ANZ Banking Group (ANZ) is the nation’s third-largest bank by market capitalisation, and is among the top 50 banks in the world.

The group provides a variety of banking and financial products and services to around 8 million customers, and employs 48,000 people worldwide.

ANZ operates in Australia, New Zealand, Asia, the Pacific, the Middle East, Europe and America. In recent years the group’s strategy has shifted to become a super-regional bank. To this end, the bank is aiming for between 25-30% of its earnings to come from its Asia, Pacific, Europe and America Division (APEA) by 2017, with the major focus being the high growth Asian region.

China manufacturing in expansion mode

For much of the early part of 2012 the discussion surrounding China was whether it was heading for a hard landing or a soft landing. The fears of a hard landing abated by the end of 2012’s second half, helped by China’s central bank adopting an easing bias towards monetary policy.

Measures including lower interest rates and targeted fiscal stimulus appear to be flowing through to China’s manufacturing sector, which is beginning to expand after an extended period of contraction. Last month, the HSBC Flash PMI showed factory activity accelerated to a two year high in January.

A pickup in manufacturing activity is important for ANZ as it implies Chinese companies are taking advantage of easier credit conditions and borrowing money in order to expand.

What to look for in trading update

ANZ’s FY12 results revealed a 2.6% increase in FY12 cash profit to $5.75 billion.  The APEA strategy also continues to be a key driver for ANZ’s overall business.

In FY12 this region’s income comprised 21% of overall profit, putting the group on track to achieve its aim for APEA to contribute 25% – 30% of overall profit by 2017.

Today CBA reported a 6% on-year rise in 1H13 cash profit to $3.78 billion.  Impressively, the result came on the back of a 6% increase in revenue.

The group’s net interest margin rose 4 basis points from the previous half, in a sign wholesale funding pressures are easing for the four majors. CBA’s first half results are a healthy indicator for the industry, and we expect ANZ to announce a similarly positive result when it provides a trading update for the first quarter later this week.

Outlook

ANZ’s FY12 results provide it with a good base to tackle FY13, and we expect some good news in its first quarter trading update. We will look for an improvement in interest margin and asset quality, as well as a cash profit driven by good cost control and evidence of top line growth.

The group’s exposure to Asia will continue to be an important earnings driver, and the benefits of this leverage will translate to further share price appreciation in our view.

This article was distributed to our members on February 11th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only ANZ but all our current trading ideas. Simply click here and starting trading today.

ANZ Banking Group (ANZ) is the nation’s third-largest bank by market capitalisation, and is among the top 50 banks in the world.

The group provides a variety of banking and financial products and services to around 8 million customers, and employs 48,000 people worldwide. ANZ operates in Australia, New Zealand, Asia, the Pacific, the Middle East, Europe and America.

In recent years the group’s strategy has shifted to become a super-regional bank. To this end, the bank is aiming for between 25-30% of its earnings to come from its Asia, Pacific, Europe and America Division (APEA) by 2017, with the major focus being the high growth Asian region.

FY12 results

ANZ’s FY12 results were good without being great. The banking major recorded FY12 statutory profit of $5.7 billion, up 6% from the FY11 result.

An increased capital base saw EPS only rise by 2% year on year, to 213.4 cents a share. Dividend growth over the financial year managed to outpace inflation, with a 4% increase to 145 cents a share.

We were most impressed with direction of the group’s super-regional strategy.

 
As the above shows the group managed to grow the income from APEA by 5% over FY12 to 21%. Notably the group also managed to slow down operating expense growth in the region from 11% to 4%.

The group’s APEA strategy continues to be a key driver for ANZ’s overall business results and we think this will continue as the group strives for a contribution of 25% – 30% of overall profit by 2017.

China expanding again!

For much of the early part of 2012 the discussion surrounding China was whether the slowdown in growth would be a hard landing or a soft landing. The fears of a hard landing abated by the end of the second half, helped by China’s central bank adopting an easing bias towards monetary policy.

The central bank actually began its stimulus measures in December 2011 when it implemented the first of a series of reserve requirement ratio (RRR) cuts. After cutting the RRR by 1.5% the PBOC then cut the country’s official interest rate by a little over 0.5% in the months of June and July.

These stimulus measures have began to show signs of flowing through to China’s manufacturing sector, which was the cornerstones of the country’s explosive growth of the last 10 years.

The month of November saw the HSBC Flash Manufacturing Index return a reading of over 50 for the first time in 12-months, indicating the sector had returned to expansion. Every month since that return to expansion was followed by an increase in the index, with yesterday’s reading of 51.9 marking a 24-month high.

Outlook

ANZ’s FY12 results provide it with a good base to tackle FY13. The year was not an easy one for the global banks in general, with the eurozone crisis leading to higher funding costs, which increased pressure on bank interest margins.

ANZ’s net interest margin contracted 11 basis points over the year. That being said, it was the group’s exposure to Asia that allowed it to grow earnings.

We believe that ANZ’s leverage to the growing Asian region will continue to benefit the company and this is expected to result in further share price appreciation.

This article was distributed to our members on January 25th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only ANZ but all our current trading ideas. Simply click here and starting trading today.

CSL Limited (CSL) develops, manufactures and markets human pharmaceutical and diagnostic products derived from human plasma.

The company’s operations are concentrated in Australia, Germany, Switzerland and the US, although its reach extends to almost 27 countries with over 10,000 employees. CSL’s main operational businesses include CSL Behring (including CSL Plasma) and CSL Biotherapies.

The company’s products include pediatric and adult vaccines, infection and pain medicine, skin disorder remedies, antivenoms, Albumin, anticoagulants and immunoglobulin’s (IG).

FY12 results:

As the above shows CSL has a solid history of growing its earnings. Total sales for FY12 were $4.4 billion, which was on a constant currency basis is a 12% jump on FY11.

On a constant currency basis CSL’s FY12 NPAT was $983 million, a 14% increase on the previous year’s result. The balance sheet is also healthy with FY12 cash flow from operations was up 14% to $1.16 billion and $1.16 billion of cash on hand.

Aussie dollar:

Given the company earns a majority of its earnings in US dollars the falling Aussie dollar is a benefit to CSL. Several of the pillars that have been holding up the Aussie dollar are not looking as stable as they once were.

One of these pillars being Chinese demand for Australian commodities is not as strong as it once was, and this in turn means less demand for our currency. Another fact hurting the Aussie dollar is the RBA moving to an easing bias, as characterised by this week’s interest rate cut.

Buy-Back

Another factor likely to underpin the company’s stock price is the undertaking of share-buybacks. The company is currently in the middle of an on-market share buy-back that it is 77% complete.

What was interesting in the release of CSL’s FY12 results was the fact it flagged the potential for another on-market share buy-back. Given its strong cash flow, we think the company will be able to complete another buy-back without stretching its balance sheet.

Outlook:

CSL appears to be in solid shape as we move further into FY13.

The company is expecting constant currency NPAT growth of 12% in FY13, which we think is achievable given its recent history of meeting or exceeding guidance. We also think that a weaker Aussie dollar and the likelihood of another share-buyback will underpin further share price gains.

Our Recommendations:

On the 5th of October 2012 we issued a recommendation to our clients of the  Traders Report to purchase CSL at $46.10. The stock has since moved to a price of $47.17 as of 11:30am October 11th.

For further information on CSL as well as full access to our research files sign up for a FREE 7 Day trial today. Australian Stock Report provides general advice and must indicate that previous results are not a guarantee of future performance.

Artistocrat Leisure Limited (ALL) FY11 $66.7m profit

Aristocrat Leisure Limited manufactures and sells gaming machines in Australia and internationally.  The Company also supplies gaming systems, software, table gaming equipment and other gaming related products and services to casinos, clubs and hotels.

Industrial stock Aristocrat Leisure posted its FY11 earnings, showing a net profit of $66.1 million, a 14% fall compared to FY10.  The result was better than the market expected.

Revenue grew 11.4% to $762.7 million over the same period on a constant currency basis.

CEO Same Odell said that the company was targeting the most profitable segments, and this action drove share gains in major markets like the U.S. and Australia.

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National Australia Bank (ASX:NAB) is one of Australia’s “big four” banks, with a focus on regional banking, wealth management operations, international capital markets and institutional banking business. Brands within Australia include NAB and MLC, and the group is represented in New Zealand by Bank of New Zealand. In the UK the brands are Clydesdale Bank and Yorkshire Bank.

Financials stock, National Australia Bank released its first quarter trading update which showed 1Q FY12 earnings of approximately $1.4 billion, 8% higher than the previous corresponding period.

The bank said that revenue was driven by wholesale banking and to a lesser extent, MLC and NAB wealth.

NAB also revealed that it will undertake a strategic review of its UK operations, with a view to reposition the arm to deal with the current economic situation in the region.

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Woolworths (ASX:WOW) operates supermarkets, specialty and discount department stores, liquor and electronics stores throughout Australia. Woolworths also manufactures processed foods, exports and wholesales food and offers petrol retailing.  The Company also operates hotels which includes pubs, food, accommodation, and gaming operations.

ASX Blue chip supermarket giant Woolworths today announced 2Q sales growth of 5.1% to $14.1 billion compared to the previous corresponding quarter, this was in line with market expectations.

The 2Q sales results bought the 1H FY12 sales to $29.7 billion, a 5% increase on the previous year.

WOW also announced that it will sell its Dick Smith consumer electronics business following a strategic review that was announced in November.

Since the review the company said it has received a number of unsolicited approaches in relation to Dick Smith.

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Westpac Banking Corporation (ASX:WBC) is Australia’s oldest bank operating a significant banking franchise in Australia and New Zealand.  WBC is considered an ASX Blue Chip Share. The company has balanced exposures to retail, corporate and institutional sectors.

Westpac has been one of the more acquisitive banks domestically with successful takeovers of Bank of Melbourne and Challenge Bank and Trust Bank in New Zealand. More recently WBC has aggressively expanded its wealth management activities with the acquisition of Rothschild Australia Asset Management, BT Funds Management and Hastings Funds Management.

Westpac today held their AGM where it warned that the European debt crisis will continue to impact the price and possibly the availably of funding to Australia’s banking sector.

CEO Mrs Gail Kelly said the outlook for the global economic outlook remained mixed with Australia not immune to these headwinds, with growth slowing and consumer and business spending cautious.

Mrs Kelly also hinted that WBC may not pass on future interest rate cuts to borrowers in full, citing the impact of higher funding costs on interest rate margins.

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BHP Billiton (ASX:BHP)  has a global portfolio of high-quality assets, with more than 100 operations in 25 countries.

BHP held its AGM today, with CEO Marius Kloppers outlining challenges for the company on the back of economic uncertainty and equity market volatility.

Mr Kloppers told the AGM that despite short-term challengers the long-term outlook remains unchanged.

BHP’s strategy remains to invest through the economic cycle, with a plan to invest US$80 billion over the next five years on its mining and petroleum assets.

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Qantas Airways Limited (ASX:QAN) is one of the world’s leading airlines and an Australian icon.

On top of its standard domestic and international flights, QAN also owns budget airline Jetstar, regional airline QantasLink and related travel businesses Qantas Flight Catering.

Although some still consider QAN as a blue chip stock, its huge share price fall since the GFC has taken away a lot of its lustre.

Today QAN resumed flights after the Fair Work Tribunal ordered the termination of industrial action by its workers.

The carrier sensationally grounded its entire fleet on Saturday in response to the strikes, forcing the government to intervene in the crisis.

Qantas and its workers now have 21 days to resolve their dispute otherwise the Tribunal will impose a resolution of its own.

Following the tribunal’s decision, QAN has been one of the best performers in the Australian share market today.

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BHP Billiton (ASX:BHP) is the world’s largest diversified resources company, with a global portfolio of high quality assets and more than 100 operations in 25 countries.

It is the biggest listed company on the Australian share market and is widely considered among the blue chip stocks.

It is an industry leader in most of the major commodities markets, including aluminium, coking and thermal coal, copper, manganese, iron ore, uranium, nickel, silver and titanium. On top of this, BHP has sizeable interests in oil, gas, natural gas and diamonds.

Today, BHP reported a 28% on-year increase in 1Q11 iron ore output. The increase was driven by greater system capability of the group’s WA rail infrastructure.

Petroleum production increased 19% in the same period, with BHP’s acquisition of the Fayetteville and Petrohawk shale businesses helping the result.

However copper output declined 24% over the year amid strikes and lower ore grades at the Escondida mine in Chile.

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