AGL Tumbles On Weaker Foward Guidance

Posted on | by Todd

Shares of  AGL have lost more than 6% over the last two sessions after a mixed full-year report was released on Thursday.

The top line data was impressive as the energy generator announced net profits surged to $1.6 billion, which is almost three times higher than the previous year’s profit of $539 million.

However, a large part of the increase in profits came from a $562 million gain on electricity derivative contracts, a segment of their business which lost over $250 million in 2017.

Along these lines, AGL indicated that based on a fall in the forward price curve, it expects wholesale prices (and their margins) to decline into 2019.

On balance, while the overall full-year NPAT beat most estimates, the downbeat forward guidance has weighed heavily on the stock price and points to lower levels over the short-term

The next key technical support level is in the $19.50 area, which would represent a 2-year low.

AGL

 

 

AMP’s 1H18 Result

Posted on | by Leon Hinde

AMP’s 1H18 result was underpinned by effective cost management offsetting
weaker revenue performance.

The Australian Wealth Management division saw net outflows of $673m in the quarter.

Going forward, we expect well managed costs to offset weaker revenue.  There is longer-term value here for patient investors, who are willing to hold the stock through to the appointment of a new permanent CEO.

In 2019, AMP’s board will likely outline a plan to split the funds management business away from the traditional advice side model, unlocking value for shareholders.

We have AMP now trading on a 6.8% yield and expect FY19 reported profit to remain around $800m.

AMP

Star Entertainment – Buy “high conviction”

Posted on | by Leon Hinde

Our Algio engine generated a recent buy signal in SGR and we continue to have a positive outlook on the stock and rate this as a “high conviction” buy opportunity.

SGR is set to report FY18 results on Friday 24th August and we see potential upside to market expectations for VIP growth. The new VIP room in Sydney, (which opened in April), should further add to positive revenue growth.

With underlying earnings growth running at 8 – 10%, we expect FY19 EBITDA to increase from $570m to $620m, placing SGR on a forward yield of 5%.

Star Entertainment Group

Crown – Looking Fully Valued

Posted on | by Leon Hinde

Crown was a “high conviction” call coming into yesterday’s FY18 earnings result. EBITDA increased by 6% and NPAT was up 13% to $378m.

VIP gaming revenue was up almost 70% on the same time last year. At the peak in 2015, Crown VIP was turning over $52 billion and it now stands at $44 billion.

Although, we see scope for cost control and share buybacks as net positives for the share price, we also feel the 23x FY19 multiple is starting look too expensive.

Crown goes ex div $0.30 on the 20th September and the stock now trades on a forward yield of 4.3%.

Note: Crown’s Sydney project is due for completion in 2021 and total project cost is estimated to be $2.2 billion.

Crown Resorts

 

 

 

Tabcorp – High Conviction

Posted on | by Leon Hinde

Tabcorp has been a “high conviction” buy idea, following the recent Algo buy Signal at $4.20. The high conviction was based on the benefits of the Tatts merger showing up in the FY18 earnings results.

Yesterday, TAH reported FY18 earnings slightly ahead of consensus and importantly reaffirmed synergy guidance of “at least $130m”.

FY18 EBITDA came in at $736m & allowing for 5% growth into FY19 we now have the stock on a forward yield of 5%.

We now consider the stock full value and recommend investors lock in profit or sell covered call options.

 

 

Dominos – Watching the lower high structure

Posted on | by Leon Hinde

Dominos reports their FY18 earnings on the 14th August and consensus expectations is for underlying earnings to grow 15%, to $266m. This places the stock on a yield of 2.2%.

At 31 times earnings and a low yield, DMP can’t afford any material slow down in EPS growth into FY19. It feels that industry disruption and slow growth rates in new international markets, may come together to weigh on the FY19 numbers.

We’re mindful of the “lower high” sell structure the algo engine is pointing to, and we’ll be interested to review the numbers, post the upcoming earnings result.

We remain cautious on this one!

CBA Announces Lower Cash Profit

Posted on | by Todd

Shares of CBA have traded in a wide range in early trade today as investors react to the mixed full year result for the bank.

The bank announced a cash profit of $6.2 billion, which is a 5% drop from the previous year and largely attributed to the $700 million fine paid to AUSTRAC and other regulatory expenses.

CBA will pay a final dividend of $2.31 taking the full year payout to $4.31 per share.

It’s too early to tell if the drop in profit is due to “one-off” charges, or if the bank’s profit cycle has peaked. We remain cautious of the banking names and will revisit the sector’s valuation over the near term.

CBA