Earnings CTX.ASX
First half 16 EBIT $340 million is well above the $265 million in first half 15. Underlying forecast growth tracks at around 7% and forecast FY17 dividend of $1.03 (up from $0.94 in FY16) puts CTX on a forward yield of 3.3%.
Continue to maintain long position with $34 target + covered call.
Earnings IPL.ASX
First half 2016 underlying profit of AUD$137 million is down 6% of the same time last year. Full 2016 earnings should be around $360 million down 10% on Fy15.
Start up of new Louisiana plant in 2017 should create support for future earnings and we’re probably looking at the low point in the cycle for IPL.
FY17 forecast for $430 million profit on $0.25 EPS and $0.127 in dividends. No buy rec at this stage, waiting for the next bullish signal.
Earnings RIO.ASX
Starting at the top: Top line revenue flat, EBIT down 19%, dividend flat at $1.07 and trading on a 3.3% yield. Sell call options at $55 into November 16.
Note: 19th July – June quarter production numbers will be announced.
Long TCL.ASX
TCL reported 4Q16 traffic – trend remains positive for NSW, some softening is emerging in Melbourne and Brisbane. FY16 Proportional revenue across Australian roads was $1.7 billion. Look for FY17 dividend to increase from $0.45 in FY16 to $0.50 in FY17. This places TCL on a forward yield of 4.2%.
TCL is close to full value short term (12 month outlook) and should be complemented with a $12.70 covered call into March. We’ve collected an additional $0.50 for this call option and we expect to remain exposed to the $0.22 cent dividend in December. This trade allows for some capital gain if exercised. If TCL trades sideways, a combination of the dividend and the call option income creates approximately 10% cash flow on a stand still basis.
Earning JPM.NYS
JPMorgan – solid second quarter earnings signal improved health for US financials. This is bullish for upcoming bank earnings results in general. Analysts had generally lowered expectations for bank earnings this quarter due to low global growth. Our outlook on JPM and the major index is for mostly sideways consolidation with solid support at the lower range of the band.
JPMorgan Q2 earnings beat on both top and bottom line at $1.55 a share and on revenue of $25.2 billion.
Rally in Resources
As discussed in the July video market update report, I forecast that money was in the early stages of rotating back towards the banks and resources. We’re now seeing this reflected in strong momentum within BHP and RIO. It’s likely that this trend will help lift the energy names as well.
Short WBA.NAS
Take short exposure in Walgreen with a stop loss above the $85 level. Look for a move down to $72 over the next 2 – 4 months.
US Macro
It’s often said that the time to worry about the US Dollar is when everyone is optimistic. With the FED seemingly on hold until 2017 and rumors of an impending US recession capping the Greenback over the last quarter, committed USD bulls have been few in numbers.
However, from both a technical and fundamental perspective, the USD had a very good week last week. The economic data points were helpful with Service Sector ISM printing its highest number of the year; including forward looking gains in export orders. The Headline Non-Farm Payroll (NFP) numbers snapped back by 287,000 new jobs, which was the strongest employment gain in eight months.
Looking ahead, we expect the US inflation data later in the week to reflect the firmer tone of the growth aggregates as the Atlanta FED GDP tracker is now showing the Q2 rebound could reach 3%. This is at a time when EU data is well and truly rolling over, the fallout from the UK “Brexit” vote is still be calibrated and Japanese officials are scrambling for solutions for rising deflation and falling economic growth.
Long TLS.ASX
We had a buy signal at $5.20 in June. Telstra is now in a higher high, high low technical pattern and supported by 6% div yield. Investors are positioning ahead of the upcoming 1.5billion dollars to be retuned to shareholders in the next 6 months. TLS can rally through to $6.00 before investors may wish to look at locking in gains.
Long CWN.ASX
Crown is a slightly higher risk trade, however, I think James Packer is going to continue to be innovative in ways to unlock value for shareholders and it’s worth gaining exposure to the potential breakup story. Crown investors will gain exposure to the international assets, domestic property and domestic gaming assets. I’m looking for CWN to trade to $14 in the near term. Run a stop-loss below $11.30
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453