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.
The ASX200 finished the week up 0.1%. The materials sector was up 2.7% and the the worst performer was the Property Trusts sector, down 4.9% with Stockland down 5%.
The chart below shows a further “lower high” pattern in the index. Thursday’s top at 5820 is now the third counter trend rally that has failed, since the minor downtrend started on the 1st of May, after topping at 5956.
We view 5850 as a key market level and as long as the index trades below this level, caution for downside range extension is advised.
IAG expects to see elevated reserve releases in FY17 of ~5% of NEP, and has
upgraded insurance margin guidance to 13.5-15.5%.
We think IAG is now expensive for a general insurer, trading on 18x FY18 earnings.
Given the current tailwinds, any pullback in price will be moderate and at $6.50 the stock is well supported by a 5% dividend yield.
IAG remains an attractive buy-write.
IAG
There are encouraging trends in the core Tabcorp wagering business and the pending merger with Tatts remains an attractive investment case.
Following the Tatts merger, we look at the earnings profile of Tabcorp in 2019 and assess the forward yield and EPS growth.
We estimate Tabcorp could see EPS increase by 15% by FY19, helping to underpin a forward yield of 6%.
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