Investment Matters

What Matters this week

Prospa (-41.2%) kicked off the week by delivering a massive earnings downgrade.  The fintech small business lender, which squeezed out a listing after having its IPO pulled at the 11th hour by ASIC last year (over concerns around its lending terms) underwhelmed its prospectus forecasts on all fronts.  The company guided to operating profit of about half of what was forecast when it listing in June of this year, as it looks to lend to more “premium” counterparties (i.e. less risky and at less *ahem* onerous rates).

Woodside Petroleum (+0.4%) revealed that it has finally reached agreement with joint venture partner BHP on a tolling contract (an agreement to liquify natural gas to LNG for a fee) for the planned expansion of its Pluto LNG train.  The agreement is another step towards the expansion which would see another train added, bringing 5.0 Mtpa of capacity to process gas from the Scarborough gas field as part of the company’s vision of the “Burrup Hub”.

Webjet (+2.0%) reassured investors at its annual general meeting that the travel business remains resilient and growing, despite the uncertain macro-economic environment.  Its guidance was in line with expectations although its business to business hotel business, WebBeds is likely to do much of the heavily lifting.  The company also flagged that air travel continues to be “challenged” with the domestic flight market contracting significantly.  After coming across the chart below this week, we are inclined to believe them ...

20FY20 WMSource: Macrobusiness, BITRE, CommSec

Prime Media Group (2.5%) revealed it isn’t immune to the weakness seen across the advertising market.  It urged shareholders to accept a bid from Seven West Media, as a structural shift to digital content providers (the Netflix of the world) leaves it fighting for regional advertising revenue.

Lastly, Westpac (-6.5%) dragged the market down in the second half of the week, as AUSTRAC alleged it contravened the Anti-Money Laundering and Counter-Terrorism Financing Act - a mere 23 million times.  The regulator alleges that Westpac failed to notify it of the international fund transfers, including a number of transactions linked to child exploitation.  Each contravention comes with a potential penalty of up to $21m.  While a fine of $483 trillion dollars seems unlikely, the market’s reaction implies a fine of approximately $5 billion.  A fine of this magnitude will handily beat the previous penalty doled out by AUSTRAC of $700m to CBA in 2017.  Fortunately, the bank happened to raise $2.5 billion in capital two weeks before the announcement ....