Transurban Group 1Q17 Traffic Growth

Posted on | by Leon Hinde | Leave a Comment on Transurban Group 1Q17 Traffic Growth

Overall the traffic results for TCL.ASX were in line with expectation. New projects over the next 2 – 3 years help to underpin the valuation, along with the rising dividend.

We expect to see the traffic growth rate steadying, which then requires a favourable back drop in bonds, i.e slow gradual interest rate rises in the US, to allow TCL to track sideways.

We’ve been buyers on the recent dip and we see TCL as a sell back above $11.75. For portfolio investors it will pay to cover TCL with an $11.75 call into next year with a view towards collecting the $0.25 December dividend plus the call premium.

Fy17 revenue of$2.2b, on EBITDA of $1.65b, DPS $0.50 places the stock on a forward yield of 4.7%. Fy18 DPS should increase by a further $0.05 to $0.55 per share.

TCL.ASX

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Property Exposure – Are You Watching?

Posted on | by Leon Hinde | Leave a Comment on Property Exposure – Are You Watching?

The recent market rotation towards growth assets and in particular, materials and financials, has resulted in selling utilities and property trusts. In many cases, these names have seen 10 to 20% correction.

The following post takes a quick look at some of the relevant chart patterns.

SCG.ASX (forward yield 4.9%)

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SGP.ASX (forward yield 5.5%)

sgp

WFD.ASX (forward yield 3.5%)

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DXS.ASX (forward yield 5.2%)

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GMG.ASX (forward yield 3.7%)

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GPT.ASX (forward yield 5%)

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MGR.ASX

mgr

On the utilities, we think that both Sydney Airports and Transurban should be back on the radar and maybe looking oversold.

SYD.ASX (forward yield 5%)

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TCL.ASX (forward yield 4.8%)

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Tabcorp – FY18 Earnings Upgrade

Posted on | by Leon Hinde | Leave a Comment on Tabcorp – FY18 Earnings Upgrade

Tabcorp (TAH.ASX) will likely see $20m+ in earnings upgrade from the NSW Government’s decision to reverse its ban on greyhound racing from FY18.

FY17 revenue of $2.3b looks flat on the same time last year, with EBIT of $350m and EPS $0.23. Out into FY18 the investment case picks up. FY18 revenue $2.35b, EBIT jumps to $370m on $0.25 of EPS and a forward yield of 5%+. With a  relatively high payout ratio and 20x PE, the stock looks slightly expensive and we prefer to be a buyer on a dip back below $5.00

TAH.ASX

tah

CWN.ASX

Crown looks attractive at or near $13.00 with gaming revenue picking up in Macau and the pending breakup of the ASX listed Crown business splitting into 3 separate entities, unlocking value for shareholders.

cwn

 

 

 

 

CIMIC Takeover Offer for UGL

Posted on | by Leon Hinde | 2 Comments on CIMIC Takeover Offer for UGL

CIMIC (CIM.ASX) announced it intends to make a takeover offer for UGL at $3.15 per share. This is almost a 50% premium to UGL’s last traded price and values the business at $520m.

Pre UGL, FY17 EPS growth in CIM is forecast to increase by 5% to approximately $1.90, assuming they payout around $1.10 in dividends,  it places the stock on a forward yield of 4%, (100% franking credit).

It’s worth adding CIM.ASX to your watch list as the UGL acquisition will help strengthen the investment case.

CIM.ASX

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UGL.ASX

ugl

 

 

 

Global Macro

Posted on | by Leon Hinde | Leave a Comment on Global Macro

In the lead up to last Friday’s US Payroll (NFP) report, there were several Federal Reserve officials, as well as many market commentators, who believed that a better-than-expected jobs report would increase the likelihood of  a November rate hike. Even FED “dove “Charles Evans seemed to warm to the idea that above trend growth in employment would justify a near-term move in the Fed Funds target.

However, the less than spectacular Non-Farm Payroll report saw the odds of a November move scaled back materially, the USD lose some of its gains for the week.

We have never  really supported the speculation about further rate normalization at the November FOMC meeting. There is no historic precedent for any FED policy change so close to a Federal election and the current FED will likely want to show a political and independent posture.

In addition, the November FOMC doesn’t have a scheduled press conference nor are any updated economic forecasts scheduled for release. These scheduling issues wouldn’t completely preclude a rate hike if the recent data was extremely strong; which is not the case. On balance, the NFP report was solid even though the headline new jobs component was weaker-than-expected. Private sector jobs gained 167,000, while the participation rate rose to 63% which is the best rate since February of 2014.

Chart – US 10yr

10yr

Dow Jones

dow-jones

 

BOQ FY16 Earnings Result

Posted on | by Leon Hinde | Leave a Comment on BOQ FY16 Earnings Result

A quick look at Bank of Queensland and Bendigo following the release of the BOQ FY16 earnings result.  BOQ.ASX Underlying result was weaker than market expectations, predominately driven by greater than expected margin pressure.

BOQ.ASX FY17 outlook now appears to offer flat EPS growth at best, assuming a $0.78 FY17 dividend, it places the stock on a 6.9% fully franked forward yield.

BOQ.ASX

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BEN.ASX

ben

A technical summary of where we see price action heading is different in BOQ opposed to BEN, whilst we see short term downside pressure in both names, (despite the yield support), a retracement in BEN.ASX back to $10 will likely trigger a buy signal in our algorithm engines. Whereas, BOQ.ASX remains in a structural downtrend and it’s the current short signal that draws our attention.

 

 

 

 

Resmed 1QFY17 – Get Ready to Buy

Posted on | by Leon Hinde | 2 Comments on Resmed 1QFY17 – Get Ready to Buy

Resmed (RMD.ASX) reports first quarter FY17 results on the 26th of October. The result is likely to meet or exceed market expectations.

RMD is forecast to deliver 10%+ in EPS growth across the next few years. The recent acquisition of Brightree, Inova and Curative Medical will underpin both revenue and future profit growth, within an industry sector where demand continues to grow.

rmd

 

Caltex Continues to Perform

Posted on | by Leon Hinde | Leave a Comment on Caltex Continues to Perform

We hold Caltex (CTX.ASX) across most client portfolios from lower price levels. The algorithm engines triggered the entry signal back on 8th of July when CTX.ASX was trading at $32.00.

Our target was $34+ with a view towards selling covered calls at this point to then achieve an average exit price in the range of $36 to $37 or on a stand still basis, (or unexercised), 10% per annum cash flow from the dividend and option premium.

The investment continues to perform as expected.

FY17 forecast EPS of $2.15 with a forward yield of 3.3%. Underlying growth 5 – 7%.

Chart – CTX.ASX

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