China & Iron Ore

Posted on | by Leon Hinde

China is now enforcing strict restrictions aiming to keep 2021 steel output in line with 2020 levels.

Iron Ore futures sank to as low as $US99.50 on the Singapore Exchange on Friday, to then close the week down a further -4.9% to $US101.95 a tonne.

Within the resource space, our preference remains BHP, WPL and NST as core holdings. OZ Minerals is the preference in base metals.

The OZR ETF provides a basket trade, weighted towards BHP, RIO, FMG NCM and WPL as the top 5 holdings.

US Macro Data

Posted on | by Leon Hinde

On Wednesday we will receive guidance from the US Fed on monetary policy and the timing of the central bank plans to taper its $US120 billion in monthly bond purchases. Markets are expecting a scaling back of emergency pandemic-era monetary policy to begin in November or December.

S&P500 Q3 earnings need to deliver US$50 of average earnings per share to support the current valuations. Analysts are expecting Q2 to be the peak of the recovery for many companies and some tapering off in earnings is now likely.

We note the S&P500 index short-term indicators have rolled over and we would need to see a reversal and a rally back through 4485 to negate the current sell signal.

Woodside – Algo Buy

Posted on | by Leon Hinde

Woodside Petroleum is under Algo Engine buy conditions and is a current holding in our ASX 100 model.

Woodside is expected to issue almost 1 billion new shares to pay for the acquisition of BHP’s petroleum business under the $41bn merger deal. BHP shareholders will receive shares in WPL and we may see some overhang of selling for the market to absorb, however, we view the deal as a vote of confidence in the new merged entity, given BHP’s decision to merge their energy assets rather than pursue a cash deal.

  • Woodside will acquire BHP’s oil and gas business in a proposed $41 billion merger deal
  • Analysts tip the deal will pave the way for Woodside’s $US12 billion Scarborough project
  • The merger will relieve pressure on Woodside whose existing assets are depleting

Reece – FY21

Posted on | by Leon Hinde

Reece is now under Algo Engine buy conditions.

The FY21 result highlighted strong sales trends in both Australia and
the US, however, costs in the US dampened the operating profit.

The market is looking for 10% EPS growth into FY22 and FY23 which places REH on 30X forward earnings and 1% dividend yield.

Update: 18/9

Pexa – Accumulate

Posted on | by Leon Hinde

Pexa Group has helped transform conveyancing from a clunky paper-based process into a digital one. PXA was recently listed on the ASX with a market cap of $3bn.

FY21 underlying earnings are expected to double to $108 million, before rising a further 20% in FY22.

CBA & Link are major shareholders.

Update 18/9

ASX 200 Resources Fund

Posted on | by Leon Hinde

OZR:ASX is under Algo Engine buy conditions and we anticipate buying support to increase within the accumulation range of $10.50 to $12.50.

A sector sub-index of the S&P/ASX 200 Index, this index provides investors with exposure to the Resources sector of the Australian equity market as classified as members of the GICS® resources sector. Resources are defined as companies classified in the Energy sector (GICS® Tier 1), as well as companies classified in the Metals and Mining Industry (GICS® Tier 3).

U.S Retail Sales

Posted on | by Leon Hinde

U.S. retail sales unexpectedly increased in August, likely boosted by back-to-school shopping and child tax credit payments from the government, which could temper expectations for a sharp slowdown in economic growth in the third quarter.