We consider the 2019 recovery rally in the below names, as now largely complete.
The post below is from the 14th of November.
GARP is an acronym which is referenced to “growth at a reasonable price”.
This is how we now view ALL, TWE, CAR and SEK.
Shares of TWE have extended yesterday’s gains and are 3% higher at $14.70 in early trade today.
The catalyst for the sudden rally has been the Chinese government’s clarification of on-line sales regulations for offshore companies.
Prior to yesterday’s announcement, TWE and other online vendors were uncertain of the on-line sales protocol past December of this year.
So far this year, TWE has registered over $500 million in sales from the Asian region, led by sales to China, which make up over 20% of its total group sales.
The next chart resistance level is at $15.60 with a longer-term target near $17.90.
Treasury Wine Estates
CAR is one of the “GARP” (growth at a reasonable price), names that we’ve been tracking.
With the stock bouncing off the $11.00 price level, we suggest running a tight stop-loss below the recent “pivot low” and giving the upside momentum a chance to develop.
Within the back drop of market volatility, it is difficult to know how this trade plays out in the short-term. Therefore, we highlight the need to run a stop loss.
We consider ALL & TWE as similar technical opportunities.
Carsales.com
Since posting an all-time high close at $19.85 on September 3rd, the share price of TWE has dropped over 30% reaching a 12-month low of $13.40 in early trade today.
This selloff has come despite the fact that the company has maintained their guidance for EBITS growth of 25% going into 2019.
Technically, the momentum indicators have reached an oversold level last seen in January of this year, which preceded a 23% rally over the following 2 months.
Treasury Wine Estates
TWE, SEK and CAR are all displaying current Algo Engine buy signals and are therefore a holdings within our ASX100 model portfolio.
We recommend accumulating TWE stock within the $14.50 – $15.50 price range.
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Seek is another name where above average EPS growth is likely to be achieved in FY19 & FY20. We recommend accumulating the stock within the $17 – $18 price range.
CAR delivered a disappointing earnings update earlier this month, however, with the stock price correcting 25%, we now see value emerging.
Over the last three years, ALL & TWE have been among the best performing stocks within the ASX100 model portfolio.
Both names now reflect a “higher low” chart formation and Algo Engine buy signals.
TWE’s 20% sell-off post FY18 results provides an attractive entry point. FY19 EPS growth is still likely to be in the range of 15 – 20%.
TWE held their AGM last Thursday which was co-located in Hong Kong and Melbourne.
Chief executive Michael Clarke said earnings for 2019 would be bolstered by its new distribution model in the US, which was gaining traction with industry players, and its ability to deliver more luxury wine to its consumers.
He also reiterated his guidance for 25% EBITS growth in 2019 and noted that 1Q results were in line with internal plans for every revenue location.
In August, TWE reported a 34% jump in full-year net profit to $360 million as revenue fell by 1.5 per cent to about $2.5 billion.
Despite this upbeat news, TWE share price has been unable to hold above $17.00.
We consider this more a transitory function of the overall re-balancing of the ASX 200 Index, than a specific valuation issue with TWE.
As such, we suggest accumulating shares at current levels with an initial upside target of $19.40 and then $21.60.
Treasury Wine Estates
Our ALGO engine triggered an initial buy signal for TWE on September 20th at $17.45. Another buy signal was generated into yesterday’s close at $17.15.
The share price has open sharply lower today and has reached a 4-month low of $16.40 in early trade.
We see the recent price action as technically oversold and see good upside potential to the $20.00 area over the medium-term.
It’s worth noting that TWE posted a 33% increase in NPAT in its last report, and has given guidance of 20% growth in volume and a 12% increase in sales for calendar 2018.
Treasury Wine Estates
Since posting a high of $19.90 on September 4th, shares of TWE have slipped over 12% lower and hit $17.40 in early trade today.
Our ALGO engine triggered a buy signal for TWE on Tuesday at $17.60.
This “higher low” pattern is referenced to the $16.50 low posted on May 30th.
According to a directors interest notice last week, the company Chairman, Paul Rayner, bought 18,700 shares at around $18.70, which lifted his personal interest to over 260,000 shares.
It’s our base case that TWE can continue to build on the strong FY 2018 results and the share price represents good value at current levels.
Treasury Wine
Shares of TWE have been trading actively since the release of their full-year results on August 15th.
It seems investors are weighing up the negative impact of increased trade tensions between the US and China against the positive bottom line news over the last year.
TWE posted a NPAT of $360 million for FY 2018, which was an increase of 33% on the prior year.
The strongest component of the report was in Asia, which reflected a 23% rise in volume and a 12% increase in net sales.
As such, the biggest risk for TWE is a material slow down in demand from their Asian customers.
On balance, we see scope for a pull back into the the $17.20 area and a medium-term upside target of $20.00
Treasury Wine Estates.
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