Construction Arm Boosts Lendlease

Posted on | by Todd | Leave a Comment on Construction Arm Boosts Lendlease

Shares of property group Lendlease popped to an 18-month high of $15.84 in early trade as the company announced a sharp increase in after tax profit.

For the six months ending December 31st, Lendlease posted a 12% rise in net profit to $394.8 million.

The stronger result was largely based on the 40% increase in earnings for their construction division, with their investment and development divisions posting pretty much unchanged results from last year.

The company announced an interim dividend of 33 cents per share (fully franked), which was slightly higher than the street’s expectation of 30 cents per share.

The company’s return on equity for the last six months reached 13.7%, which is at the upper end of their 10 to 14% target guidance.

Woolworths – Buy on the Dip

Posted on | by Leon Hinde | Leave a Comment on Woolworths – Buy on the Dip

Woolworths  trading back to $25.50 looks like reasonable value. We’re buyers on a dip in the share price at or $25.50. We see scope for 5% underlying EPS growth and when complimented with a  covered call option, we’re generating  10%+ in annualized cash flow from the dividend and the call option income.

Chart – WOW

CCL is another name that we’ve been buying the stock at or near $10.00 and selling tight covered call options to generate 10 – 12% annualized cash flow .

Chart - CCL

 

Medibank Private – 10%+ Cash flow

Posted on | by Leon Hinde | Leave a Comment on Medibank Private – 10%+ Cash flow

We’ve been buying MPL and selling at-the-money covered call options to deliver an annualized cash flow of 10%+

There’s limited revenue growth, limited profit growth and a 4% dividend yield. However, we see the stock as a defensive income contributor to client portfolios.

In addition to the 10% cash flow from the dividend and option income, we’re allowing for a small capital gain over the next 4 months.

Chart – MPL

 

REIT’s & Yield Sensitive Stocks Offer Value

Posted on | by Leon Hinde | Leave a Comment on REIT’s & Yield Sensitive Stocks Offer Value

Domestic yield sensitive stocks are looking well supported as global yields in G7 economies retreat from recent highs.  The bond  market seems to be losing some of the optimism in the”reflation” trade.

Evidence of the retreat in yields can be seen in the US 10-YR treasuries where the yields are now trading down from 2.61% to 2.31%.

The impact of this is:  money is now flowing back to REIT’s, infrastructure, consumer staples and telecommunication stocks.

We’ve been promoting the selling of resources and buying of defensive yield names, for the past few weeks. We continue to see defensive yield names complimented with tight covered call options as the best way to deliver 10-12% cash flow whilst protecting capital.

Chart – SCG

Chart – GPT
Chart – TCL

QBE Announces A Share Buy Back Plan

Posted on | by Todd | Leave a Comment on QBE Announces A Share Buy Back Plan

Shares of QBE are up over 5.5% in early trade as the insurance giant reported a 5% jump in net profit, as well as, a $1 billion share buyback scheme.

In the year up to December 31st, the  company announced net profit after tax of $844 million, which is up from $807 million over the previous year. Return on equity also improved from 7.5% to 8.1%.

QBE declared it will pay a 33 cent dividend, compared to 30 cents last year.

QBE is fully valued and we recommend selling covered call options to enhance the investment return.

Chart – QBE

BHP & RIO

Posted on | by Leon Hinde | Leave a Comment on BHP & RIO

We’ve sold $27 call options over BHP into April and quit all other metals exposure.  Our preference for BHP over other resource names is based on our assumption that energy prices will remain  supported in the near term.

Three factors will likely support energy prices short term: The Trump administration’s policy will likely be bullish for energy, OPEC and Saudi  production cuts and the Saudi Aramco IPO early next year (biggest IPO in history). The IPO will be better received in a supportive energy environment.

For this reason we’ve kept BHP, and sold at the money call options to boost cash flow to 10 – 12%.

We’re not overweight the stock since we see risks building for the market, in general, and Iron Ore prices, specifically.

Chart – BHP

Chart – RIO

 

XJO – Chart Update

Posted on | by Leon Hinde | Leave a Comment on XJO – Chart Update

We’ve been cautious of the resource names rolling over from the recent highs and the potential negative impact on the overall XJO index. It appears that the broader Australian market may be in the early stages of a  price correction.

Also, the Australian banks appear fully valued given the low revenue and profit growth outlook across the next 12 to 18 months.

Chart – XJO