REA Group – Valuation Review

Posted on | by Leon Hinde

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

REA Group announced that its results for the nine months ended 31 March 2019. Reported 3Q revenues up 7% and EBITDA up 6%. The result highlights the quality of the REA business, with solid growth despite a very challenging macro environment.

If we assume FY20 revenue of $990mn, EBIT $520mn and DPS of $1.50, it places REA on a forward yield of 1.8%.

Underlying earnings growth in FY20 is forecast to be up  12%.

 

 

ORA – Algo Update

Posted on | by Leon Hinde

The entry level in Orora was flagged at or near $3.00, the stock price has now rallied 7% and investors should consider locking in the gains.

Our main concern is the weak technical backdrop for the XJO index, combined with the recent Algo Engine sell signal on Orora.

 

Coca-Cola Valuation Review

Posted on | by Leon Hinde

Coca-Cola Amatil is under Algo Engine sell conditions following the lower low and lower high price structure. The downtrend started back in 2013 when CCL traded as high as $15 and during investor capitulation in 2017, traded down to $7.50.

If we look at the valuation metrics on CCL and assume flat earnings per share growth over the next 12 months, we have CCL trading on a 5% dividend yield. We assume total revenue of $5bn producing EBITDA of $950mn.

The last positive volume growth period was after Coke Life was launched in 2015.  Indonesian volumes appear to be rebounding with growth of 10%+ in the March quarter, compared to the same time last year.

Buying CCL and selling a covered call option is a consideration for investors looking to generate 10%+ cash flow from a low risk opportunity, on a moderate PE of 15.5x earnings.

CCL goes ex-div $0.21 on the 27th August. For more detail on the covered call strategy, please call our office on 1300 614 002.

 

Gold Miners ETF

Posted on | by Leon Hinde

Gold Miners ETF, GDX is now under Algo Engine buy conditions, following the higher low formation at $29.

Look for the short-term indicators to turn positive and buying support to increase within the $28.50 to $29.50 range.

Our preferred ASX listed gold miner is Evolution Mining

 

 

 

Graincorp – Add to Watch list

Posted on | by Leon Hinde

GrainCorp is now added to our watch list following the recent Algo Engine buy signal. We see value near $7.50 and look for buying interest to rebuild following the disappointing half year earnings announcement.

GNC reported an underlying net loss after tax of $48 million for the half year. Net profit after tax for the half year last year was $36 million.

GrainCorp Chief Executive Officer Mark Palmquist says these results reflect a particularly challenging period in grains and oilseeds, including severe drought conditions in eastern Australia and grain trade conditions.

They expect continued demand for Malt products in the 2019 northern hemisphere summer but challenging conditions in eastern Australia to continue in the second half.

Planting for the winter grain crop is well underway in eastern Australia, however it is too early in the season to forecast grain production levels and the potential implications for GrainCorp.

We’ll continue to track GNC and update our readers as we see the short-term indicators rebound.

GPT – Algo Buy Signal

Posted on | by Leon Hinde

GPT is under current Algo Engine buy conditions and has been in the ASX 100 model portfolio since October last year.

The recent retracement from $6.32 back to $5.65 has triggered a new entry signal and we draw investors attention to the opportunity.

GPT is growing earnings at 5% per annum and trades on 4.8% dividend yield. Through adding a covered call option, we are able to boost the annualised cash flow to over 10%.

Buy within $5.50 to $5.75 range.

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