Investment Matters

What Matters this week

Drone attacks on two major Saudi Arabian oil facilities gave the entire energy sector a kick on Monday.  The price of Brent Crude spiked approximately 20% on the day, dragging much of the energy sector with it including Beach Energy (+3.5%), Oil Search (+4.6%), Woodside Petroleum (+2.6%), Santos (+4.5%) and Worley (+5.1%).

Not to be outdone, the share price of Bellamys (+43.7%) rocketed on Monday, taking fellow China exposed health company Blackmores (+9.7%) with it, as the infant formula producer received an offer of $13.25 in cash per share for the company.  The offer, from one of China’s leading dairy product manufacturers was circa 60% higher than the company’s share price at previous close and represents a healthy forward EV/EBITDA multiple of around 26x.  Granted, the company’s share price has dwindled of late due to delays in receiving approval from the State Administration for Market Regulation (SAMR) to sell its organic baby formula in China.  And a state-owned enterprise has a circa 20% stake in the bidder ...

The Ramsay Foundation executed one of the largest block trades that have been seen in several years on Tuesday, with approximately 10% of Ramsay Healthcare (-3.7%) changing hands.

Shareholders jumped after OzForex’s (+10.2%) (a foreign exchange provider) announcement of a partnership with Link Market Services that will see it become Link’s preferred partner in Australia.  The partnership will see the group handle international payments such as dividends and corporate action payments for overseas investors.

The recent decline in the price of iron ore has led SIMS Metals (-14.3%) to issue a warning that its result in 1HFY-20 will be materially lower than last years.  The falling price for scrap metal has been compounded by higher deep-sea freight prices.  The graph attached to the announcement makes the rise in the company’s share price since June all the more perplexing, given over the same period the price of scrap has shown a continued decline.

We also saw the tail of August reporting season’s results:

  • Kathmandu (+15.1%) rallied after releasing its result.  The highlights: positive sales growth in Australia, relatively resilient margins, lower debt than expected and strong sales growth in overseas markets.
  • Coal producer New Hope Corporation (-3.3%) delivered a solid result with a higher than expected dividend.
  • Brickworks (+4.0%) delivered higher than expected earnings driven by significant property revaluation profits and flagged an improved outlook for the second half of the fiscal year with sales and orders in their building products division “bottoming”.

Lastly, all four of the big banks have now released credit data to the relevant credit bureaux, just short of the October deadline.  Under mandatory Comprehensive Credit Reporting, the banks now have to share richer data on consumer's credit history, including monthly repayments and credit limits.  This in part will see some of the banks’ competitive advantage being eroded (that is, the treasure trove of credit data that they had up until now kept to themselves).  Furthermore, while richer data will assist new borrowers to build up a credit history, it will also deal a harsh dose of reality to those who have failed to disclose multiple loans (and their lenders).