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Shares of SUN hit a 3-week low of $13.43 as the downside momentum in local financial names continues to increase.
SUN announced today that they will snug interest rates higher on all variable rate home loans next Wednesday due to higher funding costs.
Our ALGO engine triggered a sell signal in SUN on November 10th at $14.05.
We will look to cover short positions near the February low of $12.45.
SunCorp
Our ALGO engine triggered a sell signal in SHL on February 5th at $24.85
In our blog post from March 3rd, we set an initial downside target of $23.10.
Shares of SHL hit $23.00 yesterday and we closed out of our short CFD positions on the SAXO Go platform.
At 21X estimated 2018 earnings, the stock looks more attractive at $23.00, than at $25.00
However, given the heightened volatility in the ASX market in general, we will remain flat in SHL and advise clients when we look to enter another position.
Sonic Health
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Local banking stocks will be facing higher funding costs as LIBOR rates have surged higher over the last few weeks.
Considering the negative combination of the Royal Commission and lower margins on Mortgage lending, we have been urging caution to investors looking to buy the recent dips in the Big 5 banking names.
As illustrated in the chart below, the cost of local bank funding has posted the sharpest monthly rise in over 8 years.
As such, we don’t believe the local bank shares have found sustainable price support levels yet.
Phone in for more details on trading the local banking stocks on a cash basis and on the SAXO Go CFD platform
LIBOR
West Texas Intermediate (WTI) Crude Oil rose over 3% in NY trade to reach a 7-week high of $65.70.
The boost was a result of EIA data showing US crude stocks unexpectedly fell by 2.6 million barrels, or 0.6%.
For the week, WTI has risen over 5%.
In Monday’s blog, we mentioned our preference to buy local names STO, WPL and OSH.
These three stocks are up over 2% for the week and we still see scope for further upside range extension. Also, all three of these stocks are in our ASX Top 50 Model portfolio.
On the daily charts, the next area of resistance for STO is near the $5.65 level, with support at $4.90.
The chart of OSH shows resistance at $7.70 and support at $7.05
The valuation metrics for WPL are more complex. The share price has under performed the Spot WTI price by 24% since September and is 21% below it’s EPS momentum trend.
At 6.50 X EBITDA, WPL may be the best pick for a move back into the price gap above $29.65.
Santos
Oil Search
Woodside
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The Algo Engine triggered a sell signal in Goodman Group earlier this week. The signal resulted in GMG being removed from ASX 50 model portfolio. The position was held for 550 days with a return of 22.2%, plus an additional $0.39 in dividends.
Goodman Group has been a very strong performer within the REIT sector, with underlying EPS consistently at high single digits. The sell signal can be viewed as a cautious reminder of the compressed 3.4% yield GMG now trades on.
Goodman Group
TPG reported 1H18 EBITDA up 0.1% to $418 million. The 1H result was ahead of expectations and TPG upgraded their full year earnings guidance on the back of ongoing cost reductions.
We continue to view TPG as expensive and with significant execution risk around upcoming capital expenditure, we prefer the short-side of this trade.
FY18 EPS $0.42 and DPS $0.04, places the stock on a forward yield of less than 1%.
TPM
We look at what the financials are likely to be in 2020; post the Tatts Group integration and cost savings.
FY20 revenue $5.5 billion, EBIT $880m, (FY17 was $325m) with underlying earnings growth of 6 – 8% per year and a forward dividend yield into 2020 of 5.5%.
Investors will be well served by tracking TAH for an upcoming entry point as the stock price re-bases near current levels.
TabCorp
Level 29 Chifley Tower
2 Chifley Square
Sydney, NSW 2000
1300 614 002
Investor Signals Pty Ltd
ABN 44 143 555 453
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