ALGO Buy Signal For AZJ

Our ALGO engine triggered a buy signal for Aurizon Holdings on Tuesday at $4.24.

This “higher low” chart pattern is referenced to the low of $4.10 posted on June 13th.

AZJ’s FY2018 results, which were released last week, showed a modest 1% decrease in revenue from last year, but the underlying EBIT of $940 million was up 6% from 2017.

With a total dividend of 27 cents, the stock has an effective yield of 6% at current prices.

We expect the initial price target of $4.60 to be reached over the medium term.

AZJ

AZJ – A Buy/Write Strategy For A 10%+ Return

Our Algo Engine triggered a buy signal for AZJ going into yesterday’s ASX close.

With the stock trading $4.22 today, we now look to accumulate AZJ and sell the Nov $4.40 call to add an additional $0.10 of cash flow for the next 3 months.

AZJ next goes ex-div in Feb 19 for $0.14.

Aurizon Holdings

Algo Update – Short AZJ

Our Algo Engine flagged the recent “lower high” structure in AZJ, and we’ve been highlighting the trade on the blog as one of our preferred shorts.

The stock is $0.40 lower today from last weeks $5.40 high.

Our concern with AZJ, relates to the unsustainable payout ratio.

The downside momentum looks to be increasing for a move to the early October lows near $4.75.

AZJ

 

AZJ – Is $5.20 a Shorting Level?

Although we don’t  have a current Algo Engine short signal in AZJ, we remain cautious of the 100% payout ratio the company continues to maintain.

Investors should look at the short side with a stop loss above the $5.23 high.

Chart – AZJ

 

Aurizon Holdings – FY17 Earnings

AZJ reported its FY17 EBIT of $836m and guided towards  FY18 EBIT growth of 8 – 11% or $900 – 960m.

Losses in both Intermodal and bulk divisions were higher than market expectations. Dividends were reduced to $0.225 for the year but this was offset by the company announcing a $300 million share buy back.

We feel FY18 EPS growth may be optimistic and the reduced dividend is something we’ve been flagging as a potential concern coming into this result.

Assuming dividends remain flat over the next 12 months, it places AZJ on a forward yield of 4.4%.

Chart – AZJ

 

 

 

 

AZJ – Selling Pressure

AZJ has recognised an A$526m impairment to its Bulk assets, and continues its Inter-modal review.

AZJ noted continues to face challenging market conditions and we feel investor sentiment will be negative leading into the FY17 results on 14 August 2017.

AZJ has previously guided towards FY17 EBIT within A$800-850m range.

Regular viewers of the ASX top 50 video market report, will recognise AZJ as a stock we’ve been warning about, in 2017. Our concern relates to the sustainability of the high dividend payout ratio and the probability of the company being forced to announce a cut at the August result.

Chart – AZJ

 

 

AZJ FY16 Earnings Result

AZJ reported FY16 EBIT of $870 (down 10%).  AZJ has a challenging outlook on the revenue front (9% decline to $3.45b) and their 100% payout ratio means that dividends are likely to be cut in the near future. The company remains focused on cost cutting and $130m in savings were achieved in the past 12 months, helping to reduce the impact of softer haulage volumes.  

FY16 NPAT of $510m (down 16%) was impacted by higher interest expenses. Dividends per share (DPS) of $0.24.  

FY17 EBIT guidance of $900m.

We’ve been on the short side of this trade and we now look to lock in profits.

AZJ

Short AZJ.ASX

Short AZJ.ASX

AZJ

Time to look at AZJ on the short side. $4.80 range is the target I’ve been waiting for, the stock has pushed higher against a backdrop of selling in the broader equity market but with no revenue growth, 100% payout ratio on the dividend, I think AZJ is susceptible to a pullback into the July/Aug earnings result. Target pullback to $4.40 – $4.50