Views at a Glance / Income Report; Updating our technical views (NAB, SUN, NCK, CBA, GMA, TLS, PPT, ALF, FMG, IGL, ECX)

By Market Matters 05 September 18

Income Report; Updating our technical views (NAB, SUN, NCK, CBA, GMA, TLS, PPT, ALF, FMG, IGL, ECX)

Market Matters Income Report 5th September 2018

The ASX 200 is having a tough week trading down another 25-points as I start typing this morning’s report, that’s now over 100-points below last week’s decade fresh high at 6373. The news around emerging markets continues to dominate and Australian resource stocks have been caught in the negative downdraft – fortunately we refrained from adding to our FMG holding around $4, a wise move so far with the stock ~7.5% lower at $3.70.

The Income Portfolio served its purpose this week with plenty of dividends being paid out – ALF, FMG, TLS & MXT along with two of the hybrid holdings all went ex-dividend. Despite this the portfolio saw a small pullback or -0.13% for the week, still better off than the index. so far, financial year to date the portfolio has added 2.39% vs its benchmark of 0.98% (RBA +4%), while since inception the portfolio is up 8.54% vs 6.42% for the benchmark.

We also plan to remove the BENPG from the portfolio making room for the NB Global Corporate Income Trust with a 5% weighting. This will increase cash to 3%.

Today we have reviewed our stock holdings from a technical perspective following the recent market weakness.

1 National Australia Bank (NAB) $28.08

NAB along has corrected some of its +10% rally from June with gloss being removed from the sector as investors consider the ramifications of a potential Labor government moving forward.

NAB is now trading on a EST P/E of 12.95 while yielding an attractive 7.05% full franked.

MM still likes NAB moving forward but a pullback towards $27 would not surprise.

National Australia Bank (NAB) Chart

2 Suncorp (SUN) $15.30

SUN has reached our long-term target of ~$16 and we are watching very carefully.

SUN is now trading on a EST P/E of 15.2 while yielding a solid 5.3% full franked.

MM still likes SUN moving forward but will become concerned below $15.10.

Suncorp (SUN) Chart

3 Nick Scali (NCK) $6.45

Nick Scali (NCK) continues to oscillate between $5.60 and $7.60 in what is technically a perfect Neutral Pattern. The company is clearly an excellent operator and has outperformed most of its peers in the retail sector. However, we do have concerns around the sectors ability to grow while the average Australian is being weighed down by the second largest debt to income burden from a global basis perspective.

NCK is now trading on an EST P/E of 11.6x for 2019 while yielding a solid 5.57% full franked.

MM still likes NCK moving forward from an income perspective but capital gains are likely to be limited over the next 18-months.

Nick Scali (NCK) Chart

 

4 Commonwealth Bank (CBA) $70.34

Commonwealth Bank (CBA) paid us a very nice $2.31 fully franked dividend last month but the stock has fallen by more following the recent Liberal Party ructions.

CBA is now trading on an EST P/E of 12.65x for 2019 while yielding an appealing 6.13% full franked.

MM likes CBA moving forward when the yield pops above 6% but obviously a property melt down will be bad for the whole banking sector.

Commonwealth Bank (CBA) Chart

5 Genworth Mortgage (GMA) $2.70

The Australian market has scarred many and GMA has certainly borne the brunt of some of the pessimism trading down over 50% from its 2015 highs. However a struggling housing market can also be good for GMA as banks want to divest risk and mortgage insurance premiums rise.

Technically GMA looks excellent with an eventual target around 15% higher.

GMA is now trading on an EST P/E of 13.35x for 2019 while yielding an almost scary 8.86% full franked.

MM likes GMA from both a yield and potential capital gain perspective.

Genworth Mortgage (GMA) Chart

6 Telstra (TLS) $3.00

Telstra (TLS) has been on a rollercoaster ride over recent weeks following the TPG Telecom (TPM) – Vodafone merger with the effect clearly net positive as we saw a 20% appreciation over just 2 weeks. The stock has pulled back recently but the shares traded ex-dividend late last month, 11c fully franked.

TLS is now trading on an EST P/E of 14.2x for 2019 while yielding an excellent 7.35% full franked.

MM still likes TLS moving forward from an income perspective plus we expect it will outperform if / when equities do finally experience a correction.

Telstra (TLS) Chart

7 Perpetual (PPT) $43.40

Perpetual Ltd (PPT) has recovered well since the lows of June but we are becoming concerned by the rejection from the $46 resistance area. We are watching PPT closely at present.

PPT is now trading on an EST P/E of 14.62x for 2019 while yielding an appealing 6.22% full franked.

MM obviously likes PPT’s yield but we have become wary of where the underlying share price heads next.

Perpetual (PPT) Chart

8 Australian Leaders Fund (ALF) $1.06

The Australian Leaders Fund (ALF) has had a quiet 18-months trading in a relatively tight range and its achieved our initial $1.10 target area.

The ALF is currently yielding an appealing 5.66% full franked.

MM is neutral ALF from a technical perspective around current levels.

Australian Leaders Fund (ALF) Chart

9 Fortescue Metals (FMG) $3.68

Fortescue (FMG) has suffered along with the sector / emerging markets, fortunately we didn’t pull the trigger to average our small holding as was previously considered.

FMG is now trading on an EST P/E of 8.9x for 2019 while yielding an appealing 6.27% full franked.

MM is currently neutral FMG.

Fortescue Metals (FMG) Chart

10 IVE Group (IGL) $2.24

The advertising and marketing business IVE Group (IGL) continues to trade sideways which is fine by us while it yields 6.43% fully franked.

IVE is now trading on an EST P/E of 8.39x for 2019 while yielding an appealing 6.43% full franked.

MM remains very comfortable with our IGL holding in the Income Portfolio.

IVE Group (IVE) Chart

11 Eclipx Group (ECX) $2.66

Vehicle leasing / fleet management business Eclipx (ECX) certainly scarred us and many others in the market last month but its 60% bounce has rewarded our patience in not hitting the panic button.

ECX is now trading on an EST P/E of 10.58x for 2019 while yielding an appealing 5.9% full franked.

MM remains comfortable with ECX at current levels.

Eclipx Group (ECX) Chart

Conclusion(s)

From a technical standpoints, our most concerning position remains PPT, while we are most positive GMA in the Income portfolio.

Have a great day

James / Harry &  the Market Matters Team

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.

Disclaimer

All figures contained from sources believed to be accurate.  Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy.  Prices as at 05/09/2018

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