Two Fully franked dividend stocks - Woolworths Ltd. and Sunland Group Ltd.

Woolworths Limited

WOW Details

Moderate performance in challenging business environment: For FY17, Woolworths Limited (ASX: WOW) reported a sales growth of 3.7% year on year (yoy) to $55.5 billion from continuing operations, led by 4.5% and 4.3% growth in Australian Food and Endeavour Drinks, respectively.  Gross profit from continuing operations (before significant items) as a percentage of sales increased 35 bps on the prior year to 28.71% driven primarily by the material improvement in stock loss in Australian and New Zealand Food during the year. Cost of doing business from continuing operations (CODB) as a percentage of sales increased 74 bps on the prior year to 24.52% primarily due to increased investment in Australian and New Zealand Food into customer offers and higher team performance-based bonuses. Excluding the incremental performance based incentives and $35.3 million BIG W impairment in HY17, CODB before significant items increased by 33 bps for FY17 and decreased by 4 bps in the second half. EBIT from continuing operations (before significant items) decreased 4.9% on the prior year to $2,326 million with the majority of the reduction as a result of higher losses in BIG W. In the second half, EBIT from continuing operations (before significant items) increased by 11.0%, driven by Australian Food. Accordingly, NPAT attributable to equity holders of the parent entity from continuing operations (before significant items) decreased by 3.6% on the prior year to $1,422.1 million, with corresponding EPS (before significant items) down 5.1% to 110.8 cents.


FY17 Results; (Source: Company reports)

Recommendation: The stock has moved up 12.3% in the past one year on account of strategic initiatives taken to compete in the challenging business environment. Post an initial rise, WOW stock edged lower by 0.44% on August 23, 2017. We give a “Buy” recommendation on the stock at the current market price of $ 26.94

Sunland Group Limited

SDG Details

Delivered in line with the guidance: For FY17, Sunland Group Limited (ASX: SDG) reported a 12% year on year (yoy) growth in net profit after tax at $35.3 million, consistent with the guidance. Basic earnings per share increased 19% to 22.4 cents, while consolidated Net Tangible Assets per share increased to $2.39 from $2.22 in 2016. Residential housing and urban development continues to provide a sound earnings profile and will be strategically complemented by the multi-storey portfolio. Moreover, return on cost achieved at Group's target of 20% and land & housing portfolio is generally leveraged to 35% of inventory value. However, marketing costs are expensed ahead of revenue recognition which is material with multi-storey projects Further, contribution from multi-storey development with Abian settlements is commencing and, will continue through to FY18.


Operational Performance; (Source: Company reports)

The company enters FY18 in an active phase of delivery, with 14 residential projects under construction in Queensland, New South Wales and Victoria. Strong cashflow generated from the settlement of significant projects, including the luxury Abian residential tower in the Brisbane CBD, will assist in the delivery and replenishment of the portfolio. Following consecutive years of strategic site acquisitions, Sunland intends to launch up to eight new residential developments in FY18. This includes a substantial expansion of the Group’s multi-storey portfolio on the Gold Coast, comprising both high-rise and integrated mid-rise apartment developments, and new residential housing developments in South-East Queensland and New South Wales. Importantly, the Group maintains its conservative approach to portfolio delivery and replenishment and continues to implement a counter-cyclical approach to navigate market cycles and mitigate risk.

Recommendation: The stock has moved up 16.9% in the past one year (as at August 22, 2017) on account of strategic acquisitions for sustained growth and strong financial performance. We give a “Hold” recommendation on the stock at the current market price of $ 1.83

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