We prefer BHP over RIO

Posted on | by Leon Hinde

Rio Tinto reported their June quarter production which was in line with market consensus.

If we assume a slight softening in Iron Ore prices next year, (back below US$100 per tonne), RIO will produce $45bn in FY20 revenue and generate EBITDA of $20bn. Underlying reported FY20 profit will be $10bn, which will sustain a 5.5% yield based on dividends per share of $4.50.

Within the resource space, we continue to prefer BHP over RIO and within the energy complex WPL and ORG.

We also like the look of Oz Minerals.

 

 

Earnings Season is Underway

Posted on | by Leon Hinde

This week we have the resource companies providing production guidance. With OSH and RIO today, BHP Wednesday, S32 and WPL on Thursday.

Next Wednesday we have ILU, followed by FMG on Thursday.

We also have earnings season starting and of interest will be CIMIC 1H19 earnings tomorrow. RMD on Friday 26th July and RIO’s half year earnings on the 1st August.

By the first week of August we’re in full swing with earnings season and i’ll look to update opportunities on the blog, ahead of the earnings results.

Graph – XJO ASX 200

 

 

 

 

 

 

CIMIC Reports 1H19 Earnings

Posted on | by Leon Hinde

Cimic Group reports 1H19 earnings tomorrow and the market is looking for  NPAT of $390m.

Full year NPAT should maintain within guidance at $790m to $830m.

The CIMIC share price has been trading at the lower end of the valuation band following allegations of creative accounting. CIMIC has pushed back against the claim and maintained that their accounts meet the required auditing standards.

We’ll wait to see what’s in tomorrow’s result, but we continue to like the industry thematic in which CIMIC operates. We expect CIMIC to report a strong net cash position of $1.4bn+.

Based on FY20 earnings we have CIMIC trading on a forward yield of 4%.

 

 

GrainCorp Limited – MaltCo divestment

Posted on | by Leon Hinde

GrainCorp is a current holding in our ASX100 model portfolio.

We continue to follow the developments regarding the demerger or divestment of the MaltCo entity from the main Graincorp listed business. Either outcome is likely to unlock value for Graincorp shareholders.

GrainCorp’s proposed MaltCo would be the world’s fourth-largest independent maltster with assets in Australia, the United States, Canada and Britain. It made $170 million EBITDA in the 2018 financial year.

We see upside potential for the GNC share price supported by a share buy-back or capital return in early 2020.

Evolution – June Quarter Results

Posted on | by Leon Hinde

Evolution Mining reported June quarter production in-line with market estimates and FY20 guidance remains flat at $725koz – $ 775koz.

The reversal in yesterday’s share price action can be attributed to flat production growth and higher operating expenses. FY20 all-in costs increase by 5% to A$890 – $915oz.

Production capex increases to support development at Cowal and Mt Calton.

We have EVN trading on 3% forward yield and continue to see opportunities for NST, EVN, OGC and GOR within the gold space.