BHP – Capital Management
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.
Perpetual & Iress “Short Watchlist”
Downer – Sell Off is Overdone
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
CIMIC Group – Exit Cost From the Middle East
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 – Algo Buy Signal
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 – Earnings Downgrade
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 – Buy the Dips
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
NEC – Short Opportunity
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.
Coca-Cola Income Trade Generates 10%
Coca-Cola Amatil is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.
We see value in buying CCL and selling $12.00 June call options to enhance the cash flow return. CCL goes ex-div $0.26 on the 26th of February.
For more detail on the buy-write, please call our office on 1300 614 002.
American Express – Buy
American Express is under Algo Engine buy conditions and is on our “high conviction” buy list.
Since posting the above trade on the 7th of Dec, Amex has rallied to $133 or +10%.
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