Star Group Rising Into FY 18 Earnings Report

Shares of Star Entertainment have reclaimed the $5.00 handle for the first time in three weeks as investors get positioned for the FY 2018 earnings report due out on August 24th.

Over the last two weeks, SGR has had nine buy ratings and two hold ratings from local broker names.

The company operates casinos in Sydney, Brisbane, the Gold Coast and also manages the Gold Coast Convention Center on behalf of the Queensland Government.

SGR is one of the largest beneficiaries of tourism inflows into Australia, which means their hotels and developments could significantly raise future earnings.

The stock is currently trading at 8.7X FY19e EBITDA and we believe their FY 2018 earnings could surprise to the upside.

SGR was added to our ASX Top 100 portfolio and we see scope for a move back into the $5.70 range over the medium-term.

Star Entertainment Group

Buy Healthscope 

Our Algo Engine triggered a buy signal recently in Healthscope and we continue to see upside potential.

HSO has announced the sale of its Asian Pathology business to TPG Capital Asia for A$279 million. The transaction is expected to be completed by the end of August 2018.

Cash proceeds from the sale will be used to pay down debt and fund new domestic development plans.

The potential for M&A activity, along with the retracement in share price, makes HSO an attractive consideration supported by 3% dividend yield.


Stay Long Tabcorp In Front Of Next Week’s Earnings Report

Over the last two weeks, shares of TAH have been trading in a narrow 15 cent range between $4.60 and $4.75.

It’s likely that this indecision pattern is due to the upcoming FY 2018 earnings report scheduled for August 8th.

This will be the first report which will include the combined Tatt’s and Tabcorp earnings data.

A recent broker note suggests that the the merged entities will have at least $130 million of synergy savings and has upgraded the stock to “overweight” with a target of $5.20.

Our ALGO engine triggered a buy signal on TAH on April 5th at $4.27 and the stock is included in our ASX Top 100 portfolio.



AMP – 1H18 warning

AMP will need to address a wide range of issues including the Royal Commission responses, grandfathering and impact of Budget proposals in order for investors to understand AMP’s sustainable level of profitability. 

Investors are also looking for the CEO to outline  the longer-term group strategy. With many anticapiting some sort of restructure and the separation of the funds management business away from the advice model. 

1H18E profit guidance came in lower than consensus expectations at  $490-$500 million.

AMP is the worst performing stock in the ASX 50 model.

We have two under performing stocks, AMP and FMG. Both businesses face unique structural issues that have weighed on their respective share prices.

We feel investors will be rewarded for slowly accumulating AMP shares at discounted levels but it is very difficult to see when the inflection point occurs.

AMP goes ex div $0.145 on 23rd August and we have the stock trading on a  forward yield of 7%.



ALGO Update: Stay Long A2 Milk

Our ALGO engine triggered a buy signal in A2 Milk at $9.81 on July 20th.

Since then, a broker note has lifted the company to an “outperform” rating with a 12-month price target of $12.40.

The report focuses on the fresh milk delivery partnership between A2M and Fonterra in New Zealand, and the opportunity to replicate that model in other countries.

As a result, the broker note estimates growth in EBIT to rise from $274 million to $523 million over the next two years.

A2 Milk


Woolworths – Buying Opportunity Ahead

Consensus expectations for the upcoming Woolworths’ earnings result, is for underlying profit to grow by 8 – 10%. This is well above competitors, but hardly supports the current 24 x multiple.

If the sell-off in WOW extends to the downside, we would encourage investors to “load up” on Woolworths. Our target buy range is $28 to $29.

Based on forward earnings WOW trades on 3.2% dividend yield. We’d like to see that increase to 3.6% as the share price retraces. Keep this one on the radar and watch for the next ALGO buy signal.


Downer EDI – High Conviction Update

Our Algo Engine generated a buy signal in Downer EDI at $6.75.

With the stock now trading at $7.50 we recommend locking in gains, as the stock is now trading at our initial “sell” price target.

We continue to like the long-term fundamentals for Downer and CIM and will revisit these names on the next retracement & algo buy signal.

Downer EDI