Automotive Holdings Group Limited

Renewed Melbourne Football Club partnership: Automotive Holdings Group Limited (ASX: AHG) recently reported that they extended their sponsorship for the Melbourne Football Club in the AFL, to strengthen their automotive dealerships brand presence in Australia. On the other hand, AHG stock lost over 8.2% in the last three months (as of December 28, 2016) impacted by the challenging economic conditions. For the first four months ended on 31 October 2016, AHG reported an unaudited Group Operating EBITDA of $62.7 million, which is a decline by 7.8% from the same period of last year. Refrigerated Logistics division contributed to this decline as Operating EBITDA fell 51.6% year on year (yoy) to $7.4 million during the period. In Automotive division, private buyer sales lost over 14.9% against their prior corresponding period as pressure in Western Australian economy led to pressure on both new and used car margins. On the other hand, the group’s overall performance of their core Automotive division Operating EBITDA surged 8.4% yoy to $52.9 million driven by acquisitions and strong performances by dealerships in New South Wales, Victoria, and New Zealand.  Moreover, to combat the weakness, the group is controlling costs while positioning WA operations to revamp consumer demand. Management expects a better division revenue growth in H2 FY2017. AHG is taking new market initiatives with the easyauto123 used car warehouse pilot in Western Australia. Swap The group is planning to launch the model nationally in FY2017. AHG boosted their capital position by raising $113m while generated $2.0m from a property sale. AHG stock recovered over 7.1% in the last four weeks (as of December 28, 2016). We give a “Buy” recommendation on the stock at the current price of - $ 3.95

Thorn Group Limited

Already positioned itself for the upcoming new Small Amount Credit Contract Laws: Thorn Group Limited (ASX: TGA) reported 2.8% growth in revenue from continuing operations to $156.8m for the half year ended on 30 September 2016, as compared to $152.6m in the same period last year.  Profit after tax from continuing operations (excluding both the operational profit and loss on sale of NCML) rose 6.1% to $15.3 million against $14.4 million while Profit after tax including the sold NCML decreased 1.4% to $15.2m as compared to $15.4 million. However, the group sold NCML to further focus on their core businesses which has the capability to generate better rates of return on capital. The group recently welcomed the Federal Government’s response to the final review of Small Amount Credit Contract Laws. Even though the new restrictions would be applicable twelve months after the passage of the legislation through Parliament in 2017, the group reported that they are already adopting new consumer protection safeguards. Thorn expects to see a better growth in long term despite short term headwinds. Thorn Equipment Finance forecasts ongoing growth driven by rising receivables book which would boost potential earnings. The group would be paying a distribution amount of $0.055 on January 20, 2017. Meanwhile, Thorn stock rose over 23.45% in the last three months (as of December 28, 2016) and we believe the bullish momentum to continue. We give a “Hold” recommendation at the current price of - $ 1.93

G8 Education Limited

Bank debt funding facilities’ update: G8 Education Limited (ASX: GEM) recovered over 12.2% in the last four weeks (as of December 28, 2016) as the group is now targeting high quality child care centers from strategic locations. The group enhanced their bank debt funding facilities by 2-year extension of their $50 million working capital facility with Bankwest, with expiry in December 2018. GEM’s trading results for 10 months to October 2016 and estimates for November and December indicated for full year EBIT of $158m and $162m. The group also announced about some leadership changes with Gary Carroll being the new Chief Executive Officer and Managing Director effective next year beginning. GEM stock has an outstanding dividend yield and is trading at a reasonable P/E. We maintain our “Buy” recommendation on the stock at the current price of - $ 3.59

Retail Food Group Limited

Rise in new outlet commissionings: Retail Food Group Limited (ASX: RFG) reported a Same Store Sales (SSS) rise of 1.5% in first 19 weeks’ of FY17 while Average Transaction Value (ATV) enhanced 2.3% during the period. The group forecasted over 140 new outlet commissionings in first half of 2017, which is a rise of 20% against second half of 2016. RFG maintained a favorable outlook for FY17 and forecasts an underlying NPAT growth of 20%. On the other hand, RFG stock already rose over 47.4% during this year to date (as of December 28, 2016) and we believe the stock is currently trading at higher valuations and is close to its52-week high price. We give an “Expensive” recommendation on the stock at the current price of – $ 7.09

Insurance Australia Group Limited

Positive long-term strategy: Insurance Australia Group Limited (ASX: IAG) is offering a small shareholding sale facility for holdings valued at $500 or less. The group recently appointed Dr Helen Nugent AO and Duncan Boyle as independent nonexecutive directors. The group boosted their capital position by raising $404.1 million of Additional Tier 1 Capital. The group is targeting a cash return on equity (ROE) equivalent to 1.5 times IAG’s weighted-average cost of capital and a compound earnings per share (EPS) growth of over 10% for the coming three to five years. IAG stock rose over 6.7% (as of December 28, 2016) in the last four weeks and has a reasonable dividend yield. We give a “Hold” recommendation on the stock at the current price of – $ 6.05 

Australia and New Zealand Banking Group Limited

Improvement in home lending position: Australia and New Zealand Banking Group Limited (ASX: ANZ) sold their Retail and Wealth units in five Asian countries to Singapore’s DBS Bank to enhance their focus in Institutional Banking. ANZ’s refocus on their Institutional Bank led to decrease in risk weighted assets by $21 billion. ANZ solid retail and commercial businesses in 2016 improved their home lending position in Australia to number three from fourth position. ANZ stock rallied over 31.5% in the last six months (as of December 28, 2016). We give a “Buy” recommendation on the stock at the current price of – $ 30.88

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