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At Flight Centre’s AGM yesterday, management provided a weaker than expected trading update.
The update suggested trading conditions were softer than expected driven by weak Australian leisure business.
FY19 underlying profit before tax was guided to be within $390-420m which equates to around 5%.
Whilst the update was below consensus, we believe the stock is close to support and will find buying interest near the current $48 – $49 level.
Flight Centre
Shares of HSO are up over 20% in early trade as the company received an unsolicited takeover offer from a group led by BGH Capital.
This is the second takeover bid proposed by BGH, whose first acquisition attempt was rejected by HSO’s board in May.
The details of the new offer are not clear, but it’s suggested to be in the $2.35 per share area.
Interestingly, the GBH consortium includes AustralianSuper, one of HSO’s largest shareholders.
Our ALGO engine triggered a buy signal for HSO at $2.10 on August 16th and we have suggested scaling in to long positions at lower levels.
Healthscope.
Since posting an intraday low of $18.60 on September 6th, shares of NCM have risen over 10% and reached a 2-month high of $20.75 in early trade today.
A combination of firm Gold prices and investors’ interest in holding shares in hard assets has been bullish for the stock.
NCM will release its quarterly sales and revenue numbers tomorrow.
Recall that NCM shares rallied to $21.95 after the release of their Q4 production numbers showed a 15% increase in production to just under 635,000 ounces.
NCM was added to our ASX Top 50 portfolio in July at $20.05.
We suggest adding to long positions in NCM with an initial target of $21.50 followed by $22.40 over the medium-term.
Newcrest Mining
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CIMIC will report their 3Q18 earnings result tomorrow.
We expect 12% growth based on the same time last year and the company to reaffirm the calendar year 2018 guidance of underlying NPAT to be in the range of $750 million+.
The company is currently bidding on several major projects within the contract mining and infrastructure construction divisions. Work in hand is currently over $35 billion
We also look for any additional information around the 10% share buy-back program. FY19 dividend of $1.70 per share, places the stock on a forward yield of 3.6%
We recommend accumulating CIM & Downer EDI.
Cimic
The market is looking for Domino’s to grow earnings in FY19 at 10%.
This translates into $1.80 EPS, which will place the stock on a forward yield of 2.4%.
We believe the February result will miss consensus expectations and will act as a catalyst for downside selling pressure to build.
Dominos
Resmed should continue to deliver 10% EPS growth per year over the next 2 – 3 years.
However, at 27x F19 earnings and 1.5% yield, the stock looks expensive.
Other names within the Healthcare space such as CSL at 32x and COH at 38x FY19 also, look expensive.
With the above in mind, our base case is that the sector trades sideways and investors should add a covered call option to enhance the returns.
Resmed
CIMIC is growing earnings at 12 – 14% p/a and continues to win new large scale infrastructure projects, helping to support the work in hand pipeline.
The stock has recently retraced from $51 back to $46, although we’re mindful of the price gap in the chart down to $43.50, we see value beginning to emerge.
Our accumulation range is $43 – $46.
Keep Downer EDI on your watch list. $7.00 looks like a low risk entry level.
TWE held their AGM last Thursday which was co-located in Hong Kong and Melbourne.
Chief executive Michael Clarke said earnings for 2019 would be bolstered by its new distribution model in the US, which was gaining traction with industry players, and its ability to deliver more luxury wine to its consumers.
He also reiterated his guidance for 25% EBITS growth in 2019 and noted that 1Q results were in line with internal plans for every revenue location.
In August, TWE reported a 34% jump in full-year net profit to $360 million as revenue fell by 1.5 per cent to about $2.5 billion.
Despite this upbeat news, TWE share price has been unable to hold above $17.00.
We consider this more a transitory function of the overall re-balancing of the ASX 200 Index, than a specific valuation issue with TWE.
As such, we suggest accumulating shares at current levels with an initial upside target of $19.40 and then $21.60.
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