Tag: ASX:CTX

WTI Crude Oil prices posted their largest one-day loss in six weeks, as the US Energy Information Administration reported a smaller than expected draw down on crude supplies.

The Spot crude price fell $1.97, or 3.8% to settle at a 4-week low of $52.90. The next level of support will be found at $52.50.

We expect the overnight fall to put shares of Caltex (CTX) back into the buy zone around the $28.80 level.

Regular readers will recall that we sold our long positions in CTX early last week in the $30.50 area.

The Daily chart pattern is showing a trading range of $28.30 to $30.50, we are looking to trade this range over the near-term.

Chart Caltex

We’ve been buyers of Caltex at the recent low and see further upside potential to $31 – $32.

Caltex delivered upbeat profit guidance following strong performances in Lytton and Marketing & Supply divisions. Fy17 revenue $16b, EBIT $900m on EPS of $2.30 and DPS of $1.20. This represent year on year underlying growth of around 10%.

The chart below shows the market’s favourable reaction to the updated guidance with CTX rallying $1.40 from yesterday’s session lows. CTX trades on Fy17 PE of 13x and 4% dividend yield.

Here is our strategy recommendation on Caltex…

Buy CTX at market, sell May $32.50 call for $1.00 credit. March dividend will be $0.50+

Total return if exercised 13%+ in 5.5 months.

We hold Caltex (CTX.ASX) across most client portfolios from lower price levels. The algorithm engines triggered the entry signal back on 8th of July when CTX.ASX was trading at $32.00.

Our target was $34+ with a view towards selling covered calls at this point to then achieve an average exit price in the range of $36 to $37 or on a stand still basis, (or unexercised), 10% per annum cash flow from the dividend and option premium.

The investment continues to perform as expected.

FY17 forecast EPS of $2.15 with a forward yield of 3.3%. Underlying growth 5 – 7%.

Chart – CTX.ASX

Caltex (CTX.ASX) delivered 1H16 NAPT of $252m which is in line with market expectations. FY17 growth is likely to be around 8%, placing the stock on a forward yield of 3.7%, assuming $1.25 in dividends.

FY17 revenue forecast of $16b on EBIT of approximately $900m.

We like CTX as a value and yield story. The stock could trade to $36.50 over the next 12 months.

Long CTX

We are buying CTX.ASX at market today. Look for a rally into the $34 range and either take profit or sell at the money calls to enhance the income from the estimated $0.50 September dividend.

Consider a stop loss on a trade below $29.00