Six Stocks To Diversify

 
Bapcor Limited (Burson Group Limited)



BAP Details

Solid project pipeline: Burson Group Ltd (ASX: BAP) has changed the name to Bapcor Limited (ASX: BAP), effective July, 2016. The group has 15 optimization projects and the majority of the financial benefits of the projects is said to start from FY 17 onwards and the product procurement project would be mostly completed by July 2016. In addition, the indirect procurement project would end by December 2016 but its benefit is expected after 18 months. The group support office project would be delivered over FY17 to FY19, while the consulting assignment of Warehouse Optimization would be completed by September 2016 with benefits from FY 18. BAP is expecting full year NPAT in the range of $41.5M to $43.0M and the expected earnings per share of 17.04 cps and 17.66 cps representing annual EPS growth of between 24.5% and 29.0%.
 


Identified Benefits (Source: Company Reports)
 
On the other hand, the intercompany product sourcing and sales optimization project is going slow and the network development project’s ground work is through. Moreover, BAP stock rose over 38.36% in the last six months (as of July 15, 2016), placing the stock at a high P/E. We believe that the stock is “Expensive” at the current price of  $5.48
 

BAP Daily Chart (Source: Thomson Reuters)
 
Washington H. Soul Pattinson and Co. Ltd



SOL Details

Joint venture agreements: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) performance is dependent upon the strategic investments of its major holdings coupled with performance of the volatile mining sector. SOL’s subsidiary Exco Resources Limited has signed the joint venture agreements with Graphitecorp Limited (having 80% interest) for the exploration and development of the northern and central portions of the Mount Dromedary Flake Graphite Project.
 


Investment Details (Source: Company Reports)
 
The project is currently undergoing feasibility study to assess the economic opportunity to market high quality graphite products. Moreover, SOL has finished the 40% interest in Bengalla JV which has good quality of thermal coal and has got approvals to mine up to 15mtpa until 2039. Group’s interim dividend for 1H16 was up 5% and the total portfolio value as at January 31, 2016 is $5.4 billion. But, SOL stock has already surged 23.22% in one year (as of July 15, 2016), placing the stock at an unreasonable P/E. Based on the foregoing, we give an “Expensive” recommendation on the stock at the current price of $17.34
 

SOL Daily Chart (Source: Thomson Reuters)
 
Suncorp Group Ltd



SUN Details

Positioned to survive rising claims pressure: Suncorp Group Ltd (ASX: SUN) stock rose over 6.7% in the last four weeks (as of July 15, 2016) while Anna Lenahan, the Chief Risk and Legal Officer resigned. SUN got over 8,000 home, motor and commercial claims due to the severe low pressure system impacted in the east coast of Australia during the first week of June. This leads to the financial impact as led by the storms in the range of $60 to $80 million. On the other hand, SUN has an allowance of $670 million for the FY16 and after taking into account the impact of the east coast storms, Suncorp expects the total natural hazard costs for the year to date to be broadly in line with the annual allowance. SUN announced for restructuring of its operating model which was said to be finished by June 2016 with up to pre-tax $55 million charge in FY16, and at least $80 million per annum ongoing benefit. We maintain our “Buy” recommendation on the stock at the current price of $12.88
 

SUN Daily Chart (Source: Thomson Reuters)
 
FlexiGroup Limited



FXL Details

New payments business: FlexiGroup Limited (ASX: FXL) is launching new payments business and has started signing partners already. FXL is focusing on the core business units of consumer and business finance and has made equity investment into Kikka to enter new markets while acquired Fisher & Paykel Finance from Fisher & Paykel Appliances.
 


Guidance (Source: Company Reports)
 
The company expects to have FY16 cash NPAT guidance of $92 million to $94 million with FY16 dividend to be within 50-60% of cash NPAT. FXL even announced the pricing of AUD260 million asset-backed securities, originated by Certegy Ezi-Pay Pty Ltd (“Certegy”), a wholly owned subsidiary of FlexiGroup Limited. Trading at a high dividend yield and low P/E, we give a “Speculative Buy” recommendation on the stock at the current price of  $1.98
 

FXL Daily Chart (Source: Thomson Reuters)
 
CSL Limited



CSL Details

FDA approvals: CSL Limited (ASX: CSL) had announced about receiving the US Food and Drug Administration (FDA) approval for AFSTYLA® (Antihaemophilic Factor (Recombinant), Single Chain) for adults and children with haemophilia A and Seqirus’ FLUCELVAX QUADRIVALENT™ (Influenza Vaccine). The company is forecasted to have EPS growth of 23.5% for the FY17, as per market expectations.  One key aspect is that the long term profitability is significantly dependent on R&D. The stock has risen 11.5% in last three months (as at July 15, 2016). We still believe that the stock is “Expensive” at the current price of $113.85
 

CSL Daily Chart (Source: Thomson Reuters)
 
Genworth Mortgage Insurance Australia Ltd 



GMA Details

Capital position and share consolidation: Genworth Mortgage Insurance Australia Ltd (ASX: GMA) is returning a total of $202.4 million capital to shareholders and each shareholder was paid 34 cents per share. Meanwhile, GMA’s lower loan-to-value ratio (LVR) mix of business is adding to the capital position and the high LVR lending as a proportion of total mortgage originations is reducing due to the regulatory changes. Recently, the group appointed Georgette Nicholas as Managing Director and David Foster as Non-Executive Director. GMA stock surged 13.77% in the last three months (as of July 15, 2016), and still trading at a lower P/E with a lucrative dividend yield. We put a “Hold” recommendation on the stock at the current price of  $2.83
 

GMA Daily Chart (Source: Thomson Reuters)

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