CYBG Plc

Increase in legacy PPI costs:CYBG Plc’s (ASX: CYB) stock tumbled 6.7 per cent on April 18, 2018 after the group released its declaration that it expects to increase its provision to cover the cost of an earlier insurance industry scandal. The Board has thus approved to increase the Group’s provision by 350 million pounds to cover multiple particulars such as 88 million pounds will be covering the close-out of the final case investigations, 186 million pounds will cover around 110,000 additional customer complaints which will be received before August 2019 time bar; and finally, 76 million pounds will cover the costing of administering redressal programmes. Henceforth, the Group expects to recognise a pre-tax charge of 202 million pounds in its half-year results that is ending on March 18. The additional cost would result in a reduction in the Group's Common Equity Tier 1 ratio of about 100 basis points as at December 31, 2017. Moreover, the Group has received approximately 59,000 complaints over the past six months that were more than the expected number. The Group will continue to maintain its regulatory capital requirement. The group still states to be on track to deliver its medium-term targets. Meanwhile, the stock price was down by 4.5 per cent this year to date, as on April 17, 2018, and is trading at a slightly high P/E. We give an “Expensive” recommendation on the stock at the current market price of $ 5.190.
 

Operating Segments’ Performance (Source: Company Reports)
 

Harvey Norman Holdings Limited (ASX: HVN)

Soft performance for franchising operations:Harvey recently disclosed that HNM Galaxy Pty Limited is a wholly owned subsidiary of HVN and is the owner of 49.9 per cent of the issued shares in Coomboona Holdings Pty Limited. The consolidated entity has built on the record-breaking comparative base for HY17 to deliver a new record underlying profit result. Underlying net profit before tax ($296.08 million) for the half-year ending on 31 December 2017 was up by 0.8 per cent as compared to the corresponding period in the prior year while profit ($167.2 million) from franchising operations was down by 2.9 per cent as compared on pcp basis. Total assets ($4.51 million) decreased by 6.2 per cent as on 31 December 2017 as compared to prior corresponding period. The Board recommended the payment of a fully-franked dividend of 12.0 cents per share and this will be paid in May 2018. Gerald Harvey, a substantial holder changed its substantial holding and now holds 30.51 per cent of the voting power from 29.4 per cent. The stock price was down by 17.1 per cent in the past six months but surged up by 2.7 per cent as on April 18, 2018 at the back some positive sentiments emanating in the market. It might be prudent to wait for some catalysts that can drive the future performance, while we give an “Expensive” recommendation at the current market price of $ 3.440.
 

Franchisee Operations Performance (Source: Company Reports)

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