Amcor Slides Lower After Takeover Announcement

Posted on | by Todd

Shares of Amcor are down over 4.5% in early trade as the market digests the $7 billion (all script) takeover of US packaging peer, Bemis Company.

Logistically, the takeover bid maker sense since 85% of AMC’s revenue is from the US, Europe and the Middle East.

Along those same lines, a large proportion of AMC’s share registry is made up of international investors, which suggests the company will eventually de-list on the ASX to join the NYSE.

Monday’s announcement was not a surprise as the company has disclosed that they were in negotiations with Bemis for over a year.

Our ALGO engine has triggered several sell signals over the last week and we have been advising investors to either exit the stock or employ a buy/write strategy into October.

The next key technical support level will be found in the $13.90 to $14.00 area.

Amcor

SEEK – Waiting For Value

Posted on | by Leon Hinde

SEEK has yet again pushed out the timing of its earnings growth, committing to another huge uplift in operational and capex spending to grow market share in China, South East Asia and Australia.

The market has downgraded earnings forecasts to reflect the FY18 result and the guidance for FY19.  This now leaves FY20 and 21 as the growth opportunity with forecast EPS set to accelerate to 20%+ p/a.

With the stock now on 2% dividend yield and questions over short-term growth and large capital expenditure, we feel investors should be patient and wait for our next ALGO buy signal.

SEEK offers investors exposure to the global hiring cycle and increasing migration of employment advertising to the online market.

SEEK

Banks Brace For Round 5 Of The Royal Commission

Posted on | by Todd

The Big four banks will be in the spotlight this week as the Banking Royal Commission commences round five today in Sydney.

The main topic for this round of examination will be the fees, charges and weak performance of bank-managed superannuation funds.

One Melbourne-based think tank has estimated that excessive fees and poor performance can cost superannuation investors up to $12 billion per year.

Australia’s largest superannuation provider, AMP, felt the wrath of the Royal commission during the last round of testimony, which saw their share price drop over 30% and the sacking of its chairman, CEO and three other directors.

The chart below illustrates the performance of AMP’s share price relative to the other Big 4 banks.

We don’t have ALGO buy signals for any of the domestic banks and we’re not holding any banking names in our ASX Top 100 portfolio. However, we will look for signals as the share prices approach the June lows.

 

 

 

Buy Star Entertainment

Posted on | by Leon Hinde

Star Entertainment reports FY18 earnings on the 24th of August and consensus forecasts are expecting underlying NPAT of $255 million, up 15% on the same time last year.

The  1 to 3 year outlook for SGR supports ongoing EPS growth of 10% +, placing the stock on a forward FY19 dividend yield of 4.5%.

SGR is a current holding within our ASX 100 Model portfolio.

Star Entertainment Group

 

ALGO Buy Signal For RIO Tinto

Posted on | by Todd

Our ALGO engine triggered a buy signal for RIO Tinto into the ASX close yesterday at $76.50.

This “higher low” chart pattern is referenced to the intra-day low of $72.30 posted on April 9th.

Despite the announced expansion of their share buyback program, RIO’s share price slid more than 5% last week to hit a 3-month low of $76.15.

We calculate that the stock is currently on a 4.5% yield and will go ex-dividend for US $1.70 on Thursday the 9th of August.

From a technical perspective, we see solid support in the $73.25 area.

Rio Tinto

 

 

Crown Firms In Front Of Next Week’s Earnings Report

Posted on | by Todd

We followed an ALGO buy signal for CWN back in February at $12.60.

However, over the last few months, the stock has traded in a relatively narrow range between $13.80 and $13.25.

With the company reporting full year earnings next Thursday, we see the potential for the stock price to trade up through the top end of the range.

We expect CWN to beat the consensus NPAT forecast of $370 million as operations in both Victoria and Sydney could print higher numbers.

CWN goes ex-dividend for 30 cents on September 21st and we see the next upside target neat $14.25.

Crown Resorts

ALGO Update: Stay Long James Hardie

Posted on | by Todd

Our ALGO engine triggered a buy signal for JHX on July 31st at $21.50.

Since then the stock has picked up almost 6% and is over 1% higher at $22.75 in early trade today.

The company will release their Q1 FY19 results next Friday.

Expectations are that the EPS should rise to 67 cents per share on stronger earnings.

Our initial upside target is the May 16th high near $23.85.

James Hardie

CBA Continues To Slide In Front Of FY18 Earnings Report

Posted on | by Todd

Our ALGO engine triggered a sell signal for Commonwealth Bank on July 9th at $76.10.

Since then the stock has lost over 3% and reached $73.50 in early trade today.

CBA is scheduled to report its FY18 result next Wednesday.  The early forecast is for NPAT to print at $9.5 billion and DPS to be flat near $2.30.

There are three key reasons why we believe the earnings risk is skewed to the downside in this report.

The AUSTRAC settlement of $327 million, margin pressure from short-term funding costs and a disappointing 4% loan growth in June.

Technically, the CBA chart has followed a “lower high” pattern since since mid-January and has dropped over 10% during that time.

We continue to hold a bearish bias toward the banks, in general, and expect CBA to test the June low trade of $67.50 over the medium-term.

CBA

RIO – Sell A Call Option To Deliver 10% Cash Flow

Posted on | by Leon Hinde

RIO’s 1H 2018 earnings result was slightly below the consensus forecast with underlying EBITDA of US$9.2 billion.

If we assume flat earnings and dividend growth over the next 12 months, it places RIO on forward yield of 4.5%.

Returning cash to share holders through an increased share buy back program, (largely proceeds from asset sales), will help to underpin RIO’s current share price.

We recommend investors add a covered call option to enhance the income returns.

RIO goes ex-dividend US$1.70 on the 9th August.

Rio Tinto

 

Sell Signal In Bank Shares

Posted on | by Leon Hinde

All four major banks, and the regional names, are now displaying Algo Engine sell signals. Currently we have no bank long holdings within our model portfolio.

Within the financial sector our preference remains for ASX and IAG. Both offer a fully franked dividend yield, and when combined with a covered call, we’re generating 10 – 12% annualized cash flow.

Our concern about the low ROE for the domestic banks is driven by weak housing loan growth and the rising cost of funds. These conditions keep us cautious on the banks, especially when combined with the present group of ALGO sell signals.