Genworth Mortgage Insurance Australia Ltd (ASX: GMA)

Anticipates a fall in net earned premium: Insurance group, Genworth Mortgage Insurance Australia has finalised its annual review of the premium earning pattern and flagged for a 17% to 19% fall in its 2017 net earned premium (considering an impact of about $40 million) owing to a change in its premium earning pattern. The earlier slated fall in the net earned premiums was of about 10% to 15%. Primarily, the group now highlights that losses from mining related regions seem to pose some challenges while GMA has improved its underwriting quality in response to regulatory actions.

On the other hand, GMA does not foresee any impact on the total amount of revenue expected to be earned over time from premiums it had already written, from the changes to the earning pattern. Further, the regulatory solvency ratio would also remain more or less unaffected. The net earned premium was noted to witness a fall of about 13.6% for the third quarter of 2017.

In the last six months, GMA stock has risen 5% but fell about 1.9% on December 15, 2017 at the back of the above update. While the group still targets an ordinary dividend payout ratio of 50% to 80% of underlying NPAT, we maintain a “Hold” on the stock at the current price of $3.06, given the shortcomings.
 

Crown Resorts Ltd (ASX: CWN)

Tracking well on debt reduction strategy: Crown Resorts’ stock surged up 3.2% on December 15, 2017 as the group updated the market about progress on a number of transactions under its ongoing debt reduction strategy along with an update on buy back of subordinated notes. The group’s majority owned subsidiary, Alon Las Vegas Resort has inked an agreement with a subsidiary of Wynn Resorts Limited to sell its interest in a 34.6-acre vacant site on Las Vegas Boulevard for US$300 million. This will result in Crown’s share of the gross proceeds to be approximately US$264 million. One of the group’s subsidiary received a distribution of about 4.2 million Caesars Entertainment Corporation shares that CWN intends to sell. Crown will also be selling its interest in part of the property and operations at Ellerston in the Hunter Valley for $62.5 million to Consolidated Press Holdings Pty Limited and an entity associated with Ms Gretel Packer, and the sale will be completed by January 2018. With regards to CrownBet, while there is no certainty on finalisation of a transaction, CWN is putting efforts for the sale of Crown’s 62% interest in CrownBet. The group is also selling two floors of the Crown Sydney Residences at the Crown Sydney Hotel Resort to Mr James Packer for $60 million. Meanwhile, CWN is progressing well on majority of other ends with Crown’s wagering and online businesses continuing with good revenue growth. Crown Melbourne’s VIP program play is yet to perform as per expectations. Given the recovery on track, we put a “Buy” on the stock at the current price of $12.85
 

Focus Areas (Source: Company Reports)

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