Tabcorp – High Conviction

Posted on | by Leon Hinde

Tabcorp has been a “high conviction” buy idea, following the recent Algo buy Signal at $4.20. The high conviction was based on the benefits of the Tatts merger showing up in the FY18 earnings results.

Yesterday, TAH reported FY18 earnings slightly ahead of consensus and importantly reaffirmed synergy guidance of “at least $130m”.

FY18 EBITDA came in at $736m & allowing for 5% growth into FY19 we now have the stock on a forward yield of 5%.

We now consider the stock full value and recommend investors lock in profit or sell covered call options.

 

 

Dominos – Watching the lower high structure

Posted on | by Leon Hinde

Dominos reports their FY18 earnings on the 14th August and consensus expectations is for underlying earnings to grow 15%, to $266m. This places the stock on a yield of 2.2%.

At 31 times earnings and a low yield, DMP can’t afford any material slow down in EPS growth into FY19. It feels that industry disruption and slow growth rates in new international markets, may come together to weigh on the FY19 numbers.

We’re mindful of the “lower high” sell structure the algo engine is pointing to, and we’ll be interested to review the numbers, post the upcoming earnings result.

We remain cautious on this one!

CBA Announces Lower Cash Profit

Posted on | by Todd

Shares of CBA have traded in a wide range in early trade today as investors react to the mixed full year result for the bank.

The bank announced a cash profit of $6.2 billion, which is a 5% drop from the previous year and largely attributed to the $700 million fine paid to AUSTRAC and other regulatory expenses.

CBA will pay a final dividend of $2.31 taking the full year payout to $4.31 per share.

It’s too early to tell if the drop in profit is due to “one-off” charges, or if the bank’s profit cycle has peaked. We remain cautious of the banking names and will revisit the sector’s valuation over the near term.

CBA

BHP Drifts Lower After Asset Sales

Posted on | by Todd

Shares of BHP have traded with a slight downward bias since announcing over $10 billion in asset sales last week.

Some of the investor uncertainty focuses on what the mining giant will do with the proceeds of the sales.

The company has signalled its intention to return all net proceeds to shareholders but has not outlined the timing or manner in which this will happen.

Technically, we see solid price support in the $32.50 area.

Factoring in the expanded share buyback scheme, an increased dividend and a special dividend could lift the share price back into the $37.00 area.

BHP

Amcor Slides Lower After Takeover Announcement

Posted on | by Todd

Shares of Amcor are down over 4.5% in early trade as the market digests the $7 billion (all script) takeover of US packaging peer, Bemis Company.

Logistically, the takeover bid maker sense since 85% of AMC’s revenue is from the US, Europe and the Middle East.

Along those same lines, a large proportion of AMC’s share registry is made up of international investors, which suggests the company will eventually de-list on the ASX to join the NYSE.

Monday’s announcement was not a surprise as the company has disclosed that they were in negotiations with Bemis for over a year.

Our ALGO engine has triggered several sell signals over the last week and we have been advising investors to either exit the stock or employ a buy/write strategy into October.

The next key technical support level will be found in the $13.90 to $14.00 area.

Amcor

SEEK – Waiting For Value

Posted on | by Leon Hinde

SEEK has yet again pushed out the timing of its earnings growth, committing to another huge uplift in operational and capex spending to grow market share in China, South East Asia and Australia.

The market has downgraded earnings forecasts to reflect the FY18 result and the guidance for FY19.  This now leaves FY20 and 21 as the growth opportunity with forecast EPS set to accelerate to 20%+ p/a.

With the stock now on 2% dividend yield and questions over short-term growth and large capital expenditure, we feel investors should be patient and wait for our next ALGO buy signal.

SEEK offers investors exposure to the global hiring cycle and increasing migration of employment advertising to the online market.

SEEK

Banks Brace For Round 5 Of The Royal Commission

Posted on | by Todd

The Big four banks will be in the spotlight this week as the Banking Royal Commission commences round five today in Sydney.

The main topic for this round of examination will be the fees, charges and weak performance of bank-managed superannuation funds.

One Melbourne-based think tank has estimated that excessive fees and poor performance can cost superannuation investors up to $12 billion per year.

Australia’s largest superannuation provider, AMP, felt the wrath of the Royal commission during the last round of testimony, which saw their share price drop over 30% and the sacking of its chairman, CEO and three other directors.

The chart below illustrates the performance of AMP’s share price relative to the other Big 4 banks.

We don’t have ALGO buy signals for any of the domestic banks and we’re not holding any banking names in our ASX Top 100 portfolio. However, we will look for signals as the share prices approach the June lows.

 

 

 

Buy Star Entertainment

Posted on | by Leon Hinde

Star Entertainment reports FY18 earnings on the 24th of August and consensus forecasts are expecting underlying NPAT of $255 million, up 15% on the same time last year.

The  1 to 3 year outlook for SGR supports ongoing EPS growth of 10% +, placing the stock on a forward FY19 dividend yield of 4.5%.

SGR is a current holding within our ASX 100 Model portfolio.

Star Entertainment Group

 

ALGO Buy Signal For RIO Tinto

Posted on | by Todd

Our ALGO engine triggered a buy signal for RIO Tinto into the ASX close yesterday at $76.50.

This “higher low” chart pattern is referenced to the intra-day low of $72.30 posted on April 9th.

Despite the announced expansion of their share buyback program, RIO’s share price slid more than 5% last week to hit a 3-month low of $76.15.

We calculate that the stock is currently on a 4.5% yield and will go ex-dividend for US $1.70 on Thursday the 9th of August.

From a technical perspective, we see solid support in the $73.25 area.

Rio Tinto

 

 

Crown Firms In Front Of Next Week’s Earnings Report

Posted on | by Todd

We followed an ALGO buy signal for CWN back in February at $12.60.

However, over the last few months, the stock has traded in a relatively narrow range between $13.80 and $13.25.

With the company reporting full year earnings next Thursday, we see the potential for the stock price to trade up through the top end of the range.

We expect CWN to beat the consensus NPAT forecast of $370 million as operations in both Victoria and Sydney could print higher numbers.

CWN goes ex-dividend for 30 cents on September 21st and we see the next upside target neat $14.25.

Crown Resorts