Insurance Australia Group Limited

IAG Details

In Line 1HFY18 Performance: Insurance Australia Group Limited (ASX: IAG) has reported inline 1H FY18 performance with the management expectation. During the first half of the year, the Group recorded solid like-for-like gross written premium (GWP) growth of nearly 4% which reflected a short tail rate response to claims inflation and ongoing momentum in commercial lines. Revenue from ordinary activities grew by 1.1% to $8,272 Mn in 1HFY18 from $8,179 Mn in 1HFY17. Net profit attributable to IAG shareholders registered a growth of 23.5% to $551 million in 1HFY18 at the back of rate increases in commercial and consumer line, and volume growth in motor division. As a result of this, basic earning per share came at 23.32 cents per share(cps) in 1HFY18 from 18.61 cps in 1HFY17. Further, IAG declared a fully franked interim dividend of 14 cents per share which was paid on 29 March 2018, representing a dividend payout ratio of 52.5% of cash earnings and dividend rise of 7.7% as compared to previous corresponding period. Looking at historical dividend performance, we believe that the company will maintain its dividend payout ratio in the range of 50-80% in future while this might be subject to the Company’s financial performance.


Dividend Trend (Source: Company Reports)

Besides this, IAG’s capital position remains strong with a Common Equity Tier 1 (CET1) ratio of 1.19 against the target benchmark of 0.9-1.1. Furthermore, the Group is forecasting low-single-digit growth in gross written premium for FY18 on an insurance margin in the range of 15.5%-17.5%. The guidance includes the ongoing rating response to short tail claims inflation, especially in motor. Meanwhile, IAG stock has risen 5.46 per cent in three months as on April 18, 2018 and trading at higher level. We maintain a “Hold” recommendation on the stock at the current price of $ 7.560.
 

IAG Daily Chart (Source: Thomson Reuters)
 

Dicker Data Limited

DDR Details

Reaffirmed Dividend update and Guidance for FY18: Dicker Data Limited (ASX: DDR) recorded decent revenue growth of 10.2 per cent to $1,305.9 Mn in FY17 which was just ahead of its guidance. Gross profit was up by 7.4 per cent to $177.8 Mn in FY17 from $109.7 Mn in FY16. However, gross profit margin abated slightly by 23 bps to 9.0 per cent in FY17 as compared to previous year due to product mix and market competition. Net profit after tax (NPAT) amounted to $26.9 Mn in FY17 as against of $25.6 Mn in 1FY16, up by 4.8% on YoY basis. As a result of this, basic earning per share came at 16.82 cents per share during the same period.

Recently, the company announced that it will retain its current dividend policy of paying quarterly dividends to shareholders. In line with last financial year and to provide consistency and certainty for investors, the company proposed that each interim dividend for FY18 will be 4.40 cents per share fully franked. This would bring total proposed dividend to be paid in the FY18 year to 18.00 cents per share which is an increase of 9.8% from FY17 dividend of 16.40 cents per share. The Group has forecasted a revenue of $1.38 billion and a net profit before tax of $42.5m for FY18. The company is expecting consolidated revenue and profit growth of 6% for FY18 on the back of organic growth and contribution from new vendors in full year and taking into account the shortcomings at New Zealand (NZ). 


Dividend Table (Source: Company Reports)

It is also worth noting that Dicker Data will continue to act as a distributor of Buddy Ohm in Australia but will become the primary distribution channel for Buddy Ohm in Australia. Meanwhile, the stock has fallen 7.24% in past three months as on April 18, 2018. We maintain our “Hold” recommendation on the stock at the current price of $ 2.840.
 

DDR Daily Chart (Source: Thomson Reuters)
 

Collins Foods Limited

CKF Details

Poised for Growth: Collins Foods Limited’s (ASX: CKF) stock has been down 2.6 per cent in last five days as at April 18, 2018 post being up by 4.7% in last one month. The group delivered a mixed 1H18 result wherein higher margins in KFC Australia were offset by lower margins in KFC Europe business. During the first half of the year, the group reported a statutory net profit of $12.7 Mn as compared to $15.4 Mn in the previous corresponding period. As a result of this, basic earning per share amounted to 11.31 cents per share in 1HFY18. The group’s revenue grew by 14.0% on a year on year (YoY) basis to $322.1 million in 1HFY18 as compared to $282.5 million in 1HFY17. Underlying EBITDA came at $40.8 million in 1HFY18 from $38.6 million in 1HFY17, marking growth of 5.7% YoY. The group maintained their fully franked interim dividend of 8.0 cents per ordinary share. During the first half of 2018, the group has completed acquiring five out of 28 restaurants from Yum!  while the rest of 23 would be finished in the second half. Moreover, the group has launched a new KFC app which is performing well and is processing over 13,000 transactions each week. The trial of home delivery has been successful, and the group intends to launch the service very soon.
 

Mixed 1H18 Performance (Source: Company Reports)
 
For the rest of fiscal year of 2018, the group continues to focus on growing their core KFC Australian business through same store sales growth, integrating the newly acquired restaurants in WA, SA and Tasmania, building new stores and positioning delivery for further roll-out. Recently, Kevin Perkins has decided to retire from his executive role of managing the Sizzler business and has been appointed as Non-Executive Director. Based on ongoing development related to expanding footprints in Asia region and increased store counts over the period, CKF is expected to witness growth in years to come. We give a “Buy” recommendation on the stock at the current market price of $ 5.300, given the almost consistent dividend growth.
 

CKF Daily Chart (Source: Thomson Reuters)

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