Westpac – 1H17

Posted on | by Leon Hinde | Leave a Comment on Westpac – 1H17

WBC has announced 1H17 cash earnings of $4b  which is slightly below market consensus. The 2H16 dividend remains steady at $0.94

Revenue was weaker than expected yet in line with recent trends in the other banking names.

NIM fell to 2.07% with 4bpts decline due to higher deposit costs.

FY18 forecast net profit $8.2b, EPS $2.40, DPS $1.88 placing the stock on a forward yield of 5.6%

Chart – WBC

 

 

 

China’s Credit System

Posted on | by Leon Hinde | Leave a Comment on China’s Credit System

China’s credit system has expanded quickly and there are some concerning signs beginning to emerge. In particular,  ballooning assets in Chinese wealth management products could create another credit crisis.

As soon as we see investors opting to not rollover existing investments due to rising  risks and defaults, the lack of liquidity will expose under performing  investments. 

Wealth management products, or WMPs, have swelled to $4 trillion in assets in the last few years against a $34 trillion banking system. This well exceeds the mismatch at the peak of the US subprime collapse.

China Bonds vs Stocks
Chart – Yuan Short Term Rates

 

Macquarie Group – FY17 Earnings

Posted on | by Leon Hinde | Leave a Comment on Macquarie Group – FY17 Earnings

FY17 revenues were broadly flat on last year at $10.6b. Operating costs were down slightly which helped to produce an approximate 7% uplift in net profit to $2.2b.

FY17 EPS $6.58 and a very solid final dividend of $2.80 takes the payout ratio to 72% and now places the  stock on a 5.5% yield into FY18.

With the stock is up 50%  during the last 12 months and now trading on 15x forward earnings, further upside is likely to be limited. Flat revenue will continue to place pressure on management to drive down operating costs.

FY18 forecast revenue $10.5b. net earnings $2.2b, EPS $6.50 & DPS $4.90.

Chart – MQG

 

 

BHP – Where is the 50% Retracement

Posted on | by Leon Hinde | Leave a Comment on BHP – Where is the 50% Retracement

At $21.00,  BHP will be trading at the 50% retracement level of the 2016 rally.

Often, we’d expect this level to provide buying support. The Algo Engine is now flagging the higher low structure and therefore, within the $21.00 – $22.50 range, we look to identify the short-term momentum indicators turning positive, to confirm our entry point.

Chart – BHP

 

 

Origin Increases Beetaloo JV

Posted on | by Leon Hinde | Leave a Comment on Origin Increases Beetaloo JV

ORIGIN INCREASES INTEREST IN PROSPECTIVE BEETALOO JOINT VENTURE TO 70%

Origin Energy Limited (Origin) today announced it had increased to 70%  its share in the Beetaloo Joint Venture after acquiring Sasol Petroleum Australia Limited’s (Sasol)  35% share.

Origin CEO, Frank Calabria said, “Having recently announced the discovery of a material shale gas resource in the Beetaloo Basin, Origin has seized the opportunity to increase its interest in the Beetaloo Joint Venture by acquiring Sasol’s 35 per cent share.

Our Algo Engine triggered a buy signal in early March at or near $6.25. We remain long the stock and see upside potential to $8.00.

Chart – ORG

 

 

Has Gold Found A Bottom?

Posted on | by Todd | Leave a Comment on Has Gold Found A Bottom?

The Spot Gold price hit a high of $1290.00 on April 17th. Over the last two weeks, the price has dropped over 5% to close just over $1227.00 in late NY trade.

During the same time, the share price of Newcrest Mining has dropped over 20% from $25.30 to $20.10 at Friday’s ASX close.

The closure of the Cadia mine has had a multiplying effect on the share price; which was already feeling the pressure of lower spot gold prices.

The daily chart patterns in both Gold and Newcrest are showing technically oversold conditions. At current prices, we consider both assets good value for a medium-term reversion trade to $1260 and $22.75, respectfully.  Newcrest