Newcrest FY17 earnings, (based on spot gold prices), are forecast (in USD) to be in the range of $650m – $670m on EPS of $0.90 and DPS of $0.25. This places the stock on a forward yield of approximately 1.5%.
Our algorithm engine is flagging NCM.ASX as a buy on the dip signal.
NCM.ASX
Gold (2 Year chart)
Our algorithm engine is flagging the following stocks as potential buy on the dip alerts.
DMP.ASX
JHX.ASX
The recent market rotation towards growth assets and in particular, materials and financials, has resulted in selling utilities and property trusts. In many cases, these names have seen 10 to 20% correction.
The following post takes a quick look at some of the relevant chart patterns.
SCG.ASX (forward yield 4.9%)
SGP.ASX (forward yield 5.5%)
WFD.ASX (forward yield 3.5%)
DXS.ASX (forward yield 5.2%)
GMG.ASX (forward yield 3.7%)
GPT.ASX (forward yield 5%)
MGR.ASX
On the utilities, we think that both Sydney Airports and Transurban should be back on the radar and maybe looking oversold.
SYD.ASX (forward yield 5%)
TCL.ASX (forward yield 4.8%)
Tabcorp (TAH.ASX) will likely see $20m+ in earnings upgrade from the NSW Government’s decision to reverse its ban on greyhound racing from FY18.
FY17 revenue of $2.3b looks flat on the same time last year, with EBIT of $350m and EPS $0.23. Out into FY18 the investment case picks up. FY18 revenue $2.35b, EBIT jumps to $370m on $0.25 of EPS and a forward yield of 5%+. With a relatively high payout ratio and 20x PE, the stock looks slightly expensive and we prefer to be a buyer on a dip back below $5.00
TAH.ASX
CWN.ASX
Crown looks attractive at or near $13.00 with gaming revenue picking up in Macau and the pending breakup of the ASX listed Crown business splitting into 3 separate entities, unlocking value for shareholders.
CIMIC (CIM.ASX) announced it intends to make a takeover offer for UGL at $3.15 per share. This is almost a 50% premium to UGL’s last traded price and values the business at $520m.
Pre UGL, FY17 EPS growth in CIM is forecast to increase by 5% to approximately $1.90, assuming they payout around $1.10 in dividends, it places the stock on a forward yield of 4%, (100% franking credit).
It’s worth adding CIM.ASX to your watch list as the UGL acquisition will help strengthen the investment case.
CIM.ASX
UGL.ASX
In the lead up to last Friday’s US Payroll (NFP) report, there were several Federal Reserve officials, as well as many market commentators, who believed that a better-than-expected jobs report would increase the likelihood of a November rate hike. Even FED “dove “Charles Evans seemed to warm to the idea that above trend growth in employment would justify a near-term move in the Fed Funds target.
However, the less than spectacular Non-Farm Payroll report saw the odds of a November move scaled back materially, the USD lose some of its gains for the week.
We have never really supported the speculation about further rate normalization at the November FOMC meeting. There is no historic precedent for any FED policy change so close to a Federal election and the current FED will likely want to show a political and independent posture.
In addition, the November FOMC doesn’t have a scheduled press conference nor are any updated economic forecasts scheduled for release. These scheduling issues wouldn’t completely preclude a rate hike if the recent data was extremely strong; which is not the case. On balance, the NFP report was solid even though the headline new jobs component was weaker-than-expected. Private sector jobs gained 167,000, while the participation rate rose to 63% which is the best rate since February of 2014.
Chart – US 10yr
Dow Jones
A quick look at Bank of Queensland and Bendigo following the release of the BOQ FY16 earnings result. BOQ.ASX Underlying result was weaker than market expectations, predominately driven by greater than expected margin pressure.
BOQ.ASX FY17 outlook now appears to offer flat EPS growth at best, assuming a $0.78 FY17 dividend, it places the stock on a 6.9% fully franked forward yield.
BOQ.ASX
BEN.ASX
A technical summary of where we see price action heading is different in BOQ opposed to BEN, whilst we see short term downside pressure in both names, (despite the yield support), a retracement in BEN.ASX back to $10 will likely trigger a buy signal in our algorithm engines. Whereas, BOQ.ASX remains in a structural downtrend and it’s the current short signal that draws our attention.
Resmed (RMD.ASX) reports first quarter FY17 results on the 26th of October. The result is likely to meet or exceed market expectations.
RMD is forecast to deliver 10%+ in EPS growth across the next few years. The recent acquisition of Brightree, Inova and Curative Medical will underpin both revenue and future profit growth, within an industry sector where demand continues to grow.
We hold Caltex (CTX.ASX) across most client portfolios from lower price levels. The algorithm engines triggered the entry signal back on 8th of July when CTX.ASX was trading at $32.00.
Our target was $34+ with a view towards selling covered calls at this point to then achieve an average exit price in the range of $36 to $37 or on a stand still basis, (or unexercised), 10% per annum cash flow from the dividend and option premium.
The investment continues to perform as expected.
FY17 forecast EPS of $2.15 with a forward yield of 3.3%. Underlying growth 5 – 7%.
Chart – CTX.ASX
Over the past 12 months, the correlation between the EURO and Eurozone (EZ) share market has gone through several different phases. Earlier in the year, the single currency was sold off on risk aversion when EZ equities were showing weakness. A few months later, the EURO was bid higher when EZ stocks fell as fund managers allegedly unwound currency hedges while cutting long stock positions.
However, during last Friday’s LDN session, the EUR/USD tracked the German DAX index with pretty much a point-to-point correlation. As discussed in previous FX UPDATES, the legal and financial pressures on Deutsche Bank (DB), along with other EZ banks, has been a headwind for the EURO but so far hasn’t unravelled the current price or chart structure.
But last Friday was different. As the LDN session opened, the German DAX was pushed below the 10,200 level for the first time since early August. At the same time, the EUR/USD fell to the session low of 1.1160 and was well offered on the crosses. A well timed rumor that the US Department of Justice (DoJ) was willing to lower their penalty demand on DB down to the $5.0 billion area triggered a 1.5% rally in the DAX and reversed the EUR/USD back up to near-term resistance at 1.1250.
With a full slate of data points from both sides of the Atlantic this week, FX Investors will be watching to see if this EURO-Equity connection of stronger EZ equities driving the EUR/USD higher has any staying power, or if it was just an end of month adjustment.
It’s our base case is that the DoJ rumor was just that and the market will be sensitive to ongoing litigation between the DB and the DoJ. Further, two of the key data points this week, US ISM aggregates and the US Jobs data, are both extremely currency sensitive releases which will drive USD flows.
On balance, we expect both the ISM manufacturing and services reports to bounce back from last month’s readings, which would be USD positive and SP 500 positive. The US Payroll data has been a volatile series over the last six months, but a print near the forecasted number of 170,000 new jobs should be good enough to keep the EUR/USD on a downward trajectory.
Chart – Deutsche Bank
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