.PNG)
BHP Billiton Limited
Financial support for Samarco: BHP Billiton Limited (ASX: BHP) has approved further amount of US$181 million to fund the remediation and compensation programs for Samarco operations. BHP’s ongoing cost control efforts coupled with recovering commodity prices would continue to support the stock. The group’s unit cash costs were down 16% in FY16 over FY15. Further, FY16 underlying EBITDA margin was 41%. BHP stock has risen 26.87% (as of November 30, 2016) in the last six months and still we give a “Buy” recommendation on the stock at the current price of – $ 25.61
Rio Tinto Limited
Focusing to enhance productivity: Rio Tinto Limited (ASX: RIO) has committed to generate a $5 billion of additional free cash flow over the next five years from a productivity drive as part of its long-term strategy. RIO has planned to raise the productivity across its $50 billion portfolio of assets by focusing on operational excellence. Moreover, RIO is reshaping their portfolio and is going to sell the Lochaber smelter in Scotland for $410 million. Therefore, the total of agreed divestments in 2016 now stands at $1.3 billion. Additionally, RIO cut capex for 2016 to less than $3.5 billion from previously announced $4 billion. The 2017 production is expected to generate operating cash flow of around $10 billion based on Q3 2016 average prices. The investment in exploration continues in 17 countries and eight commodities. The debt repurchases of $3 billion have finished in October 2016, which is enhancing the debt profile with less than $1.5 billion maturing over the next three year. We give a “Buy” recommendation on the stock at the current price of – $ 58.70
Commonwealth Bank of Australia
Operating Income subdued in the September quarter: Commonwealth Bank of Australia (ASX: CBA) in the September quarter has posted the unaudited cash earnings of around $2.4 billion and statutory net profit on an unaudited basis for the September quarter is also about $2.4 billion. The average Assets under Management (AUM) and Funds under Administration (FUA) rose by 3 per cent and 2 per cent, respectively, due to the stronger investment markets and positive net flows. The growth in the operating income is slightly below that of FY16 due to the low interest rate environment, a strengthening Australian Dollar (AUD) and higher insurance claims. Last fiscal year, the group had paid 75% of the profit after tax of $9.5 billion by way of dividends and superannuation funds. We give an “Expensive” recommendation on the stock at the current price of – $ 79.53
Westpac Banking Corp
Fall in cash earnings per share in FY 16: Westpac Banking Corp (ASX: WBC) is holding its AGM on December 09, 2016. In FY 16, WBC reported total revenue growth of 3% and the net interest income growth of 8% to $15,348 million. The cash earnings reached $7,822 million, which is in line with the prior year and but the cash earnings per share fell 5% to 235.5 cents. We remain bearish on the group and give an “Expensive” recommendation on the stock at the current price of – $ 31.65
Australia and New Zealand Banking Group Ltd
CPS2 suspended from the quotation: Australia and New Zealand Banking Group Ltd (ASX: ANZ) lately announced for the suspension of CPS2 of the bank from the close of trading on 28th November 2016, at the request of the company. These will be purchased by a nominated purchaser. But all quoted securities will not be affected; and following the resale, ANZ will buy-back the CPS2 from the purchaser for cancellation. On the other hand, ANZ has reached an agreed settlement with the Australian Competition and Consumer Commission related to Non-Deliverable Forward FX contracts for the Malaysian Ringgit undertaken in Singapore during 2011. The group had delivered a good performance in FY 16 in the core domestic franchises. Moreover, ANZ is emphasizing on strong capital and cost management outcomes along with $1,077 million of charges (after tax) for specified items primarily related to reshaping the bank. The bank even entered into an agreement with DBS to sell the retail and wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia. ANZ will plan for the remaining businesses in the retail and wealth in Asia during FY17. We give a “Buy” recommendation on the stock at the current price of – $ 28.68
National Australia Bank Ltd
Strengthening core ANZ business: National Australia Bank Ltd (ASX: NAB) divested non-core CYBG business via demerger and IPO in 2016, and sold 80% of NAB Wealth’s life insurance business to Nippon Life. This move from NAB is a part of their strategy to strengthen their focus on Australia and New Zealand customers. In addition, NAB in FY 16 has reported 4.2% growth in the cash earnings of $6,483 million. Moreover, on a cash earnings basis, the revenue grew 2.5%. NAB is now placed first as compared to major competitors on priority segment Net Promoter Score (NPS) during FY16 indicating their ongoing efforts to boost customer experience. We give a “Buy” recommendation on the stock at the current price of – $ 29.38
Telstra Corporation Ltd
Agreed new commercial terms with the strategic partner, Vita group: Telstra Corporation Ltd (ASX: TLS) and strategic partner Vita group have agreed new commercial terms, according to which the remuneration structure will change. On the other hand, TLS intends to incur up to $3 billion incremental capital expenditure, which comprises more than $1.5 billion for building networks for the future, as well as over $1 billion in accelerating the digitization of the business and up to $500 million in other customer experience related improvements. Moreover, the group expects only is ‘mid to high’ single digit revenue growth outlook, and ‘low to mid’ single digit EBITDA growth in 2017. We maintain an “Expensive” recommendation on the stock at the current price of – $ 5.00
Wesfarmers Ltd
Agreement with Citi: Wesfarmers Ltd (ASX: WES) has announced that Coles has agreed to enter into a ten-year agreement with Citi, which is a leading global credit card provider, for the distribution of Coles branded credit cards. Coles has grown its credit card portfolio for over 20 years via focusing on customer value. However, the FY16 operating cash flows of WES declined 11.2% to $3,365m due to the higher working capital investment. At the back of limited prospects, we give an “Expensive” recommendation on the stock at the current price of – $ 41.51
Woolworths Limited
Woolworths Notes II suspended from quotation: Woolworths Limited (ASX: WOW) had announced about suspension of Woolworths Notes II from quotation from 29 November 2016 as per the listing rules. But, WOW has introduced strong Voice of the customer scores in the first quarter of FY 17, coupled with an improvement of Voice of the Team scores and Voice of the Supplier. There is an improvement in the Australian Food trading performance due to the growth in the customers (transactions), which led to positive comparable sales growth for the first quarter of 0.7%. The relaunch of Woolworths Rewards has shown a material improvement in the customer satisfaction. Additionally, the Endeavour Drinks Group continued to gain share with sales growth of 3.8% in the quarter and the attached BWS stores benefitted from the improved supermarket foot traffic. The multi-year turnaround of BIG W is also underway. We maintain a “Buy” recommendation on the stock at the current price of – $ 23.14
Woodside Petroleum Limited
Acquired BHP Billiton’s Scarborough area assets in the Carnarvon Basin: Woodside Petroleum Limited (ASX: WPL) finished acquisition of BHP Billiton’s Scarborough area assets in the Carnarvon Basin, located offshore Western Australia. In the third quarter ending 30th September 2016, WPL has reported a number of production records in the quarter driven by the excellent LNG capacity and reliability, and contributed to a twenty per cent quarter-on-quarter growth in the revenue. In the third quarter 2016, the group reported for a record quarterly LNG production at Karratha Gas Plant (KGP), which is 4% higher than the previous record of the third quarter 2014. There is a record quarterly LNG production at Pluto LNG, which is 1% higher than the previous record of the third quarter 2015. Additionally, WPL has narrowed the 2016 production guidance to 92–95 MMboe. This is due to the strong operational performance and after the increase in production guidance from 86–93 MMboe to 90–95 MMboe in August 2016. Overall, the production in the third quarter 2016 was 13.5% higher than the previous quarter primarily due to solid production performance across operating asset and the recommencement of full production at the NWS facilities after the planned turnaround in the second quarter 2016 and resulting increase in capacity. In addition, the production at the Okha FPSO (NWS oil) recommenced after the facility turnaround. WPL stock has risen 6.5% on December 01, 2016. We give a “Buy” recommendation on the stock at the current price of – $ 31.54
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