on September 14, 2017, the group has gained some attention with the news that the law firm, Slater and Gordon, has proposed for a class action against it on the allegations relating to Vocus being engaged in ‘misleading and deceptive conduct’ and breached its disclosure obligations with respect to FY17 guidance. It has been particularly alleged that Vocus had no reasonable grounds for its original 2017 guidance of November 2016, which was downgraded in May. VOC had reported net profit after tax (NPAT) which was $152.3 million below the company’s guidance, as stated in its August’s result update. This was reasoned out on the back of integration of M2, Amcom and Nextgen Networks businesses and tougher market conditions. The lack of proper disclosure is said to have led the shares trade at higher prices during the period. Slater in partnership with the funding-service provider, Investor Claim Partner (ICP), has proposed this class action, which is said to be brought on behalf of investors who purchased Vocus shares between November 29, 2016 and May 2, 2017. The law firm also highlights that Vocus was aware of most of these issues when the FY17 guidance was originally issued in November, and has misled the market. On the other hand, Vocus has acknowledged the announcement and replied that the group has always complied with the continuous disclosure obligations. It will be worth noting the development on this front while the stock has been down about 44% in last six months (as at September 13, 2017).

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