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.

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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.

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Credit Corp Group (CCP) is a receivables management company, specialising in debt purchase and debt collection. CCP’s primary business is the acquisition of purchased debt ledgers (PDLs) comprised of distressed debt from Australian and New Zealand credit issuers.

Over the past several years’ the company has made significant investments in technology and resources, which has led to solid infrastructure that is geared to produce sustainable long term performance.

With the infrastructure in place the group has begun to expand into the large US market, where it now employs 30 full-time staff.

1H13 results

CCP enjoyed a solid 1H13, in which underlying net profit rose 12% to $14.6 million.  The higher profit came on the back of a 6% increase in underlying revenue.

Over the half, the company grew its PDL collections and fee income to a record $72 million, a 54% increase on the same period in FY12. CCP also reported that the contracted pipeline for purchasing grew to $105 million in the 1H. This is a great result considering that the upper end of the guided range for FY13 was only $70 million.

The group also declared a half year dividend of 20 cents per share, fully franked – a 54% increase on 1H12’s interim dividend. Collections as % of total PDL continues to improve, rising from 71% at the end of FY12 to 72% at the end of December.

The rise in the collection rate highlights the company’s disciplined approach to purchasing, especially in the face of the strong competition from sector peers.

CCP’s US operations, which are only in the second year of operations, grew debt purchasing from $2.2 million as of June 30, 2012 to $4.0 million at the December 31, 2012.

The Australian loan book branded ‘MoneyStart’ also had solid growth over the half, doubling to $12 million in six months to December.

Outlook

The two most impressive points we took out from CCP’s 1H13 results were the massive increase in PDLs and the company’s disciplined investment approach, which has allowed it to increase its collection rate.

The Australian and US commercial loan books look solid and we expect further growth in the coming six-month period. The group has made specific mention of its plans to grow its US operations through optimisation and technology upgrades, which we believe will show exponential growth given the size of the market.

The group has plenty of room to grow its consumer loan books given its almost unleveraged balance sheet. Overall we were pleased with CCP’s 1H12 result and we expect the company’s current earnings momentum will translate into further share price appreciation.

This article was distributed to our members on February 8th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only CCP but all our current trading ideas. Simply click here and starting trading today.

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Ausdrill (ASL) is an international mining services group who provides specialist drilling services to the mining sector. The company’s operates mainly in Australian and Africa, but does have offices in the United Kingdom.

ASL has a five main business segments; Contract Mining Services Australia, Contract Mining Services Africa, Manufacturing, Supply and Logistics and Diamond Communication.

Over the past few years, ASL has made a conscious decision to diversify its business and offer more services then its traditional, drill, blast and exploration drilling business.

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The diversification has seen the company being able to become ‘the complete service company’ to the mining industry in both Australia and Africa.

ASL continues to able to win key contracts, with an aim to make these contracts as long-term as possible for income stability.

Projects

The company has completed a raft of acquisitions over the last few years, in line with their strategy to become ‘the complete service company’.

The last acquisition was of Connector Drilling in early 2011, with the deal increasing the company’s presence in Western Australia and in particular the growing Pilbara region.

ASL has also been able to secure key contracts from some of the biggest miners in Australia, including Fortescue and BHP Billiton.

The contracts are not all Australian-based either, with ASL winning several gold contracts in African.

As at the company’s last update, ASL had approximately $1.84 billion work in hand for FY12 onwards in the mining services business alone.

With the mining sectors growing in Australia and across Africa, ASL is in position to take advantage of this growth and build upon its already strong relationships.

Financial Position

ASL has achieved solid growth over the last few years and profits are hitting record levels.

Profit jumped 52% to a record $73.3 million in FY11, on the back of 32.3% growth in revenue to $834.6 million.

The company provided earnings guidance in December, expecting to report a first-half profit of $48-$50 million on revenue of approximately $500 million.

 

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