Stocks’ Details

AMP Limited

AMP Successfully Completes Its $650 Mn Institutional Placement:Wealth Management Company, AMP Limited (ASX: AMP) is involved in expanding international investment management business and a growing a retail banking business. The company recently announced that it successfully completed its institutional placement to raise $650 Mn. In the process, around 406.3 Mn new fully paid ordinary shares in AMP will be issued to new and existing institutional investors. The placement was priced at A$1.60 per New Share, representing a 6.7% premium to the underwritten floor price of A$1.50 per New Share.The funds raised will allow AMP to immediately implement its transformational strategy to create a simpler, higher-growth, and higher-return for its customers.In another update, AMP declared dividend/distribution of AUD 1.09690000 on security ‘AMPPA - CAP NOTE 3-BBSW+5.10% PERP NON-CUM RED T-12-21’, with record date and payment date on September 13, 2019 and September 23, 2019, respectively.

H1FY19 Key Highlights:Its retained businesses operating earnings decreased by 21.8% to $316 Mn as compared to $404 Mn in H1FY18. Its underlying profit decreased by 37.6% to $309 Mn from $495 Mn in H1FY18. The major reason behind the result can be attributed to the challenging first half as AMP transitions and fundamentally de-risks the business.


H1FY19 Income Statement (Source: Company Reports)

What to expect:As per the report, AMP is invigorating three-yeartransformational strategy towards a client-led, simpler, growth-oriented business. Its A$1.0-1.3b investment program is expected to drive growth, significantly reduce costs, and de-risk the business.

Stock Recommendation:It is presently trading close to its 52-week low level of $1.715. Its debt to equity ratio for H1FY19 stood at 5.21x, higher than the industry median of 2.02x, which implies the company is highly leveraged than its peer group. Hence, considering the aforesaid facts and current trading levels, we put our watch stance on the stock at the current market price of $1.825 per share (down 3.694% on August 15, 2019) and suggest that investors should wait for a few more catalysts that may drive the stock.

 REA Group Ltd

Trading at Higher Levels: REA Group Ltd (ASX: REA) is engaged in providing property and property-related services on websites and mobile apps across Australia and Asia. The company recently announced that two of its substantial holder Pinnacle Investment Management Group Limited (and its subsidiaries) and Hyperion Asset Management Limited have ceased to be the substantial holder inthe company effective from August 7, 2019. In another update, REA announced (fully-franked) dividend/distribution of AUD 0.63000000 with record date and payment date on August 30, 2019 and September 19, 2019, respectively.

FY19 Key Highlights:The revenue for the period increased by 8% to $874.9 Mn. The EBITDA for the period increased by 8% to $501.2 Mn. The net profit for the period increased by 6% to $295.5 Mn. The following picture provides an overview of the company’s performance:


FY19 Income Statement (Source: Company Reports)

What to expect:The market remains challenging with Australian residential listing volumes down 19% in July 2019 compared to July 2018 with declines of 31% in Sydney and 29% in Melbourne.However, a number of factors are now in place to support a market recovery, including lower interest rates and an improved lending environment. Coupled with a very healthy increase in buyer activity, it signals an eventual recovery of listing volumes.

Stock Recommendation:REA Group’s share generated positive YTD return of 41.66%. Its debt to equity reduced from 0.46x in FY18 to 0.34x in FY19, which implies that the company has reduced its debt, which can be supported by the fact that REA’s long-term debt to total capital decreased from 22.6% in FY18 to merely 5.8% in FY19. Currently, the company’s stock is trading towards the 52-week higher levels of $105.740 with premium PE multiple of 112.880x. Hence, considering the aforesaid facts coupled with decent outlook and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $100.85 per share (down 4.135% on August 15, 2019).
 

Woodside Petroleum Ltd

Q2 2019 Highlights:Woodside Petroleum Ltd (ASX: WPL) is involved in hydrocarbon exploration, evaluation, development, production, and marketing. During the quarter, the company generated sales revenue amounting to $738 million and production of 17.3 MMboe. Sales revenue and production were lower in comparison to the prior quarter values of $1,221 million and 21.7 MMboe, respectively. In Q2 2019, the company witnessed a decline in production and revenue due to the major turnaround at Pluto LNG. However, the period saw strong LNG production from the North West Shelf and Wheatstone LNG. In addition, the company is expected to reap future benefits out of the recent business developments and contracts.
 

WPL’s Quarterly and YTD Revenue Detail (Source: Company Reports)

What to expect:During the period, the company began offshore commissioning for theGreater Enfield project. The company also put forward Julimar-Brunello Phase 2 that will develop gas from the Julimar reservoir. Final investment decision is targeted for H2 2019. In addition, the company commenced front-end engineering design (FEED) activities for Greater Western Flank Phase 3. Completion of FEED is targeted for Q1 2020.  Subsequent to the quarter,the company also signed an agreement for the mid-term supply of around 1.5 million tonnes of LNG in the period to 2024.

Stock Recommendation: The company’s gross margin, EBITDA margin, and net margin for FY18 stood at 50.3%, 71.0% and 28.0%, better than the industry median of 44.3%, 37.4%, and 15.9%, respectively, which implies decent fundamentals of the company. Its current ratio for FY18 stood at 2.31x, better than the industry median of 1.25x, which implies the company is in a better position to address its short-term obligations than its peer group. Coming to the stock’s past performance, it generated negative returns of 7.79% and 5.22% in the time span of one month and six months, respectively. It is presently trading slightly below the average of 52 weeks high and 52 weeks low price of $39.380 and $29.330, respectively, with reasonable PE multiple of 15.93x. Hence, considering the aforesaid factors and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $31.180 per share (down 6.73% on 15 August 2019).

 
Comparative Price Chart (Source: Thomson Reuters)  

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