1 ASX stock to hold and 2 to stay away fromTeam Veye | 03 May 2018 ASX - GMA, WBA, GTY
Genworth Mortgage Insurance Australia Ltd (ASX:GMA)
The company published its 1Q FY2018 results on 2nd May’18 highlighting a very strong performance across key metrics. The company highlighted a reported Net Profit after Tax (NPAT) of $52.2m, up 83.9% and underlying net profit after tax of $68.3m, up 70.9%
(Chart Source – Company Reports)
The company highlighted that the economic outlook for 2018 is expected to be relatively similar to 2017, with growth remaining below the long-term trend of 3.5% p.a. Labour market growth is expected to continue into 2018, albeit at a more moderate pace than in 2017. Official cash rate is likely to remain on hold due to benign wage growth and low inflation. Housing market conditions are likely to ease further in 2018 as macro-prudential measures continue to take effect and record levels of new housing supply comes onto the market. Expect Sydney and Melbourne housing markets to moderate and regional markets (especially resources states) to face continued pressure. National House Price Appreciation expected to be flat in 2018 (Data Source – Company Reports).
The company currently offers an exceptional fully franked Annual Dividend Yield of 10.08% against a sector average of only 2.35%. The company’s EPS stands at 22.42 and EBITD margin at 37.22. The Debt-to-Equity ratio is 10.25 against a sector average of only 62.28. The group has a P/E ratio of 8.05 against the sector average of 18.61. The stock has a Market cap of 1.13bn & a Share Volume of 473.81m. The stock price of the company has slipped 25% during Nov’17 until Feb’18 and has been on its way to recovery since 7th Mar’18. We reckon that it will go up from this point on the back of positiveQ1 FY2018 results (Data Source – Reuters.com).
We give a “Hold” to “Genworth Mortgage Insurance Australia Ltd” at the current price of $2.37.
Gateway Lifestyle Group Ltd (ASX: GTY)
The company declared its H1 FY2018 results on 23rd Feb’18 highlighting a strong performance across key metrics. The key highlights were as follows:
• Statutory net profit after tax of $20.6 million (1H17: $20.1 million) and growth in Distributable earnings of 35.3 % to $19.6 million (1H17: $14.5 million)
• Interim distribution of 3.75 cents per stapled security (1H17: 3.5 cps) for the half year
• Rental revenue up 12.8% to $30.8 million (1H17: $27.3 million) driven by a 10.1% increase in long term site rental revenue of $25.1 million (1H17: $22.8 million)
• As at 31 December 2017 annualised long-term rental revenue of approximately $51 million from 6,660 long-term occupied sites (1H17: 6,2771 ) at an average weekly rent of $146.0 (1H17: $141.50) • 119 home settlements (1H17: 92) at an average net profit margin of $103,000 per home (1H17: $97,000), has the Group well positioned for circa 250 settlements in FY18
• Forward investment in home inventory for 2H18 sales campaigns. Cash conversion expected to improve in 2H18 as display home inventory is sold
• Asset recycling well progressed following the divestments of Rainbow Waters and Bass Hill communities with $18.4 million sales proceeds (excluding transaction costs)
• Acquisition of DA approved land lease community greenfield site at Evans Head, NSW North Coast, for $7.5 million (Data Source – Company Reports).
(Graphic Source – Company Reports)
On 19th Mar’18, Gateway Lifestyle Group (GTY or Gateway Lifestyle) has announced the acquisition of two established residential land lease communities located in one of South Australia’s major retirement markets for a total consideration of $45 million (excluding transaction costs) that finally got completed on 2nd May’18. The purchase consideration was funded from the existing syndicated debt facility, with $3 million of the purchase price funded by issuing the vendor with 1,525,709 fully paid ordinary GTY securities.
As part of its outlook, the group highlighted that it’s on track to deliver on guidance of 7% growth in Distributable Earnings for FY18, assuming no material changes in market conditions. On 2nd May’18, the company released a trading update and revised guidance highlighting that Gateway Lifestyle has observed an extension of the period from sale to settlement as incoming residents take longer to sell their family home. Whilst enquiry levels remain robust, Gateway Lifestyle now expects new home settlements in a range of 230 to 240, compared to previous guidance of ~250 settlements for the full year.
As a result of reduced settlement volume which continues to be the key variable driver of short-term earnings, the company now expects distributable earnings to be in the range of 2-4% growth for FY18. against the previous forecast of 7%.
The company currently offers a decent un-franked annual dividend yield of 4.73% against a sector average of only 2.35%. The company’s EPS stands at 13.88 and EBITDA margin is 35.95. The company has a market cap of 596.85m and a Share Volume of 302.2m. The Debt-to-Equity ratio is 32.80 against a sector average of 62.28. The stock price has slipped 18% during the last 6.5 months and 9% dip has been witnessed yesterday alone after announcement of reduced distributable earnings by the company. We reckon it would be wise to wait for the stock until it stabilizes during this period of uncertainty (Data Source – Reuters.com).
We give a “Stay Away” to “Gateway Lifestyle Group Ltd” at the current price of $1.79
Webster Ltd (ASX:WBA)
The company published its FY2017 results on 2nd Nov’17 highlighting a very strong performance across key metrics. The company highlighted a Net Profit after Tax (NPAT) of $58.2m as compared to losses of $80m PCP. On19th Dec’17, Webster Limited announced the appointment of Maurice Felizzi as Chief Executive Officer to take effect from January 2018. Maurice was appointed Chief Financial Officer and Company Secretary of Webster in April 2016. Chris Corrigan, who took up an executive Chairman’s role in March 2016, will continue as Chairman but will relinquish his executive role from the commencement of 2018. On 7th Mar’18, Webster Limited further diversified and strengthened its horticultural operations with the acquisition of the Sandy Valley almond property in NSW. Webster acquired the 934.7-hectare property for a total consideration of $16.8 million. Sandy Valley is located close to Webster’s existing walnut operations at Tabbita in the Riverina district of NSW. The property includes stage one and stage two almond plantings totalling 260 hectares planted, with 2 and 3- year-old trees. Stage one harvesting has commenced. Stage two will be harvested for the first time in 2019. The property also includes potential for further planting of some 460 hectares (Data Source – Company Reports).
The company currently offers a minute fully-franked annual dividend yield of 1.94% against a sector average of only 2.35%. The company’s EPS stands at 7.20. The company has a market cap of 559.93 and a Share Volume of 361.25m. The Debt-to-Equity ratio is 24.74 against a sector average of 24.87. The stock price of the company has grown 18 % during the last 4.5 months and is very volatile, and it’s currently hovering around its resistance level for the last 1.5 months with not much potential for growth (Data Source – Reuters.com).
We are “Bearish” on “Webster Ltd” give a “Stay Away” at the current price of $1.53
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