Tag: ASX:IPL

On 11th of July we reminded readers of the blog that we viewed the recent Algo Engine signal on IPL,  as one our preferred buy-side signals.

IPL today has opened up 6.5% higher and is now up over 10% from the recent low.

Considering the recent volatility in fertiliser prices, we suggest taking profits in the current $3.55/60 price range.

Incitec Pivot

On May 23rd, the ALGO engine triggered a buy signal in IPL at $3.40. Since then the stock has traded in a moderate range of $3.30 to $3.60.

While we view the outlook as broadly positive given the ramp up of the WALA ammonia plant in Louisiana and domestic fertilizer demand, this has been offset by the upcoming change in their CEO and declines in global fertilizer prices.

IPL is currently trading at 30% discount to its North American peers, and at 13x  estimated FY 18 earnings, we see the upside potential into the $4.15 range over the medium-term.

At the same time, we expect the 2017 EPS of 21 cents to rise to 25 cents in FY18, which puts the stock on a forward yield of 4%.

IPL

Our Algo Engine flagged a buy signal in IPL on 23rd May. The price action looks to be developing support at or near $3.50 and the fundamental earnings picture is likely to improve in FY18 & FY19.

Our Algo Engine triggered a buy signal in IPL on the 23rd of May at $3.45.

The price action looks to have found support, at or near $3.50 and adding a long position with stops under $3.50 is worth considering.

IPL reported 1H earnings of $152m, slightly ahead of market expectations.

IPL’s outlook was the most positive it has been in years. Although, global fertiliser prices have started to soften, with seasonal demand peak in April/May.  US ammonia prices to are forecast to trade within the US$300/t to US$330/t. A weaker AUD offers a some upside to IPL’s earnings.

FY18 forecast revenue $4b, EBIT $640m, EPS $0.25, DPS $0.15, placing the stock on a forward yield of 3.7%.

Underlying earnings growth now tracking in the 10 – 20% range.

Incitec Pivot reported FY16 NPAT of $295m.

Moranbah production remains strong with output hitting a new record. The Louisiana plant will come in below budget. Any new capital management will be contingent on better fertiliser prices and reliable  output from the new Louisiana plant.

With gearing likely to begin falling over the next 12 months we may see capital management in Fy18 or FY19.

FY17 we see revenue increasing to $3.8b, EBIT increasing 10% to $490m, EPS of $0.18 and DPS of $0.11, placing the stock on a forward yield of 3.5%

IPL has struggled with difficult industry conditions over the past 18 months, the tide may be turning but we will wait for a higher low formation from the algorithm engine before setting up new buying levels.