Telstra Chairman Connects With Shareholders At AGM

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During the recent AGM, Telstra chairman John Mullen covered many topics including market penetration to the NBN.

However, what shareholders were most interested in hearing was that the 22 cent dividend would be a low as it would go and, if anything, will be increased.

Shares of TLS have been beaten down pretty hard since trading over $5.00 earlier this year. In our view there is plenty of pessimism priced into the stock.

TLS is the dominant player in the domestic telecom industry, with strong brand recognition and a network quality advantage which underpins a 49% subscriber advantage.

The stock currently trades on a P/E of 10X and hasn’t been this fundamentally cheap since 2010, when base interest rates were 5.5%.

It’s our view that TLS offers good value at current levels and we have a medium-term price target of $4.15.

Telstra

 

 

 

 

 

TRADE UPDATE: Take Profits In Ansell

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Since trading down to $20.30 on September 15th, shares of ANN have rallied over 18% and are priced at $24.00 in early trade.

Even though we see organic growth tracking at the upper end of their 3% to 5% guidance, internal momentum indicators are now looking overbought.

ANN is currently trading at 18X earnings and we estimate the FY18 EPS around USD 95 cents.

Investors holding shares of ANN can look to either sell their shares outright, or sell the December $24.50 call option and collect 80 cents of premium to enhance cash flow.

Ansell

 

 

Key Data Points For The Aussie Dollar

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From a trading perspective, the main numbers to watch this week for the AUD/USD are the Chinese GDP and local employment data on Thursday.

According to the recent PMI readings, labor market activity has slowed and the headline jobs number is estimated to fall from 54,000 to 14,000.

Since posting a multi-year high at .8125 on September 8th, The AUD/USD has been largely driven by comments suggesting the RBA may join other G-7 central banks in beginning to raise interest rates.

If theses two data points show weakness, it’s reasonable to expect the RBA to keep its easing bias and the  AUD/USD to continue its downward trend.

Investors looking to profit from a lower AUD/USD can buy the BetaShare ETF with the symbol: YANK.

YANK is an inverse ETF, which means the price of YANK increases as the AUD/USD trades lower. It also has a weighting of 2.5%, which means the unit price will fluctuate  by 2.5% for every 1% change in the AUD/USD exchange rate.

With a current price of $13.00, we calculate that the price of YANK will be near $16.50 as the AUD/USD returns to the January low of .7160.

 

Aussie versus US Dollar

 

 

TCL Firms On Lower US Yields

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On October 5th, shares of TCL  traded as low as $11.62. At that time the US 10-year bonds were yielding 2.40%.

US yields have now dropped to 2.28% and TCL’s share price is over 6% higher at $12.30.

This interest rate correlation and sensitivity is linked to several other ASX stocks including WOW, SYD and SCG.

With the odds of a FED rate hike in December still over 70%, we see limited upside in TCL beyond $12.50.

As such, we like selling the $12.50 TCL calls into March and collecting the 40 cents premium.

In addition, TCL is set to pay a 27 cent dividend in December, which will bring the total cash flow from the derivative overlay strategy to 67 cents.

   Transurban Group

 

Chinese Imports Rise In Front Of 5-Year Plenary

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Chinese import data released on Friday showed a surge of 18.7% on a year-on-year basis.

Leading the the stronger import numbers was Iron Ore.

Purchases of Iron Ore expanded to 102.8 million tons compared to 93 million tons during the same time last year. Compiling the data for the first nine months of 2017, full year purchases are on course to top 1 billion tons.

Shares of RIO and BHP have responded by rising by 2% and 2.5%, respectfully, in early trade

China will convene its five-yearly congress on Wednesday. Some reports suggest that the rise in raw material imports into the lead-up of the Communist Party meeting may not be sustainable.

Looking at the daily charts, we see near-term resistance for BHP at $27.50 and at $70.70 for RIO. 

BHP

Rio Tinto

 

CCL Regains It’s Fizz

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Since trading at a three-year high of $10.80 in late March, shares of CCL have slid almost 30% to post a nine-year low of $7.66 on October 6th.

Buyers returned last week and lifted the share price back over $8.10.

One of the likely reasons for investors’ interest was that the US Coca-Cola Company has recently increased their shareholding in CCL from 29.4% to 30.4%.

This increased stake has been part of the $350 million share buyback scheme announced by CCL earlier this year.

At this point we don’t have an ALGO buy signal on CCL, but will update as more price sensitive information comes forward.

Technically, we see the next level of price resistance in the $8.60 area.

Coca-Cola  Amatil

 

Perth Mint Gold Sales Double In September

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The Perth Mint reported sales of 46,415 ounces of Gold during the month of September. This is more than double the 23,130 ounces sold in August.

The Perth mint refines over 90% of newly-mined Gold in Australia and ships to investors world-wide.

As illustrated in the chart below, this trend in higher demand could indicate higher Spot Gold prices in coming months.

As mentioned in a previous blog post, Gold has rallied after the Chinese Golden week for the last four years.

This year, the yellow metal has traded $25.00 higher since the Chinese market has been back online and is now over $1300.00 per ounce.

At this point the local Gold mining names haven’t rallied in the same percentage terms as spot Gold. However, we consider this price lag to be temporary and to see higher share prices in the near-term.

Perth Mint Gold Coin Sales

BOQ Shares Reverse Lower

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Shares of BOQ have given back all of yesterday’s gains as CEO Jon Sutton warned of industry headwinds, regulatory uncertainty and increased scrutiny of banking fees. 

Mr Sutton also pledged to improve its complaint resolution protocol after the Financial Ombudsman Service said the bank had topped the list as Australia’s worst offender for disputes for home loan customers for the fourth consecutive year.

BOQ shares are currently down 1.75% at $12.83. Technically, we see the next area of support near the $12.25 area. 

Bank of Queensland

 

 

US Banks Fall On Lower Revenue Numbers

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Despite beating top line quarterly expectations, shares in US banking giants JP Morgan and Citigroup both fell on Wall Street as trading revenue numbers showed a sharp decline on a year-on-year basis.

Citigroup shares closed 3.4% lower after their trading revenue dropped 16% and JP Morgan shares slipped 1% lower on a 27% fall in year-over-year revenue.

We expect the other major US banks to report the same fall in trading revenue as lower volumes on the NYSE, combined with historically low price volatility, reduces overall market participation.

The next key levels of support are $67.50 for Citigroup and $91.70 for JP Morgan.

Citigroup

JP Morgan