Bank Shares Roiled On Royal Commission Announcement

Shares of the “big-4” banks are trading sharply lower as the Government announced a $75 million Banking Royal Commission before the ASX open today.

When making the announcement, PM Turnbull said it was a regrettable but necessary action.

The terms of the inquiry are wider than the market expected and will include the entire financial services sector. The final report will be due in February 2019.

We have been giving the banks a wide berth recently due to likely headwinds from slower loan growth and falling profit guidance. We’ll continue to watch the ALGO engine for trade updates and future levels to enter the market.

MVB Aussie Banking ETF



SEEK – Valuation Review

SEEK provided a trading update at its AGM yesterday, upping its guidance for
EBITDA growth to 13% and reaffirming NPAT guidance of $220-230m.

FY18 Revenue $1.3b, EBIT $340m, EPS $0.63, DPS $0.44, placing the stock on a forward yield of 2.4%.

Our Algo Engine last triggered a buy signal back in June, when SEEK was trading at $16.40.  A pullback to $17 will provide a lower risk entry level.



ALGO Signal: Sell Brambles

Our ALGO engine triggered a sell signal in BXB on yesterday’s ASX close at $10.19.

This was the highest closing price since June 26th, but still within the technical “lower high” pattern based on the May 29th high trade at $10.70.

We consider the current price level to be near the top of the counter trend range and ready to trade lower.

Fundamentally, BXB is trading at 19X earnings and a 3.1% yield based on FY18 earnings

For those CFD traders using our SAXO Go platform, we see the next significant price support level near the early November lows at $9.40.



BHP – Valuation Review

BHP’s  medium-term cost guidance for iron-ore and coal is better than expected and will help to underpin EPS targets into FY18 and FY19.

FY18 revenue will be up slightly to $40b, EBIT $13b with reported profit in FY18 forecast to increase 10% to $6.4b.

Assuming dividends per share of $0.80,  BHP is placed on a forward yield of 4%.

We see upside in BHP’s share price to $30 and suggest selling a March $29.50 call option to enhance the yield.



Origin – Reaffirmed FY18 Guidance

 ORG indicated it’s targeting a Crude Oil price of US$40 per barrel distribution break-even for FY20.

ORG hosted its 2017 investor day,  this week, at which time they reaffirmed their FY18 guidance with respect to capital expenditure, debt management and APLNG.

The market is encouraged by the potential for up-to $500m in cost savings,  ($110m OPEX and $400m CAPEX), over the next 2 – 3 years.

ORG will likely reinstate dividend distributions, building to $0.40 per share in FY19 and $0.50 in FY20.

These targets have ORG trading on a FY19 forward yield of 5%.

We continue to see ORG as a buy on the dip opportunity and look to keep exposure to the name in portfolios over the next 3 to 5 years.

Origin Energy