SYD’s FY16 results were in line with market forecasts.
EBITDA of $1.1b and DPS at $0.31. The company has flagged a
higher than expected FY17 distribution of $0.33
FY18 we assume EBITDA increasing to $1.2 billion and based on DPS of $0.35 the stock trades on a forward yield of 5.6%.
Our preference remains TCL over SYD.
WES has reported a slightly better-than-expected 1H17 result, with EBIT of $2.4b.
Coles’ earnings were disappointing, declining by 2.6% on headline basis or 6% after adjusting for one-off property sales. At a group level, the strong result from the industrial division and Bunnings off set the weakness in Coles.
With Coles accounting for 40% of earnings, we believe group earnings growth will be moderate (3 – 4%) and full value for the stock is $40 – $43.
FY18 we assume revenue of $71.b, EBITDA of $5.9b, Net Profit $3.1b, EPS of $2.70 and DPS of $2.10 placing the stock on a forward yield of 5.5%
With the above in mind, we are selling covered calls over WES and a combination of the dividend and option premium is generating 10 – 12% annualized cash flow.
TWE has reported its 1H17 EBITS of $227m, underlying NPAT was $136m and an interim dividend of$0.13
Assuming 2H17 is in-line with the first half, we expect a full year result slightly above consensus, which currently sits at $440m
FY18 revenue $2.6b, EBIT $490m, EPS $0.42 and DPS of $0.28, places the stock on a forward yield of 2.4%
SCG and WFD went ex-dividend yesterday at $0.105 and $0.125, respectively. With both names we’ve added tight covered calls to boost the cash flow to 10 – 12% on an annualised basis.
Ansell is a relatively new addition to portfolios and yesterday’s earnings result was slightly disappointing. Again, we’ve been aggressive with the covered calls so we’re not looking for too much on the upside with ANN and we collected between $0.80 to $1.20 for the covered calls. We will look to exit on a rally back towards $23 by April/May.
Amcor reported a terrific earnings result with underlying growth running ahead of market expectations at 5%. This could accelerate up to 8 – 10% in the second half. This supports our $15.50 price target.
CBA’s earnings result tomorrow will be key for the banks. Thus far NAB and BEN have failed to deliver growth on the revenue and profit lines. We shorted BEN from $13.00 and we’ve been aggressive with selling call options over the top 4 banking names.
AZJ reported earnings in-line with market expectations. We remain cautious of the group’s high payout ratio with almost 100% of earnings being paid in dividends. This looks unsustainable in the medium term.
Tomorrow we will be focused on the earnings results for BLD, CBA, CPU, CSL, SHL and WES.
JB Hi-Fi 1H17 earnings results beat expectations driven by strong sales and gross margin expansion.
1H17 underlying NPAT of $125 million represented growth of 32%. Assuming FY17 EPS of $1.87, it places the stock on a forward yield of 4.1%.
Our Algo Engine generated a buy signal in both retail names back in December.
NCM has reported first half underlying NPAT of US$273m and declared a US7.5cps interim dividend.
Group profit was as expected, yet cash flow was weaker. NCM reported first half EBITDA of US$783m, slightly ahead of forecasts due to lower corporate costs and exploration expenses.
The momentum looks positive on the XJO as the index bounces from the recent 5600 point low. We have a big week in earnings coming up with AMC, ANN, AZJ, BEN and NCM on Monday.
COH and TWE on Tuesday. BLD, CBA, CPU, CSL, DMP, ORA, SHL and WES on Wednesday.
IAG, ORG, S32, SYD and TLS Thursday.
ANZ, ASX, CCL, LNK, MPL and STO on Friday.
Until October 2016, TPG Telecom was the fast growing telco with almost 20% EPS growth whilst trading on a low 2% yield.
Then came the earnings update and the company suggested future EPS growth will be more like 5%. If Telstra is growing earnings at 3 – 5% and paying a 6% yield, why would an investor buy TPG on a substantially different yield or valuation?
You just wouldn’t. As such, we’ve watched TPG sell-off from $12.50 to $6.20 and the stock is now back on a 4.5% yield. TPG will likely find buying support now and the market is hoping EPS growth will creep higher into the range of 5 – 10% to support the yield differential with Telstra.
We’ve been buyers of Telstra at sub $5.00 and we’re looking for the stock to trade $5.50 before evaluating a covered call option strategy.
Goldman Sachs and JP Morgan remain within the consolidation range which began in early December.
In our local market we’ve seen BOQ & BEN sell off 10% from the January peak-to-trough. NAB reported weak revenue growth and higher than expected expenses, leading to a 1% fall in profit.
CBA report their half year results on Wednesday, we expect NPAT of $4.8b and DPS $2.00. 3 – 5% underlying EPS growth on the same time last year.
ANZ corrected 10% from peak-to-trough.
We’ll watch the US banks in the weeks ahead to see which way they break from their current consolidation range.
We’ve been buying the following names in the past week and selling covered call options.
WFD, GPT and SCG within the REIT space.
TCL and SYD defensive infrastructure.
RMD, CSL & SHL as our preferred healthcare exposure.
AMC, BXB and ANN as industrial trades.
IAG & MPL as insurance exposure.
The names above are performing well and in many cases have been the leading ASX companies by % gain, over the past week. Tabcorp on the other hand has been a disappointing inclusion in client portfolios. Our exposure to TAH is only minor, as we don’t view it as a core holding. (rather a tactical trade based around the Tatts deal).
TAH remains within our buy range, although testing the lower band. We continue to feel there’s opportunity ahead. We are again buying TAH at these levels and will look to exit mid year. The upcoming ACCC decision on the Tatts deal, will likely be a positive catalyst and we expect TAH to trade back above $4.60.
The other names mentioned above, have been complimented with a covered call option, which is helping to deliver 10 – 12% cash flow from the option premium and the upcoming dividends.
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