FY17 refining margins have improved from last year after averaging US$12.40 versus US$10 over 1H16.
We expect CTX stock price to find support at the current price level and trade higher off the back of the earnings result announced in August.
Assuming DPS of $1.15, we have CTX on 3.7% yield, and when complimented with a covered call, we ‘re delivering 10 – 12% annualised cash flow.
The S&P/ASX 200 Index finished the week down 0.31%. The best performer was the Materials sector, up 2.1% and the worst performer was the Health Care sector.
The XJO remains below the recent 5850 “lower high” formation, as displayed on the graph below.
Our Algo Engine has flagged a buy signal in TCL with the price trading at or near $11.60.
With a 10% underlying dividend growth supported by free cash flow, we feel TCL should trade back up into the $12.25 level, as bond yields retrace from their current short-term rally.
Sydney Airports is approaching buying support at or near $6.60. We see anywhere in the $6.60 – $6.90 range as a reasonable entry level.
Adding covered calls into Sept – Oct will help boost cash flow, whilst waiting for the next dividend period in late December.
Weaker than expected activity trends in June led to small earnings downgrades by most analysts.
We are now forecasting flat year over year revenue growth.
ASX is trading on 24x forward earnings which seems excessive considering the low growth outlook.
As bond yields have pushed higher in recent weeks, following global central banks hawkish tone, we’ve seen capital rotate out of yield sensitive names such as infrastructure and property and into financials & resources.
The rotation now leaves property stocks approaching an oversold price zone.
The chart below provides a broad-based picture of the listed property stocks within the ASX 200, via the SLF.AXW (SPDR ASX200 Listed Property ETF).
Our Algo Engine has triggered a buy signal at or near $12.00.
Woolworths, Woodside, Medibank & Origin look like they’re setting-up as strong buy signals.
Other names which we view favourably from recent ALGO alerts include, SYD, TCL & GPT.
Our Algo Engine has triggered recent buy signals on Magellan Global Equities Fund and Magellan Infrastructure Fund.
The Reserve Bank of Australia has released its financial aggregate data. Over the 12 months to May 2017, total credit provided to the private sector increased by 5.0%.
However, for the first time since 2011, the annual growth in dwelling loan approvals turned negative. This has also coincided with a slowdown in loan size growth.
We’re likely to see softer housing credit growth over the next 6 to 18 months.
The major banks have responded to the lower housing loan growth by announcing mortgage re-pricing starting with investor & interest only loans.
We believe the net-net impact on bank earnings will result in flat EPS growth over the next 12 – 24 months with the unknown risk being the potential pick-up in bad-debt provisioning.
Our Algo Engine has triggered a short signal in CBA.
Thursday’s top in CBA at $84.37 creates a “lower high formation” following the prior high made in early May.
We remain cautious across the banking names and see the current counter trend rally as topping out at or near the current levels.
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