On 9th December last year we warned…
TWE is under Algo Engine sell conditions and we highlight the recent softness in US sales data as a concern. Downside target $15.50 – $16.50
Since then the stock price has plunged to $12.30 and we now expect further weakness before consolidating within the $11 – $12 price range.
Growth expectations for the FY20 ASX200 earnings have eroded from around 6% to only 2%.
Ex-resources, the PE valuation for the ASX200 now stands at 19.5x versus the 10-year average of 14.5%.
Low bond yields and modest levels of global growth continue to support defensive names. Capital management remains an important factor in underpinning stocks, as share buybacks help to drive average EPS growth.
Our current ASX top 20 holdings include:-
BHP Group is under Algo Engine buy conditions following a switch in May 2019.
Strong cash flow should allow BHP to lift its dividend payout ratio or consider a new off-market buyback.
BHP goes ex-div $0.80 on the 7th March.
Downer cut its FY20 profit guidance by $60mn to $300mn, representing an 18% cut.
The profit warning in Engineering & Construction, (ECM and Mining businesses), are likely short-term and we see value in the stock at $6.50
ASX:CIM will take a one-off impact of ~$1.8b in FY19 from the impairment of the entire BICC division. This represents all of CIM’s exposure in relation to BICC, including shareholder loans and financial guarantees.
FY19 underlying NPAT is expected to be $800m, excluding the impact from the BICC writedown. The company will suspend its next dividend payment which saves around $270mn.
CIMIC’s middle east exposure has been a negative overhang for the past 10 years and we see this step as an important de-risking outcome for investors. Going forward, CIMIC will focus on Australia, New Zealand, and Asian business opportunities. We remain bullish on the macro trends supporting the infrastructure sector.
Qantas Airways is under Algo Engine buy conditions and is now a current holding in our ASX 100 model.
The switch from sell to buy conditions means the stock has automatically been added, however, traders may wish to watch the shorter-term indicators for confirmation of the change in trend.
The below graph highlights the key trend signals to watch and we forecast buying support to build near the $6.50 level.
NIB Holdings has downgraded FY20 earnings by $30m, owing to claims inflation across the business.
Based on the updated FY20 earnings outlook we now have NHF trading on a forward yield of 3%.
Lendlease is under Algo Engine buy conditions.
We remain bullish on the urban redevelopment business model and are further encouraged by the announcement LLC has entered into an agreement with Acciona to sell its engineering business for $180 million.
Buy $17.80
Nine Entertainment Co. Holdings is under Algo Engine sell conditions. We see an opportunity to lean on the short side of this position coming into the February earnings result.
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