Star Entertainment & Crown Resorts
An improvement in Chinese gaming data & revenue should help to support Star Entertainment and Crown Resorts.
Crown is under Algo Engine buy conditions and we see value at $11.50.
Woolworths – Valuation Review
Woolworths Group is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.
The company is conducting a $1.7 billion off-market buyback which is 7 to 8% earnings accretive on an after-tax basis. Australian superannuation funds on a 15% tax rate are set to benefit from the off-market buyback.
Woolworths is trading on 23x FY20 earnings, which partly reflects the value of the off-market share buyback. If we assume the buyback is creating up to $2.00 of added value, fair value post the buyback, is sub $30.
Even at $29 – $30, it places WOW on 21x FY20 earnings and 3.1% dividend yield.
This places the stock at a very high valuation relative to the long-term average.
JB Hi-Fi Short Sellers Retreat
JB Hi-Fi is under Algo Engine buy conditions and was added to the ASX 100 model in late 2017.
JBH was one of the top performers in March, rallying over 15%. Part of this strength can be attributed to short sellers buying back, or closing out their positions. This is reflected in the fall in data on “open shorts” in JBH.
Flight Centre – Support Developing
Flight Centre Travel Group is under Algo Engine buy conditions and is a current holding in the ASX 100 model portfolio.
After going ex-div on the 21st March for $0.60 and paying a special div of $1.49, FLT now looks to be finding buying support at $40.00.
Woodside – Higher Low
Woodside Petroleum is a current holding in our ASX 100 model portfolio.
Recent production guidance suggests 2019 will likely deliver relatively flat production growth. WPL trades with an implied oil price of around US$55.
Upside in the share price still exists and we suggest adding a covered call option to enhance the income return.
A2 Milk – Valuation Review
The A2 Milk Company is under Algo Engine sell conditions and resistance is likely to build around the $13.50 level.
A quick look at the fundamentals puts into perspective the lofty expectations that are currently priced into the stock. 2018 EBIT was $280mn and no dividend was paid out. By 2020 the EBIT needs to double to $560mn to support the forecast 2.3% yield.
We’re skeptical of these consensus growth targets.
BBOZ – Volume Builds
Betashares Australian Equities was recently added to the ETF model portfolio. It’s an inverse ETF, meaning it goes up in value when the market goes down. The ETF has x2 multiplier.
The chart below shows the build up in activity, (reflected in the high volume traded), over the last few weeks.
Computershare – Stay on the Short Side
Computershare is under Algo Engine sell conditions and we recommend staying on the short side of this trade.
XJO – Sell Conditions
The S&P/ASX 200 is under Algo Engine sell conditions and the short-term technical indicators now also align. As a reference point, we suggest applying a 10 day moving average and monitoring the market closely, relative to it being above or below the average.
Below the average is a sign of continued weakness.
Coles – Take Profit
Earlier this month we recommended buying Coles Group at $11.25. With the stock now trading $12.00 + we consider this an opportunity to lock-in profit.
Coles offers limited earnings growth and the rally in the stock price has been supported by lower global interest rates, rather than company specific news.
Alternatively, investors who wish to hold the stock, may consider selling at the money call options to enhance the income return.
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