IPL -1H Earnings

Posted on | by Leon Hinde | Leave a Comment on IPL -1H Earnings

IPL reported 1H earnings of $152m, slightly ahead of market expectations.

IPL’s outlook was the most positive it has been in years. Although, global fertiliser prices have started to soften, with seasonal demand peak in April/May.  US ammonia prices to are forecast to trade within the US$300/t to US$330/t. A weaker AUD offers a some upside to IPL’s earnings.

FY18 forecast revenue $4b, EBIT $640m, EPS $0.25, DPS $0.15, placing the stock on a forward yield of 3.7%.

Underlying earnings growth now tracking in the 10 – 20% range.

Chart – IPL

 

CBA Under Pressure

Posted on | by Todd | Leave a Comment on CBA Under Pressure

CBA, Australia’s largest bank, posted an un-audited Q3 profit of $2.4 billion for the three months ending march 31st.

This is up 4.3% from last year’s number of $2.3 billion. The level of bad debts rose to $6.7 billion compared to $6.3 billion a year ago. CBA shares opened over 2% lower at $83.30.

The ALGO engine gave buy signals on the 5 major banks during the last several months. Over the last several weeks, we have been suggesting that based on future growth prospects, the banking names were fully valued.

We will watch for ALGO buy signals over the near-term as the banking sector sell of extends lower.

James Hardie – FY17 Earnings Review

Posted on | by Leon Hinde | Leave a Comment on James Hardie – FY17 Earnings Review

We forecast JHX FY17 NPAT of US$250m vs Management’s guidance of US$245-255.

On FY17 numbers JHX is looking expensive. FY17 EPS of $0.56 places the stock on a PE of 29x and a 2.4% yield.

Based on the current share price valuation, the market is looking for a 30% lift in underlying earnings into FY18, to support an EPS target of $0.72 and a reduction in the forward PE to 22x.

The above assumptions seem overly optimistic.

Chart – JHX

CSL – Outlook

Posted on | by Leon Hinde | Leave a Comment on CSL – Outlook

CSL’s FY17 NPAT guidance implies US$1.38b net profit after tax.

The company has purchased 1.4m shares during 2HFY17, of the $500 million share buy-back program.

With the stock price now trading 28x FY18 earnings, much of the good news is priced in.  FY18 revenue $7.2b, EBIT $2.2b, forecast net profit up 20% to $1.7b, EPS US$3.60, DPS US$1.75 places the stock on a forward yield of 1.8%.

We remain attracted CSL and look for the next Algo Engine buy signal to provide a discounted entry point.

Chart – CSL

 

 

 

 

Westpac – 1H17

Posted on | by Leon Hinde | Leave a Comment on Westpac – 1H17

WBC has announced 1H17 cash earnings of $4b  which is slightly below market consensus. The 2H16 dividend remains steady at $0.94

Revenue was weaker than expected yet in line with recent trends in the other banking names.

NIM fell to 2.07% with 4bpts decline due to higher deposit costs.

FY18 forecast net profit $8.2b, EPS $2.40, DPS $1.88 placing the stock on a forward yield of 5.6%

Chart – WBC

 

 

 

China’s Credit System

Posted on | by Leon Hinde | Leave a Comment on China’s Credit System

China’s credit system has expanded quickly and there are some concerning signs beginning to emerge. In particular,  ballooning assets in Chinese wealth management products could create another credit crisis.

As soon as we see investors opting to not rollover existing investments due to rising  risks and defaults, the lack of liquidity will expose under performing  investments. 

Wealth management products, or WMPs, have swelled to $4 trillion in assets in the last few years against a $34 trillion banking system. This well exceeds the mismatch at the peak of the US subprime collapse.

China Bonds vs Stocks
Chart – Yuan Short Term Rates

 

Macquarie Group – FY17 Earnings

Posted on | by Leon Hinde | Leave a Comment on Macquarie Group – FY17 Earnings

FY17 revenues were broadly flat on last year at $10.6b. Operating costs were down slightly which helped to produce an approximate 7% uplift in net profit to $2.2b.

FY17 EPS $6.58 and a very solid final dividend of $2.80 takes the payout ratio to 72% and now places the  stock on a 5.5% yield into FY18.

With the stock is up 50%  during the last 12 months and now trading on 15x forward earnings, further upside is likely to be limited. Flat revenue will continue to place pressure on management to drive down operating costs.

FY18 forecast revenue $10.5b. net earnings $2.2b, EPS $6.50 & DPS $4.90.

Chart – MQG

 

 

BHP – Where is the 50% Retracement

Posted on | by Leon Hinde | Leave a Comment on BHP – Where is the 50% Retracement

At $21.00,  BHP will be trading at the 50% retracement level of the 2016 rally.

Often, we’d expect this level to provide buying support. The Algo Engine is now flagging the higher low structure and therefore, within the $21.00 – $22.50 range, we look to identify the short-term momentum indicators turning positive, to confirm our entry point.

Chart – BHP