Investment Matters

What Matters this week: Viva IPO, CSL @ $200, Corporate Travel conquering the world (but it isn't all positive)

Success story, Corporate Travel (which does as its name suggests), is continuing its international expansion.   This week it announced the acquisition of Hong-Kong based Lotus Travel, along with an upgrade to its FY-18 earnings guidance.

The IPO of Viva Energy, owner of the Geelong refinery and >1,100 petrol stations (Shell mostly), starts trading today at noon.  It was priced at the lower of the indicative range ($2.50), valuing the company at ~$4.86bill (one of the more significant IPOs in recent times).

CSL's share price hit the $200 mark this week.  It’s an impressive share price graph over the last 20 years (see below).  (On an eye-watering forward P/E of 39.8x, source: IRESS consensus, it is a tad expensive for your Investment Team.)


Source: IRESS, First Samuel

Pressure is starting to ramp up on the vertically integrated (retail + generation) power retailers AGL Energy and Origin Energy re domestic power prices.  This week an ACCC review recommended measures to increase competition, there were calls for a Royal Commission, and there was other commentary from the PM down.  This week AGL share price -5.8%, Origin -5.9% versus the market (XAO) at -0.2% (as we go to print.  Source: IRESS).

The ‘you can’t be serious’ announcement of the week came from serial offender Blue Sky Alternative Investments.  It had advised as recently as 12-Jun it did not expect any ‘material impact’ asset write-downs from the third and final round of asset valuations.  Well, another $2.2m of write-downs were announced this week.  The initially maligned agitator Glaucus Research, who instigated the whole Blue Sky saga, has certainly been     proven to be barking up the right tree.  ASIC is now reportedly (The Australian, 2-Jul) investigating in the company and its books.  Perhaps they should look at the auditors too.  And perhaps they are, again, years late to the party.

Toll road operator Transurban reportedly (AFR 1-Jul) is going to review its fees, with changes to be implemented as quickly as next week.  This follows reports in The Age (10-Jul) that is made $147m from fees in 2016 (which are meant to only cover costs – the company must have the most expensive cost structure in the world).  If it walks like a monopoly, quacks like a monopoly, then it might just be a monopoly.

And we couldn't finish the week without something on the banks.  The big-4 banks are facing a "damned if you do, damned if you don't" decision.  Rising interest rates overseas means they either need to increase mortgage rates to protect their net interest margin and thus shareholder returns. (Their smaller peers and Macquarie Bank have put up their rates in recent days and weeks.)  Or face the wrath of politicians / commentators etc against the backdrop of the Royal Commission, plus risk putting more of its stressed customers under more stress, and thus increase mortgage impairments.