Tuesday 09 May 2017 by FIIG Research Company updates

Company updates – ANZ, CBA, CenturyLink, Frontier Communications, Genworth Australia, Genworth Financial Inc and more

Results across the board this week from two major Australian banks ANZ and CBA, US companies CenturyLink and Frontier and Genworth Financial Inc and domestic corporate issuers Genworth Australia, Impact Group and Praeco

ANZ

ANZ has released a solid set of interim results for the half year ended 31 March 2017, with cash net profit after tax (NPAT) of AUD3.41bn, up 23%. This was slightly below consensus estimates. We include a relative value assessment of its subordinated Tier 2 bonds.

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Commonwealth Bank of Australia (CBA)

CBA leads the pack with a full year statutory net profit after tax tracking toward AUD10bn and globally comparable common equity Tier 1 ratio of 15.2%, or 9.6% under APRA methodology. This note also discusses four recurring bank themes.

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CenturyLink

CenturyLink has provided its 1Q17 results, with revenue coming in below guidance.

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Frontier Communications

Frontier has provided its 1Q17 results, noting a dividend cut and proposed debt repayment.

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Genworth Australia

Genworth Australia has released a mixed set of 1Q17 results with underlying profitability of AUD68.3m (1Q16 AUD61.7m) offset by slowing growth in investor lending and lower interest only lending.

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Genworth Financial Inc 1Q17 results

Overnight Genworth released its 1Q17 results with Net Income of USD155m which was up strongly on 1Q16 of USD53m. Adjusted for state guaranty assessments for the Penn Treaty Network American Insurance Company and America Network Insurance Company plan of liquidation (-USD14m) net income for the quarter was a solid USD143m. 

Following heavy selling of the equity over the past 48 hours, management provided an update on the acquisition by China Oceanwide and confirmed equity concerns that on 28 April Genworth and Oceanwide withdrew and refiled the joint voluntary notice to The Committee on Foreign Investment in the United States ("CFIUS"). This delay was a surprise to many in the market as the CFIUS consent was widely viewed as the easy part of the approvals process.

The equity market is clearly viewing this as a heightened risk that the government may have concerns on the transaction from a national security perspective – the shares closed at USD3.70 versus the sale price of USD5.43.

That said however, in discussions with offshore market participants, we understand it’s not entirely unheard of for companies to refile with CFIUS to buy more time or to address an inquiry from CFIUS. Stratasys, Sygenta, CNOOC, and others all did this and saw their deals ultimately close.

Impact Group

Impact’s results for the nine months to 31 March 2017 are slightly weaker than the company forecasts, however are broadly on track to meet our full financial year expectations.

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Praeco

The coupon on Praeco Pty Limited’s 7.13% AUD216m July 2022 nominal bonds will convert to floating rate if not refinanced by its Scheduled Maturity Date in July 2020. We provide an update on the progress of the refinancing plans and compare relative value.

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