WBC has announced 1H17 cash earnings of $4b which is slightly below market consensus. The 2H16 dividend remains steady at $0.94
Revenue was weaker than expected yet in line with recent trends in the other banking names.
NIM fell to 2.07% with 4bpts decline due to higher deposit costs.
FY18 forecast net profit $8.2b, EPS $2.40, DPS $1.88 placing the stock on a forward yield of 5.6%
China’s credit system has expanded quickly and there are some concerning signs beginning to emerge. In particular, ballooning assets in Chinese wealth management products could create another credit crisis.
As soon as we see investors opting to not rollover existing investments due to rising risks and defaults, the lack of liquidity will expose under performing investments.
Wealth management products, or WMPs, have swelled to $4 trillion in assets in the last few years against a $34 trillion banking system. This well exceeds the mismatch at the peak of the US subprime collapse.
FY17 revenues were broadly flat on last year at $10.6b. Operating costs were down slightly which helped to produce an approximate 7% uplift in net profit to $2.2b.
FY17 EPS $6.58 and a very solid final dividend of $2.80 takes the payout ratio to 72% and now places the stock on a 5.5% yield into FY18.
With the stock is up 50% during the last 12 months and now trading on 15x forward earnings, further upside is likely to be limited. Flat revenue will continue to place pressure on management to drive down operating costs.
FY18 forecast revenue $10.5b. net earnings $2.2b, EPS $6.50 & DPS $4.90.
Telstra should push higher into the top end of the trading band, as shown on the chart below.
Yield hungry investors buying TLS for the compelling 7% fully franked dividend, will likely push the share price higher, before running into resistance at $4.80.
The last Algo Engine signal on TLS was a sell signal back in January at $5.25
We like Resmed as a portfolio holding. Our Algo Engine triggered a buy signal in November 2016 when RMD was trading at $7.50. With the recent higher low formation at $9.00, we believe the price can extend higher to $10.00 before reaching resistance.
At $21.00, BHP will be trading at the 50% retracement level of the 2016 rally.
Often, we’d expect this level to provide buying support. The Algo Engine is now flagging the higher low structure and therefore, within the $21.00 – $22.50 range, we look to identify the short-term momentum indicators turning positive, to confirm our entry point.
ORIGIN INCREASES INTEREST IN PROSPECTIVE BEETALOO JOINT VENTURE TO 70%
Origin Energy Limited (Origin) today announced it had increased to 70% its share in the Beetaloo Joint Venture after acquiring Sasol Petroleum Australia Limited’s (Sasol) 35% share.
Origin CEO, Frank Calabria said, “Having recently announced the discovery of a material shale gas resource in the Beetaloo Basin, Origin has seized the opportunity to increase its interest in the Beetaloo Joint Venture by acquiring Sasol’s 35 per cent share.
Our Algo Engine triggered a buy signal in early March at or near $6.25. We remain long the stock and see upside potential to $8.00.
Caltex held its AGM today and reported NPAT of A$154m for Q1FY17. This was up 2% on same time last year.
EPS should increase from $2.18 in FY17 to $2.30 in FY18. Placing CTX on a forward yield of 3.5%
Forecast FY18 revenue $16b & EBITDA $1.1b
We like CTX as a buy-write.
Scentre Group (ASX: SCG) today announced its first quarter update for the three months to 31 March 2017. The Group’s operations continue to perform strongly with developments progressing well and comparable speciality sales up 2.4% for the 12 months to 31 March 2017
The Group maintains its guidance for full year growth in funds from operations (FFO) of approximately 4.25%. The distribution guidance of 21.73 cents per security is also maintained.
We like SCG as an income contributor to client portfolios. When complimented with a tight covered call, we’re delivering 10 – 12% annualised cash flow and allowing for moderate capital growth.
WOW has reported very strong Aust Food sales for the 3Q17.
If we assume FY18 revenue of $57b, EBITDA $3.5b, Net Profit $1.55b and dividends increasing from $0.70 in FY17 to $0.80 cents in FY18, it places WOW on a forward yield of 3%.
Based on the above metric, we think WOW is now fully valued and investors should add a covered call above the market to enhance the return.
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