ALGO UPDATE: Stay Long Transurban

Posted on | by Todd | Leave a Comment on ALGO UPDATE: Stay Long Transurban

We added TCL to the model portfolio on July 3rd at $11.70 and our ALGO engine triggered a buy signal on July 12th at $11.20.

With its $9 billion pipeline of road projects over the next 7 years, the stock should be well supported with increased longer-term cash-flow numbers.

For the six-month period ending December 31st, TCL will pay 28.5 cents per share and a total of 56 cents per share over fiscal 2018.

This equates to 4.5% with the share price at $12.40 (plus some limited franking credits.)

We see the next resistance level at the December 19th high of $13.15.

Transurban

Softer US Yields Could Lift Local Names

Posted on | by Todd | Leave a Comment on Softer US Yields Could Lift Local Names

The recent move higher in longer-dated US Treasuries has created a headwind for some of the yield sensitive names listed on the ASX.

Over the last 10 days, the US 10-year notes have risen from 2.28% to just under 2.50%.

This 10% move has also lifted the 2yr to 30yr spread from 85 basis points to a full 100 basis points.

The impact on local shares has been a 4.5% drop in TCL and a 3.3% fall in SYD.

Looking forward, it’s reasonable to expect the US yields to soften and the yield curve to flatten.

Given the current correlation to the local shares, we see the US flattening trade as potential positive for the local names such as TCL, SYD, WFD and GPT

US 2yr versus 30yr spread

 

TCL Entitlement Offer

Posted on | by Leon Hinde | Leave a Comment on TCL Entitlement Offer

TCL is undertaking a 3 for 37 entitlement offer at $11.40 per share to raise $1.9b of new equity. The retail offer will close on 24th January.

The TCL share price has hit an all-time high today at $12.93.

And while the internal momentum indicators on the daily charts are approaching an overbought reading,  we expect prices to move higher and consider TCL a cornerstone holding in the model portfolio.

Transurban

 

 

 

 

Transurban – Preferred Holding

Posted on | by Leon Hinde | Leave a Comment on Transurban – Preferred Holding

TCL announced a $1.9bn fully underwritten renounceable entitlement offer to
fund WestConnex & West Gate Tunnel Project in Melbourne.

We continue to see high single digit growth in dividends with FY18 guidance at $0.55, placing TCL on a forward yield of 4.8%

TCL & SYD are current holdings in our ASX 50 model portfolio, following the recent Algo Engine buy signals.

 

 

Sydney Airport & Transurban React to Lower Yields

Posted on | by Leon Hinde | Leave a Comment on Sydney Airport & Transurban React to Lower Yields

With the short end of the interest curve in the US moderately increasing and the longer end not reacting, we’re seeing a flattening in the US yield curve.

The message this sends,  is the bond market believes US rates will rise short term but the global economy is still fragile and inflation is low, therefor the prospects of longer term rate increases are quite low.

These events are helping to support interest rate sensitive names such as SYD and TCL.

SYD will pay a $0.16 dividend on the 29th of Dec and TCL will pay $0.26.

SYD is in the ASX 50 model and TCL is on both the ASX 20 and ASX 50 model.

We consider both names fully valued at current prices and recommend overlaying a covered call option to enhance the return.

 

 

 

TCL Firms On Lower US Yields

Posted on | by Todd | Leave a Comment on TCL Firms On Lower US Yields

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

 

Algo Update – TCL, SYD & AMC

Posted on | by Leon Hinde | Leave a Comment on Algo Update – TCL, SYD & AMC

Following recent Algo Engine buy signals, we’ve seen solid price performance in TCL, SYD & AMC.

At the time of the algo buy signal, we highlighted these stocks to members as preferred buying opportunities.

However, we now see the stocks as near full value. Yields have compressed relative to 12 month EPS growth and investors should look to take profit, or sell at the money covered call options.

AMC
SYD
TCL

 

 

 

 

SYD, TCL And GPT Show Upside On Rate Reversion

Posted on | by Todd | Leave a Comment on SYD, TCL And GPT Show Upside On Rate Reversion

Over the last two weeks, yield sensitive names like SYD, TCL and GPT have all dropped over 10% from recent highs.

One of the main drivers has been the change in interest rate expectations from G-7 central bankers and the subsequent rise in short-term paper.

Moving forward, we see more likelihood of G-7 rates reverting lower within the year’s range and providing upside potential in the stocks above.

Other stocks we like on the basis of lower local rates are: AMC, WOW and MPL.

We see reasonable upside potential in the names and will employ the derivative overlay strategy (selling covered calls)  to enhance the portfolios returns.

Transurban

Sydney Airport

General Property Trust