ASX- Valuation Review

Posted on | by Leon Hinde | Leave a Comment on ASX- Valuation Review

Following the recent 1H17 earnings update, we will take  a look at establishing fair value for the ASX.

1H17 NPAT of A$219m represented 3% underlying earnings growth. Moderate revenue growth occurred across most major ASX activities.

Here is the issue: the stock trades at 22x forward earnings on a 3.9% dividend yield. The earnings are stable but the stock is expensive. And whilst ASX delivered 3% revenue growth in 1H17, this is down on the 6% average level achieved over the last 3 years.

Our conclusion on fair value is; buy ASX on a pullback to $47 or a 4.5% dividend yield.

Chart – ASX

 

 

 

 

ASX Limited

Posted on | by Todd | Leave a Comment on ASX Limited

ASX Limited reported continued profit growth for H1 2017, up 3% to $219 million. Earnings per share was posted at $1.13 per share, which is 2.9% higher than a year ago.

The exchange operator declared a fully franked dividend of $1.02 per share, which pencils out to a 90% pay out ratio.

ASX also announced a 2.8% increase in operating revenue to $386.6 million, which is a 10.4 million increase from the previous reporting period.

Solid growth in Derivatives, OTC products and the sharp increase in ETF interest has underpinned the company’s  forward guidance.

However, we see a potential “double top” pattern on the daily charts dating back to the August highs of $52.40 and would look for a pull back in the share price.

Chart – ASX

ASX – Earnings Review

Posted on | by Leon Hinde | Leave a Comment on ASX – Earnings Review

Shares in ASX have performed well since the Algo buy signal in early November.  If we look out 12 months, ASX should deliver revenue in FY18 of $850m and EBIT of $600m. The business is growing at around 5% p/a and management are remaining disciplined on cost control.

From an earnings per shares basis,  FY18 EPS will increase from $2.30 in FY17 to $2.45 in FY18, and DPS will increase from $2.10 in FY17 to $2.20 in FY18. This places ASX on a forward yield of 4.3%.

We think ASX shares are trading at the top end of the valuation range given the compressed yield and moderate EPS growth. The upside still remains the potential of a take-over bid as global exchanges look to consolidate.

Chart – ASX

 

 

ASX Banks and Financials

Posted on | by Leon Hinde | Leave a Comment on ASX Banks and Financials

Currently, ASX leading Financials are being dragged higher as the US equity rally continues into the lead up to their fourth quarter earnings results. We’re somewhat sceptical of the valuation support and yesterday started hedging our banking exposure in client portfolios. This was done through using in-the-money European-style calls over CBA and slightly in the money February calls over NAB, as two examples.

In the case of CBA, we stay exposed to the February dividend and franking credit but have hedged a price pullback of up to 5% between now and March.

In NAB, we’ve hedged to a similar extend but without the need to protect the dividend. NAB’s next payment period is not until May

Chart – ANZ
Chart – NAB
Chart – WBC
Chart – ASX
Chart – CPU

 

Higher Low Pattern Stocks to Add to Your Watchlist

Posted on | by Leon Hinde | Leave a Comment on Higher Low Pattern Stocks to Add to Your Watchlist

The following group of stocks are in either established uptrends or, in recent months they’ve broken downtrends to begin building the early stages of a bullish “higher low” formation.

Many of these names have been mentioned previously in the blog and/or the monthly strategy video report. It’s worth loading these codes into your watch list and considering rebalancing your portfolio to include allocations towards some, or all of these names:

JHX, LLC, MQG, SHL, TWE, ANN, ANZ, ASX, CCL, CIM, COH, QUB, TAH, WOW & WPL.

With the lower growth names within the above basket, such as WOW & CCL, we compliment the position now with tight covered calls to enhance the yield to 10%+ per annum. With some of the other names, we give a little more breathing space as we expect 5 to 10% price appreciation before selling the call option overlay.

 

 

 

 

Buy Signals – Now Trading on Support

Posted on | by Leon Hinde | Leave a Comment on Buy Signals – Now Trading on Support

The following group of stocks offer above average earnings growth, structural uptrends and are currently trading back on support levels that warrant closer attention.

ASX, AMC, BXB, JHX RHC, SEK, SHL, SUN and TWE.

asx
Chart – ASX
Chart - AMC
Chart – AMC
bxb
Chart – BXB
jhx
Chart – JHX
sek
Chart – SEK
Chart - SHL
Chart – SHL
Chart - SUN
Chart – SUN
Chart - TWE
Chart – TWE

More detail on the Investor Signals portfolio allocations and derivative overlay strategy will be provided in the October ASX top 50 Video Market Report.

 

Take Profit on Boral and Buy James Hardie

Posted on | by Leon Hinde | Leave a Comment on Take Profit on Boral and Buy James Hardie

In today’s post we look at stocks recently commented on that require further attention, as profit taking is in sight or the entry level setups are now looking compelling.

NVT.ASX – Lift trailing stop loss to $5.25 support and retain profit target at $5.40

nvt

BLD.ASX – We had a buy recommendation on this at $6.20 and it has now rallied 10%+ to $6.85. Take profit on BLD and switch to JHX.

bld

AMC.ASX – We see value in AMC at $15 only when complemented with a covered call strategy. Target is 7% capital growth, plus 2% from Feb div and 3% option premium. We have a six month time horizon on this trade.

amc

ASX.ASX – Looks better value following the recent pullback and our algorithm engines are flagging a buy point.

asx

The above charts summarise a few opportunities we’re watching. For further detail on our investment ideas, visit the monthly strategy piece or the recent mid week update.

If you have trouble locating the links to either of the above recordings, please email me.

leon@investorsignals.com

 

 

 

 

 

 

Macquarie Outlook Remains Stable

Posted on | by Leon Hinde | Leave a Comment on Macquarie Outlook Remains Stable

Macquarie (MQG.ASX) FY17 profit should be $2.1b up around 5% on the same time last year. FY17 earnings per share (EPS) $6.00 and dividends per share (DPS) are forecast to be $4.10, placing the stock on a forward yield of 5%.

There are no algorithm signals present and therefore, our short term synopsis of MQG is that the stock sits at fair value and subject to any large shift in volatility, the stock is most likely to consolidate and move sideways at or near current value.

mqg