Medibank – Rising Political Risk

Posted on | by Leon Hinde | Leave a Comment on Medibank – Rising Political Risk

Medibank has been under selling pressure on fears of rising political risk.  The Labour Party appears likely to campaign into the next Federal Election with a promise to limit annual premium rate increases to 2% for two years. This is well below the 4-6% historical trend.

Despite the concern highlighted above, we view Medibank as a buying opportunity, as it approaches an oversold level.

A rally back to $3.00 should provide an opportunity to set covered call options and generate additional premium income to complement the 6.5 cent  September dividend.

Medibank Private

 

Star Entertainment – Growth Outlook

Posted on | by Leon Hinde | Leave a Comment on Star Entertainment – Growth Outlook

Star has entered into a private placement with its JV partners, Chow Tai Fook  and Far East Consortium to raise $490m at $5.35. The alliance agreement has been entered to build an additional 5 JV towers at the Gold Coast and one in Sydney.

The SGR board has revised the dividend pay-out ratio to a minimum of 70% of normalised EPS. The announcement was also accompanied by a trading update – Normalised group revenue for the March 18 quarter was up 19%.

FY19 revenue of $3 billon, EBIT $440m, EPS $0.33 and DPS $0.20 places SGR on a forward dividend yield of 3.7%.

Star

ETF Watch – World Ex Australia

Posted on | by Leon Hinde | Leave a Comment on ETF Watch – World Ex Australia

Our Algo Engine generated a buy signal yesterday in the SPDR S&P World ex Australia ETF.

The signal was triggered at $21.63 as the stock retraced back to form a “higher low” formation. $20.50 is also a relevant price target from the high back in 2015. Investors wanting to add global portfolio exposure through one simple transaction may consider this ETF.

3 year average annual return is running at around 9%.

If investors wanted to play a US dollar recovery, they may opt for the un- hedged WXOZ ETF.

Dow Jones falls 11.6% – Where is support?

Posted on | by Leon Hinde | Leave a Comment on Dow Jones falls 11.6% – Where is support?

The Dow Jones Index dropped 724 points on Thursday and another 425 points in the overnight session to close at 23,533.

The benchmark index has now declined more than 3,000 points, or 11.6% from its high on Jan 26th, at 26,616.

We’ve been warning about the stretched PE valuations in US markets and we forecast further selling in the tech-heavy NASDAQ, which will drag markets lower.

The Dow closed at 19,827 on Inauguration Day, 20th Jan, 2017, which means it has about 3,700 points further to go before the Trump rally gains disappear.

22,000, or a 50% retracement of the breakout rally which began in late 2016, provides a reasonable downside target where buying interest is likely to provide support for the index.

The NASDAQ is 10% above the 50% retracement price target.