BHP – Buy

Posted on | by Leon Hinde

BHP Group is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.

BHP outlined earlier this week its outlook for the Petroleum business, which includes an increase in capital spending and plans to double production by 2025.

FY21 revenue remains flat, EBIT the same as FY20 at $19bn, which supports DPS of $1.55 per share placing the stock on a forward yield of 5%.

The market is negative on the outlook for Iron Ore prices, with extra supply hitting the market in 2021, however, if spot prices stay where they are analysts will have to upgrade the earnings outlook. 10 to 20% upgrade in earnings will support BHP trading back over $40 per share.

 

Coles – Valuation Review

Posted on | by Leon Hinde

Coles Group is under Algo Engine buy conditions and is a current holding in the ASX 100 model portfolio.

1Q sales results are tracking in line with guidance and we continue to see a relatively flat revenue and profit growth outlook for the Coles business.

FY20 revenue $39bn, EBIT $1.2bn and reported profit forecast is around $830mn. This places the stock on a forward yield of 3.2%, which looks like full value.

Adding an out-of-the-money covered call will help boost the cash flow returns to almost 10% per annum. For more detail on the strategy, please call our office on 1300 614 002.

 

 

Coca-Cola – Buy

Posted on | by Leon Hinde

Coca-Cola Amatil is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.

We see price support developing near the $10 level, supported by 4 – 5% EPS growth and a 4.8% dividend yield.

Look for a move back towards $10.75 and then sell call options to enhance the income return. For more information on the derivative strategy, please call our office on 1300 614 002.

 

 

Rates Are Up & REITs Are down…

Posted on | by Leon Hinde

US Treasury yields have surged to the highest levels since late July, with the 10-year yield jumping to 1.945%.

The higher rates in the US bonds have seen domestic REITs move lower by an average of 5%, despite a generally better-than-expected earnings season.

An opportunity will soon approach within a number of the yield sensitive names and investors should be watching out for oversold levels to present within REITs, infrastructure, utilities and gold names.

An example of a name we’re watching for a buying point is Dexus Group. We’ll update you on the blog as we see the buying point playout.