Medibank – It’s An Income Story

Posted on | by Leon Hinde

We see Medibank staying within a $2.90 – $3.20 consolidation range. There was nothing in last week’s earnings result to suggest otherwise.

With the stock on 4.1% yield, little to no revenue growth and flat underlying earnings at best, we see MPL as a “tight buy-write” strategy.

The only opportunity here is to strip out the dividend, franking credits and option income to generate 10 – 12% cash flow from a relatively low risk stock.

Value emerges near support at $2.70.

Medibank Private

Brambles – FY18 Earnings Review

Posted on | by Leon Hinde

Brambles has been excluded from our models for the last 2 years, due to the lower high price formations, caused be deteriorating profit margins.

We’seen underlying group profit slip over the last 2.5 years from high single digit growth, to negative growth.

After reporting underlying EBIT of US$997, up 4% on the same time last year, we’ve hopefully seen the inflection point. A further positive is the announcement of the IFCO sale, which is likely to fetch up to US$2.5b.

With the stock trading 20x earnings on a 3% yield, we consider it close to full value.

Brambles

Buy RIO – Value On Offer

Posted on | by Leon Hinde

Our Algo Engine generated a buy signal recently in RIO following the “higher low” formation at $71.00

RIO will soon complete US$11 billion +  in  asset disposals and further realization of their portfolio is likely. With net debt now at historically low levels, we expect the bulk of this cash to be returned to shareholders via buy-backs and dividends.

Iron Ore prices appear to be steady at around US$63 p/t. We recommend accumulating RIO shares within the $65 – $73 range.

RIO

Algo Update – Buy AGL

Posted on | by Leon Hinde

Our Algo Engine generated a buy signal in AGL at $20.50.

With moderate earnings growth into FY19 and the regulators looking to intervene in retail electricity pricing, it is hard to see where the uplift in the share price will come from.

With the stock on a 5.5% forward yield and limited downside risk, we consider AGL a suitable buy-write opportunity for portfolios. Through adding a $22 call option we’re generating 10 – 12% annualised cash flow.

AGL

Mortgage Choice – Shorting Opportunity

Posted on | by Leon Hinde

Any short strategy in a bull market will often be at a disadvantage, simply as a function of “fighting the tide” of capital flows.

Often to succeed, investors need to be identifying structural issues within companies or industries caused by increased competition, regulation changes, weakening margins or excessive  debt.

Mortgage Choice goes onto our watch list and we’ll begin taking a closer look at the fundamentals and will update in a future posting.

Mortgage Choice

 

 

Algo Buy Signal In Woolworths

Posted on | by Leon Hinde

Our Algo Engine has triggered a buy signal in WOW following the recent sell-off from $30.50 back down to yesterday’s close at $28.25.

Woolworths goes ex-div $0.50 on the 13th of September and we recommend accumulating the stock now , ahead of the dividend and then looking to sell $29.00 covered calls to enhance the income.

Woolworths

APA Group – FY18

Posted on | by Leon Hinde

APA’s FY18 operating results were ahead of market consensus with underlying profit growth of 6%.

FY19 forecasts suggest low single digit growth with EBITDA guidance in the range of $1.55b to $1.57b.

The ACCC is expected to release a Statement on, or before the 13th September, expressing its preliminary concerns about the take-over by CKI, (offer price$11 per share).

Further price retracement back towards $9.00 creates another buy opportunity here with APA. The stock now trades on a  forward yield of 4.5%