Wesfarmers (WES.ASX) reported NPAT of $2.25b and announced a final dividend of $0.95. Coles delivered total sales growth of 3.5%, whilst Bunnings was again the standout with 10%+ in underlying growth year on year.
FY17 forecast dividends of $2.10, places the stock on a forward yield of 5%.
We own WES in the model from lower price levels and we’ve sold covered calls into December to enhance the return.
Qantas (QA.ASX) released its FY16 earnings and underlying profit before tax came in at $1.5b up 50%+ on the same time last year. Revenue of $16b was up 2%.
QAN announced a $500m capital return and $0.07 per share in fully franked dividends.
We’re on the short side of this trade from the $3.45 level, looking for a pullback to $3.10.
Westfield (WFD.ASX) reported 1H16 earnings of $715m at the EBIT line and FFO of $342m or $0.165 cents per share. FY16 guidance remains around $0.34 cps
WFD trades on a high multiple and a forward yield into FY17 of 3.4%. For this reason, we see the stock fully valued but attractive due to it’s high quality asset base and $7b+ development pipeline.
Add a Dec covered call to enhance the yield.
Caltex (CTX.ASX) delivered 1H16 NAPT of $252m which is in line with market expectations. FY17 growth is likely to be around 8%, placing the stock on a forward yield of 3.7%, assuming $1.25 in dividends.
FY17 revenue forecast of $16b on EBIT of approximately $900m.
We like CTX as a value and yield story. The stock could trade to $36.50 over the next 12 months.
SCG reported 1H16 NPAT of $1.15b on $0.116 cps up 2%+ on the same time last year. FY17 forecast growth of 3% or $0.23 cps places the stock on a forward yield into FY17 of 4.4% on a 90% payout ratio.
Potential for added growth from the development pipeline into FY17 and FY18 along with low interest rates underpin SCG. The stock is close to full value and a sideways consolidation is the most likely price action. Buy at $5.00 and sell at $5.45
Seek (SEK.ASX) reported FY16 NPAT of $198m in line with guidance. The company maintained FY17 guidance of NPAT in the range of $215 – $220m.
Weakness in the education segment was off set by strength in the Asian employment business. FY17 revenue should increase 10% to $1b on EBITDA of $415m, EPS of $0.64 representing 15 – 20% underlying growth. This places the stock on a forward yield of 2.4%, assuming $0.40 in dividends for FY17.
Seek trades on 25x FY17 multiple and therefore we think the stock trades in a range of $16.00 support to $17.50 resistance for the next 12 months or more.
LLC delivered FY16 NPAT earnings increase up 13% to $700m. The share price has underperformed in the early stages of 2016 reflecting fears of significant apartment defaults which could derail an otherwise strong cash flow profile. The announced FY16 earnings result puts some of these fears at ease and on 11x forward earnings and FY17 EPS growth of 6 – 8%, we see okay value on a relative basis.
FY17 revenue forecast of $15b, EBIT of 1.1b and DPS $0.66, placing the stock on a forward yield of almost 5%.
We own LLC and have left the stock uncovered coming into the earnings result. Our view, (as expressed in the monthly strategy recording), on LLC was the market had become too negative and we are now seeing the re-rating of the stock back to our initial target price of $14.50. With the stock now back at fair value, we’ll look to set the covered call position into the December period.
After our buy signal on TWE.ASX at $9.20 we’ve started locking in the gains (PE now 27x). The stock rallied 15% during the last week following better than expected earnings result.
FY17 and FY18 should see EPS growth in the mid teens. Fy17 EPS forecast $0.37 and 2.5% yield on revenue of $2.6b and EBITDA of $550m
WPL.ASX 1H16 underlying profit of $340m was down 50% on 1H15. IH16 EPS $0.41 and DPS (down 50%) to $0.34
Fy17 outlook is for full year EPS of $1.30 and DPS of $0.90 placing the stock on a forward yield of 4.5%.
The stock appears to be in the early stage of a break higher and for the time being, we leave this name uncapped from a call option perspective.
MPL.ASX NPAT $418m on EPS of $0.154 and final dividend of $0.065
FY17 outlook is for more of the same, growth will be difficult to achieve and revenue will remain flat, whilst net insurance margins will likely decline or remain flat at best. FY17 EPS $0.15 and DPS $0.12
Buy on a pullback into the $2.60 $2.75 range. Our algorithm engines will track for the entry alert.
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