SG Fleet Group Limited

SGF Details

Change of Director’s Interest: SG Fleet Group Limited (ASX: SGF) is mainly involved in providing integrated mobility solutions, including fleet management, vehicle leasing, and salary packaging services. On 26 October 2021, one of the company’s Directors, Kevin Wundram, acquired 24,070 unlisted performance rights and 271,332 unlisted options of the company as part of the Long-Term Incentive awards for FY22.

2021 AGM Highlights: On 26 October 2021, SGF held its 2021 Annual General Meeting (AGM), wherein, the management informed that the corporate channels are performing well, with strong orders across various geographies and customer segments. Some of the key points mentioned in AGM are as follows:

• Improved Underlying Profit: For FY21, the company reported underlying profit of $51.6 million, up ~42% on FY20, underpinned by a strong performance from AU, NZ & UK Corporate businesses.
• Increase in H2FY21 Dividend: For H2FY21, SGF has paid a final dividend of 5.393 cents per share, bringing the total dividend for the year to 12.585 cents per share, which is 26% higher than FY20.
• Q1FY22 Results Update: Over the quarter, the company renewed some of its largest contracts, including that for the NSW Government, where the company will be managing a larger proportion of the total fleet, and for an extended contract period. During the quarter, the company’s New Zealand and UK businesses have also performed well.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 Pandemic: The company is exposed to the risks related to the COVID-19 pandemic as it could cause disruptions and can impact consumer sentiment and consequently the demand for novated leases.
• Foreign Currency Risk: The company is exposed to the risks related to the fluctuations in foreign currency exchange rates as it could impact the company’s financials.

Outlook: The company is of the view that the introduction of its new ventures, such as Carly and DingGo, will wider its customer book, and strengthen its revenue profile. The LeasePlan integration is also providing benefits to the company in terms of expertise, products and services range and cross-sell, scale, and the many referrals coming through the LeasePlan Corporation alliance agreement.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last three months, the stock has been corrected by ~16.49% and is trading lower than the average 52-weeek price level band of $2.147 -$3.29. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers, considering the improving consumer sentiment, decent performance of corporate businesses, and modest outlook. For the valuation purpose, peers such as BSA Ltd (ASX: BSA), Mader Group Ltd (ASX: MAD), Smartgroup Corporation Ltd (ASX: SIQ), etc., have been considered. Considering the recent renewal of contracts, decent performance from New Zealand and UK businesses, benefits from LeasePlan integration, modest outlook, current trading level, and indicative upside in valuation, we give a “Buy” rating on the stock at the closing price of $2.360, down by ~1.256% as on 3 December 2021.

SGF Daily Technical Chart, Data Source: REFINITIV 

Kina Securities Limited

KSL Details

Termination of Agreement for Westpac’s Pacific businesses Acquisition: Kina Securities Limited (ASX: KSL) is a diversified financial service company that offers customers end-to-end financial solutions from savings accounts to business loans. On 22 September 2021, KSL and Westpac Banking Corporation announced that they have decided to terminate the agreements for the purchase of Westpac’s Pacific businesses, comprising Westpac Fiji and Westpac's 89.91% stake in Westpac Bank PNG Limited.

Key Takeaways from H1FY21 Results:

• Rise in NPAT: For H1FY21, the company reported NPAT of PGK 39.8million, up 36% on previous corresponding period (pcp), supported by the growth in transactional volumes and fees and commissions income.
• Rise in Net Interest Income: The company’s Net Interest Income increased by 6% YoY to PGK 85.4 million in H1FY21, supported by growth in the existing loan book, investment in high yielding government instruments, and lower interest expense (against total deposits).
• Dividend Update: For H1FY21, the company has paid an interim dividend of AUD 3.00 cents per share, down from an interim dividend of AUD 4.0 cents per share in H1FY20.

Net Interest Margin Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risks related to the changes in monetary policies, including change in interest rates, which could impact the company’s operations and results. The company operates in a highly competitive environment, exposing it to competition risk.

Outlook: The company is focused on reshaping the customer experience with digital upgrades and enhancements to mobile and online retail banking. Further, the company is also focused on the expansion of its market leading eftpos fleet to meet significant demand.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last six months, the stock has been corrected by ~22.38% and is trading lower than the average 52-week price level band of $0.795 and $1.2. The stock has been valued using Price to Book Value multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight premium to its peers considering the rise in transactional volumes, improved fees and commissions income and modest outlook. For the valuation purpose, peers such as Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC), and Heartland Group Holdings Ltd (ASX: HGH), have been considered. Considering the rise in net interest margin, growth in the existing loan book, investment in high yielding government instruments, decent outlook, current trading level and indicative upside in valuation, we give a “Buy’ rating on the stock at the closing price of $0.810, down by ~1.220% as on 3 December 2021.

KSL Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined:

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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