Woodside Petroleum is a current holding in our ASX 100 model portfolio.
We see a new entry opportunity approaching in WPL and investors should watch the short- term indicators for a turn higher.
WPL has greater yield support versus STO and OSH.
The S&P500 and Dow Jones indices are under sell conditions and we’ve now had a close below the first of the short-term momentum indicators in both indices.
The NASDAQ shows greater relative strength and remains under buy conditions, although we’re beginning to see deterioration in some of the market “favorites” such as Netflix, Tesla & Nvidia.
BHP Group is trading near fair value and investors should consider selling $42.18 Euro call options into Sept, to add to the cash flow returns.
The highlight of the June quarter production update was petroleum volumes outpacing estimates. Iron ore and copper were in line, while coal disappointed.
FY20 revenue is forecast to be $46bn and net profit $12bn, supporting a 5.5% yield.
The surging iron ore prices creates the potential for BHP to announce a special dividend when it reports its full year result next month.
Rio Tinto reported their June quarter production which was in line with market consensus.
If we assume a slight softening in Iron Ore prices next year, (back below US$100 per tonne), RIO will produce $45bn in FY20 revenue and generate EBITDA of $20bn. Underlying reported FY20 profit will be $10bn, which will sustain a 5.5% yield based on dividends per share of $4.50.
Within the resource space, we continue to prefer BHP over RIO and within the energy complex WPL and ORG.
We also like the look of Oz Minerals.
This week we have the resource companies providing production guidance. With OSH and RIO today, BHP Wednesday, S32 and WPL on Thursday.
Next Wednesday we have ILU, followed by FMG on Thursday.
We also have earnings season starting and of interest will be CIMIC 1H19 earnings tomorrow. RMD on Friday 26th July and RIO’s half year earnings on the 1st August.
By the first week of August we’re in full swing with earnings season and i’ll look to update opportunities on the blog, ahead of the earnings results.
Graph – XJO ASX 200
Cimic Group reports 1H19 earnings tomorrow and the market is looking for NPAT of $390m.
Full year NPAT should maintain within guidance at $790m to $830m.
The CIMIC share price has been trading at the lower end of the valuation band following allegations of creative accounting. CIMIC has pushed back against the claim and maintained that their accounts meet the required auditing standards.
We’ll wait to see what’s in tomorrow’s result, but we continue to like the industry thematic in which CIMIC operates. We expect CIMIC to report a strong net cash position of $1.4bn+.
Based on FY20 earnings we have CIMIC trading on a forward yield of 4%.
OZ Minerals is back on our radar following the recent price retracement back to $9.80.
OZL was originally added into the ASX 100 model portfolio back in May, when the stock was trading at $8.80.
We now look for a move from $9.50 back to $10.50
GrainCorp is a current holding in our ASX100 model portfolio.
We continue to follow the developments regarding the demerger or divestment of the MaltCo entity from the main Graincorp listed business. Either outcome is likely to unlock value for Graincorp shareholders.
GrainCorp’s proposed MaltCo would be the world’s fourth-largest independent maltster with assets in Australia, the United States, Canada and Britain. It made $170 million EBITDA in the 2018 financial year.
We see upside potential for the GNC share price supported by a share buy-back or capital return in early 2020.
Evolution Mining reported June quarter production in-line with market estimates and FY20 guidance remains flat at $725koz – $ 775koz.
The reversal in yesterday’s share price action can be attributed to flat production growth and higher operating expenses. FY20 all-in costs increase by 5% to A$890 – $915oz.
Production capex increases to support development at Cowal and Mt Calton.
We have EVN trading on 3% forward yield and continue to see opportunities for NST, EVN, OGC and GOR within the gold space.
Origin Energy is under Algo Engine sell conditions, however, we see value emerging from a fundamental analysis perspective. This should lead to a switch in the algo model from sell to buy in the near future.
The key positive is the strong cash generation from the APLNG project, which has led to the de-gearing of the company balance sheet. The next key driver will be the reinstatement of the dividend policy which will have the stock trading on a forward yield of 4.5%.
We expect the future dividend payments to steadily increase, which will help support the share price.
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