Scentre Group – Algo Update

Scentre is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.

We’ve been promoting the buying opportunity in SCG and the stock has now rallied 10%+ from the May low.

SCG is likely to generate low levels of earnings growth, however, the weak backdrop for global bond yields and the share buyback program that Scentre Group is running, were both catalysts to support our “buy” rating.

The stock is now getting close to reflecting fair value and investors should consider taking profit or selling covered calls.

 

Scentre Group – Buy

Scentre is under Algo Engine buy conditions and is a current holding in the ASX 100 model portfolio.

SCG goes ex-div $0.11 on the 14th of August.

Low global bond yields and the  announced share buy back by SCG, will help underpin downside risks. We see value emerging, following the recent correction from $4.15 to Monday’s low at $3.84.

Scentre Group – Algo Update

Scentre is under Algo Engine buy conditions and  a name we’ve recently drawn our readers attention to, as a buy write.

The share price has since rallied from $3.80 to $4.08. We still  see scope for gains from a buy write strategy, which captures the upcoming dividend .

SCG goes ex div $0.11 on the 14th of August.

Low global bond yields and the  announced share buy back by SCG, will help underpin downside risks.

Scentre Group – Buy to generate 10% cash flow

Scentre Group announced an on-market buy-back of outstanding shares, the Company intends to complete the buyback within 12 months. The buy-back will add incremental support to our suggested buy-write strategy.

We recommend buying Scentre and selling covered call options. The stock goes ex-div $0.11 on the 14th of August.

Selling a Sept out of the money call will generate an additional $0.12 per share of income.

Real Estate Investment Trusts – Outperform

Our Algo Engine has the following group of REITs under  buy conditions CHC, DXS, GMG, GPT, LLC, SCG, & VCX. These names all sit in the ASX 100 model portfolio.

Chart Hall Group is the best performing REIT within our models, up 54% after holding it for 574 days.

REITs have performed very well in recent weeks, due to the  moderating outlook for bond yields. If yields remain under pressure, defensive asset
classes, such as A-REITs and utilities will outperform through 2019.

A slowing global growth picture, low bond yields, rising equity market volatility are generally seen as positive catalysts for defensive sectors. The recent run up in these names means much of the value has already been captured. Therefore, we recommend investors use covered call options to enhance the income return.

As an order of preference, we feel large scale logistics, followed by office and then residential. 

EPS growth for the sector is running around 4 -5% and dividend yields are near 5% also.  Add a covered call and you’re able to achieve 10% annualised cash flow.

For more detail on covered call strategies please call of our office on 1300 614 002.

CHC

SLF Property ETF

 

 

XJO – The 5941 Level Is Technical Resistance

The XJO has formed a “lower high” pattern within the existing Algo Engine buy signal structure.

The market has rallied 6% from the recent buy signal but we’re now mindful of the recent break of the “higher low” structure, as circled on the chart below.

5941 is resistance for the XJO and whilst the market remains below this level, some caution is required.

Names that remain supported within today’s broad market sell off include, AGL, CTX, GPT, WES, SCG, TCL, HSO & WOW. We remain cautious on the banks and select resource names .

XJO

SCG & SYD – Approaching Oversold Levels

During the recent run-up in US interest rates, yield sensitive names have faced heavy selling pressure over the last 8 weeks.

However, as a “risk off” wave now appears to be hitting equity markets, it’s likely bond yields will consolidate, and in the process provide some selling reprieve for the yield sensitive names.

SCG and SYD are two examples where we now feel the prices reflect good value.

Sydney Airport

Scentre Group

Scentre Group – Now On The Radar

Our Algo Engine generated a buy signal in SCG going into Friday’s close at $3.97

The chart below shows the value range and SCG is now on our radar as a defensive buy-write strategy.

A combination of the 22 cent annual dividend and the option premium is generating 10 – 12% cash flow on an annualised basis.

Scentre Group

Stress Is Building In the Inter-bank Lending Market

While much of the financial media has been pointing to the threat of a trade war as the source of recent market volatility, we have also noticed rising stress in the inter-bank funding market.

As illustrated in the chart below, the LIBOR-OIS spread has spiked from 22 basis points to almost 60 basis points over the last 5 weeks.

The LIBOR-OIS spread reflects the amount of premium one bank requires from another bank to loan them money.

In simple terms, when banks start to question the financial health of other banks, the spread widens.

Rising funding costs are a headwind to global equity markets, which in turn acts to dampen bond yields; especially in the longer end of the curve.

The practical impact of this dynamic has been seen in the recent firming in some of the local interest sensitive names.

At these levels, we prefer the long side of SYD, TCL, SCG and WFD

LIBOR-OIS Spread

Sydney Airport

Transurban

Scentre Group

Westfields