Investment Research Updates

Company Updates: CBA, XRO, CSR, GNC, PDL, WBC, AUB

13/05/2022

Commonwealth Bank of Australia (CBA) released its 3Q22 trading update yesterday, reporting cash NPAT of ~$2.4 billion in the quarter, which was flat vs the 1H22 quarter average. Operating income came in at 1% below the 1H22 quarter average, with 2 fewer trading days in the quarter (1% higher on a day weighted basis), while operating expenses fell 2%, benefitting from higher annual leave usage and the two fewer trading days. Household and business deposits both increased by 13.5% in the quarter over the pcp, while home lending and business lending increased by 8.5% and 12.6%, respectively. CBA’s financial position remains within regulatory requirements, with a CET1 ratio of 11.1% and $3.0 billion in 1H22 interim dividend payments to shareholders. CBA shares rose 0.6% to close at $102.15.

Xero Limited (XRO) released its FY22 results yesterday, with operating revenue increasing by 29% to $1.1 billion vs the pcp, as total subscribers increased by 19% to 3.3 million and the average revenue per user increased 7% to $31.36. Group EBITDA increased by 11% to $213 million, on strong revenue growth in all regions, most notably Australia up 26% to $483 million and the UK up 30% to $292 million. Free cash flow decreased from $57 million to $2 million, whilst NPAT fell to -$9 million from $20 million in the prior period as XRO maintains its preference to reinvest capital generated back into the business. XRO shares fell 11.6% to close at $76.90.

12/05/2022

CSR Limited (CSR) released its FY22 result yesterday, with trading revenue up 9% on the pcp to $2.3 billion and EBIT up 22% to $291 million, as operational initiatives implemented over the last 18 months began to flow through to earnings. Building products EBIT grew 24% to a record $228 million as strong housing activity driving higher volumes was coupled with improved operational performance and cost controls. Property EBIT was $47 million, down from $54 million in the pcp, and Aluminium EBIT grew 70% to $40 million on increased prices. CSR expects building activity to remain strong into FY23, whilst Property EBIT is expected to be ~$52 million and Aluminium in the range of $33-49 million. CSR shares rose 0.5% to close at $5.72.

GrainCorp Limited (GNC) released its 1H22 result yesterday, with EBITDA of $427 million vs $140 million in the pcp and NPAT of $246 million vs $51 million. Agribusiness saw EBITDA up 200% to $376 million as strong global demand for Australian grain led to increases in total grain handled and increased supply chain margins for grain exports. Processing EBITDA grew 192% to $70 million driven by higher oilseed crush margins and ongoing efficiency improvements, whilst global challenges in canola and soybean continue to benefit the segment. Looking forward, demand for Australian grain and oilseed remains elevated from Northern hemisphere supply issues, with GNC confirming FY22 EBITDA guidance of $590-670 million. GNC shares fell 1.0% to close at $10.46.

11/05/2022

Pendal Group Limited (PDL) released its 1H22 result yesterday, reporting underlying EPS growth of 34% on the pcp and underlying profit after tax up 59%, while an interim dividend of 21cps was declared, up 24%. Fee revenue increased by 31% to $362.6 million, while operating expenses increased by 20% to $209.6 million, generating an operating margin expansion of 5% to 42%. The positive shift in revenue mix has been supporting the stable base management fee margins, while prudent cost management has contributed to the improved operating cost margin. Average FUM has increased by 37% to $133.3 billion. PDL share rose 8.1% to close at $5.33.

10/05/2022

Westpac Banking Corporation (WBC) released its 1H22 result yesterday, reporting 1H22 cash earnings of $3,095 million, a 71% increase vs 2H21 however down 12% on 1H21. Core earnings came in at $4,589 million for 1H22, 6% above the 2H21, as a reduction in costs more than offset lower revenues. Net interest margins decreased by 13bps from 2H21 to 1.85% driven by competition for lending and low interest rates, while return on equity increased by 8bps to 8.7%. Consumer core earnings excluding notable items fell by 7% on 2H21 to $2,332 million, while the Business segment increased 36% to $504 million and WIB increased 39% to $492 million. WBC group financial position remains within regulatory requirements, with Group capital surplus of $5.5 billion and Bank CET1 ratio of 11.3%. WBC shares rose 3.3% to close at $24.60.

AUB Group Limited (AUB) announced its proposed acquisition of London based Tysers yesterday, the sixth largest wholesale broker in the Lloyd’s marketplace, writing annual gross premiums of AUD$3.6 billion. AUB has launched a AUD$880 million dollar bid for Tysers, with an additional AUD$176 million in deferred consideration dependent on revenue targets. This implies a 12x EV/FY22 pro forma EBITDA multiple, with annual estimated run rate synergies of $25 million per annum realised within 18 months. The acquisition will be funded by the proceeds of a $350 million equity raise via an institutional placement and non-renounceable Entitlement Offer, a placement of $176 million of AUB shares to the vendor of Tysers and a new $675 million debt facility. AUB shares were in a trading halt yesterday.

 

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