2019-05-01 Money Australia

IN BRIEF

SHARES

T

heequitiesexpertsatinvest-

mentbankJPMorganhave

re-ratedthesefivecompaniesand

increasedtheirrecommendation

tooverweight:

1.CharterHall(ASX:CHC)

Thepropertygroup’spotentialfor

increasingeconomiesofscaleis

relativelystrong,saysJPMorgan.It

alsoenjoysfavourableportfoliocom-

positionwithoffice,industrialand

longweightedaverageleaseexpiry

(WALE)assetsat85%ofitsassets

undermanagement.

2.FortescueMetalGroup(FMG)

JPMorgansaysit hasbittenthe

bulletonitsrating,upgradingthe

stockfollowingupgradestoits58%

increasein theironorepricefore-

castto$60-$55a tonnewithhigher

pricesoverthemediumterm.The

sharepricehasralliedstronglythis

year,fromjustover$4in Januaryto

around$8in earlyApril.

3. JanusHenderson(JHG)
   Janussaleshaveimproved
   onbettermarketconditions
   andimprovedperformance,
   whichwillhelpearningsgrowth/val-
   uation.JPMorgansaysthedividend
   yieldis highanda balancesheetnet
   cashpositionprovidessomedown-
   sideprotectionforshares,partially
   mitigatinga greaterequityexposure.
   Eventhoughtherearechallengesto
   theassetmanagementsector,it says
   Janusbenefitsfrombigger-than-peer
   performancefeerevenue.It hasa
   pricetargetof$29.

4.StBarbara(SBM)

Thegoldproducerhasreleased

itsfindingsfromtheGwaliamass

extraction(GMX)study,a keyexpan-

sionprojectatitsflagshipasset,

Gwalia.Thestudyhashighlighted

thatthebestoptionis tocontinue

withtruckingoperationsinsteadof

developinganundergroundprocess-

ingfacility.Thishasledtoproduction

downgradesforthe 2019 and 2020

financialyears.Aftera dropof29%

thesharepriceis 13%belowJPMor-

gan’stargetandit saystheunderly-

ingbusinessremainsin solidshape.

5.VicinityCentres(VCX)

A yearagoVicinitycanvassed

marketopinionontheprospectsof

separatingitsportfoliotailviaan

in-speciedistribution,whichreceived

mixedfeedback.JPMorgansaysit

believesthetwopotentialentities

couldlikelytradestrongerthanthe

current17%discounttonettangible

assets.Ona stand-alonebasis,Vicin-

ity’sbalancesheetis in goodshape,

its$4 00 millionbuybackhasbeen

reactivated,itsoperationalsales

performanceis improvingandits

valuationmetricsremainattractive.

Thepricetargetis $2.80.

XMORE

SHARES

STORIES ON

P76-

BUY Westpac Bank (WBC)

TheIntelligentInvestor RakeshTummala

Source:IntelligentInvestor;

priceasat 20 Mar-19closeofbusiness

RECOMMENDATION

BUY

below

$27.

HOLD

upto

$40.

BUYat$26.

above

$40.

SELL

COMPILED

BY

SUSAN

HELY

5 upgraded

stocks to watch

will be sold to Viridian Advisory and

the bank’s customers will be referred to

external financial planners.

More importantly, Westpac will

keep its insurance, platform and

superannuation businesses. This is

where it makes its money from wealth

management – around $790 million

in cash earnings for 2018, nearly 10%

of Westpac’s total – and management

thinks it can grow. As expected,

removing the unprofitable advice

business will lift the bank’s earnings.

In the end, these changes will have

little impact on Westpac’s bottom line,

but they will remove risk and free up

some management time.

We don’t expect much growth over the

next few years. But it will return at some

stage and, with a fully franked dividend

yield of around 7.2%, not much growth

is factored into the share price. BUY.

Rakesh Tummala is an analyst at InvestSMART.

See investsmart.com.au/money.

PROSPECTS

T

he financial advice industry

is going through a painful

change. The end of commissions

and increased transparency mean

that customers are increasingly

having to pay upfront and in

full for advice – and they’re

increasingly trying to avoid

doing so, by seeking more limited

advice, or “robo advice”, or just

figuring it out for themselves.

It’s causing a headache for the

owners of large financial planning

networks. Their planners have been

leaving in droves.

For the major banks, their wealth

divisions were always a sideshow

to lucrative lending activities, so

they’re getting out.

Westpac is staying the course

but will stop providing financial

advice. Good riddance. It lost

$53 million on financial planning

in 2018. The planning business