How Are These Blue-Chip Stocks Placed Amid COVID-19: CBA, ANZ, NAB, BHP, REA

  • May 09, 2020 AEST
  • Team Kalkine
How Are These Blue-Chip Stocks Placed Amid COVID-19: CBA, ANZ, NAB, BHP, REA

Investors always look for opportunities that can aid them in generating substantial and consistent returns. Though small-cap stocks hold the potential to deliver high returns, they have a substantial amount of risk involved as well. For investors looking for less volatile investment options, blue-chip stocks seem to be the answer, as they belong to companies usually boasting a brand presence and believed to have a tendency to operate steadily amid difficult market conditions.    

Coronavirus outbreak has trigged a deep economic and health crisis, while impacting various big and small players in the market around the globe.

Let us skim through the recent updates and COVID-19 measures implemented by few ASX-listed blue-chip companies to know how they are positioned in the current market turmoil.  

Interesting Read: How will the ASX look post COVID-19

Commonwealth Bank of Australia (ASX: CBA)

Stock of Commonwealth Bank of Australia (ASX: CBA) has delivered a negative YTD return of 25.39% while last one-month return was noted at -0.35%, as on 8 May 2020. By the end of day’s trade on 8 May 2020, the stock closed at A$59.600, up 0.574% from its previous close. CBA has a market cap of A$104.9 billion and ~ 1.77 billion outstanding shares.

Ratings/Outlook Revised by S&P and Fitch  - In April 2020, CBA's long-term and short-term ratings were affirmed by S&P at AA- and A-1+, respectively, while its outlook was revised from stable to negative to indicate a considerable decline in its domestic market’s fiscal headroom at the AAA rating level.  

Fitch also downgraded the bank’s long-term as well as short-term rating. Long-Term Issuer Default Rating was revised from AA- to A+, with outlook remaining negative. On the other hand, its Short-Term Issuer Default Rating was amended from F1+ to F1 and Tier 2 rating from A+ to A.

More than A$555 Million Approved in SME Loans - On 7 May 2020, CBA announced to have approved over A$555 million in loans for small and medium businesses (SMEs) via the Government-supported SME Guarantee Loan Scheme. The loan was provided to over 6.5k customers whose business suffered amid the COVID-19 (CV19) pandemic. Under this scheme, customers were able to lodge applications for loans from 23 March 2020.  

Australia and New Zealand Banking Group Limited (ASX: ANZ)

Stock of Australia and New Zealand Banking Group Limited (ASX: ANZ) has provided a negative YTD return of 35.93%, while in the last five days, the stock has delivered a negative return of 2.60%, as on 8 May 2020. By the end of the trading session on 8 May 2020, the stock price dropped by 0.757% to settle at A$15.73. ANZ has a market cap of A$44.95 billion and ~ 2.84 billion outstanding shares.

Statutory NPAT Down in First Half - On 30 April 2020, the Company released its half year 2020 financial results report, highlighting a significant drop in statutory NPAT for the six months ended 31 March 2020 as compared to the previous corresponding period.

 

Image Source: ANZ's report

 

COVID-19 Response/Initiatives

  • Relocated & trained over 500 branch staff to support with clearing call centre backlogs. More than 95% of employees are working from home.
  • Engaged with key stakeholders with 300 people trained to support customers in Australia, contacting the bank through digital mode. The bank also supported 30,000 NZ personal, home and business loan customers. It received approx. 105k repayment deferral requests on A$36 billion Australian home loans.
  • The bank granted 1.35k temporary overdraft facilities to NZ businesses, while pre-approved A$4 billion lending to 35k Australian small businesses with active transactional accounts. ANZ also provided A$16 billion in extra lending to primarily long-term investment-grade institutional clients.
  • In March 2020, ANZ announced a reduction in some fixed and variable rates on loans, in addition to a deferral on repayments for a maximum of six months for impacted customers.
  • On 23 April 2020, the Company announced to have set up a dedicated hotline number to support SMEs eligible for JobKeeper payments.

 

Ratings from Fitch and S&PIn April 2020, Fitch Ratings changed ANZ’s Long-Term Issuer Default Rating from AA- to A+ , while S&P also downgraded the bank’s outlook from stable to negative, with long-term rating at AA- and short-term issuer credit rating at A-1+.

Do Read: Shadowing Banks’ dividends and capital ratios under the knife: WBC and ANZ

National Australia Bank Limited (ASX: NAB)

In the year-to-date period, National Australia Bank Limited (ASX: NAB) has provided a negative return of 34.55%; however, in the past one month, the stock has delivered a return of 4.76%, as on 8 May 2020. By the market closure on 8 May 2020, the stock closed at A$16.08, down 0.863% from the previous close. ANZ has a market cap of A$51.84 billion and around 3.2 billion outstanding shares.

Capital Raising Program - On 4 May 2020, NAB announced to have opened a Share Purchase Plan (SPP), under which eligible investors would be able to subscribe for up to A$30,000 worth of new fully paid ordinary shares in the Company. Moreover, on 28 April 2020, NAB announced the completion of a A$3 billion institutional placement, under which the Company would issue ~212 million new fully paid ordinary shares each at A$14.15.

Proceeds from the capital raising program would provide NAB with sufficient capacity to support its clients during this challenging period.

1H FY2020 Performance - For 1H FY2020 ended 31 March 2020, NAB highlighted to have registered sound underlying performance with COVID 19 impacted group level performance.

 

Image Source: NAB's report

 

Revised Credit Ratings - Fitch downgraded NAB’s Long-Term Issuer Default Ratings (IDR) from AA- to A+ while Short-Term IDR revised down from F1+ to F1. S&P Global Ratings downgraded the bank’s credit ratings from stable to negative for long-term issuer credit, while confirming its view that the bank is capable of bearing increased credit losses due to the COVID-19 pandemic and containment actions.

Must Read: Banking blues; NAB reveals notable items  

BHP Group Limited (ASX: BHP)

Mineral exploration, production and processing company, BHP Group Limited (ASX: BHP) has a market cap of A$91.32 billion and ~ 2.95 billion outstanding shares, as on 8 May 2020. Its stock has provided a negative YTD return of 19.38%, while in the past 5 days, the stock has delivered a return of 5.09%. By the end of the trading session, the stock closed at A$31.400 per share, up 1.29% from its previous close.  

New Board Appointments - On 7 May 2020, BHP announced new appointments to the Board, with Dion Weisler and Xiaoqun Clever joining the Company as independent Non-executive Directors.

Mr Weisler, who would join from 1 June 2020, holds extensive global executive experience on operations, transformation & commercial fronts in the global IT sector, with a focus on capital discipline, perspectives on current and emerging ESG issues. Ms Clever, who would assume responsibilities from 1 October 2020, has global experience in the technology sector and is expected to aid the Company with significant inputs towards its strategy & risk management.

COVID-19 Response - As the health, safety and well-being of employees and communities is the top priority of BHP, it has rolled out several measures to reduce the spread of coronavirus, including regular health screenings, uptake of social distancing practices, and reduced number of people at mine sites and other operational facilities.

Nine-Month Operational Review - The Company with a strong financial position expects to continue generating solid cash flow, supported by low-cost operations and resilient business.

For the nine months to 31 March 2020, BHP reported

  • Strong underlying operational performance across the portfolio offset the impacts of scheduled maintenance, natural field drop and wet climate in Australia.
  • Record production registered at Western Australia Iron Ore and Caval Ridge. Record average concentrator output was delivered at Escondida and record ore was piled at Spence.

 

Image Source: BHP's report

 

Production guidance remains unaffected for petroleum, iron ore and metallurgical coal for FY2020.

Do Read: Australian Mining Industry and The Workforce Shuffle

REA Group Ltd (ASX: REA)

REA Group Ltd (ASX: REA) is a global digital advertising company, specialising in property. By the market closure on 8 May 2020, the REA stock settled at A$95.170, up 7.719% from the previous close. The stock has provided a negative YTD return of 9.58%, while in the last 5 days, it has delivered a return of 11.73%. REA has a market cap of A$11.64 billion and ~ 131.71 million outstanding shares.

Nine-Month Performance - On 8 May 2020, REA Group Ltd announced results for 9 months ended 31 March 2020.

  • Revenue during the period after broker commissions declined by 4% to A$640.2 million as compared to the previous corresponding period (pcp).
  • Operating expenses registered a drop of 5% to $249.4 million and EBITDA went down by 3% to A$390.8 million.
  • Free cash flow during this period declined by 14% to $195.2 million.

 

The market recovery was in full flight before the coronavirus impact, with very strong listings in the weeks leading up to mid-March 2020. The Group also witnessed record audience numbers and strong buyer interest in February 2020. For three months ended 31 March 2020, financial highlights for the Company are as follows

Interesting Read: COVID-19: Takers in the Real Estate Sector with the 'New Normal'

 

Image Source: REA's report

 

Outlook - REA highlighted that the real estate market has been negatively impacted due to social distancing measures implemented by the government, closure of businesses along with uncertainty surrounding COVID-19.

Owing to softening in new listing volumes as well as measures undertaken to support customers during this tough time, the Company expects its revenue to get negatively impacted. Consequently, it is implementing cost-saving initiatives such as workforce planning measures, reduced marketing spending and evaluation of all supplier agreements.

However, REA has a strong balance sheet and low debt levels. Cash balance as at 30 April 2020 stood at A$135 million. Besides the Group has strengthened its liquidity position by signing an additional A$149 million loan facility with existing banking syndicate, due to mature in December 2021. 

 


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