The Five Financial Stocks – Z1P, IFL, NWL, PPT, CCP

Financial Stocks

The financial sector of the economy consists of firms and institutions, which provides financial services to retail and commercial customers, covering borrowing and lending of funds, and the transfer of ownership of financial claims in Australia. Financial sector in Australia contributes the largest proportion of GDP and is one of the major drivers of growth in the economy. The fintech sector also plays a major role in the accelerating rate of technology change, and have a dramatic implication on the ways in which financial sector is structured.

Let us have a look at some Financial Stocks:

Zip Company Limited (ASX: Z1P)

Zip Company Limited (ASX: Z1P) provides point of sale credit and payment solutions to customers, and also offers a variety of retail financial solutions to the merchants across various industries, both online and in-store.

Zip acquired Spotcap AUS/NZ, fast tracking Zip Biz BNPL
  • The company announced that it has entered into an agreement to acquire the Australian and New Zealand businesses of global SME lending provider- Spotcap which provides significant capability in the small and medium-sized enterprise credit space.
  • This acquisition will help Zip Co Limited with a proven SME credit decisioning platform and would give the company access to the underlying intellectual property and technical code base, which will assist in driving continued innovation in Zip’s business-focused digital wallet product offering.
  • This also provides the company with approx. $23 million in Australian SME receivables and 4 years of credit performance data.
Zip Completed Landmark Debt Funding Deal:

The company announced that it has priced its deal from the Zip Master trust, and it was significantly oversubscribed and was closed at $500 million.

Outlook:

The company is targeting growth from below mentioned areas:

  • Financial Targets: The company is expected to have a customer base of 2.5 million having Zip accounts, with $2.2 billion in annualised transaction volume.
  • Local Expansion: In FY20, the company is prioritising to launch instalments for business, growth of Spotcap, to secure more strategic deals with partners and to enter everyday spend categories and accelerate acceptance.
  • Global Expansion: Australia represents only 1% of the relevant global market and the company is prioritising to integrate PartPay and to grow market share in New Zealand and to launch fast track in the UK.
  • Technology and Marketing: In FY20, the company is planning to invest in brand awareness, customer acquisition and partner marketing, and in platform to deliver best in class availability, performance and connectivity.
Stock Performance:

By the end of the trading session, on 10 October, the Z1P stock was at $5.290. up by 0.38 percent from the prior close. The market cap of the company is $1.86 billion, and the stock gave a return of 158.33% in the past 6-month timeframe.

IOOF Holdings Limited (ASX: IFL)

IOOF Holdings Limited (ASX: IFL) is one of the largest group of financial services and provides its clients with services like Financial advice, portfolio and estate administration along with investment management.

AET Judgement:

The company took on record the judgement in the Kerr v Australian Executors Trustees Ltd; AET v Fuller and others trading as Sparke Helmore Lawyers. The judge ordered that Mr Kerr is entitled to recover equitable compensation from AET. The maximum exposure to IOOF, net of insurance proceeds, is approximately $16.5 million.

IOOF announced the completion of the sale of Ord Minnett:

The company announced the completion of sale of Ord Minnett Holdings Pty Ltd to a consortium of private investors led by current Ord Minnett management for a consideration of $115.0 million for its 70% holding.

Dividend/Distribution – IFL:

The company declared an ordinary fully paid dividend of 19 cents per share for the period of 12 months ended 30 June this year, on 26 August 2019 which was paid on 27 September 2019.

FY19 Financial Performance (for the period ended 30 June 2019)
  • During the financial year, underlying NPAT from continuing operations went up by 5.2% and stood at $184.9 million including 9 months of ownership of ANZ ALs of ($16m) after a tax loss. It also includes 7 months of ANZ P&I economic interest via 14.4% coupon rate, 2 months via 2% coupon rate – $50m after tax.
  • For the FY19, total fully franked dividends per share were 44.5 cents per share which included 19 cents per share paid in this quarter.
Stock Performance:

The IFL  stock  last quoted at $6.040 on 10 October 2019 with an annual dividend yield of 6.22%. The P/E multiple of the stock is relatively high and was recorded at 73.99x but the performance of the stock went up, providing 13.31% return in the past 3-month timeframe.

Netwealth Group Limited (ASX: NWL)

Netwealth Group Limited (ASX: NWL) provides financial services to financial intermediaries and investors which includes managed funds, investor directed portfolio services, superannuation master fund, separately managed accounts etc.

Sale of Shares – Heine Brothers Pty Ltd:

Heine Brothers Pty Ltd has sold 7,100,000 Netwealth shares at a price of $7.70 per share. After the sale, Heine has voting control of over 60.66% of Netwealth shares.

Dividend/Distribution – NWL:

The company announced an ordinary fully paid dividend of $0.066 per share, for the 6 months period ended 30 June 2019, which was paid on 26 September 2019.

Business Highlights:
  • The company is ranked number 1 platform for functionality 4th year in a row by investment trends and for overall user satisfaction 8th year in the row.
  • The company is listed on ASX which increases the brand profile and reputation. The company is the leader in the solutions for high net worth and affluent clients, focused on expanding whole of wealth solutions.
  • The company has also gained the market share driven by leading FUA net inflows.
Outlook
  • In FY20, the company is expecting FUA net inflows in excess of $7bn and FUA in excess of $30bn at 30 June 2020 which would be driven by continued support by the existing advisors, strong pipeline of new business, increase in contestable market, winning business in HNW sector.
  • The company seems confident on the increase in investment in IT infrastructure, people and software.
  • Further, the company is expecting the EBITDA margin to be marginally below the current year, due to overall reduction in bps and business weight towards HNW sectors and due to strategic increase in IT infrastructure, people and software combined with full year impact of new hires in FY19.
Stock Performance:

On 10 October 2019, NWL stock last traded at $9.2, up by 3.139 percent compared to its last closing price, with PE multiple of 61.820x. In the last 3 months, the stock has given a return of 22.87 percent.

Perpetual Limited (ASX: PPT)

Perpetual Limited (ASX: PPT) is an independent wealth manager and is engaged with work related to portfolio management, financial planning, investment administration and custody services and more.

Dividend/Distribution – PPT:

The company announced an ordinary fully paid dividend of $1.25 for 6 months period ended 30 June 2019, on 24 September 2019 which was paid on 30 September 2019.

FY19 Financial Performance (as at 30 June 2019)
  • During the year, profit after tax decreased by 17% to $2m due to decline in average funds under management, partially offset by growth in average funds under advice, net outflows and the impact of prior period distributions and lower performance fees earned within Perpetual Investments, higher equity markets and new business growth within Perpetual Corporate Trust and Perpetual Private.
  • Total expenses in FY19 was noted at $351.9 million, 4% higher than FY18, comprising of costs incurred in pursuing the Group’s inorganic strategy, issuance costs connected with the listed investments strategy, increased regulatory expenses and remediation costs related to legacy matters, lower variable remuneration and ongoing expense management.
Outlook
  • The long-term outlook of the company is supported by the need of investments, advice and income in retirement. The group can face some regulatory and political uncertainty, and market volatility in long term.
  • Australian equity markets, net flows, and investment performance, near-term results are subject to significant variability, particularly during periods of high market volatility as experienced during FY19.
Stock Performance:

The P/E multiple of the stock was noted at 13.99x and its market stands at $1.64bn. The PPT stock last traded at $35.44 on 10 October 2019, with an annual dividend yield recorded at 7.12%.

Credit Corp Group Limited (ASX: CCP)

Credit Corp Group Limited (ASX: CCP) is engaged in debt purchase and collection, as well as consumer lending.

Credit Corp acquired Baycorp and increased 2020 guidance:

The company announced that it has acquired Baycorp Holdings Pty Limited from Encore Capital Group for a total consideration of approx. $65 million. The company is expecting to achieve the targeted investment return on the PDL component of the transaction.

Dividend/Distribution – CCP:

The company announced an ordinary fully paid dividend of 36 cents per share, for the 6-month period closed 30 June this year, on 29 July 2019 which was paid on 30 August 2019.

Dividend or Distribution Snapshot Source: Company’s Report

Strong Financial Performance (for the period ended 30 June 2019)
  • For PPT, 2019 was a year of strong financial performance and increased investment, setting the platform for continued earnings growth in 2020 and beyond. During the year, the net profit after tax increased by 9% to $70.3 million. This growth was partially led by the organically developed consumer lending business and the fast growing and transformative US debt buying business.
  • The company raised almost $140 million during equity raising which was strongly supported by both institutional and retail investors.
Outlook
  • The company is expected to current year earnings due to the acquisition of Baycorp. This will produce growth earnings and will complement growth from the company’s US debt buying and consumer lending segments.
  • The Company is also expecting the growth of NPAT within the range of 15% to 18% over the prior year. The acquisition of Baycorp increases the expectations of PDL investment between the range of $300-$320 million.

Strong Financial Performance

Snapshot Source: Company’s Report

Stock Performance:

On 10 October 2019, CCP stock last traded at $30.400, moving up by 1.911 percent from the last close. The stock gave a return of 29.81 percent in the last 6 months timeframe, which is close to its 52-week high of $30.420. The stock last traded with a P/E multiple of 21.020x and its annual dividend yield was recorded at 2.41%.


Disclaimer

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