The reasons why CYBG has rallied +10% in the last week or so (CYB, TPM, AWC)
Another soft session for the Aussie market today, failing to hold onto early optimism and closing in the red. The Telco space (thanks to TPG Telecom + a good +1.11% rally in Telstra) provided most support while weakness was felt amongst the Real Estate stocks. Overall, we had a range of +/- 28 points, a high of 5742, a low of 5713 and a close of 5713, down -7pts or -0.12%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Direct From The Desk – I took a quick look at CYB today and outlined some of the reasons why it’s been strong in recent times – largely comes down to interest rate expectations in the UK and they’re highly leveraged to it. A 1% hike in rates in the UK gives CYB earnings a +30-40% boost. We have 10% of the MM Growth Portfolio in CYB and enjoying the ride. I cover our target level in the update below.
CYBG Daily Chart
TPG Telecom (TPM) – Reported full year numbers this morning that were ahead of market expectations however their guidance was soft and below consensus numbers. The strength in the stock (+5.08%) was interesting and highlights just how negative the market has gotten in terms of positioning within this sector. In terms of the numbers, earnings were better however as you’d expect with a stock building multiple mobile networks, the dividend was cut fairly substantially – although no one in their right mind will be holding this coy for income! Although it doesn’t show in the table below, the outlook was also less upbeat than expected with the company guiding to EBITDA in the range of $800m-815m while the market sits at $844m. Margins held up well and they’re adding customers so not a bad result from TPM over the past 12 months, however forward guidance is the issue + the company is spending money hand over fist in the next few years. Hard to get excited about it despite a good day today + the mkts negative positioning!
TPG Telecom Daily Chart
….and finally we took a nice profit in Alumina (AWC) in both the income and growth portfolios booking gains of 13% and 10% respectively. Not a bell ringer however we continue to think that Material stocks are showing signs of an overall topping pattern while the banks are showing signs of a bottoming pattern. CYB as outlined in the vid above is your suercharged exposure to higher interest rates in the UK, however it’s a good ‘magnified’ example of the sort of stocks we should be in as external influences track back nearer to normality. QE – Interest Rates etc.
Alumina (AWC) Daily Chart
Have a great night
The Market Matters Team
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