Computershare – Algo Engine Sell

Posted on | by Leon Hinde

Computershare is under Algo Engine sell conditions and we continue to see downside risks to earnings and consensus valuations. Bond yields are well below the input levels used by analysts 6 months back, when forming the forecast valuations.

With the stock trading 20x earnings on a 2.3% yield, we see little reason to own this one.

 

 

Coles – Valuation Review

Posted on | by Leon Hinde

Coles Group is under Algo Engine sell conditions following the lower high at $12.70.

The group announced their 3Q19 sales growth which came in ahead of market expectations. Food and liquor sales grew at 3.3% in 3Q19, however, management indicated that they expect to see the growth moderate back to 2%, or in line with historical growth rates.

A review of the valuation forecasts show FY20 revenue of $40bn, EBIT $1.34bn, on EPS of $0.68 and DPS of $0.55, placing COL on a forward yield of 4.8%.

We see limited downside risk for the share price and we consider selling at-the -money-call options as an alternative to selling the underlying stock.

 

 

 

REITs in Review

Posted on | by Leon Hinde

A number of REITs announced their 3Q19 operational updates yesterday.

Dexus forecast 5% underlying earnings growth.  reaffirmed its FY19 guidance for 5% growth.

Mirvac indicated their FY19 guidance will be in the 3 – 4% growth range with DPS growth at 5%.

Across the sector it is likely residential and retail remain the weak spots, whilst  office and industrial will continue to provide strong growth. Softening of the retail sector was evident in GPT’s March quarter business update.

Despite GPT’s exposure to retail, the office exposure along with the groups strategy to expand the footprint in logistics, makes the stock one of our preferred opportunities within the REIT sector.