GENWORTH MORTGAGE INSURANCE AUSTRALIA LIMITED (ASX: GMA) | Investor Support

1. GENWORTH MORTGAGE INSURANCE AUSTRALIA LIMITED (ASX: GMA) | Investor Support The advice given by Investor Support Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The information on this website has been prepared from a wide variety of sources, which Investor Support Pty Ltd believes is accurate. Investor Support Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. The given information represents our views on the date of publication and may change without notice. To the extent permitted by law, Investor Support Pty Ltd excludes all liability for any loss or dama

2. GENWORTH MORTGAGE INSURANCE AUSTRALIA LIMITED (ASX: GMA) | Investor Support

3. GENWORTH MORTGAGE INSURANCE AUSTRALIA LIMITED (ASX: GMA) GMA Details On Tuesday (May 15, 2018), GMA closed at $2.48, 11.76% above the 52 week low of $2.21 (Mar 07, 2018). And year change of -18.23% (Low of $2.21 at Mar 07, 2018 and high of $3.23 at Aug 02, 2017). GMA is a small-cap company with market capitalization of $1.18B. For the fiscal year ended 31 December 2017, GMA revenues decreased 19% to $398.5M. Net income decreased 27% to $149.2M. Revenues reflect Investment income on technical funds decrease of 31% to $28M. Net income also reflects Investment income on shareholder funds decrease of 12% to $75.3M (income), Reinsurance and other recoveries – undis decrease of 38% to $4.3M (income). Year on year GMA’s revenues fell -19.21% from $493.23M to $398.47M. This along with an increase in selling, general and administrative costs has contributed to a reduction in net income from $203.09M to $149.17M, a -26.55% decrease. GMA performed in-line with its thrifts and mortgage finance industry on the basis of its ROE – producing a return of 7.67% relative to the peer average of 6.91% over the past 12 months. GMA’s debt-to-equity ratio currently stands at a sensible 10.25%, meaning that GMA has not taken on excessive debt to drive its returns. The company is able to produce profit growth without a huge debt burden. GMA’s above-industry ROE is noteworthy, but it was not high enough to cover its own cost of equity. Its high ROE is not likely to be driven by high debt.

4. The current trailing twelve-month payout ratio for the stock is 80.81%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect GMA’s payout to remain around the same level at 84.64% of its earnings, which leads to a dividend yield of 10.13%. Furthermore, EPS is forecasted to fall to $0.22 in the upcoming year. GMA has only been consistently paying dividends for 4 years; however, standard practice for reliable payers is to look for a 10-year minimum track record. Over the past 4 years, GMA has returned an average of 10.00% per year to shareholders in terms of dividend yield. GMA is trading with a trailing P/E of 8x, which is lower than the industry average of 18.9x. Analysts’ expectations for earnings over the next 3 years of -4.31% provides negative outlook for the business, however, this is contrary to the signal company insiders are sending with their net buying activity. Digging deeper into the line items, GMA is expected to experience decline in top-line growth next year, which could imply some headwinds going forward. This will likely flow through to its earnings next year, illustrated by a highly negative growth expectation, implying cost management may not be effective enough to bring the company into positive earnings growth. However, company insiders appear to know something the market doesn’t and have been investing more money into the stock. This may mean they believe in a turnaround or believe the stock is well-undervalued by negative market sentiment. Another factor we should consider is whether the timing of these insider transactions coincides with any significant share price movements. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. GMA’s shares ranged between $3.16 and $2.23 over the past three months. This suggests a fairly large volatility with a share price movement of 41.7%. This movement could potentially be significant enough to warrant insiders to accrue their shares. Before you jump to the conclusion on GMA, it is important to realize that conclusion rests on two important assertions. The first is that “similar companies” are actually similar to GMA. If the companies aren’t similar, the difference in P/E might be a result of other factors. For example, if you accidentally compared higher growth firms with GMA, then GMA’s P/E would naturally be lower since investors would reward its peers’ higher growth with a higher price. Alternatively, if you inadvertently compared less risky firms with GMA, GMA’s P/E would again be lower since investors would reward its peers’ lower risk with a higher price as well. The second assumption that must hold true is that the stocks we are comparing GMA to are fairly valued by the market. If this does not hold, there is a possibility that GMA’s P/E is lower because firms in our peer group are being overvalued by the market. The stock seems fairly valued at the moment according to valuation model. It’s trading above intrinsic value, which means if you buy GMA, you’d be paying a relatively fair price for it. Since GMA’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market. Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Though in the case of GMA is expected to deliver a negative earnings growth of -9.92%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term. GMA seems fairly priced right now, but given the uncertainty from negative returns in the future,

5. this could be the right time to de-risk your portfolio. If you’ve been keeping tabs on GMA for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $2.48. (Source: simplywall) Disclaimer The advice given by Investor Support Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The information on this website has been prepared from a wide variety of sources, which Investor Support Pty Ltd believes is accurate. Investor Support Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. The given information represents our views on the date of publication and may change without notice. To the extent permitted by law, Investor Support Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Investor Support Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Investor Support Pty Ltd reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Investor Support Pty Ltd do not hold positions in any of the stocks covered on the website.