Boral has been triggered by the algorithm engine as a “buy alert”.
Fy17 NPAT is forecast to be up 10% ($280m) on last year, based on EPS of $0.38 cps, placing the stock on 17x PE and assuming $0.24 in dividends, Boral trades on a forward yield of 3.8%
The stock has pulled back 15% from the late August high. Buy within the $6.40 – $6.00 value range.
Amcor (AMC.ASX) acquired Sonoco’s North American rigid plastics operation for $280m. The acquisition will be EPS accretive by 2 – 3%. Amcor management expects to save $20m+ in synergy benefits.
FY17 Amcor should generate revenue of USD$9.7b, EBIT USD$1.1b, EPS growth of 8% and DPS of USD$0.44, placing the stock on a forward yield of 3.8%
We like AMC and see this as a suitable buy-write candidate for client portfolios. The stock trades ex-dividend tomorrow AUD$0.29.
Buy today and sell $17.00 calls into January.
Today’s report is a summary of what I’m watching following some of the recent price action in the market. On the 30th of August I wrote a blog post under the heading “Property Trusts” and the commentary there still remains relevant. If the Fed Reserve doesn’t raise rates in 2016, we’ll see the yield names rally 5% to 10%. With this in mind, WFD, GPT, SCG are worth keeping on your watch list. AGL, TCL, BXB, IAG, SUN and BLD have also been triggered by the algorithm engine as buying opportunities that should be tracked for an appropriate entry point.
Other names that we’re waiting for a buy signal on include JHX, SGR, QUB, RMD, TWE, SHL, CWN, AMP and NVT. Out of this group, QUB and CWN are the closest to the entry condition being triggered.
The AUD/USD, in particular, looks vulnerable to further downside range extension. After posting a technical double top at .7755 on August 10th and 11th on Thursday, the AUD/USD finished the week with two consecutive losses for the fist time in almost two months and the first close below the 30-day moving average since July 25th. Technically, the pair has been in a strong uptrend over the last three weeks but the RSI has now rolled over below the 50.00 level.
The 11.3% surge in building approvals (reported this week) was 10 times more than expected and the strongest reading in over two years. However, it was not sufficient to lift the Aussie above the high of .7580
Harvey Norman (HVN.ASX) FY16 NPAT $350m and final dividend of $0.17
FY17 outlook for 5 – 7% EPS growth on $1.8b in revenue and EBIT of $530m. Assuming total FY17 DPS of $0.27 the stock is trading on a forward yield of 5%.
Brambles (BXB.ASX) is now approaching a buy signal entry point.
Our algorithm engines have alerted this setup and it’s now worth establishing the entry conditions. The stock has just traded into the first level of the entry point band and we therefore, begin adding exposure.
In a weak market we could see BXB trade down to the lower range of the entry band, therefore, we split the entry parcel into two equal buy orders and place one at today’s open and the remaining 50% parcel at the lower band price of $11.50. If both orders are filled, this will generate an average entry price of around $11.85.
There’s no denying that PE’s on the property trusts look stretched and we are likely facing a period of price consolidation. Earnings growth is attractive but yields have compressed too far. In some cases, yields on property trusts of barely 3% offer investors little risk reward. However, if you feel the US will not raise rates in September, you may share my view that we could see another bounce, (approximately 5%), yet to play out.
WFD, GPT and SCG are all on my radar as buy signals. I think we get a small bounce from here and it will then pay to sell tight covered calls to double the cash flow over the next 6 months, whilst still remaining exposed to the next round of dividends.
Feel free to contact me leon@investorsignals.com to discuss how we can help set up these strategies and others on your investment portfolio.
Orica (ORI.ASX) short trade triggered 10 days back is now starting to roll over. This was mentioned in our monthly strategy piece, (see YouTube channel), posted at the beginning of the month. With the weak earnings trend and sector headwinds, it may pay to give this one some room to move lower and trail the stop loss down to lock in profits on the way.
Qantas (QAN.ASX) short is now approaching our buy back price target of $3.20. Price has now corrected 10%+ in 5 days.
On 30 June 2016, a buy signal was posted on SGR.ASX with an entry price of $5.40. The stock traded as high as $6.20 following a solid earnings result that delivered revenue growth of 6%, EBITDA growth of 14%.
Today we started selling the $6.25 November calls against client holdings for a credit of $0.14, this added premium complements the upcoming dividend of $0.07, (fully franked), on the 31st of August, (ex div date).
If exercised, the return on this trade will be approximately 15% for 5 months exposure.
For clients not yet set in SGR, our algorithm engine will continue tracking for new entry opportunities.
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