Bell Potter

In this daily reporting season update, we provide first impressions on key takeouts from companies reporting today, including Commonwealth Bank (CBA) and Carsales (CAR), with links through to more detailed reports.

Commonwealth Bank:

Group BDD charge $1,095m/15bp GLA (BP $1,182m/16bp. Cash EPS 574cps (BP 575cps, consensus 570cps); Jaws” -1% (BP neutral “Jaws”), underlying +1.4% comprising 3.8% income growth and 2.4% expense growth (excluding one-off accelerated software amortisation expense in 1H17);GLA, consensus $1,128m/15bp GLA); and CET1 capital ratio 10.1% (BP 9.6%, consensus 9.9%).

Outlook: Both NPAT are ahead of consensus by ~1% and higher EPS plus DPS given strong organic capital generation (CET1 ahead of 9.9% consensus). NIM stable in 2H17 given mortgage repricing and cost discipline evident over the two halves. Retail and Business banks and NZ the key profit drivers (despite some loss in market shares) with Wealth turning around in 2H17. In summary, strong momentum maintained in 2H17 and a good result overall for CBA.

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EBIT up 2% to $166.5m.Operating expenses (before interest and D&A) up 13%. Overall, H2 expense growth rate was higher than H1 growth rate primarily reflecting increased contribution of lower margin adjacent and international businesses. Core expense growth rate lower in H2 than H1. Carsales domestic highlights: Total domestic revenue up 7% to $363.8m. ( ie Online advertising up 12%, , Data & Research up 10%, Finance and Related Services down 12%). Carsales International highlights: Skencarsales Underlying revenue up 29% to $38.7m, EBITDA up 32% to $20.5m. WebMotors-CAR share of equity acc profit: adjusted NPAT down 9% to $3.6m. Demotors Argentina adjusted NPAT ($4.6m). Soloauto financials adjusted NPAT ($37.4m); Carsales Chile adjusted NPAT. Net operating cash flow up 4.4% to $124.8m.

Outlook: “Assuming market conditions remain stable we anticipate revenue, EBITDA and NPAT growth will remain solid in the domestic core business. Our Finance and Related Services business has demonstrated signs of stabilising in Q4 which we anticipate will continue into FY18.” Internationally, assuming market conditions remain stable, Korea is expected to see good local currency revenue and earnings growth. There are positive signs regarding macroeconomic conditions in Brazil and subject to the continued stabilisation of the economy, we expect to see solid local currency revenue and earnings growth in FY18 for Webmotors. We expect integration of core carsales IP and technology into our Chilean, Mexican and Argentinian businesses to continue. This should provide an uplift in their revenue and earnings in FY18.”

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