SYD Nears Resistance At $7.30

Posted on | by Todd | Leave a Comment on SYD Nears Resistance At $7.30

Shares of Sydney Airports (SYD) are still well bid over $7.00 after the company announced 1H17 results, which included EBITDA of $577 million , cash flow of $383 million and an upgraded dividend guidance from 33.5 cents to 34.5 cents for calendar  year 2017.

This strength  in cash flow and increased dividend puts SYD on a dividend yield of 4.9%.

We expect strong price resistance in the $7.30 area and consider the stock expensive in the $7.30/50 area.

Considering the extended market conditions, in general, we prefer a at-the-money  buy/write strategy for SYD to enhance portfolio returns on a stock with modest upside potential.

 Sydney Airports

 

 

Amcor – FY17 Earnings Update

Posted on | by Leon Hinde | Leave a Comment on Amcor – FY17 Earnings Update

AMC has delivered  FY17 operating earnings of $1.09 billion, up 3% on FY16. The Board declared a final dividend of $0.235.

Underlying net profit for the 12 months to June, came in at $700 million or 4.5% higher on the same time last year.

At 19x forward earnings, AMC is expensive.

However, earnings are defensive and the company should still achieve average EPS growth of 8% into FY18, (net profit in the range of $750 – $770 million), placing the stock of a forward yield of 3.7%.

We expect AMC to trade within a range of $15.00 to $16.50.

Amcor

 

 

OSH Finds Support After 1H Earnings

Posted on | by Todd | Leave a Comment on OSH Finds Support After 1H Earnings

Shares of Oil Search got as lift yesterday as the company announced 1H17 results, which included an underlying NPAT of USD129 million and a higher-than-expected dividend of USD 4 cents per share.

Total profit increased to AUD7.30 per share. OSH management also tightened guidance towards the higher end of production, and the lower end of costs and capital expenditure for the calendar year 2017.

The company expects the PNG LPG yearly production rates over 8.6 metric tons per annum, which is the top end of the last year’s guidance.

OSH shares have lost over 15% since trading at $7.50 in mid-April.

We see scope for a medium-term lift from the $6.30 support area, but would consider the company a buy/write opportunity at current levels.

 Oil Search

 

 

Global Equity Markets – Average Earnings Per Share

Posted on | by Leon Hinde | Leave a Comment on Global Equity Markets – Average Earnings Per Share

Global equity market price-to-earnings ratio are now trading at a 15 year high and average earnings per share sit at prior peak levels.

The World Bank forecasts that global growth will strengthen to 2.7 % in 2017 amid a pickup in manufacturing and trade, rising confidence, favorable global financing conditions, and stabilizing commodity prices.

Growth in advanced economies is expected to accelerate to 1.9 % in 2017, a benefit to their trading partners. Growth in emerging market and developing economies will recover to 4.1 % this year, as obstacles to activity diminish in commodity-exporting countries.

Source: Charles Schwab, Factset Data as of 8/17/2017

Looking at the graph below, investors can see the difficulty the global economy has had in maintaining GDP growth.

We consider this an interesting contradiction to record PE valuations and EPS growth. For the most part, this is best explained through understanding the impact of share buy-back programs, helping to deliver financially engineered EPS growth.  

Global GDP

BHP Rebounds From Last Year’s Losses

Posted on | by Todd | Leave a Comment on BHP Rebounds From Last Year’s Losses

Shares of BHP are up over 1% in early trade as the mining giant announced a USD 6.73 billion full year profit and declared a final dividend of 43 cents per share, which lifts the full-year dividend to 83 cents per share.

Higher prices for both Iron ore and Coking Coal helped contribute to the improved performance over the course of the year.

The company also announced that it wants to sell off its US Shale oil assets, as they have not performed to plan.

In our blog update from July 26th, we suggested that investors could sell European-style call options at the $26.00 strike price into November.

We still see limited upside to BHP above $26.50 and repeat that suggestion to enhance portfolio returns for investors holding BHP shares.

BHP

 

Fortescue Shares Higher On Positive Earnings

Posted on | by Todd | Leave a Comment on Fortescue Shares Higher On Positive Earnings

Shares of Fortescue Metals Group opened firmer as the Iron Ore miner more than doubled its net profit to AUD 2.7 billion and pledged to pay shareholders a bigger dividend going forward.

FMG will pay a final, fully franked dividend of 25 cents per share, which pencils out to 52% of the company’s net profit after tax. The full year dividend was announced at 45 cents per share.

Looking into next year, FMG announced it would increase its dividend guidance to a range of 50 to 80% of net profit after tax.

We feel that the share price will run into resistance around the $6.10 level and aren’t buyers at these levels.

While Iron Ore has had a respectable price rebound off the $54.00 low posted in June, we don’t expect a protracted move higher back into the $80/82.00 range, which will temper the profit outlook for FMG.

Fortescue Metals Group

 

Algo Update – WOW & ORG

Posted on | by Leon Hinde | Leave a Comment on Algo Update – WOW & ORG

As the Algo Engine identified the “higher low” price pattern in both Woolworths and Origin Energy, we’ve regularly highlighted these as preferred buying opportunities.

We’ve remained buyers of ORG and WOW throughout the past 12 months but now feel that we’re approaching a level where we see full value.

Resistance in ORG will likely be found at or near  $8.00 and WOW is likely to experience selling based on valuation grounds at or near $27.50.

Chart – WOW
Chart – ORG

 

 

 

 

 

 

Gold Tops $1300 Intra-day

Posted on | by Todd | Leave a Comment on Gold Tops $1300 Intra-day

Gold prices touched their highest intra-day level of the year on Friday, temporarily topping $1,300 an ounce before pulling back to settle unchanged on the day.

Gold had traded up to $1,303 for the first time in 2017, getting a lift from safe-haven demand on the back of weakness in global equities, a terrorist attack in Barcelona and concerns about President Trump’s pro-business political agenda.

Despite the late pull back into the weekend, the technical picture in Gold looks constructive. On a “measured move” basis, the break above $1300 points to the November highs near $1340.00 as the next area of resistance.

We still prefer the long side of NCM, along with smaller-cap miners EVN, SAR and NST.

Our medium-term price target for NCM is $23.10 and $2.80 for EVN.

Spot Gold

Newcrest Mining

Evolution Mining