Tag: Australian Market

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Funds Funds

Fidelity Australian Opportunities Tenured stock-picker with a unique approach

Approach 

Fidelity analysts use a variety of proprietary models and valuation methodologies to assess earnings, cash flows, and value. Site visits and extensive company management meetings play a critical role in the investment process, as fidelity believes these provide valuable insights into a company’s future prospects.  Each investment analyst covers around 25 companies, grouped along sector lines but sectors are rotated every three to four years. The overall portfolio tends to exhibit a growth bais. 

Portfolio

Fidelity Australian Opportunities is an all-cap domestically focused approach. The portfolio typically holds 40 – 70 stocks with core holdings in large-cap names but a longer portfolio tail of small-cap names. As a result, the average market cap slightly lower than other large-cap peers and around 50-55% of the portfolio sits in the top 10. This means active share hover around 45-50%. Positioning is aligned with a long term view of companies, and the historical average annual turnover has been moderate at about 30-50%, which will also make it reasonably tax effective.

People

Howitt was promoted to portfolio manger soon after joining fidelity in 2004 as an analyst covering banks, insurers and diversified financials. Prior to fidelity, she was an analyst/portfolio manager in AMP capital’s value team and also worked as an consultant with the Boston Consulting Group. Support comes from a wide range of local and global sources, including the Sydney based investment research team and the implementation of an assistant portfolio manager. Each analyst coverage responsibilities for a specific sector and these rotate every three to four year to ensure the analysts continued to produce well rounded insights. 

Performance 

Fidelity Australian Opportunities continues to impress long-term track records. The year 2018 was more Tricky, as positions in blue sky and Lynas materially detracted. The strategy responded well in 2019 as Lynas recovered, while CSL and Wisetech continued their strong appreciation. Despite the volatile markets during calendar 2020, performance was particularly strong, beating the benchmark and most peers. The sector Neutral-Approach protected capital on the downside, with the strong showings from Lynas, Mineral Resources, and BlueScope. Despite no significant sector bets, positions in the materials sector played a key role in the Outperformance, with Howitt’s stock picking talents on full display.

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About the Fund

Fidelity Australian Opportunities continues to impress with its quality management and unique approach, bolstered by the firm’s global footprint and top-tier research capabilities. Despite the numerous benefits that come with size and scale, the large footprint of the Fidelity group does create limitations for portfolio construction. Where the firms owns 10% of a company, strategies under the fidelity banner can no longer invest in the stock, though it’s a small price to pay for fidelity’s resources. An adaptive process and tenured portfolio manager set the strategy apart, offering an solid choice for diversified exposure to Australian equities.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Daily Report Financial Markets

Australian Market Outlook – 17 September 2021

Australian-Market-Outlook-17-September-2021Download

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Daily Report Financial Markets

Australian Market Outlook – 16 September 2021

Australian-Market-Outlook-16-September-2021Download

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Daily Report Financial Markets

Australian Market Outlook – 15 September 2021

Australian-Market-Outlook-15-September-2021Download

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Global stocks Shares

Sweetened Proposal for Sydney Airport Looks Like Enough; FVE Up to AUD 8.25, Shares Fairly Priced

Long distances between major cities in Australasia means flying is a preferred mode of travel. Despite a rival airport scheduled to open in 2026, we expect Sydney Airport to remain the favoured terminal for business and long-haul leisure travellers for the next decade. This is due to existing infrastructure which is costly to replicate, and proximity to the CBD, affluent suburbs and tourist areas, and connections to roads and public transport. 

Revenue is about evenly sourced from aeronautical and other operations. Aeronautical fees are mostly on a per-passenger basis, with base charges negotiated with airlines every five years. Retail is the largest non-aeronautical contributor, accounting for about 23% of pre-COVID-19 revenue. Duty-free and luxury shopping has threats, given the ability for e-commerce sites to offer lower prices than duty-free, and ESG risks given the reliance on tobacco and alcohol sales. However, in the long run, risks materialising in any particular sub-category should be offset by passenger growth boosting defensive categories such as food, car-rental, parking, souvenirs, and holiday items

Regulators have no power to intervene other than to recommend more regulation. Rather than pushing for more onerous regulation, government and regulators could foster more competition via the new Western Sydney Airport, though we believe this will take more than a decade. 

Catering to the growing middle-class in neighbouring countries remains a growth opportunity. Population and passenger growth should aid Sydney Airport as it can increasingly allocate slots away from domestic and toward international flights. International flights account for about 40% of passengers, but about 70% of passenger revenue.

Sweetened Proposal for Sydney Airport Looks Like Enough; FVE Up to AUD 8.25, Shares Fairly Priced:

Sydney Aviation Alliance has sweetened its pitch for Sydney Airport, now proposing a deal at AUD 8.75 per share. While the new price is only 3.5% higher than the previously rejected AUD 8.45, this time Sydney Airport granted due diligence and said it would support a binding offer at that price. A conclusion is unlikely until 2022 given it will require 4 weeks of due diligence, a binding bid from the consortium, a shareholder vote, and regulatory investigations. A lot could happen between now and then; however, the most likely outcome is a takeover proceeding at the proposed price.

We raise our fair value estimate to AUD 8.25, ascribing a 75% probability a deal proceeds at AUD 8.75, and a 25% weighting to our underlying valuation in the absence of a bid, which is unchanged at AUD 6.70. 

We understand the need for due diligence given the hefty price tag, however, we think it unlikely the due diligence process will uncover anything to disrupt the offer. Sydney Airport is well run, and its assets and books have been scrutinised closely by many parties, and its now public listing. It also has a huge debt load that attracted close scrutiny from creditors in 2020, as well as air safety and security bodies scrutinising its physical assets.

A more likely disruptor is economic or coronavirus news. We maintain our view that regulatory authorities are unlikely to throw up insurmountable concerns about aviation safety, national security, foreign investment, or competition. Competition is the most likely hurdle, if any, given consortium member stakes in other airports.

Bulls Say

  • Sydney Airport’s convenience to the business district and coastal suburbs of Australia’s largest city makes it near impossible to replicate. Rising incomes in nearby nations, and Australia’s growing population bodes well for long-term passenger numbers.
  • A light regulatory regime is unlikely to become significantly more onerous.
  • Sydney Airport has spare landing slots, plus the ability to reallocate slots away from domestic and toward more lucrative long-haul international flights, as passenger traffic grows.

Financial Strength

Financial Strength Sydney Airport’s financial health is fair, with relatively defensive income offset by high debt.Net debt/EBITDA was a high 14 times in fiscal 2021, up from 7.2 in 2019.Management acknowledged the high debt and took appropriate actions to reduce leverage, including cancelling distributions in 2020, delaying capital expenditure, securing additional bank facilities, and raising AUD 2 billion in equity in the September quarter of 2020. We expect calendar 2021 to be the low point for EBITDA, with 2022 forecast to be significantly higher due to fewer and less strict lockdowns. 

Company Profile

Sydney Airport has a lease to operate the facility until 2097. As Australia’s busiest airport, it connects close to 100 international and domestic destinations, and handled more than 40 million passenger movements annually until COVID-19 border restrictions in 2020. Regulation is light, with airports setting charges and terms with airlines, and the regulator monitoring the aeronautical and car park operations to ensure reasonable pricing and service. Retail and property operations are free from regulatory oversight, though political and commercial pressure limits Sydney Airport from overly flexing its pricing muscle, particularly as the government owns the rival Western Sydney Airport, set to open in 2026.

(Source:Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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LICs LICs

WCM Global Growth Increases Final Dividend 25%

Recently, WAM Global Growth provides 2.5 percent per share. 

WCM Global Growth Limited ((WQG)) reported a net operating profit after tax of $48.4 million for fiscal year 21. For FY21, the investment portfolio returned 26.8 percent, with total shareholder returns of 35.6 percent.

The Company declared a final dividend of 2.5cps for FY21, fully franked, a 25% increase over the FY20 final dividend. This represents a 4.5cps full-year dividend, a 12.5 percent increase over the FY20 full-year dividend.

The Board has announced that the next two dividend payments will be increased, with an FY22 interim dividend of 2.75cps and a final FY22 dividend of 3.0cps. These dividends will most likely be fully franked. The increased dividends will be subject to corporate, legal, and regulatory considerations, as well as the Company having sufficient profit reserves and franking credits.

WQG issued Bonus Options on a one-for-three basis in February 2021. The options have an exercise price of $1.50, which represents a 7.4 percent discount to the closing share price on August 19, 2021. The exercise period for the options is until August 31, 2022. 

Shareholders who exercise their options by COB 17 September 2021 and continue to hold the shares on the relevant record date will be eligible for all of the dividends listed above.

Company Profile 

WCM Global Growth Limited (WQG or the Company) is a listed investment company investing in global equities. The Company provides investors with access to an actively managed portfolio of quality global companies found primarily in the high growth consumer, technology and healthcare sectors. The portfolio is managed by WCM Investment Management (WCM), a California-based specialist global equity firm with an outstanding long-term investment track record. WCM’s investment process is based on the belief that corporate culture is the biggest influence on a company’s ability to grow its competitive advantage or ‘moat’. 

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Daily Report Financial Markets

Australian Market Outlook – 14 September 2021

Australian-Market-Outlook-14-September-2021Download

Categories
Daily Report Financial Markets

Australian Market Outlook – 13 September 2021

Australian-Market-Outlook-13-September-2021Download

Categories
LICs LICs

Wilson Asset Management Reports Record Operating Profit and Maintains Final Dividend

Currently, last traded price is $2.345. Till June 2021 net profit is 266.62 Million while Revenue is 379.57 Million.

Till 31 July 2021, Pre – tax net tangible asset is $1.89 while post – tax net tangible asset is $1.93 and Annualised dividend yield is 7 percent.

Gross asset of Wilson Asset Management Capital Limited is 1,682.2 Million.

WAM Capital’s Investment portfolio has returned 16.6 percent p.a and their overall 22 years outperforming the market by 7.9 percent p.a.

WAM Capital Limited ((WAM)) reported a record operating profit before tax of $343.3 million for fiscal year 21 due to strong portfolio performance. In FY21, WAM’s investment portfolio increased 37.5 percent (before expenses, fees, and taxes). 

The final dividend was maintained at 7.75cps, fully franked, bringing the full year dividend to 15.5cps, fully franked. This is consistent with the full-year dividend for fiscal year 2020.

WAM offered the most appealing dividend yield for domestic equity LICs as of 31 July 2021, with a dividend yield of 7.01 percent despite trading at an 11.6 percent premium.

Company Profile 

WAM Capital Limited (WAM) is an Australia-based investment company, which is primarily an investor in equities listed on the Australian Securities Exchange. The Company’s investment objectives are to deliver a stream of fully franked dividends, provide capital growth and preserve capital. The Company engages in investing activities, including cash, term deposits and equity investments. The Company’s trading opportunities are derived from initial public offerings, placements, block trades, rights issues, corporate transactions (such as takeovers, mergers, schemes of arrangement, corporate spinoffs and restructures), arbitrage opportunities, listed investment companies (LIC) discount arbitrages, short selling and trading market themes and trends. Wilson Asset Management (International) Pty Limited is the Company’s investment manager.

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Global stocks Shares

Qube reported solid FY 20 result and also made progress in the property monetisation process

Investment Thesis:

  •  The assets are attractive as well as strategically located.
  • Leveraged to improving economic growth (e.g. commodity markets, new passenger vehicle sales).
  • Improved margins on account of additional project work in future years.
  • Moorebank Logistics Park was successfully ramped up and offered logistics services at incremental margins.
  • Better cost outcomes and improved margins on account of technological advances (and automations) at its ports and operations.
  •  In order to supplement organic growth potential bolt-on acquisitions is done 
  •  The balance sheet position of Qube is sound enough.

Key Risks:

  • Excess capacity and pricing pressure because of Downturn in the domestic economy (or key end markets such as agriculture, retail)
  • Margin pressure due to cost pressures. 
  • Coronavirus outbreak leading to potential direct and indirect impacts.
  • Value destructive acquisition (dilutive to earnings and a distraction for management). 
  • Margin erosion because of competitive pressure. 
  • High competition in the logistics industry.
  • Market expectations are not met by QUB in achieving capacity utilization at Moorebank Logistics Park.

Key Highlights: Relative to the pcp:

  • QUB reported solid FY20 results reflecting record underlying earnings.
  • The firm majorly has four division-operating, property and patrick
  • Revenue increased by 7.9% to $2,032.4.
  • The increase in revenue was majorly driven by its operating and Patrick division.
  • The Operating Division experienced high volumes across most parts of the business with container, grain, forestry, motor vehicles and bulk volumes particularly strong, and the result also benefited from earnings from growth capex undertaken in the current and prior periods.
  • The operating division saw underlying revenue growth of by 12.5% to $2.0bn driven by Logistics, up by 8.5% to $860.3m and Ports & Bulk, up by 8.0% to $1,148.2m.
  • Property underlying revenue of $23.7m. The division made a loss of $2.1m
  •  In Patrick, underlying contribution from Qube’s 50% interest in Patrick of $41.3m
  • EBITA increased by 14.1 percent to $182.9 million.
  • The net profit after tax (NPAT) increased by 36.8% to $142.5. 
  •  NPATA was up 31.7 percent to $159.6.  
  • EPS was up by 16.7 percent at 8.4cps. 
  •  The Board declared a final dividend of 3.5cps (full-year dividend of 6.0cps, up 14.4%). 
  • The leverage ratio (ND/ND+E) of 29.2% is substantially below the goal range of 30-40% set by management.

Moorebank monetisation: 

QUB entered non-binding commercial terms to sell 100% of its interest in warehousing and property components of the Moorebank project (MLP project) to LOGOS for a total consideration of $1.67bn before tax, transaction costs and other adjustments. QUB will retain ownership of IMEX terminal and interstate terminal. Management noted “subject to the completion of the monetisation process, the Board will assess the appropriate use of the monetisation proceeds which is expected to include debt reduction, investment in accretive growth opportunities and potential capital management initiatives”.

Company Profile:

Qube Holdings Limited (QUB) is a diversified logistics and infrastructure firm that serves clients in both the import and export cargo supply chains. Ports & Bulk (integrated services, bulk material handling, and bulk haulage), Logistics (Australia’s largest integrated third-party container logistics provider), and Strategic Assets are the company’s three primary segments (investing and developing future infrastructure).

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.