A Look at three financial stocks – NHF, BEN, PTM

Australia’s financial sector is the most significant contributor to the country’s economy, with a 29.7% weightage in the S&P/ASX 200 (as on 31 January 2020). At a global level, the country has the fourth?biggest group of investment fund assets and the largest in Asia.

The Reserve Bank of Australia (RBA) in its financial Stability Review October 2019 report highlighted that the country’s financial system has remained sturdy and has survived the uncertainties faced by the economy. However, the sector faces various challenges looking ahead, including sustainability of life insurers, risks associated with cyber-attacks and impact of climate change, among others.

In this article, we will look at three ASX-listed stocks in the financial sector – NHF, BEN and PTM.

nib Holdings Limited (ASX:NHF)

nib Holdings Limited is a private health insurer focussed on offering medical insurance to residents and travel insurance to travellers in Australia and New Zealand. The company distributes and underwrites private health insurance to New Zealand and Australia residents as well as international students and visitors to Australia.

nib Reports Growth across All Business Segments in 1H FY20

The company reported a growth in membership and premium revenue in the six months ended 31 December 2019, increasing company’s underlying revenue by 6.4% to $1.3 billion compared to the previous corresponding period (pcp). However, the company’s Underlying Operating Profit of $83.2 million, was down by 27.2% compared to 1H FY19. The decline was due to higher claims inflation through nib’s insurance businesses and planning in the payments and receipt of claims. nib declared an interim FY20 dividend of 10.0 cents per share (fully franked).

First Half Results (Source: Company’s Report)

NIB Downgrades FY20 Profit Due to Increase in Claims

The company is expecting to report an Underlying Operating Profit of $170 million in FY20, down by about $30 million as previously forecasted.

• The downgrade in profit is because of recent claims environment within its Australian and New Zealand health insurance operations that started to place pressure on the company’s expected earnings.
• The company’s Australian health insurance business was witnessing claims growth in line with expectations, but industry data from the December quarter indicates that there will be a higher than initially forecast risk equalisation net contribution in FY20.
• As a result, risk equalisation net contribution for FY20 is now projected to be approximately $250 million, up by 9% as compared to FY19.

As per the company’s Managing Director, Mark Fitzgibbon further claims development relating to nib’s FY19 result, Australian resident’s health insurance’s (ARHI) FY19 net margin of 6.5% reported at the time of the company’s full-year results in August is now 6.2%. The company’s other businesses are also facing tougher operating environment and claims headwinds.

• The tough environment has witnessed some changing of claims experience in the adjacent underwriting segments like international students, workers and New Zealand operations, after numerous years of benevolent claims.
• While the businesses are still very sturdy, the company is anticipating margins for each business line to go back closer to longer-term viable levels moving forward.
• Although these businesses account for a comparatively small proportion of the company’s earnings, it’s expected to result in a lag in FY20 earnings.

Stock Performance

The stock of NHF closed the day’s trading at $4.850 per share on 25 February 2020, down by 2.02% from its previous closing price. The company has a market capitalisation of $2.26 billion. The total outstanding shares of the company stood at 456.08 million, and its 52-week low and high is $4.790 and $8.200, respectively. The company has given a total return of -25.45% and -28.98% in the last three months and last six months, respectively.

Bendigo and Adelaide Bank Limited (ASX:BEN)

Bendigo and Adelaide Bank Limited provides a range of banking and additional financial services, comprising business lending, retail banking, margin lending, mortgage distribution via third-parties, business banking and commercial finance, among others.

Bendigo and Adelaide Bank Open its share Purchase Plan

Bendigo and Adelaide Bank Limited has planned to undertake a non-underwritten Share Purchase Plan (SPP). The SPP is open to qualified shareholders, to apply for $15,000 of additional fully paid ordinary shares in the bank. The SPP follows a $250 million underwritten institutional placement, successfully completed at a price of $9.34 per share.

The issue price for each share under the SPP will be equal to the lesser of A$9.34 (being the price paid by institutional investors under the institutional placement) and the price that is a 2.0% discount to the volume-weighted average price of the shares traded.

Stock Performance

The stock of BEN closed the day’s trading at $9.670 per share on 25 February 2020, down by 2.716% from its previous closing price. The company has a market capitalisation of $5.17 billion. The total outstanding shares of the company stood at 520.61 million, and its 52-week low and high is $9.370 and $11.740, respectively. The company has given a total return of -3.31% and -8.56% in the last three months and last six months, respectively.

Platinum Asset Management Limited (ASX:PTM)

Platinum Asset Management Limited is a non-operating holding company of Platinum Investment Management Limited, which trades as Platinum Asset Management and manages a funds management business.

PTM Reports Double-Digit Growth in Revenue

For the period ending 31 December 2019, the company reported total revenue and other income of 15.5% to $153.7 million. Profit from ordinary activities after income tax increased by 21.3% to $79.1 million. The main contributor of the increase in revenue, profit and earnings per share was the mark to market gains on seed investments, including dividends, which made an overall gain for the half-year of $7.7 million, as compared to a loss of $19.1 million.

FUM for January 2020

The company experienced net outflows of about $254 million in the month of January 2020, which included net outflows of about $176 million from Platinum Trust Funds.

Business Highlights on First Half

• December 2019 closing FUM of $25.1 billion, up 1.4% on June 2019 despite net outflows of $1.3 billion.
• Management fee revenue down 2.7% in December 2018, broadly in line with lower average FUM.
• Retail fund net outflows of $1.1 billion were concentrated in the flagship products with PIF & PAF combined $740 million including QMFs’ net inflow $15 million.

Stock Performance

The stock of PTM closed the day’s trading at $4.350 per share on 25 February 2020, up by 1.874% from its previous closing price. The company has a market capitalisation of $2.51 billion. The total outstanding shares of the company stood at 586.68 million, and its 52-week low and high is $3.660 and $5.680, respectively. The stock has given a total return of -0.93% and 6.48% in the last three months and last six months, respectively.

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