Month: January 2019

Ansell is under Algo Engine buy conditions and the share price should remain supported by the ongoing US$265m buyback program. 

Assuming 10% EPS growth into FY20, we have ANN trading on 19x and a 3% dividend yield. ANN goes ex-div $0.26 on the 16th Feb.

We expect buying support to increase near the current $22.70 level.

At higher prices, we recommend a buy write strategy, (overlay call option), to enhance the income return.

Wesfarmers 1H19 earnings show declines of 8% in the Kmart division and in Bunnings, margins are resilient, however, growth is difficult to achieve.

We consider Wesfarmers near full value at the current 18x FY20 earnings per share multiple.

Based on FY20 earnings, we have WES trading on a 4.8% yield and we see some price support on the likelihood of a large scale share buy back in the range of $2.5bn +

We recommend selling out of the money calls to enhance the income, whilst staying exposed to the Feb dividend.

Healthscope has rallied from $2.02 to $2.30 in the past few weeks, as the market becomes more certain of a positive outcome on the pending takeover offer.

If the takeover fails, shareholder value will be unlocked through the separation of the REIT from the hospital assets.

The takeover offer is priced at $2.44 and so far, the due diligence has not uncovered anything to prevent the proposal being formalised. We expect to learn more in the next 4 – 8 weeks.

QBE and IAG are our preferred exposure within the Australian listed
general insurers.

Both names are now under Algo Engine buy conditions. We see the potential for more upside in QBE’s up coming earnings result, given the deep discount it trades on, relative to peers.

Based on FY19 Net Operating Income increasing by 10%+ to $850m, we have QBE on a forward yield of 5.5%.

We now look to add covered call options to enhance the income and capture the March dividend.

Ansell is under Algo Engine buy conditions and remains a current holding in our ASX 100 model portfolio.

We see support building in the $35 – $38 range. 

Carsales.com is a current holding in the ASX 100 model portfolio and with the share price finding support at $11 we feel value is now on offer.

CAR goes ex-div $0.205 on the 22nd of March.

Tabcorp reports its 1H19 result on 13 February 2019. Consensus forecasts are looking for an EBITDA number between $580 – $600 for the 6 month period. This will represent 12%+ growth on the same time last year.

We have TAH trading on an FY19 yield of 5.2%.

The technical structure in TAH moved into a lower high formation and an Algo Engine sell signal was formed. Our strategy is to hold TAH through to the result.

If we see higher prices next week we’ll consider using a derivative strategy to lock-in returns and protect against the downside.