Australia & NZ Archives - Page 20 of 102

November 29, 2018

ASX 200 miners tumble

ASX 300 Metals & Mining Index broke support at 3500, signaling a primary decline with a target of 3100. A bearish sign for the broad ASX 200 index.

ASX 300 Metals & Mining

The ASX 300 Banks Index is consolidating above primary support at 7000. Recovery above 7450 would indicate another bear rally but the primary trend is down and breach of 7000 would signal a decline with a long-term target of 5000.

ASX 300 Banks Index

The ASX 200 continues to display long tails and a bullish divergence on Twiggs Money Flow, signaling buying interest. Recovery above 5950 would suggest another advance but that is unlikely in the current climate. The primary trend is down and breach of primary support at 5650 would signal a decline with a target of 5000.

ASX 200

I have been cautious on Australian stocks, especially banks, for a while, and hold 40% cash in the Australian Growth portfolio.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

November 23, 2018November 23, 2018

ASX 200 bullish divergence

The ASX 300 Banks Index respected primary support at 7000 but only recovery above 7450 would indicate another bear rally. Declining peaks on the Trend Index continue to warn of selling pressure. Breach of 7000 would signal a primary decline with a long-term target of 5000.

ASX 300 Banks Index

ASX 300 Metals & Mining Index is again testing support at 3500. Breach would be a bearish sign for the broad ASX 200 index. Primary down-trends on the two biggest sectors would be likely to drag the overall index into a similar down-trend.

ASX 300 Metals & Mining

On the ASX 200, a long tail and bullish divergence on Twiggs Money Flow indicate strong support. Recovery above 5950 would suggest another advance but that is unlikely in the current climate. Breach of primary support at 5650 would signal a primary down-trend with a target of 5000.

ASX 200

I have been cautious on Australian stocks, especially banks, for a while, and hold 40% cash in the Australian Growth portfolio.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 22, 2018

Coles Group Limited (COL)

Coles commenced trading on the ASX on 21 November 2018, after the spin-off from Wesfarmers was approved by the Supreme Court of WA.

Trading is initially on a deferred settlement basis, with the demerger expected to be implemented on 28 November 2018.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 16, 2018November 16, 2018

Banks threaten ASX 200 fall

The ASX 300 Banks Index is testing primary support at 7000. Declining peaks on the Trend Index warn of selling pressure.

ASX 300 Banks Index

Breach of 7000 would signal another primary decline with a long-term target of 5000.

ASX 300 Banks Index

ASX 300 Metals & Mining Index continues to consolidate between 3500 and 4000. Breach of 3500 would be a bearish sign for the broad market ASX 200 index. Primary down-trends on its two biggest sectors would be likely to drag the overall index down.

ASX 300 Metals & Mining

On the ASX 200, Twiggs Money Flow is holding above zero, suggesting light volume on the declines. Breach of primary support at 5650, however, would confirm a primary down-trend.

ASX 200

Offering a target of 5000.

ASX 200

I have been cautious on Australian stocks, especially banks, for a while, and hold over 30% cash in the Australian Growth portfolio.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 9, 2018November 9, 2018

Bank & miners rally should lift ASX

The ASX 200 displays a cautious rally, with short candles reflecting an absence of buyer enthusiasm. But bullish divergence on 21-day Twiggs Money Flow indicates longer-term confidence.

ASX 200 with Volume

The monthly chart shows similar rising troughs on 13-week Twiggs Money Flow, reflecting buyer confidence. Recovery above 6000 would be bullish, suggesting another advance. Respect of resistance is less likely, but would warn of another test of primary support at 5650.

ASX 200

The ASX 300 Banks Index respected primary support at 7000, while bullish divergence on 13-week Trend Index indicates buying pressure. Expect a bear rally to test resistance at 8000. The primary trend, however, is down.

ASX 300 Banks Index

The ASX 300 Metals & Mining Index is consolidating above 3400 but rising iron ore prices are likely to lift the index. Recovery above 3800 would signal another advance.

ASX 300 Metals & Mining Index

The All Ordinaries Gold Index again respected resistance at 5500 and another test of primary support at 4500 is likely. Breach would warn of a primary down-trend with a target of 3500.

All Ordinaries Gold Index

I remain cautious on Australian banks and hold over 30% cash in the Australian Growth portfolio.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

November 3, 2018

ASX 200 support but bank decline continues

The ASX 200 continues to find support, with the latest large red candle and subsequent doji, testing primary support at 5650, accompanied by strong volume (indicated by red on the volume chart). Similar buying pressure (accumulation) is evident on 11th and 12th October.

ASX 200 with Volume

This is sometimes lost on the weekly chart but we can see Twiggs Money Flow troughs below have leveled out above the zero line, reflecting a mild bullish divergence (not as strong as rising Money Flow troughs but still a reflection of support). What is also evident on the daily chart (above) is how this week’s rally petered out, with shorter candles, awaiting further direction.

ASX 200

The ASX 300 Banks Index is testing primary support at 7000, the same level as its October 2009 peak. Declining peaks on the Trend Index warn of further weakness and breach of 7000 would offer a long-term target of 5000.

ASX 300 Banks Index

I have been cautious on Australian stocks, especially banks, for a while, and hold over 30% cash in the Australian Growth portfolio.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 27, 2018

ASX 200 at primary support

The ASX 200 is testing primary support at 5650. Declining Trend Index peaks warn of selling pressure and breach of 5650 would warn of a primary down-trend.

ASX 200

Banks are weighing on the index, with the ASX 300 Banks index testing support at 7000. Breach is likely and would offer a long-term target of 5000.

ASX 300 Banks Index

I have been cautious on Australian stocks, especially banks, for a while, and hold over 30% cash in the Australian Growth portfolio.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 20, 2018

ASX finds support

The ASX 200 found support around 5900, with a long tail indicating buying interest. Breakout of Twiggs Money Flow above the descending trendline would confirm. Breach of support at 5750 is unlikely but would warn of a primary down-trend.

ASX 200

Banks are weighing the index down, with the ASX 300 Banks index retracing to test resistance at its former primary support level of 7400. Respect would confirm another decline. Descending Trend Index peaks below zero warn of selling pressure.

ASX 300 Banks Index

I remain cautious on Australian stocks, especially banks, and hold over 30% cash in the Australian Growth portfolio.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 10, 2018

ASX 200 correction

The ASX 200 broke support at 6120/6150, signaling a correction. Expect support at the rising long-term trendline at 6000. Penetration of the trendline would warn that the primary up-trend is faltering.

ASX 200

Banks lead the decline, with ASX 300 Banks index headed for a test of primary support at 7300. A Trend Index peak below zero would warn of strong selling pressure. Breach of 7300 would signal another decline. Follow-through below 7000 would present a long-term target of 5000, the 2011 low.

ASX 300 Banks Index

I am cautious on Australian stocks, especially banks, and hold over 30% cash in the Australian Growth portfolio.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

October 8, 2018October 10, 2018

NEXTDC Limited (NXT)

Stock: NEXTDC Limited
Symbol: NXT
Exchange: ASX
Latest Price: $6.13
Market cap: $2.1 billion
Currency: AUD
Financial Year: 30 June
Date: 8 October 2018

Sector: Technology
Industry: Data Storage

Investment Theme: Long-term Growth
Structural Trends: Rising connectivity and online services

Company Profile

NEXTDC is an Australia-based and Australia-focused technology company providing data center outsourcing solutions through a nationwide network of Tier III and Tier IV facilities.

Markets & Competitors

NEXTDC provides enterprise-class colocation services to local and international organizations. Clients include:

Government agencies and private enterprise concerned as to whether off-shore data storage meets Australian Privacy Act and/or requirements for the protection of sensitive information;
Global cloud providers such as Google, Amazon, Microsoft, IBM and Oracle;
Large IT service providers such as Wipro, Tech Mahindra, NEC, Dimension Data, Fujitsu, NTT and Data#3; and
Telecommunications providers such as Optus, Telstra, AAPT, Vocus, TPG, PCCW, Superloop and CenturyLink.

Financial performance

Revenue Growth

NEXTDC shows steady revenue growth over the past 5 years as it expands its data centers across Australia.

Revenue per share

Net assets expanded to $1.2 billion in FY 18 from $282 million in FY15, funded by a mix of new equity and debt. Further expansion is planned for FY19:

NEXTDC recently announced plans to acquire three new sites in Australia for additional data centres in Sydney, Melbourne and Perth: S3 80MW, M3 80MW and P2 20MW – these new facilities in Sydney and Melbourne will be the largest ever built in Australia. That takes NEXTDC’s total future capacity to over 300MW.

Return on Assets/Equity

While revenue growth may appeal, return on assets is low at 0.64% in FY18 (FY17: 3.33%*). Return on equity is not much better at 0.95% for FY18 (FY17: 5.48%*). EBITDA/Total assets fell to 5.06% in FY18, from 5.75% in FY17.

Return on Equity and Return on Assets

Utility Origin Energy (ORG) earns similar rates of return at 0.88% (ROA), 1.88% (ROE) and 11.9% (EBITDA/TA).

*FY17 results were inflated by a $10.2 million tax credit.

Weaknesses

Development of new and existing data centers is capital intensive and sometimes undertaken without pre-sales commitment from customers, and there is a risk that there is not enough demand to achieve a sufficient return on investment.

According to various recent industry cyber risk reports, cyber incidents and their financial impacts are increasing significantly year on year and cyber criminals are targeting small and large businesses alike. To mitigate these risks, NEXTDC has implemented an information security management system based on ISO 27001 as well as undertaken ongoing penetration and vulnerability tests.

Catastrophic failure or equipment malfunction at a data center could result in NEXTDC not being able to provide power and cooling to support customers’ equipment, thus breaching service agreements and incurring contractual liabilities. To address this risk, NEXTDC’s data centers are designed and built with significant redundancy in place.

Technical Analysis

Twiggs Momentum has declined to a still-respectable 67% but 50-week Trend Index crossed below zero after a bearish divergence, warning of strong selling pressure.

Twiggs Momentum and Trend Index (50 week)

Conclusion

Do not buy. NEXTDC earns utility-level rates of return on assets and does not justify its current high forward price-earnings multiple of 78. Long-term revenue growth will require significant investment in new data centers, funded in part by new equity issues which dilute returns to existing shareholders.

Disclosure

Staff of The Patient Investor may directly or indirectly own shares in the above company.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.