South 32 – Production Results

Posted on | by Leon Hinde

South32 remains under Algo Engine sell conditions, but we continue to monitor the buying activity following increased speculation that the company could be a takeover target.

S32 reported June quarter production numbers which were in line with market expectations. Manganese and Cannington surprising to the upside and Met Coal disappointing.

June quarter manganese ore production was up on recent revised guidance.

2020 earnings will be down significantly on 2019, caused by lower commodity prices. EBIT will fall by 30 – 40% and EPS falls from $0.20 to $0.05. It’s not until 2022 that markets expect S32 earnings to recapture the levels of 2019.

A slow down in global economic growth would adversely impact prices across aluminium, alumina, manganese, nickel, silver and coal.

IPL – Valuation review

Posted on | by Leon Hinde

Incitec Pivot operates in explosive/mining services and fertilizers. The stock remains under Algo Engine sell conditions, but we continue to watch the buying momentum and the upcoming earnings result for signs of strength.

We are encouraged by the recent capital raising which has helped to strengthen the balance sheet and should help navigate any short-term COVID-19 volatility.

IPL trades on a forward yield of 2.2%.

Pro Medicus – Buy Signal

Posted on | by Leon Hinde

Pro Medicus has switched to buy conditions after correcting from the $30 high back in May, to $24 in yesterday’s trading.

INTERIM FINANCIAL REPORT FOR THE HALF-YEAR ENDED
31 DECEMBER 2019. 1H20 revenue increased 15% to $29m and underlying profit before tax jumped 45% to $15m, (compared with $10m for the previous corresponding period).

PME is a high growth business, trading on a lofty PE of almost 100x earnings. Watch for the short-term momentum indicators to turn positive within the $22 – $25 price range.


Goldman Sachs – Q2 Earnings

Posted on | by Leon Hinde

Goldman Sachs Group remains under Algo Engine sell conditions.

Goldman reported Q2 revenue of $13.3bn & $2.4bn in profit. Estimates were for $3.78 in EPS and the number came in much higher at $6.26 earnings per share.

The report came out before the bell last night and GS was up 5.5% yet at the close, up only 1.3%.

Banks with exposure to trading revenue have seen strong market conditions in the June quarter, however, it’s likely that trading revenue will slow down in the back half of 2020.

Goldman set aside a higher than expected, $1.59bn for potential credit losses.

We continue to have a cautious outlook on the sector as we head into the remainder of 2020, downside risks remain from the economic uncertainty and the significant pressure from low-interest rates.