Transurban + 12% cash flow

Posted on | by Leon Hinde | Leave a Comment on Transurban + 12% cash flow

Transurban has recently entered into a number of significant transactions, including the $4billion Westgate Tunnel Project, which will help underpin earnings growth of 10% over the next 3 years.

The EBIT growth will flow through to DPS growth of 10% and we see the FY18 DPS of $0.56 increasing to $0.70 in FY21, placing the stock on an attractive forward yield of 6%.

We recommend investors enhance the yield further, by selling a covered call option. A combination of the dividend and the option premium is generating 12% annualised cash flow.

 

 

 

OSH Nears Resistance at $7.90

Posted on | by Todd | Leave a Comment on OSH Nears Resistance at $7.90

The price of West Texas Intermediate Crude Oil (WTI) posted its largest weekly advance in over four years.

The 9% gain for the week in WTI also lifted the local oil names, including OSH, STO and WPL

Our ALGO engine triggered a buy signal in OSH on February 13th at $7.10.

At the time, our initial upside target was at $7.70.

With today’s high posting of $7.75, We can see the logic in taking profits in OSH and rotating into WPL.

Taking into account the sharp selloff after announcing a capital raising on February 2nd, we consider WPL a better long-term value in the oil sector.

Oil Search

Woodside Petroleum

Orgin Energy Is Approaching Full-Value

Posted on | by Todd | Leave a Comment on Orgin Energy Is Approaching Full-Value

Shares of ORG have a stable outlook, but are approaching an overbought condition relative to its fundamentals.

A mild Summer combined with reduced weather related events has seen a drop in demand which could act as a headwind to significantly higher share prices.

Our ALGO engine triggered a buy signal for ORG on February 13th at $8.30. Since then, the share price has run into resistance twice at $9.40.

We suggest that investors can look to sell the $9.50 calls to increase cash-flow enhance overall portfolio returns.

Origin Energy

 

Algo Update – CIMIC Group

Posted on | by Leon Hinde | Leave a Comment on Algo Update – CIMIC Group

Our Algo Engine triggered a recent buy signal in CIMIC Group and the price action is now finding renewed buying support near $44.

We’re comfortable with CIMIC’s s strong balance sheet, with $910 million of net cash on the balance sheet after the company added more than $500 millon in FY17.

CIMIC’s first-quarter FY18 result is due tomorrow and revenue growth is expected to be up  5 – 8% at $3.2 billion+ and profit growth up 10%.

CIMIC trades on a 3.8% forward yield into FY19

 

US Yield Curve Continues To Flatten

Posted on | by Todd | Leave a Comment on US Yield Curve Continues To Flatten

Even though the US Stock market has stabilized over the last week, the US Treasury curve continues to flatten.

As illustrated in the chart below, the difference  between the US two and 10-yr bonds has now dropped to 46 basis points (2.36% vs 2.82%).

This is the first time since 2007 that this spread has narrowed below 50 basis points, and, in the past, has been a level which has foreshadowed recessionary pressure.

It’s our base case that the bulk of the curve flattening has been a result the two-yr yields rising quickly and the longer dated yields trading sideways to lower.

In this respect, we would expect some of the local yield names to find some buying support this week.

Some of the stocks we prefer include; TCL, SYD, WFD, AMC and GPT.

For more information about how to trade the US yield curve, call our offices on 1-300-614 002

2-yr versus 10-yr yield spread

Transurban

Sydney Airport

Westfields

 

 

 

S&P/ASX 200 Index & US Earnings

Posted on | by Leon Hinde | Leave a Comment on S&P/ASX 200 Index & US Earnings

The S&P/ASX 200 Index finished the week up 0.7%. The best performer was the Materials sector, up 3.8% and worst performer was the Property Trusts sector, down 1.3%. 

As the release of US quarterly earnings gets underway, the market is assessing if the expected 17% average EPS growth rate is being met. The bar is even higher for US banks, where the market is looking for earnings to increase 28% on the same time last year.

If you take out the capital markets business and the one-time events, JP Morgan, Wells Fargo and Citigroup have fallen short of expectations. Rising interest rates, market volatility and tax cuts have not produced stronger results and the banking sector sold-off overnight in new York trade.

Bank of America and Netflix will be key results during Monday’s session.

 

XJO

 

JP Morgan

 

 

 

 

FMG Is Good Value At Current Levels

Posted on | by Todd | Leave a Comment on FMG Is Good Value At Current Levels

Shares of FMG posted their first close above $4.50 since March 27th.

This time last year the share price was close to $6.50, which is about a 30% drop over the last 12 months

We forecast earnings of about 50 cents per share in 2018, a decrease of 34% on the previous 12 months. This puts the current share price at a P/E ratio of 7.6 based on 2018 earnings.

The company currently has a market cap of just over $13 billion and $5.5 billion in debt. The forecast for 2018  EBITDA  is around $6 billion, depending on stable Iron Ore prices.

These are just a sample of the key metrics which suggest FMG shares are undervalued and will offer investors good upside price performance over the medium-term.

Fortescue Metals Group