QBE Insurance Group Ltd (ASX: QBE)
Slumping on Profit Downgrade: Down 0.57% on January 23, 2018, QBE (with a 14.26bn market cap) flagged a $US1.2 billion ($1.5 billion) full-year loss at its FY17 result updates at the back of the challenging FY17. The insurer also downgraded its combined operating ratio guidance to 104% against the target range of 100 to 102% as indicated last year in the month of October (and anything over 100% signals for an unprofitable underwriting business). This particularly entails unprofitability linking to North America, Asia Pacific, Latin America and Equator Re, while Australia and New Zealand and Europe have been on track. Further, US corporate tax rate reduction to 21% led to a $230m write down of the carrying value of deferred tax assets in North American operations. The group now expects its net investment return of 3.2% for FY17.
Earlier the group said to witness an impact of $US600 million at the back of Hurricanes Harvey, Irma and Maria and the earthquakes in Mexico. The situation has been worsened by Californian wildfires and December storms in Australia, witnessed in 4Q17. Overall, the group has been slammed over the past one year with profit downgrades and class actions on market disclosures, while the group is aiming for share buyback. Though the 2018 outlook includes a target COR range of 95-97.5% with target net investment return of 2.5-3%, investors can stay wary of the stock as we believe it is “Expensive” at the current price of $10.43, given the shortcomings.
Macquarie Atlas Roads Limited (ASX: MQA)
Released December 2017 quarter toll revenue and traffic statistics:Edging a little up on January 23, 2018, Macquarie Atlas Roads Limited (ASX: MQA) had reported that its weighted average toll revenue and traffic grew by 4.3% and 2.9%, respectively, during the December 2017 quarter, on the prior corresponding period (pcp), which shows increased aggregate traffic levels and revised toll schedules implemented over the past 12 months. For the 12 months to 31 December 2017, the weighted average toll revenue has increased by 4.0% while traffic over the same period was 2.7% above pcp. While the result is decent for its networks, Dulles Greenway is expected to face impact from competing network improvements and construction activities within the next two years. Meanwhile, MQA stock (with a 3.84bn market cap) has fallen 2.21% in three months as on January 22, 2018 and is trading at a low P/E. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $5.79
December 2017 quarter toll revenue and traffic statistics (Source: Company Reports)
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