The ASX 200 Index finished the week up 0.8%. The best performer was the Utilities sector, up 7.5% and the worst was the Health Care sector, down 1.3%.
5964 provides support for the index and a long bias should remain in place, whilst the index is above this level.
After trading as high as $10.50 on May 18th, shares of QBE have dropped over 10% and reached $9.25 last week.
However, the share price got a lift on Thursday after UK Ratings agency, A.M. Best affirmed its Financial Strength Rating to A, and its Long-Term rating to a+.
At Friday’s closing price of $9.41, QBE is trading at a P/E of 13 and the 22 cent dividend on August 24th places it on a yield of 5.10%.
Our ALGO engine triggered a sell signal on QBE at $10.30 on May 3rd. We expect that signal to reverse soon and will advise on entry levels in a future posting.
QBE
Our Algo Engine triggered a buy signal in CSR at $4.64. We suggest accumulating the stock within the $4.00 – $4.60 range.
CSR goes ex-dividend $0.135 on the 10th November and call options are available over the stock.
CSR
APA received a non-binding takeover offer at $11 per share, implying a
value of almost 15x earnings.
APA has granted access to due diligence and the offer will remain subject to regulatory approval from FIRB.
With the share price trading below the takeover offer, we’ll be weighing up the arbitrage opportunity in the week ahead.
We feel other stocks within the infrastructure sector will continue to get a boost from takeover interest and medium term support from the bond market’s tepid outlook.
One example we’re attracted to within this theme is Spark Infrastructure.
Since posting an intra-day low of $2.74 on Wednesday, shares of Telstra have risen over 8% and are pushing against $3.00 in early trade today.
We cite two fundamental catalysts for the renewed buying interest in the telco giant.
First, the acquisition of Time Warner by ATT in the US has supported the idea of global telecommunication firms increasing revenue by diversifying into media and entertainment.
Second, TLS will be hosting its highly anticipated investor day next Wednesday, June 20th.
We suggest accumulating Medibank near the $2.85 support level.
Medibank is a current holding in the ASX 50 model portfolio from may 30th at $2.73.
Following the correction from the January high of $3.30, the stock now trades on a forward yield of 4.5%.
We expect a rally from the current $2.85 level back towards $3.00. We will then add a covered call option, which will help further enhance the annualised cash flow.
Medibank Private
Shares of Clydesdale and Yorkshire bank continue to firm as the market assesses the takeover of Virgin Money as a net positive for the UK-based lender.
Under the terms of the current proposal, CYB will acquire 100% of Virgin Money by issuing 1.21 new shares in exchange for each share in Virgin.
The takeover board has extended the deadline for CYB’s decision to June 18th for Virgin’s 6 million personal and business customers.
Will believe that CYB will move forward with the takeover. As such, the cost synergies via the rationalization of operations and the reduction in IT spending will add value and lift the share price.
Our ALGO engine triggered a buy signal at $4.40 back in July of last year. We suggest buying CYB at current levels with an initial upside target of $6.00 and solid support at $5.15.
CYB
We suggest accumulating IPL shares at current levels following the recent Algo Engine buy signal at $3.30.
The stock is a current holding within the ASX 50 model portfolio.
This week IPL announced the mitigation to a recent a contract loss, through a new contract with Fortescue.
IPL stated that the FMG contract would mitigate ~50% of the financial impact associated with previously announced contract losses in Western Australia.
We forecast FY19 EPS growth of 10%, placing the stock on a forward yield of 4.3%.
IPL
Shares of RHC are down about 20% year to date.
Changes in government funding and regulations have been a headwind for the private health sector, in general, and on RHC, specifically.
However, recent industry research is estimating RHC EPS growth to reach 8% for FY 18 and then rise to 10% for FY 19.
At $58.20, the stock is trading at 18.7 X 12 month forward EPS.
We see scope for the share price to reach $74.50 over a 12-month time horizon.
Ramsay Health Care
Shares of Cimic are down over 2% to $40.85 in early trade as the company goes ex-dividend today.
This drop is a few cents deeper than than the 75 cent dividend that will be paid to shareholders on July 4th.
CIM was added to our ASX Top 100 portfolio in June of 2016 at $35.00.
CIM has been a steady performer in client portfolios over the last two years and we will look to add to long positions on a pull back into the $40.20 area.
Cimic
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453