IAG – Opportunity Builds

Posted on | by Leon Hinde

Although we don’t have a current Algo Engine buy signal in IAG, the stock is in the ASX 50 model portfolio from the original higher low pattern in 2017.

The recent share price retracement, from $8.70 back to yesterday’s low of $7.84, means we have the stock on our radar again.

Strong earnings growth, 5% fully franked dividend yield and an increase to the share buy back program should provide a floor under the share price.

We see IAG as a solid “buy/write” opportunity delivering 10 – 12% annualised cash flow.

 

IAG

 

 

IAG – Buy-write Producing 10-12% Cash-Flow

Posted on | by Leon Hinde | Leave a Comment on IAG – Buy-write Producing 10-12% Cash-Flow

The key take-away from the this week’s AGM is that IAG remains confident of reducing its cost base by >A$250 million from A$2.5 billion to A$2.25 billion by 2020.

The company also reaffirmed the outlook for 10% EPS growth over the next 3 years.

IAG provides a solid buy-write opportunity with the stock retracing back from recent highs and now finding support at $7.50.

FY19 profit is forecast to be $1billiWn, EPS $0.45 and DPS $$.36, placing the stock on a forward yield of 4.8%.

 

 

 

IAG Posts New All-Time High On Stronger Guidance

Posted on | by Todd | Leave a Comment on IAG Posts New All-Time High On Stronger Guidance

Shares of IAG have rallied over 2.5% in early trade, hitting an all-time high of $7.89, as the company lifted their earnings guidance for the year ahead.

The general insurer reported a 23 % increase in net profit after tax, which hit $551 million in the six months to December, helped by price rises in its consumer and commercial insurance products.

IAG also reported insurance margin widened to 17 %, compared with 13% a year earlier. Further, the company lifted its dividend by 1 cent to 14 cents, which will be fully franked and paid on the 29th of March.

IAG has been in our Top 50 Model Portfolio since January of last year.

We suggest investors can sell the 7.50 calls into June for 25 cents. This will increase cash flow into the portfolio and allow for the 14 cent dividend.

Insurance Australia Group

 

Chart Watch – IAG & SUN

Posted on | by Leon Hinde | Leave a Comment on Chart Watch – IAG & SUN

The Insurance sector in the US rebounded in Friday’s session, following oversold levels which were caused by concerns about weather related claims.  

We’re expecting the local insurance companies to find buying support near the current price levels. This will likely be a short-term trade higher, as we anticipate the sector will then make a “lower high” formation.

Our two preferred names are IAG and SUN.

Insurance Australia

Posted on | by Leon Hinde | Leave a Comment on Insurance Australia

IAG expects to see elevated reserve releases in FY17 of ~5% of NEP, and has
upgraded insurance margin guidance to 13.5-15.5%.

We think IAG is now expensive for a general insurer, trading on 18x  FY18 earnings.

Given the current tailwinds, any pullback in price will be moderate and at $6.50 the stock is well supported by a 5% dividend yield.

IAG remains an attractive buy-write.

IAG

 

Rotation Out Of Banking Stocks

Posted on | by Todd | Leave a Comment on Rotation Out Of Banking Stocks

Since Treasurer Scott Morrison announced a banking levy in the May 9th budget, banking stocks have been sold off across the board.

It’s become clear that a fair percentage of this investment flow has rotated into the local Insurance names with IAG and Suncorp both posting material gains since early May.

We hold both of these stocks in client portfolios and they are now up 12% and 8% since mid-May, respectfully.

With respect to the re-valuation in the banking shares, NAB has posted a fresh low at 29.00 in early trade today.

Both WBC and ANZ are approaching the lows posted in early June, while MQG and CBA have held up better but are still pointing lower.

On balance, we continue to expect to see rotation out of the banking names to the benefit of the insurance stocks.

IAG

Suncorp

NAB

Defensive Stocks For An Uncertain Market

Posted on | by Todd | Leave a Comment on Defensive Stocks For An Uncertain Market

Recent price action in the local ASX market suggests we’ve entered a period of heightened volatility and potential for downside risk. Since posting the high for-the-year at 5945.00, the index for Australian shares has dropped almost 4%.

Looking across the spectrum of ASX top 100 stocks, we have found several names which can offer defensive value in a broadly sideways to lower share market.

These include: IPL, MPL, WOW, CTX, QBE, SHL, SYD, TCL, AMC, and IAG.

We consider these stocks to have the potential for moderate capital growth and, combined with a buy/write strategy, will offer 10 to 12% cash flow on an annualized basis.

ASX: XJO Index

 

 

Insurance Group Australia (IAG)

Posted on | by Todd | Leave a Comment on Insurance Group Australia (IAG)

Insurance Australia Group (IAG) reported a 4.3% drop in first-half profits to $446 million, which was down from $466 million from the previous corresponding period but slightly higher than the street’s expectations.

Amid an atmosphere of increased claim pressures, Australia’s largest insurer by market share announced its gross written premium grew by 4.7% to $5.8 billion.

IAG declared an interim, fully franked, dividend of 13 cents per share to be paid on March 30th. This dividend represents a cash payout ratio of 64.3 %.