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

ALGO Update: Upward Bias For Sydney Airport

Our ALGO engine has been long SYD since July 12th from $7.05.

After a brief rally to $7.60 in late August, the share price is just below $7.00.

SYD reported solid passenger growth in August with a 5.1% increase in travellers year to date.

For H1 2018, SYD spent $180 million on capital upgrades aimed at increasing capacity including landing strip and terminal expansions.

We see good technical support in the $6.70 area with an upside target of $7.80 over the medium-term.

Sydney Airport

 

 

ALGO Buy Signal For Sydney Airport

Our ALGO engine triggered a buy signal for Sydney Airport into yesterday’s ASX close at $7.05.

The “higher low” chart formation is referenced to the $6.90 intra-day low posted on May 17th.

SYD has now been added to our ASX Top 50 Model portfolio.

As a medium-term strategy for investors, we are looking to buy SYD shares at current levels and sell the $7.25 Calls into March.

The option is current priced at 30 cents and SYD will go ex-dividend for 18 cents in late December. As such, this Buy/Write strategy would add 48 cents of value into client portfolios.

Sydney Airport

 

ALGO Sell Signal On GPT……3 Yield Names Go Ex-Div On Thursday

Our ALGO engine triggered a sell signal on GPT on June 21st at $5.36.

This “lower high” pattern is referenced to the high of $5.49 posted earlier this year on January 5th.

It’s worth noting that two other yield sensitive names, TCL and SYD also triggered ALGO sell signals last week. Furthermore, all three of these stocks will go ex-dividend on Thursday, June 28th.

As illustrated in the charts below, all three of these stocks have been in an uptrend since March.  We expect this pull back into their dividend should allow for better entry points for medium-term investors.

We see initial support for GPT at $4.70, with a stronger chart point at $4.50.

GPT

Transurban

Sydney Airport

Enhance Cash Flow On TCL And SYD

Our ALGO engine triggered a sell signal on both SYD and TCL into yesterday’s ASX close at $7.47 and $12.20, respectfully.

We suggest either taking profits on the stock or using the option strategy  outlined below.

With both of these names going ex-dividend on June 28th, we suggest selling a call option above the market to increase cash flow and enhance the return.

For TCL, we are looking to sell the October $12.50 call for around 24 cents and collect the 28 cent dividend.

For SYD, we will sell the October $7.75 call for around 12 cents, which will keep investors in the stock to collect the 18.5 cent dividend.

Transurban

Sydney Airport

ALGO Sell Signal For Sydney Airports

Our ALGO engine triggered a sell signal on SYD into yesterday’s ASX close at $7.37.

This “lower high” pattern is referenced to the intra-day high of $7.50 on December 19th.

The company expects to meet distribution guidance of 37.5 cents per share, which is up from 34.5 cents last year.

At $7.40, SYD shares are trading on a forward P/E of 44 X and are paying an annual dividend yield of 5%, which is un-franked. 

As such, we see a pull back in the shares price as corrective within a broader uptrend, and expect a buy signal around the $6.80 level.

Sydney Airports

 

 

 

 

 

Sydney Airports – generating 10%+ cash flow

Sydney Airports reported March quarter traffic growth of 6%, with International up 11% and domestic up 3.5%.

Total passenger volume was up 4% on the same time last year.

We’re comfortable buying SYD and selling a $7.00 call option to enhance the yield.

A combination of the dividend and the option premium is generating 10%+ cash flow on an annualised basis.

SYD goes ex-div on the 29th June for 16.5 cents per share.