Premier Investments Limited

PMV Details
· Solid first half result updates led the stock higher: Premier Investments Limited (ASX: PMV) stock surged over 11.9% on February 08, 2017 driven by their better than estimated first half result updates. The group’s retail total sales for the first half of 2017 is expected to reach over $588.6 million, representing a 7.1% rise as compared to the first half of 2016 (on a 26 week vs 26 week basis). The group’s retail’s underlying EBIT is forecasted to be in the range of $92.0 million and $93.0 million during the period. On the other hand, the update did not give an overview on their Smiggle and Peter Alexander brands performance, over which some concerns did erupt.

· Recommendation: The stock already fell over 24.1% in the last six months (as at February 07, 2017) and still trading at a slightly higher level. We give an ‘Expensive’ recommendation on the stock at the current price of - $ 14.01

Genworth Mortgage Insurance Australia Limited

GMA Details
· Weak FY16 results and guidance dragged the stock lower: Genworth Mortgage Insurance Australia Limited (ASX: GMA) stock dropped over 14.8% on February 08, 2017, impacted by their weak fiscal year of 2016 results. The group’s new business volume, as measured by New Insurance Written (NIW), fell 18.4% year on year (yoy) to $26.6 billion for the year 2016, while Gross Written Premium (GWP) lost 24.8% reaching $381.9 million during the year. This fall is mainly on the back of declining high-LVR penetration in the market and a lower LVR mix of business. Net Earned Premium (NEP) fell 3.6% yoy to $452.9 million in 2016 while the loss ratio rose to 35.1% in 2016, as compared to 24.0% in 2015. Meanwhile, the group reported that their Queensland and Western Australia markets were facing a slowdown. Moreover, for 2017, the group forecasts their GWP to be lower than their 2016 levels, which is a fall in the range of 10% and 15%. GMA also forecasts their 2017 NEP to fall by 10 to 15% while the full year loss ratio is expected to be in the range of 40% and 50%. On the other hand, the New South Wales and Victoria markets performed well. GMA business model is resilient and they are making efforts to make the best use of their excess capital. As a part of their strategy, the group is making efforts to further focus on their customers’ capital and risk management needs while enhancing their underwriting efficiency. The group also renewed their Supply and Service Contract with their major customer, the Commonwealth Bank of Australia, for a further 3 years to 31 December 2019 which accounts 47% of GWP in 2016. GMA reported a fully franked final ordinary dividend of 14.0 cents per share which is a better payout ratio of 71.8% up from 63.2% of second half of 2015.

· Recommendation: Given the volatility, we maintain a ‘Hold’ recommendation on the stock at the current price of – $ 2.87

NIW by Product Type (Source: Company Reports)

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