CIMIC – High Conviction Idea Delivers A 20% Return

Posted on | by Leon Hinde

From our Monday “opportunities in review” webinar, CIMIC was a high conviction buy idea heading into earnings season.

The strong share price reaction to last week’s 1H profit  announcement  sent CIMIC shares  20% higher.

The result came in ahead of analysts forecast with revenue growth and profit growth of more than 10%.

1H Revenue +11% to $6.9 billion, EBITDA of $794 million +11% and NPAT $363 million +12% and on the same time last year. 

Whilst the stock price now looks full value based on a forward yield of 3.3%, we continue to like the longer-term fundamentals.

Cimic Group

 

IAG – Opportunity Builds

Posted on | by Leon Hinde

Although we don’t have a current Algo Engine buy signal in IAG, the stock is in the ASX 50 model portfolio from the original higher low pattern in 2017.

The recent share price retracement, from $8.70 back to yesterday’s low of $7.84, means we have the stock on our radar again.

Strong earnings growth, 5% fully franked dividend yield and an increase to the share buy back program should provide a floor under the share price.

We see IAG as a solid “buy/write” opportunity delivering 10 – 12% annualised cash flow.

 

IAG

 

 

Stay Long Downer EDI

Posted on | by Todd

Our ALGO engine triggered a buy signal in Downer EDI on June 25th at $6.74.

Since then, the stock has reached an intra-day high of $7.30 on July 10th.

Recent broker notes have been bullish on the Engineering and Construction sector citing a high backlog of domestic infrastructure work.

The strong results for Cimic Group last week underscore this uptick in construction activity, in general.

More specifically, DOW got a lift last week after announcing it had won a 5-year support and maintenance contract with Chevron Australia.

We believe DOW is well placed to benefit from the dual tailwinds of increased infrastructure spending and a ramp up in capital spending from the mining sector.

DOW will report full-year results on August 16th. The forecast is for NPAT to increase to $295 million and the dividend per share to rise to 14.4 cents.

We see solid chart support in the $6.90 area and initial upside resistance just over $7.65.

Downer EDI

 

 

Has Spot Gold Found A Near-Term Low?

Posted on | by Todd

After reaching an intra-day high just under $1370.00 in mid-April, the price of Spot Gold has dropped over 12% and matched a 1-year low of $1210.00 last week.

The recent strength in the USD, weakness in the Yuan and uncertainty over global trade tariffs are some the reasons used to explain the slide in the yellow metal over the last 2 months.

What is clear is that the technical picture in Gold is deeply oversold and due for a material correction higher.

As illustrated in the chart below, the last 8 times that Gold fell more than $90.00 over a 3-month period, the rally that followed averaged close to $150.00, or just under 13%.

Despite the recent weakness in Spot Gold, local Gold miners have performed reasonable well and have expanded production both domestically and abroad.

Our ALGO engine is now showing buy signals for NCM, SBM, NST, OGC, SAR and EVN.  

In addition, NST, EVN and NCM are included in our ASX Top 100 model portfolio.

We currently see the $1235.00 area in Spot Gold as an inflexion point which could drive the price higher and would be a net positive for these local Gold names.

 

ALGO Update: OZL Firms On Lower Production Costs

Posted on | by Todd

Our ALGO engine triggered a buy signal in Oz Minerals on July 12th at $8.80.

Since then, a broker note from Citi has raised their 12-month target from $10.70 to $11.10.

While the guidance for Gold and Copper production was lifted to the top end of the company’s 2018 targets, the more significant surprise was the drop in production costs.

During the latest quarter, OZL reported copper production costs fell from US 97 cents in March down to 72 cents per pound. Further, we believe a steady slide in the AUD/USD will be a net positive for the share price.

Internal momentum indicators have turned positive and we see good support at $9.00 with an initial upside target of $10.20.

Oz Minerals

 

 

 

 

ALGO Buy Signal For Newcrest Mining

Posted on | by Todd

Our ALGO engine triggered a buy signal on NCM into yesterday’s ASX close at $20.04.

This “higher low” price pattern is referenced to the intra-day low of $19.33 on March 21st.

NCM has now been added to our ASX Top 50 Model portfolio.

With Spot Gold prices pressing against key support near $1210.00, we would look to enter long for half an allocation now, and be prepared to add at lower levels.

Newcrest mining

ALGO Buy Signal For A 2 Milk

Posted on | by Todd

Our ALGO engine triggered a buy signal in A2  Milk into yesterday’s ASX close at $9.81.

This “higher low” pattern is referenced to the intra-day low of $9.19 on May 23rd.

Despite falling formula prices in China, recent broker notes from both UBS and Goldman’s have positive ratings, citing robust net earnings results through 2020.

It’s worth noting that A2M is a high growth, low yielding stock and investors should apply a stop loss below the $9.10 level.

A2 Milk

 

 

 

CIMIC Shares Soar After Positive Results

Posted on | by Todd

Shares of CIMIC Group have spiked over 10% higher to reach a 5-month high of $47.50 in early trade.

The company’s H1 2018 results showed an increase of FY 18/19 earnings in the 3% range and a 10% increase in revenue growth specifically in their construction business.

Our ALGO engine triggered a buy signal in CIM at $41.15 on March 9th and the stock was added to our ASX Top 100 portfolio on June 27th at $35.00.

We see the next resistance level in the $48.75 range. CIM goes ex-dividend for 70 cents on September 12th.

Cimic Group

ALGO Update: BHP Continues To Firm Into The $35.00 Area

Posted on | by Todd

Our ALGO engine triggered a buy signal for BHP on March 9th at $28.32.

A recent broker note focused on the mining giant’s increased production of Iron Ore, Coal and Crude Oil as the basis for upgrading their 12-month price target to $37.00.

As mentioned in a previous Blog, we believe these upgrades will also lead to an increase of their dividend to the $1.40 range.

With a potential “double top” resistance in the $35.50 area, we would consider a buy/write strategy at these levels.

BHP goes ex-dividend for 60 cents on September 7th.

BHP

 

 

RIO Tinto Firms On Solid Output

Posted on | by Todd

Shares of RIO are 1% higher at $79.90 in early trade as a recent broker note has reaffirmed their “outperform” rating and set a 12-month target of $94.00.

The report mentions that Iron Ore shipments of 88 metric tons were at the top end of 2018 calendar year guidance.

In addition, shipments of copper and bauxite were also slightly ahead of 2018 guidance.

The company is scheduled to announce their  2018 earnings on August 1st. The forecast numbers are NPAT of $4.6 billion and DPS of $1.36.

RIO was added to our ASX Top 20 portfolio in March of 2017.

RIO Tinto