S32 – Valuation Review

Posted on | by Leon Hinde | Leave a Comment on S32 – Valuation Review

We assume no change to S32 earnings guidance but will review commentary on 5 December when S32 is set to host a capital markets day in Perth.

We expect management to update production guidance for its core operations for FY18.

FY18 revenue should be flat on FY17 at $7b and EBIT will also be in-line at $1.7b. We have S32 trading  on a 4% forward yield

We see the potential for earnings upgrades should spot metal prices stay at current levels. Strength in alumina, manganese, coking coal and thermal coal is helping to underpin our outlook.

 

 

Buy WPL Into The OPEC Meeting

Posted on | by Todd | Leave a Comment on Buy WPL Into The OPEC Meeting

The price of West Texas Intermediate (WTI) Crude Oil hit a 2-year high of $58.40 in NY trade yesterday. For the month of November, the price of WTI has rallied over 10%.

Much of the bullish trade has been driven by comments from OPEC members that the cartel will be able to extend their oil supply curbs put in place earlier this year.

Currently, OPEC, Russia and nine other producers have reduced oil output by 1.8 million barrels per day. Crude Oil prices have firmed on the expectations that they will extend that agreement beyond March 2018 when they meet in Vienna next week.

If they are successful in extending the deal, it would give Crude Oil prices an additional lift towards the $60.00 area.

Shares of WPL traded to $33.35 on November 7th.

News of Shell Oil divesting from the company triggered a sharp $3.00 drop to $30.35.

With the current share price at $31.55, it’s reasonable to expect WPL shares to trade back above the $33.00 handle if WTI trades back to $60.00.

Woodside Petroleum

 

Ramsay Healthcare – Long Term Value

Posted on | by Leon Hinde | Leave a Comment on Ramsay Healthcare – Long Term Value

Ramsay Healthcare has been making a “lower high” pattern since selling off from the $75 high in August.

We’re reluctant to look at counter trend trades, however, with the broad thematic of the healthcare space being one of our preferred sectors, we now look to re-enter long positions in RHC.

Over the next 12 months we look for RHC to trade back towards $72 – $75 level on the back of the recent comments from the CEO, where he confirmed the company should deliver 8 – 10% EPS growth.

Ramsay Healthcare

 

 

 

 

Sydney Airport & Transurban React to Lower Yields

Posted on | by Leon Hinde | Leave a Comment on Sydney Airport & Transurban React to Lower Yields

With the short end of the interest curve in the US moderately increasing and the longer end not reacting, we’re seeing a flattening in the US yield curve.

The message this sends,  is the bond market believes US rates will rise short term but the global economy is still fragile and inflation is low, therefor the prospects of longer term rate increases are quite low.

These events are helping to support interest rate sensitive names such as SYD and TCL.

SYD will pay a $0.16 dividend on the 29th of Dec and TCL will pay $0.26.

SYD is in the ASX 50 model and TCL is on both the ASX 20 and ASX 50 model.

We consider both names fully valued at current prices and recommend overlaying a covered call option to enhance the return.