Resmed – 4Q17 Earnings

Posted on | by Leon Hinde | Leave a Comment on Resmed – 4Q17 Earnings

Global mask sales were  weaker than expectations, but we see F18 device  and mask growth rebounding.

FY18 revenue is forecast to grow by  of 5%+ and underlying EPS growth in the high single digits.

RMD is trading at 24x F18 EPS and we see the current sell-off as a buying opportunity. 

We need to give this name a wide range to find support and the buying zone is between $8.50 and $9.25. 1, 2 & 3 years out, the stock will be trading at higher prices. Keep an eye out for the next Algo buy signal in RMD!

Chart – RMD

 

 

RIO – 1H17 Earnings

Posted on | by Leon Hinde | Leave a Comment on RIO – 1H17 Earnings

RIO reported 1H17 underlying earnings of US$3.9bn, which was largely in line with market  expectations. EBITDA of US$9.0bn was also in line.

Lower capex resulted in cash flow and net debt coming in slightly better than exceptions (gearing now 13%)  with net debt end of June US$7.6bn. 

Buy-back was boosted by US$1.0bn increase, helping to offset a softer interim dividend. The interim dividend announced was US$1.10 and assumes 50% payout ratio.

In 2018 we expect RIO to see flat earnings growth at best, and we have the stock trading  on a forward yield of 4.5%.

Chart – RIO

 

 

 

 

Woolworths – Algo Update

Posted on | by Leon Hinde | Leave a Comment on Woolworths – Algo Update

We’ve been long Woolworths following the recent Algo Engine buy signal.

Through adding a $28 December covered call option we’ve boosted the annualized cashflow to 10 – 12%, which includes capturing the $0.58 September dividend.

WOW reports on the 23rd August. The stock is trading on 20x FY18 earnings and 3.3% forward yield.

FY17 EPS is likely to around $1.50 per share and the market is forecasting underlying EPS growth into FY18 of 8 %, to $1.65 per share.

Chart – WOW

 

 

 

Resource Basket – Algo Signal Review

Posted on | by Leon Hinde | Leave a Comment on Resource Basket – Algo Signal Review

In late May our Algo Engine started flagging the “higher low” structure in large cap resource names, including a number of resource specific ETF’s.

Within the ASX 100, FMG, RIO and BHP were the standout Algo Engine buy signals. In client portfolio’s we allocated towards BHP as our preferred exposure.

Over recent weeks, a rally in Iron Ore prices from US$56 per tone to US$72 per tone, has helped to accelerate the share price advance, and crude oil back at almost $50 per barrel has helped BHP.

Fund managers continue to position in BHP ahead of a potential corporate restructure, as the market speculates on the divestment of the US shale and energy assets, into a  separate listed US company.

BHP reports on the 22nd August .  Assuming FY17 total dividends of $1.10, BHP trades on a 4.7% yield. EPS forecasts into FY18 should remain similar to FY17 at around $1.70 per share.

Chart – BHP
Chart – RIO
Chart – FMG
Chart – QRE

 

 

 

 

 

Algo Buy Signal – Amcor

Posted on | by Leon Hinde | Leave a Comment on Algo Buy Signal – Amcor

Our Algo Engine triggered a buy signal on Amcor as the stock forms a “higher low” pattern at or near $15.30.

Amcor reports earnings on the 22nd August, the market in looking for EPS growth of 8 – 10%.  The recent rally in the AUD may see forward guidance reduced slightly, if the AUD was to stay above $0.80.

We continue to like Amcor as a buy and hold portfolio position, complimented with a covered call option. We’re allowing moderate capital growth and when combining the dividend with the covered call option, we’re generate 10 – 12% annualised cashflow.

Chart – AMC

 

 

 

 

AZJ – Selling Pressure

Posted on | by Leon Hinde | Leave a Comment on AZJ – Selling Pressure

AZJ has recognised an A$526m impairment to its Bulk assets, and continues its Inter-modal review.

AZJ noted continues to face challenging market conditions and we feel investor sentiment will be negative leading into the FY17 results on 14 August 2017.

AZJ has previously guided towards FY17 EBIT within A$800-850m range.

Regular viewers of the ASX top 50 video market report, will recognise AZJ as a stock we’ve been warning about, in 2017. Our concern relates to the sustainability of the high dividend payout ratio and the probability of the company being forced to announce a cut at the August result.

Chart – AZJ

 

 

Algo Update – BHP & WOW

Posted on | by Leon Hinde | Leave a Comment on Algo Update – BHP & WOW

Recent Algo Engine buy signals in BHP and WOW continue to perform strongly.

An overnight rally in metal and oil prices will support BHP in today’s trading   and investors may wish to consider selling covered calls into November, at or near the $26 strike price.

Chart – BHP

Woolworths reports earnings on the 23rd August and the market will be looking for underlying EPS growth of 8% to support the 22x earnings multiple.

With WOW now trading on forward yield of 3% and a relatively high multiple, we encourage investors to sell $28 Dec call options to boost the annual cash flow return.

Chart – WOW

 

Computershare – Earnings Result 16th Aug

Posted on | by Leon Hinde | Leave a Comment on Computershare – Earnings Result 16th Aug

Computershare reports earnings on the 16th August.

At 20x forward earnings and 2.6% dividend yield, we feel CPU will likely disappoint and deliver earnings below market expectations.

Any bounce in CPU from these levels will provide an opportunity to consider building new short exposure.

Chart – CPU

James Hardie trades at 26x forward earnings with a 2.7% forward yield.

Again, we consider this name expensive and likely to disappoint investors when JHX report earnings on the 8th August.

A rally back towards $21.00 will provide an opportunity to reset short exposure.

Chart – JHXJHX