Tuesday, 19 May 2015

Royal Dutch Shell (RDSB) ... double dipping

Tuesday 19th May 2015

In March last, I took small turn in Exxon Mobil calls and a decent return in Royal Dutch Shell calls ... If it ain't broke.

On the RDSB trade I bought April £22 calls at 8.5 pence a lot and sold them a few days later at 22 pence. In the event, they continued to rally a fair bit higher. Having revisted RDSB, I can't help but reckon there's another chance of a similar trade. 

As the charts highlight below:
  • The market reaction to the BG announcement, appears a little harsh. 
  • In particular there's been a sizeable disconnect from BP, which historically has proven short lived. 
  • RDSB can seemingly turn on a dime and rally sharply, typically c. 10% over a 2 to 4 week period. 
  • On a consensus forward P/E basis, RDSB is the cheapest among a number of its peers; a 20% discount to the peer group average below. 
  • Despite trading on a 20% P/E discount to the average of its peers, RDSB yields the highest prospective dividend according to Bloomberg's consensus; at c. 6%.  
  • Its 200d moving average is at 2,258p/shr; 12% higher. 
  • There may be some technical support at current levels; c. 2,000p/shr. 

On the basis of the above, I snaffled a few June £21.50 calls at 4.5p/lot. They seemed good value to me.
RDSB share price
Source: Bloomberg
RDSB as compared to BP/ - historically close correlation
Source: Bloomberg
RDSB - regularly rallies sharply,
average of 10% typically over 2 to 4 week period as highlighted in green above
Source: Bloomberg
RDSB forward P/E ratio as compared to peers -
a 20% discount to the peer group average above
Source: Bloomberg
RDSB prospect consensus dividend yield as compared to peers -
the highest yield as compared to peers above
Source: Bloomberg 
Disclaimer: The information, discussions or topics referred to on this blog should in no way be considered “advice” to buy or sell anything. The information which may be referred to is freely available in the public domain and where required the source of information is referenced to for verification. While every effort has been made to ensure the veracity of any information contained within this blog, the author accepts no responsibility for the accuracy of any information contained within this blog or for the sources of information which may be referred to. Readers are responsible for their own actions and interpretation of the information contained within this blog. 

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