Investment Matters

What Matters this week

The week started with Afterpay (-2.2%) hitting back against the questions raised by UBS’ broker report last week, or rather the “recent media commentary” around it.  The company’s rebuttal consisted of an assertion that a) We deliver more value to merchants than traditional credit card providers b) Very few merchants (within Afterpay’s sphere) charge surcharges on transactions anyway, so even if we were compelled to allow Merchants to pass them on, they in all likelihood would not.  Judging by the share price reaction, the market remains unconvinced.

Super Retail Group (-4.7%) announced what appeared to be a solid start to the year at their AGM, with like for like sales growth of 3.2% for the group overall.  However, their top line was largely driven by broad promotional activity (i.e. discounting), with softness continuing in auto (i.e. Supercheap).

In contrast, fellow retailer JB-Hifi (+7.8%) continued the post-election rally it has seen in its share price (with investors banking on tax cuts stimulating demand), after highlighting strong sales growth in Q1 of FY-20 and re-affirming its sales guidance for 2020, although demand for whitegoods has remained soft with The Good Guys showing a decline in comparable sales (-1.8%).

What was particularly unusual this week was that two more initial public offerings (IPOs) were shelved (after the failed IPO of LatitudeFinancial last week).  Safe to say equity capital markets have not been kind to KKR (part owner of Latitude) in the past weeks, with the IPO of PropertyGuru failing to get up (also part-owned by KKR).  In addition, the IPO of Singaporean online property classifieds business (another KKR holding) failed to proceed, alongside a reported “lack of appetite” for Bain Capital’s Retail Zoo (Boost Juice, Betty’s Burgers).

Shares in WiseTech (-11.4%) reopened on Monday (post-short-seller attack and its subsequent rebuttal) and promptly fell another 10% within an hour, leading to another trading halt.  A second, much more comprehensive rebuttal issued on Wednesday led to shareholders clawing back some of the more than 20% share price fall sustained over the previous days, however, the company’s share price remains -11% below the levels previous to when J Capital’s short-selling thesis was published.

Fund outflows have continued for AMP (+4.0%), with the company’s September quarter update revealing cash outflows for its Australian Wealth management division of $1.9 bn in Q3 of 2019 (vs 1.3bn in the previous quarter).  AMP Capital, however, continued to provide some positive news, with net external cash inflows (net cashflows from sources other than internally from AMP’s wealth division) increasing by $0.8bn driven by flows into its infrastructure debt products.

In contrast, fellow wealth hub IOOF’s (3.2%) financial advice segment saw net fund inflow of $33 million (vs $119 million in the previous comparative period), with overall funds under management, advice and administration increasing by 3.1% to $4.2 billion.

Lastly, telecommunication provider Amaysim’s (+12.9%) shareholders provided a pertinent reminder that incentives matter.  The company’s share price jumped by 15% on Tuesday after it announced a revised remuneration structure. The new structure will see key management personnel forego rather short-term incentives (up to 75% of their base salary) in exchange for a base salary increase of around 22% and performance rights under the company’s Long-Term Incentive Plan.