Downer EDI will report earnings on Thursday and any weakness in the share price ahead of the result, provides a buying opportunity.
We expect Thursday’s result to exceed market consensus, supported by positive industry trends. As displayed in CIMIC’s recent earnings result.
Downer goes ex-dividend $0.12 on the 11th of September.
Downer EDI
Unibail-Rodamco report 2H18 earnings on the 29th of August. Due to tax complications holding the ASX listed CDIs, we recommend investors consider building a position in the stock using a synthetic instrument such as a CFD.
This is an event driven opportunity based on the August result showing the early benefits of the cost synergies of the combined Westfield and Unibail businesses.
To establish a Saxo CFD account and take advantage of buying URW ahead of the result, please contact our office on 1300 614 002.
Unibail-Rodamco
Our Algo Engine generated a buy signal in RIO and the chart below highlights the indicated “buy zone”.
Investors can look to accumulate within $68 – $74 range.
Rio Tinto
The CKI consortium has completed its due diligence and has now entered into a binding Implementation Agreement to acquire 100% of APA’s stapled securities for an all cash offer of $11.00 per share.
The offer is still subject to a number of conditions including approval from the ACCC and the FIRB.
APA goes ex div $0.21 on the 28th December.
APA
Our Algo Engine generated a buy signal in REA last week at $80.50.
Since then the stock has rallied almost $5.00, following a solid FY18 earnings result which met consensus forecasts.
Revenues were reported at $808m, EBITDA $464m and NPAT from core operations $280m.
In FY19, the market is looking for 15% revenue growth, flowing through to similar underlying earnings growth. This places REA on an FY19 forecast yield of 1.8%.
Despite, risks in soft listings and developer pipeline, we recommend maintaining long exposure to REA and applying a stop-loss below the recent $80.50 low.
REA
During last week’s earnings update, James Hardie provided an FY19 EBIT outlook in the range of US$300-340m. This was slightly below market consensus, suggesting 20% growth will not be achieved and it could be more in the range of flat to 10%.
With the stock trading on a high PE and an FY18 yield of only 2%, there’s not much room for disappointment.
JHX is a current holding within our ASX50 & 100 model portfolios, we’ll watch for the next Algo Engine buy signal and revisit the “buy side” case and update our readers.
James Hardie
Shares of AGL have lost more than 6% over the last two sessions after a mixed full-year report was released on Thursday.
The top line data was impressive as the energy generator announced net profits surged to $1.6 billion, which is almost three times higher than the previous year’s profit of $539 million.
However, a large part of the increase in profits came from a $562 million gain on electricity derivative contracts, a segment of their business which lost over $250 million in 2017.
Along these lines, AGL indicated that based on a fall in the forward price curve, it expects wholesale prices (and their margins) to decline into 2019.
On balance, while the overall full-year NPAT beat most estimates, the downbeat forward guidance has weighed heavily on the stock price and points to lower levels over the short-term
The next key technical support level is in the $19.50 area, which would represent a 2-year low.
AGL
AMP’s 1H18 result was underpinned by effective cost management offsetting
weaker revenue performance.
The Australian Wealth Management division saw net outflows of $673m in the quarter.
Going forward, we expect well managed costs to offset weaker revenue. There is longer-term value here for patient investors, who are willing to hold the stock through to the appointment of a new permanent CEO.
In 2019, AMP’s board will likely outline a plan to split the funds management business away from the traditional advice side model, unlocking value for shareholders.
We have AMP now trading on a 6.8% yield and expect FY19 reported profit to remain around $800m.
AMP
Our Algio engine generated a recent buy signal in SGR and we continue to have a positive outlook on the stock and rate this as a “high conviction” buy opportunity.
SGR is set to report FY18 results on Friday 24th August and we see potential upside to market expectations for VIP growth. The new VIP room in Sydney, (which opened in April), should further add to positive revenue growth.
With underlying earnings growth running at 8 – 10%, we expect FY19 EBITDA to increase from $570m to $620m, placing SGR on a forward yield of 5%.
Star Entertainment Group
Crown was a “high conviction” call coming into yesterday’s FY18 earnings result. EBITDA increased by 6% and NPAT was up 13% to $378m.
VIP gaming revenue was up almost 70% on the same time last year. At the peak in 2015, Crown VIP was turning over $52 billion and it now stands at $44 billion.
Although, we see scope for cost control and share buybacks as net positives for the share price, we also feel the 23x FY19 multiple is starting look too expensive.
Crown goes ex div $0.30 on the 20th September and the stock now trades on a forward yield of 4.3%.
Note: Crown’s Sydney project is due for completion in 2021 and total project cost is estimated to be $2.2 billion.
Crown Resorts
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