Origin Energy – Valuation Review

Posted on | by Leon Hinde

Origin Energy is under Algo Engine sell conditions, however, we see value emerging from a  fundamental analysis perspective. This should lead to a switch in the algo model from sell to buy in the near future.

The key positive is the strong cash generation from the APLNG project, which has led to the de-gearing of the company balance sheet. The next key driver will be the reinstatement  of the dividend policy which will have the stock trading on a forward yield of 4.5%.

We expect the future dividend payments to steadily increase, which will help support the share price.

Pendal Group – Valuation Review

Posted on | by Leon Hinde

Pendal Group is under Algo Engine buy conditions and is a recent addition to our ASX 100 model portfolio.

The current 13x forward earnings multiple offers a discounted entry level.

FY20 revenue is set to increase by 10% to $550mn, EBIT +10% to $230mn, DPS increases by 10% to $0.50, placing the stock on an attractive 6.6% yield.

We are not applying a high conviction call to PDL, due to structural challenges facing the business, however, we highlight that the current share price reflects a more bearish scenario, than what is likely to playout over the next 1 – 2 years.

 

 

CIMIC – Valuation Review

Posted on | by Leon Hinde

Cimic Group is under Algo Engine sell conditions and with the group reporting 1H19 earnings later this month, we will be looking closely at the underlying growth trends.

We expect guidance to be at the top end of the $800-$840mn range, with mining related income to be strong, and construction to be flat.

CIM’s exposure to resources and infrastructure growth should lead to FY20 Revenue of $19bn, EBIT $1.3bn and underlying profit growth of 5%+.

CIM trades on a 3.8% forward yield, based on FY20 DPS growth from $1.65 to $1.75.

 

 

 

Crown Resorts – up 10%

Posted on | by Leon Hinde

Crown Resorts has been a high conviction buy expressed on the blog. The share price made a low at $11.69 and is now trading at $12.80.

Following Melco Resorts (NASDAQ listed) buying 50% of James Packer’s holding in Crown at $13 per share, we see scope for increased VIP flow from Melco’s large high roller customer base.

Whilst there is scope for Melco to make a full takeover of Crown, it is not our base assumption. We suggest investors hold Crown for the 4.5% yield and for those seeking greater cash flow, selling an out of the money covered call option will boost the annualised cash flow to 10% plus.

 

 

Scentre Group – Algo Update

Posted on | by Leon Hinde

Scentre is under Algo Engine buy conditions and  a name we’ve recently drawn our readers attention to, as a buy write.

The share price has since rallied from $3.80 to $4.08. We still  see scope for gains from a buy write strategy, which captures the upcoming dividend .

SCG goes ex div $0.11 on the 14th of August.

Low global bond yields and the  announced share buy back by SCG, will help underpin downside risks.