CIMIC has reported a solid interim earnings result. The company delivered a 22% increase in NPAT to $323m.
We expect 10 – 15% EPS growth into FY18, placing the stock on a forward yield of 3.7%
Our Algo Engine triggered a recent buy signal in CIMIC at or near $37.50.
Over the last 10 trading sessions, yields in the benchmark 10-yr and 30-yr US bonds have dropped over 5% to 2.26% and 2.82, respectfully.
The quick reversal in yield expectations has had several “knock-on” effects across various markets.
The lower US yields will have a dampening effect on US banks, which has been illustrated by the weaker forward guidance from Goldman Sachs and JP Morgan.
More locally, the weaker US yields has triggered a sharp rally in the AUD/USD up to a 2-year high of .7940 in early trade.
We have written about how a back up in US rates would benefit local yield sensitive names like GPT and negatively impact multinationals like CPU.
US 30-yr Yield
Crown Resorts is likely to announce further capital management initiatives at the FY17 result on 4th of August.
Crown recently sold its remaining stake in MLCO, realizing net proceeds of A$1.3b. Our view is that these proceeds will be used to either reduce debt, or embark on the next stage of its capital management program.
Our Algo Engine triggered a recent buy signal at or near $12.00
Our ALGO engine triggered a sell signal in CBA on June 29th at $84.10. The share price hit a low of $81.30 yesterday.
Before the market opened this morning, APRA announced new “capital adequacy” targets with the goal of making the domestic banks safer.
The regulator will now require a 150 basis point increase to 10.5% in the minimum safety reserves that must be held by the five major banks.
Shares of the “Big 5” have all opened sharply higher in early trade. However, we believe that the local banking sector faces other market headwinds going forward and that lower share prices are likely over the medium-term.
CBA
The Australian-listed Star yesterday informed its investors that Ellerston Capital (25% owned by James Packer) now has a 5.07% stake.
Institutional investor, Perpetual, which is already Star’s biggest shareholder, also increased their holding when Malaysian casino giant Genting sold down its stake.
Star & Tabcorp have “lower high” formations, where as Crown is displaying a bullish, “higher low” formation.
Amcor is trading on a high multiple of 19x forward earnings and a 3.8% dividend yield. However, the earnings are relatively defensive and we’re expecting 8% underlying EPS growth.
The stock should find support at or near $16 and is an appropriate consideration as a buy-write for client portfolios.
We’ve been highlighting the buying opportunities in WOW, ORG, IPL, GPT, TCL & SYD over the last few weeks.
We continue to like these names and see supportive technical and fundamental factors, which we believe will create investor value.
Our Algo Engine recently triggered a buy signal in a number of ASX listed REIT’s as well as the SPDR Property Fund ETF.
Looking at the buying interest in US REITs across the last few trading sessions, we anticipate similar support for the sector on our local market.
The AUD/USD traded higher everyday last week as the currency traded to a 15-month high versus the USD at .7833.
General weakness in the USD combined with stronger Chinese import data gave the AUD/USD the momentum to break above the .7825 level last traded in April last year.
It’s worth noting that over the last 15 months, the AUD/USD has traded over .7750 four times. On each of these occasions, within a month, the AUD/USD had dropped by 4%, or more.
More precisely, after trading up to .7825 on April 21st, 2016, the AUD/USD lost over 8.5% to trade at .7150 on May 24th.
With both the RBA minutes and the monthly employment data set for release this week, we could hear some comments from the RBA regarding the impact of a higher currency on Aussie exports and the economy.
Investors looking to profit from a lower AUD/USD can look to buy the BetaShare ETF with the symbol: YANK.
YANK is an inverse ETF, which means the unit price increases as thew AUD/USD trades lower.
YANK has a 2.5% weighting, which means a 1% move in the AUD/USD translates to a 2.5% move in the unit price. The unit price is currently $13.50, we calculate that when the AUD/USD falls back to .7300, the unit price of YANK will be over $16.00.
BetaShare ETF: YANK
AUD/USD Spot price.
Our Algo Engine is flagging the “higher low” formation in OGC and it appears the stock is now trading in an oversold range.
Watch the short-term momentum indicators for a positive reversal and then apply a stop-loss below the final pivot point.
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