Metlifecare VIDEO | Weekly Updates: Reiterate Buy ANZ | Tegel | ELD | AMZN | Visa

2 May 2018

Weekly Report

Here’s your weekly update of news, analysis and research from . The full reports can be read on the
stock pages.

We have published Metlifecare’s presentation from our recent investor workshop, click here to
watch the video: https://www.youtube.com/watch?v=oibFzOpjYq4
New Stock Reports
ANZ BANK (ANZ:AX / ANZ:NZ) BUY: Buy the Dip
The banking sector has been heavily hit by the Royal commission commencing their inquiry into the
Australian Banking sector. Our view is that the sector is now likely oversold. Positive news flow could
see a surge of buying at these relatively low levels (ANZ offers a divided yield of 6%) with many investors waiting for an opportunity to “buy at the bottom”.
ANZ reported a sound result with cash profit of $3.49 billion for the half up +4%. This is despite a fall
in the bank’s net interest margin from 2.00% to 1.93% (a measure of a bank’s profitability of its
lending). The lower net interest margin was due to growth in lower margin liquid assets, the sale of
Retail Asian and Wealth businesses (which were higher margin, higher risk businesses). While we
agree with the view that ANZ’s ability to grow borrowings is limited, we view the potential rise in
interest rates as a tailwind for ANZ’s earnings – which all else equal should widen earnings margins.
A risk dominating headlines at present is the impact of increased compliance costs from the royal
commission inquiry. ANZ remains our preferred pick of the big 4 Aussie Banks given its solid balance
sheet and return to shareholders.

TEGEL (TGH:NZ / TGH:AX) BUY: Bounty for TGH at $1.23
Tegel shares surged last week after Philippines-based poultry group Bounty Fresh Foods announced
it will mount a $437.8m takeover bid for Tegel at $1.23 per share. Bounty Fresh Foods already has
Tegel’s cornerstone shareholder Affinity Equity Partners on board, but will accept a 50% stake – at
the time of writing Bounty has bought 51% of the shares on the market. The partial takeover in our
view is most likely a win-win for current shareholders, likely allowing Tegel to export into the
Philippines. We view this takeover a lot more positively than we would have if the buyer was a private
equity fund – as synergies with the partnership could add value over the medium term and there is an
opportunity for Tegel to execute growth in the Asian market.

ELDERS (ELD:AX) BUY: New Transactions “Embracing Growth”
Shares in ELD have been on a strong run post their last result to become one of our top performing
ASX agriculture exposures. Earlier this month, Elders entered into a binding agreement to acquire
agricultural chemical company Titan Ag Pty Ltd, who are an Australian based producer and supplier
of crop protection, animal health chemicals and fertiliser. The will also purchase Kerr & Co, currently
the largest privately owned independent livestock business in the south west of Victoria. Elders has
also confirmed it will sell its feedlot and processing assets in its Indonesian subsidiary which has
proved to be performing poorly and below the required return on capital. ELD’s management continue
to divest underperforming assets and embrace growth both organically and via acquisition.

Amazon.com (AMZN:NASDAQ) HOLD: An Amazing Quarter
E-Commerce giant Amazon delivered (excuse the pun) another amazing result for the first quarter of
2018, beating both market expectations and prior management guidance. As a result, AMZN shares jumped +6.4% on the back of the result. Revenue for the quarter was $51 billion, up 43% year on
year, driven by subscriber numbers for Amazon prime hitting 110m and Amazon Web Services reporting revenue of $5.4 billion up +49% year on year. AMZN’s growth continues to astound us because of the size and diversity of Amazon’s business.

Visa (V:NYSE) BUY: Still Cashing In
Visa recently announced their second quarter results for the 2018 financial year, beating market
expectations. Visa also upgraded guidance for the 2018 financial year and the credit card company
is expecting another year of double digit earnings growth in the high 20’s. This was due to solid
business operations and added benefits from the new U.S Tax reform and favourable currency
movements. Visa has a great existing business and benefits from a clear thematic tailwind of growth
as the move towards a cashless society accelerates.

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