Ansell has found short-term support at $24.70 during yesterday’s trade.
However, with the USD weakening overnight, we’re “on watch” for a break of this level.
We see a good buying opportunity, should the stock trade down to $23.50.
Keep ANN on your watch list.
Ansell
We recommend accumulating Ansell within the 24.25 – $24.75 range.
The share price has reached oversold territory relative to the healthy rise in NPAT announced in its FY18 results.
Ansell
Shares of ANN have dropped over 10% since reporting their full year results last week.
We see solid chart support in the $24.50 area and suggest buying in that range.
Ansell
Based on the positive macro data, cost savings, benefits from US tax changes and the transformation program Ansell announced, we see upside to Ansell’s upcoming earnings result on the 12th February.
ANN currently trades at 17x 2019 earnings and a forward dividend yield of 2.7%.
We’re buyers on near-term weakness ahead of the upcoming earnings result.
Ansell
Since trading down to $20.30 on September 15th, shares of ANN have rallied over 18% and are priced at $24.00 in early trade.
Even though we see organic growth tracking at the upper end of their 3% to 5% guidance, internal momentum indicators are now looking overbought.
ANN is currently trading at 18X earnings and we estimate the FY18 EPS around USD 95 cents.
Investors holding shares of ANN can look to either sell their shares outright, or sell the December $24.50 call option and collect 80 cents of premium to enhance cash flow.
Ansell
Since posting an intra-day low of $20.30 on August 15th, shares of Ansell have traded 12% higher to reach $22.81 in early ASX trade today.
The August low coincided with their FY17 earnings report. Part of that report focused on the level of earnings based in USD and how an stronger AUD could dampen results.
The AUD/USD has now dropped over 5% since trading at .8125 on September 8th. As a result, ANN shares have pushed higher.
We currently see ANN trading at 18X earnings and estimate FY18 EPS around USD .95 cents.
As such, we consider ANN a good buy/write strategy up to $23.50 to increase cash flow and enhance portfolio returns.
Ansell
FY17 results for ANN were mixed with revenue growth of 2- 3 %. Cash conversion was strong and lower capex supported the dividend.
With this report, it’s difficult to draw any clear comparisons to past results as added expenses and divestment of businesses segments renders historical divisional comparison meaningless.
We view FY18 guidance as conservative and see the 3% forward yield as an attractive risk reward proposition.
A streamlined operation and moderating raw material costs should see Ansell’s share price trade higher over the next 12 -24 months.
At the start of the year, the market consensus was for the Aussie Dollar to fall against the major currency pairs during 2017. So far this year, the AUD/USD has climbed 10% and almost touched .8000 last week.
At 1pm today, RBA chief Philip Lowe will be giving a speech in Sydney. Since many exporters look at .8000 as a pain level, it’s reasonable to expect Mr Lowe to comment about the level of the Aussie.
The strengthening AUD/USD has created a headwind for domestic companies with earnings exposed to the softening USD.
Four companies that we follow which have seen their share prices dampened due to a stronger Aussie are: BXB, CPU, ANN and JHX.
Australian Dollar
Our Algo Engine triggered a buy signal in Ansell on the 7th February at $21.50 and the stock is now trading $23.22.
The recent selling weakness, where price has retraced from $25 back to $23, provides another buy side entry opportunity. The company will commence a $400m share buyback program later this month which should help to underpin the share price.
Stop-loss orders should be applied on a break back below $22.50. Buy and hold investors seeking added yield, may prefer to take a slightly longer-term view and sell-out-of-the-money calls at $25 into November.
Shares of Ansell (ANN) reached a 5-month high of $25.30 yesterday as a Chinese consortium agreed to buy part of their non-core asset group for $800 million.
In announcement after the agreement, ANN officials outlined a plan to buyback up to 10% of the company’s common stock over the next 12 months.
We believe this development will underpin the share price to the downside. However, $26.00 could could be a difficult level to clear, even with the buyback.
With today’s sharp sell off into the $23.00 handle, ANN shares are a good candidate for a buy/write strategy. Selling the $26.50 calls into December will enhance the returns, and keep investors exposed to the August dividend of approximately 32 cents.
Ansell
Level 17 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453
Or start a free thirty day trial for our full service, which includes our ASX Research.