NAB delivered FY17 cash earnings of $6,642m, just below consensus estimates.
2H17 dividend of 99¢ was flat on the pcp and total annual dividends in FY18 will be $1.98, placing NAB on a forward yield of 6.2%.
NAB has a dividend payout ratio of ~79%, which may prove to be unsustainable.
The market may have concerns following NAB announcing additional investment spend of $1.5bn over the next three years and a large restructuring provision in FY18.
WPL has traded to our medium-term price target and we recommend taking profit.
NCM is finding support as US interest rate expectations re-adjust lower.
SYD & TCL are rallying ahead of their December dividend payment period.
As the market re-prices for a slower trajectory in the increase of US interest rates, yield sensitive sectors are finding renewed buying interest.
Our Algo Engine remains long SYD & TCL. We recommend covering the position with an out-of-the money call option.
Australian equities increased by 4% in October with IT up 9.3%, Energy 5.8% and Healthcare 5.5%.
We’ve been allocating towards ORG, WPL, RHC & RMD to help capture these returns. There are incremental further gains in resources and energy, we’re cautious on banks and financials and forecast sideways to lower price consolidation.
High PE companies with US dollar earnings should now run into resistance. Examples being JHX, BLD, RMD, and CPU.
AMC has identified challenging conditions going into 1H18 at its 1Q trading
update and AGM.
Profit headwinds relate largely to Asia and Latin America, along with rising raw material costs. AMC has guided to flat 1H EBIT, yet maintained FY18 guidance of around 5% EPS growth.
AMC trades on a forward yield of 3.6%, based on FY18 EBITDA of $1.6b.
We see the current sell-off as a buying opportunity and recommend investors cover with a $15.50 call option into June 2017, whilst keeping exposure to the February dividend.
Domestic banking system lending growth was 2.9%, with positive growth
seen in housing (2.6%) and corporate (2.8%) but negative growth in cards
(-2.9%) and other personal (-2.2%).
ANZ’s lending growth (2.3%)
NAB’s lending growth (2.7%)
WBC’s lending growth (3.5%)
BEN’s subdued lending growth (0.1%)
We forecast that headwinds to Banks’ margins will re-emerge in 2018.
We continue to like WOW as a low risk income play in client portfolios. Our Algo Engine generated a recent buy signal in Woolworths and the stock is held in our top 20 and top 50 model.
Price target of $27. Investors may choose to add a covered call to boost the cash flow.
1Q18 sales update today shows growth in customer transactions driving Australian Food comparable sales growth for the quarter of 4.9%.
Strong double-digit online sales growth in both Australian and New Zealand Food assisted by the rollout of Pick up to all Woolworths and Countdown supermarkets.
Solid sales growth in Endeavour Drinks, with the sales performance of BWS a particular highlight.
We feel Woolworths provides further upside potential heading into tomorrow’s quarterly trading update.
Price target $27.00
We’ve been buyers of WPL and ORG following the recent Algo Engine buy signals.
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