The S&P/ASX 200 Index finished the week down 0.5%.
The best performer was the Telecoms sector, up 1.4% and the worst performer was the Consumer Discretionary sector, down 3.2%.
The XJO remains in a “lower high” pattern, with 5836 acting as resistance.
Telstra will announce its earnings report this Thursday, August 17th.
The Telco giant is expected to maintain its 15.5 cents per share dividend, which will take its FY 2017 total dividend to 31 cents per share.
At the current share price of $4.15, this pencils out to a dividend yield of 7.4%, which is respectable in the current market environment.
Some analysts expect TLS to cut their dividend guidance into 2018 as the government cuts the NBN related payments, and may rule unfavorably on the unsettled bandwidth sharing plan.
However, considering the share price has dropped over $1.00 since the beginning of the year, and the recent price action has shown good support at $4.00, we consider the risk asymmetrical to the topside over the medium term.
As such, we view TLS as a good dividend play with a medium-term target of $4.80.
Telstra
The S&P 500 dropped 1.45% last night, with the other major indices down over 1%, as investors sold shares amid an escalation of the war of words between the USA and North Korea.
Technology and Financials were the worst hit posting their worst day in three months. Goldman Sachs fell 2.4% as part of a weaker banking sector.
We can recap the the overall market performance as follows:
Nasdaq, Dow, S&P, Small Caps had their worst day in 3 months (to one month lows)
High-Yield Bonds worst 3-day move in 5 months.
VIX volatility index posts its biggest 3-day spike since Aug 2015
Gold’s best 3-day rally in 3 months to $1292.00
These bullet points are just a few examples of the heighten volatility we can expect in global financial markets going into the weekend.
VIX Volatility Index
Our Algo Engine has triggered a sell signal in Goldman Sachs.
We maintain a negative outlook and advise running a stop-loss should the price action trade above the signal high of $235.
Following the Algo Engine short signal in General Electric, the price action continues to carve-out lower levels.
Should we see GE trade down to $22, we would consider this price target as an oversold and providing a suitable entry point for new long exposure.
The FY17 result was slightly ahead of expectations and underlying EBIT rose 11% to A$302m
ORA’s ability to execute on its growth strategy should help to underpin top and bottom line growth of 5%, resulting in EBITDA in FY18 increasing from $420m to $450m.
ORA trades on a forward yield of 3.8%.
Orora
AGL Energy recorded a solid FY17 NPAT.
However, the market has reacted negatively to the board de-prioritised capital management. This has happened less than 12 months after launching its buy-back program.
AGL provided FY18 Underlying NPAT guidance in the range of $940-$1,040m. Earnings growth forecast is driven predominantly by higher wholesale electricity prices.
FY18 EPS increases from $1.20 in FY17 to $1.40, placing AGL on a forward yield of 4.6%
We have previously expressed our concerns with regards to AGL being overvalued and we continue to maintain our $22 price target.
AGL
Recent Algo Engine buy signals in ANN and SHL are now finding buying support.
We maintain our medium-term price targets near the June 29th high of $24.00 in ANN, and the July 4th high of $24.50 in SHL .
Following the recent Algo Engine buy signal, Amcor has now formed a solid base at $15.40. We have an upside target of $16 – $16.50.
We recommend adding December covered calls to the Amcor holdings to increase cash-flow and enhance portfolio returns.
The spot Gold price posted a low of $1204.50 on July 10th.
Since then, the yellow metal has rallied almost 6.5% and hit an intra-day high of $1281.20 in last night’s New York trade.
This marks a two-month high for Spot Gold. Internal momentum indicators, combined with increasing geopolitical risks, now suggest the $1300.00 resistance level is within reach.
The share prices of local gold miners NCM and EVN have finally commenced participating in the positive uptrend in the spot Gold price.
We expect both names will break out their recent ranges to the topside and have medium-term price targets of $22.10 for NCM and $2.60 for EVN.
Investors have been showing keen interest in buying both the outright shares, as well as, trading the CFDs listed on the SAXO Trader GO platform.
In addition to the larger-cap mining stocks, the SAXO GO platform offers direct access, tight spreads and deep liquidity in some of the smaller-cap mining names.
These include NST and SAR. Call in to the office for more detail about how to trade CFDs on the SAXO GO platform.
Newcrest
Evolution Mining
Saracen Mineral Holdings
Northern Star Resources
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