Why these two stocks surged high? QBE Insurance Group Ltd and Lendlease Group

QBE Insurance Group Ltd

QBE Details
· Better than estimated results and buyback program boosted the stock higher: QBE Insurance Group Ltd (ASX: QBE) stock surged over 2.4% on February 27, 2017 as the group’s results were better than expected. QBE managed to deliver a net profit after tax rise of 5% to $844M for the fiscal year of 2016 while cash profit after tax was slightly up by 1% to $898 million. The group’s return on equity enhanced to 8.1% during the year as compared to 7.5% in the prior corresponding period. Insurance profit margin improved to 9.7% in FY16 as compared to 9.0% in FY15. QBE also reinsured potentially volatile claims liabilities in North America and Europe. The debt to equity ratio reached 33.8% which is in line with their targeted range of 25% - 35%. Cash remittances from divisions surged 55% to $1,106 million during the year from $715 million in fiscal year of 2015. Consequently, QBE’s final dividend rose 10% to 33 Australian cents per share. To revamp investors’ confidence, the group also announced an on-market share buyback facility of up to A$1 billion, but not exceeding A$333 million in any one calendar year. On the other hand, QBE Probability of adequacy of outstanding claims rose to 89.5% in FY16 against 89.0% in FY15. The combined operating ratio reached 93.2% during the year from 94.3% in FY15. Moreover, gross written premium performance was also weak which fell 2% to $14,088 million during the year. Net earned premium also declined 2% to $11,636 million during the year.

· Recommendation: QBE stock rallied over 21.8% in the last six months (as of February 24, 2017) placing them at a higher P/E. We give an “Expensive” recommendation on the stock at the current price of $ 12.60

 
2016 Performance (Source: Company Reports) 

Lendlease Group

LLC Details
· Outstanding pipeline: Lendlease Group (ASX: LLC) stock rose over 3.57% on February 27, 2017 driven by their solid first half of 2017 results. LLC delivered a profit after tax rise of 12% to $394.8 million during the first half of 2017 while earnings per stapled security enhanced 11% to 67.8 cents. The group built an overall residential presales of $5.7 billion during the period while Funds under Management (FUM) surged 12% to $24.7 billion. The group currently has 13 major commercial buildings across the globe wherein the overall end value is expected to be around $7 billion. Meanwhile, LLC built a decent balance sheet which has a gearing of 5.1% with a liquidity of $3.3 billion.

· Recommendation: LLC stock rallied over 8.9% in the last four weeks (as of February 24, 2017). The stock has a decent dividend yield and we maintain our “Hold” recommendation on the stock at the current price of $ 15.35
 

Commercial Portfolio (Source: Company Reports)

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