a2 Milk Company Ltd

A2M Details

Trading at higher levels: a2 Milk Company Ltd (Australia) (ASX: A2M) rallied over 4.9% on October 04, 2017 leading to a total rally of over 23% in the last four weeks. On one hand, a research note from Goldman Sachs entails a buy rating on the stock with a $7.25 price target at the back of growth from developments in China; and on the other hand, the market saw Deutsche Bank downgrading the rating to hold for A2M shares.

Lately, A2M reported that Synlait (ASX: SM1) has received registration by CFDA (China Food and Drug Administration), which would enable exports of the group’s China label infant formula to China to continue. This registration is a significant one for A2M, who had acquired an additional 8.2% shareholding in Synlait in March 2017 given the growing success of their infant formula in Asia Pacific region. On the other hand, A2M already generated over 197.5% in this year to date (as of October 03, 2017) placing them at a very high price to earnings ratio. We think that the stock is overvalued at the current price of $ 6.31

Investa Office Fund

IOF Details

Attractive return on equity: Investa Office Fund (ASX: IOF) has recently reported that Investa Property Group acquired 59.3 million securities in IOF, reflecting 9.89% of IOF’s issued securities, from Cromwell Property Group for $276 million. This move has enhanced Investa Property Group’s co-investment stake in IOF to 19.95%. IOF has been seen to outperform the S&P/ASX200 A-REIT Index and their peers in FY17. Further, IOF is known to have total assets under management of $3.8 billion, with 20 investment grade office buildings in core CBD markets across Australia. With rise in earnings, distributions, and portfolio value, the fund has delivered an attractive return on equity over FY17. The stock has a decent dividend yield and has fallen about 4.8% this year to date (as at October 03, 2017). IOF is trading at reasonable levels from an investment point of view andwe give a “Buy” at the current price of $ 4.38


Five-year performance (Source: Company Reports)

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