ALGO Update: Buy The Dip In IPL

Posted on | by Todd | Leave a Comment on ALGO Update: Buy The Dip In IPL

On August 5th, we posted a buy signal on IPL at $3.20. Since then the stock has traded as high as $3.72, but slipped lower into the weekend.

One of the market stories supporting IPL has been that company officials have been actively buying shares, which is usually a good reflection of the company’s earnings and growth outlook.

More importantly, analysts’ earnings growth expectations of 90% over the next three years also illustrates a buoyant outlook for the business.

We still prefer the long side of IPL and suggest that investors could look to buy a pullback into the $3.45 support level.

Incitec Pivot

 

Chart Watch: The XJO Index

Posted on | by Todd | Leave a Comment on Chart Watch: The XJO Index

The XJO 200 Index continues to trade within a broad, sideways “Flag” pattern bound by the June 8th low of 5624 and the June 15th high of 5834.

The low price for the week at 5637 was the result of weakness in the banking names, as well as, a drop in major miners BHP and RIO; which lost 2% and 1.5% for the week, respectively.

The continuation of the “lower high” price pattern suggests a downward bias with the next key support level near the February low of 5578.

ASX XJO Index

Trade Update: Stay Short FMG

Posted on | by Todd | Leave a Comment on Trade Update: Stay Short FMG

The steady decline in Iron Ore prices over the past two weeks turned into a rout as concerns grow about new supply combined with fears that Chinese steel production may have peaked for the year.

The Steel Index benchmark price for Northern China 62% Iron Ore sank by 7.4% to trade at $63.00 per ton on Thursday, an 11-week low. On a Year-to-date basis, Iron Ore has dropped over 20%.

On September 11th, we posted a sell signal on FMG at $6.05, with an initial target of $5.40. FMG shares closed at $5.12 on Friday and now target the July 24th low of $4.88.

Fortesque Metals Group

Are Ramsay Shares Ready To Rally?

Posted on | by Todd | Leave a Comment on Are Ramsay Shares Ready To Rally?

After posting a 6-month low of $61.05, shares of RHC rebounded Friday afternoon to close the week at $61.85.

RHC shares traded as high $76.15 on August 22nd and have dropped almost 20% over the last month.

While  there’s no guarantee that the $61.00 level is the medium-term turning point, we believe that value investors will do very well to start scaling into long positions at the current share price.

Core earnings per share are expected to grow by 8% to 10% in FY 2018, and the company’s global footprint now extends to 25,000 hospital beds and 1,150 operating theatres across its 221 hospitals and 13 health care and treatment facilities.

Further, as the company generates over 40% of its revenue outside of Australia, when the AUD/USD resumes its down trend, RHC is well placed to benefit from favorable currency movements.

Ramsay Health Care

Will the Tatts/Tabcorp Merger Get Over The Line?

Posted on | by Todd | Leave a Comment on Will the Tatts/Tabcorp Merger Get Over The Line?

Shares of Tabcorp have been under pressure this week as the $11 billion merger with Tatts hit another legal hurdle.

On Wednesday, the lengthy merger talks were thrown into uncertainty with the Federal court finding in favor of arguments from the ACCC about why the deal should be reviewed further.

The combination of Tabcorp and Tatts is expected to deliver at least $130 million per year from synergies and business improvements, so shareholders are anxious to get the deal completed.

From the government’s perspective, it’s clear that they would like to continue consolidating corporate bookmakers to tighten up the regulatory aspect of the industry. It’s our base case that his merger will be completed in within a month.

However, we see scope for negative headlines to push the shares back into the low $4.00 support area. After the the merger is completed, we would expect to see TAH shares trade back into the $5.10/25 area.

   Tabcorp

 

CBA Offloads Its Insurance Arm

Posted on | by Todd | Leave a Comment on CBA Offloads Its Insurance Arm

Shares of CBA opened higher in early trade on the news that the bank has sold its troubled insurance business to the Chinese owned AIA Group for $3.8 billion.

The sale of Comminsure Life was largely considered a fire sale considering several problems involving denying payments to policyholders and pressuring medical assessors to reject client’s claims.

Our ALGO engine gave a sell signal in CBA on July 4th at $84.00. We consider this bounce in price as corrective and still see scope for CBA shares to return to the low $70.00 handle.

Commonwealth Bank

 

FOMC Overview

Posted on | by Todd | Leave a Comment on FOMC Overview

As expected, the US FOMC voted to keep rates unchanged last night but signalled that it still expects one more rate hike before the end of the year.

If that’s the case, then the FED Funds target will have been lifted from .25% to 1.50% in just over 12 months. The “Dot plots” were revised slightly lower from 3.0% to 2.75% by the end of 2019.

The response from US stock indexes was muted, but we expect the combination of higher borrowing costs and the reduction of the FED balance sheet to temper any significant gains in US equities into the end of the year.

 

 

ALGO Update: Stay long CWN

Posted on | by Todd | Leave a Comment on ALGO Update: Stay long CWN

Our ALGO engine triggered a buy signal on CWN at $11.43 on August 11th.

With the current price around $11.77, the trade has been slow to develop but we still prefer the long side.

CWN will go ex-dividend tomorrow and pay shareholders 30 cents, with 60% franking.

Looking across the gaming sector, we see improving conditions for CWN, SGR and Tabcorp. Seasonal growth in tourist numbers will benefit all three of these names.

We see scope to reach upside targets of $12.80 in CWN, $5.10 in TAH and $5.75 in SGR over the medium-term. 

Crown Resorts

Tabcorp

Star Entertainment

Newcrest Goes Ex-Dividend Today

Posted on | by Todd | Leave a Comment on Newcrest Goes Ex-Dividend Today

Shares of Newcrest are trading lower in early trade as the company went ex-dividend today.

Shareholders will be paid a 9.5 cent dividend, fully-franked, which we expect to increase over the next 6-month period.

The share price has found good buying support in the $22.00 area in recent sessions and we consider the $21.80 to $22.00 levels a reasonable buy zone.

In addition, we have noticed a “higher low” pattern in Evolution Mining (EVN). Our ALGO engine has not yet triggered a buy signal and we will update when that happens.

With a positive base case for spot gold moving higher, we would look for the domestic gold mining sector to improve into year end.

Newcrest Mining

Evolution Mining

Stay Short BOQ

Posted on | by Todd | Leave a Comment on Stay Short BOQ

In a recent analyst review, the forward pricing on BoQ has been gauged at 12% overvalued and  adjusted lower from current levels to $11.50 over the medium-term

The note focused on the bank’s balance sheet being skewed towards residential mortgages  and that a rise in bad debts will put downside pressure on operating margins.

We agree with the initial downside target of $11.50 and see scope for some range extension into the low $11.00 handle.

Bank of Queensland