Icarus Signal New Entries For Today

This story features NATIONAL AUSTRALIA BANK LIMITED, and other companies. For more info SHARE ANALYSIS: NAB

Update on share prices and consensus price targets.

By Rudi Filapek-Vandyck

There's something not quite right with CommBank ((CBA)) shares trading at a considerable premium vis-a-vis the other Major Four in the Australian share market. This implied premium can easily be established via FNArena's Icarus Signal with CBA shares now trading above consensus price target while the other three are trading at double digit percentages from their target.

To add further insult to the observation, consensus growth forecasts for CommBank are the weakest amongst peers for the two years ahead. Yes, you read that correctly. The weakest.

Not that the outlooks for ANZ Bank ((ANZ)), National Australia Bank ((NAB)) and Westpac ((WBC)) look particularly rosy with projected cash earnings per share growth still in low single digits at best for both years (Westpac is slightly negative for FY12) but "growth" and CBA don't seem to match if current consensus forecasts prove accurate.

With forecasts for a 0.9% decline this year, to be followed by a 1.7% gain, the implication here is that Commonwealth Bank of Australia's profits have been attached to a gigantic ball-and-chain post FY11, with little prospects for relief in the foreseeable future. Dividends are still expected to rise, thanks to a projected higher payout ratio.

Closer inspection shows the differences with growth projections for the Other Big Banks are not substantial, with possible exception of eternal laggard NAB. Westpac, for example, is anticipated to endure a step back to the tune of 1.9% this year, which then opens the way to a projected 3.6% growth pace. On balance the progress booked (if accurate) would only be slightly ahead of what seems to be on the menu for CBA.

So what to make of it all?

What we are witnessing is yet another form of the classic Risk Off trade with investors flocking to CBA instead of the other three for the simple reason that CBA carries less risk. It wasn't that long ago that CBA and ANZ stood ahead of WBC and NAB but it appears a slowing down in Asian economies has pushed ANZ bank shares closer to the laggards and a little farther away from the sector leader.

Note that NAB shares are the only ones that are not in positive territory for calendar 2012 today (though not far off either) while all three peers are in positive territory with ongoing promise of above market average dividend yields (fully franked). Relative undervaluation for NAB shares translates now into the promise of a 8%-plus yield next year.

CBA and OM Holdings ((OMH)) have now joined 32 other stocks in trading above consensus price target. This group also includes the likes of Westfield ((WDC)), Platinum Asset Management ((PTM)), Domino's Pizza ((DMP)) and Telstra ((TLS)).

A total of 25 stocks is now trading close, but still below target including newcomers Bravura Solutions ((BVA)), Charter Hall Retail ((CQR)), Breville Group ((BRG)), Elders ((ELD)), Westfield Retail ((WRT)), APA Group ((APA)) and Flexigroup ((FLX)). I don't really need to repeat my earlier observations about yield stocks and their ongoing market outperformance, do I?

Investors should consider the information and data are provided for research purposes only.

Stocks <3% Below Consensus

Order Symbol Current Price($) Consensus Target($) Difference(%) 1 APA $ 4.81 $ 4.88 1.43% 2 BRG $ 4.33 $ 4.37 0.85% 3 BVA $ 0.15 $ 0.15 0.00% 4 CQR $ 3.29 $ 3.31 0.61% 5 ELD $ 0.22 $ 0.22 1.36% 6 fxl $ 2.49 $ 2.56 2.93% 7 WRT $ 2.85 $ 2.88 1.37%

Stocks Above Consensus

Order Symbol Current Price($) Consensus Target($) Difference(%) 1 CBA $ 51.70 $ 51.53 – 0.34% 2 OMH $ 0.39 $ 0.38 – 2.60%

Top 50 Stocks Furthest from Consensus

Order Symbol Current Price($) Consensus Target($) Difference(%) 1 SWM $ 1.69 $ 3.36 98.76%

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