Macquarie Group 1H16 Earnings

Posted on | by Leon Hinde | Leave a Comment on Macquarie Group 1H16 Earnings

Despite a 2% fall in earnings for the first half of 2016, Maquarie Group announced an interim dividend of $1.90 per share, up from $1.60 per share in the corresponding period last year and above market estimates for a $1.73 per share dividend.

The investment bank also reaffirmed its guidance for the full year, with expectations of matching the the record $2.06 billion profit it posted in fiscal 2016. For the six months to September 30, the bank recorded earnings of $1.05 billion, down 1.9% from the same period last year but materially better than the forecasts of a drop to $994.5 million.

Macquarie’s tier 1 capital ratio was seen at 10.4% versus 10.7% when it last reported in May, while assets under management rose 3% to $493.1 billion. The modest decline in earnings was driven by an 18% drop in net interest and trading income and a 21% slump in fee and commissions down to $2.2 billion.

As long as the group meets its own forward forecasts that FY 17 will be broadly in line with FY 16 results, the share price valuation will remain reasonable at 12.5X forward earnings for a 5.5% dividend yield.

With around 60% of its total expected income to be earned overseas in H1 17, the company could get a bit of a tailwind if the Australian Dollar continues to track lower versus the US Dollar over the next six months.

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Chart – Macquarie Group

NAB 2H16 Earnings Result

Posted on | by Leon Hinde | Leave a Comment on NAB 2H16 Earnings Result

Shares of the National Australia Bank (NAB) are pushing back toward the $28.00 level after announcing that its final dividend will be unchanged at 99 cents per share as full-year cash earnings  rose 4.2% to $6.48 billion.

Forward guidance suggests a drop in FY17 dividend to 85 cents as bad and doubtful debt charges rose 7.0% to $800 million, expenses rose 2.2% and net interest fell to 1.88%. Based on these figures, the FY17 growth forecast of -1% is the lowest in the sector, which is likely to limit further out performance to peer banks in the near-term.

The forward guidance equates to NAB trading on a P/E multiple of 12x , which is a 6% discount to peers, and a forward yield of 6.2%

Chart NAB
Chart NAB

US Earnings – Amazon Sell-Off

Posted on | by Leon Hinde | Leave a Comment on US Earnings – Amazon Sell-Off

Amazon shares are down over 5% after the company reported earnings below consensus expectations and sales numbers which were barely in line with forecasts.

The e-commerce giant announced it earned $252 million during Q3, or 52 cents per share, compared with 17 cents per share on revenue of $79 million in the third quarter of 2015. Net sales rose 29% to $32.7 billion, compared with $25.4 billion a year ago.

However, analysts had expected the company to report earnings of 77 cents per share on sales of $32.69 billion for Q3.

Comments from chart technicians suggest a key price support level of $810.00 followed by the September low of $765.00

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Chart – Amazon

Coca-Cola Valuation Analysis

Posted on | by Leon Hinde | Leave a Comment on Coca-Cola Valuation Analysis

CCL has it challenges as consumer trends continue to move away from large volume consumption of carbonated sugar drinks. CCL is responding through new product ranges and reducing the size of both cans and bottles.

$100m in cost savings along with automation and efficiency gains in the production facilities will help to offset any revenue weakness. Our base case for CCL on a 12 to 24 month outlook is for relatively flat revenue and EPS growth.

FY17 revenue $5.2b, EBIT $680m, EPS $0.55, DPS $0.45 places the stock on a forward yield of 4.8% and a PE ratio of 17x.

We’ve been active in selling covered calls over CCL as we’ve maintained full value is around $9.50.  Keep CCL on your radar as a pull back to $9.00 is worth considering as an entry point to buy the stock. We think CCL trades in a consolidation channel over the next 12 months. A combination of the dividend and option premium produces 10% annualised cash flow.

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Chart CCL.ASX

 

 

 

 

NAB to Report FY16 Result on Thursday

Posted on | by Leon Hinde | Leave a Comment on NAB to Report FY16 Result on Thursday

NAB is scheduled to report its FY16 result on Thursday and we’re expecting FY16 cash earnings of $6.4b. The final dividend will likely be around $0.98 fully franked & we continue to expect the dividend to be cut next year.

We are forecasting a 2H16 credit impairment charge of $500m which is an increase of $125m on the 1H16 number.

Based on a slight reduction in dividends the FY18 yield is 6.75%.

Selling covered calls at or near $28.50 into early next year, with a view towards collecting the upcoming dividend is our preferred strategy.

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Chart NAB.ASX

 

Lendlease Group – Higher Low Formation

Posted on | by Leon Hinde | 2 Comments on Lendlease Group – Higher Low Formation

Most property stocks have broken their long term uptrends and are displaying the early signs of a “rollover” type pattern. We’ll most likely see a bounce from the current oversold level, driven from an outcome on the December Fed rate hike. However, the probability of a bearish lower high in the next 3 to 6 months will mean the counter trend trade from the current lows will be short and explosive but the real opportunity to watch will be the short side trade in 2017.

The above picture applies to most property trusts and property development companies. The exception appears to be SGP and LLC. Out of the two names, my preference remains Lend lease.

FY17 should deliver EBITDA of $1.2b, EPS of $1.30 and DPS of $0.68 placing the stock on a forward yield of 4.9%

 

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LLC.ASX
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SGP.ASX

Santos Q3 Production

Posted on | by Leon Hinde | Leave a Comment on Santos Q3 Production

Santos Energy Group (STO) report a sharp rise in Q3 production and sales allowing the company to re-calibrate its forward guidance to the top end of the range.

For the three months ending September 30, Santos posted a 31% increase in sales volume to 21.3 million barrels of oil while forward production advanced 7% to 15.5 million barrels. Sales volumes are anticipated to hit 81-83 million barrels for the full year.

Overall LNG sales volumes more than doubled to 1.3 million tons as the ramp-up of the company’s cornerstone GLNG project in Queensland accounted for 755,000 tons and shipping 21 cargoes in Q3.

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STO.ASX

Global Macro

Posted on | by Leon Hinde | Leave a Comment on Global Macro

Investors who were looking for specific details about the future trajectory of monetary policy from yesterday’s European Central Bank (ECB) press conference would have been sorely disappointed. Granted there was very little consensus that there was going to be any new policy measures announced, but ECB chief Mario Draghi and his staff still managed to fall short of even the lowest expectations. This lack of substance is best illustrated by the fact that Mr Draghi’s prepared statement at the beginning of the press conference, which usually run for 15 to 20 minutes, lasted less than five minutes.

However, Mr Draghi said nothing to dampen expectations that the new staff forecasts in December would support the extension of the of the current asset purchase program past the current expiry date of March 2017. This assessment is based on two economic realities: First, there are no convincing signs of an upward trend in Euro zone inflation. Second, growth risks in Europe’s largest economies are skewed to the downside. European equity markets were happy with Mr Draghi’s dovish tone as both the French CAC and German DAX both posted fresh two-month highs at 4557 and 10,750 respectfully.

The Euro has responded accordingly with the EUR/USD dipping below the 1.0900 handle for the first time in over four months in today’s Asian session. Reading between the lines of the ECB statement, it’s likely that  December will be the time when the asset purchase program is extended by at least six months and the asset pool will be expanded. In contrast, recent comments from FED Governors Fischer and Dudley keep the prospects of further rate normalization in the USA very much on the table.

 

RIO 3Q Production Result

Posted on | by Leon Hinde | Leave a Comment on RIO 3Q Production Result

RIO’s 3Q16 production result was mixed. Copper production was weaker than expected & iron-ore shipments were broadly in line with market expectations. Thermal coal & coking coal delivered strong production numbers.

FY17 forecast revenue of $35b, EBIT of $5.5b, EPS $2.00 and DPS of $1.10, places the stock on a forward yield of almost 3%.

RIO.ASX

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