Computershare is under Algo Engine sell conditions and we continue to see downside risks to earnings and consensus valuations. Bond yields are well below the input levels used by analysts 6 months back, when forming the forecast valuations.
With the stock trading 20x earnings on a 2.3% yield, we see little reason to own this one.
Boral has been highlighted on the blog as a “high conviction” recovery play. The stock price has now rallied from $4.40 to $5.00.
Looking through any short term market weakness, we see a second half 2019 price target of $5.50 as achievable.
Macquarie Group reported FY19 earnings today and group revenue was up 19% to $6.25bn and NPAT was up 17% $2.99bn.
MQG is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.
We forecast FY20 earnings to increase by 6%, placing the stock on a forward yield of 4.8%.
Coles Group is under Algo Engine sell conditions following the lower high at $12.70.
The group announced their 3Q19 sales growth which came in ahead of market expectations. Food and liquor sales grew at 3.3% in 3Q19, however, management indicated that they expect to see the growth moderate back to 2%, or in line with historical growth rates.
A review of the valuation forecasts show FY20 revenue of $40bn, EBIT $1.34bn, on EPS of $0.68 and DPS of $0.55, placing COL on a forward yield of 4.8%.
We see limited downside risk for the share price and we consider selling at-the -money-call options as an alternative to selling the underlying stock.
A number of REITs announced their 3Q19 operational updates yesterday.
Dexus forecast 5% underlying earnings growth. reaffirmed its FY19 guidance for 5% growth.
Mirvac indicated their FY19 guidance will be in the 3 – 4% growth range with DPS growth at 5%.
Across the sector it is likely residential and retail remain the weak spots, whilst office and industrial will continue to provide strong growth. Softening of the retail sector was evident in GPT’s March quarter business update.
Despite GPT’s exposure to retail, the office exposure along with the groups strategy to expand the footprint in logistics, makes the stock one of our preferred opportunities within the REIT sector.
South32 has been under Algo Engine sell conditions since forming a lower high pattern back in February at $4.00.
Weak alumina and coal prices saw 3Q19 earnings miss analysts forecasts. We now downgrade the earnings outlook by 15% and remain cautious on the prospects of a near term turnaround.
Ongoing declines in spot alumina and thermal cost prices, combined with rising costs, will translate to weaker earnings over the next 2 -3 years.
Flight Centre Travel Group downgraded FY19 underlying earnings by 15% to $345m due to softer trading conditions in the Australian leisure market. The company also cited higher operating costs across the business.
Based on the downgrade we now have the stock trading 19x FY20 earnings and 3.5% yield.
Buying interest in FLT is likely to increase near $35 – $36 range.
Lendlease looks attractive from a long-term valuation basis, especially relative to other opportunities within the real estate sector.
Although the share price may remain weak until a solution for Engineering &
Services is achieved, we feel the negatives are already priced in.
Based on FY20 earnings, we have the stock trading on a forward yield of 5%.
OceanaGold is a current holding in our ASX 100 model.
They have reported 2018 underlying EBITDA of US$364m and company cash reserves increased to US$108m.
Buy within $4.00 to $4.10 range.
Evolution Mining buy within the $3.00 to $3.30 range.
Bega Cheese comes onto our Radar following the price correction from $8.00 down to $4.51.
The PE valuation has corrected from lofty levels to now being 21x FY19 earnings and the stock trades on a 2.3% yield.
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