Investment Matters

What Matters this week

This week we are back to the normal news flow - with reporting season wrapping up last week.

Firstly, to retailers, and specifically retail rents.  There has been talk for some time.  And a few specific examples (Oroton in administration, and the forthright Solomon Lew of Premier Investments) of pressure being applied.  But this week was notable in Investment Matter’s eyes with news that Specialty Fashion (owner of brands including Katies, Millers and Rivers) has apparently negotiated a wholesale 20% rent reduction for its stores across all Scentre (Westfield Australia) centres [source: The Australian 8-Mar-18].  This bodes ill for the revenue outlook, and thus property valuations, for the retail property sector (i.e. shopping centres).

Retail Food Group's woes continued this week, with the belated release of ugly H1FY-18 results at 1 pm last Friday, including the announcement of 160-200 store closures (many franchisee-owned) [UBS reckons 400].  As well as press about a deal with a company established by a former senior employee to apparently manage underperforming RFG stores - and now that company (Exit 57) has itself gone bust.  Share price peak $7.65 on 6-Mar-15; $1.19 as we go to press.

Management of Latitude Financial Services (ex GE Capital Finance) started roadshowing in Australia, in preparation for a listing on the ASX.  You may have noticed the prominent advertising (Alec Baldwin) by the provider of personal loans and credit cards.

The takeover of Mantra (listed Australian hotel operator) by Accor (French headquartered global accommodation behemoth including brands from Ibis to Sofitel and Raffles), is as of this week much more likely to proceed.  This follows receipt of ACCC (Australia’s competition regulator) approval of the deal.

The telecoms company with a troubled recent past, Vocus, is moving some heavy-hitting credibility into the company’s Chairman role (former Telstra chairman and founding Optus CEO Bob Mansfield AO).  He will be leading the search for a new CEO, following the termination by mutual agreement (read: firing?) of the CEO last week.

News Corporation and Telstra are to merge News’ Fox Sports operation in Australia with Foxtel cable TV (jointly owned by News and Telstra).  This was viewed favourably by the market: News Corp +2.2%, Telstra +2.1% on a day the market was +1.1%.

And to conclude, shares in BHP, Rio Tinto and Fortescue Metals have been under relative (to the market) pressure over the last week.  This comes as the iron ore price has fallen from US$78.69/t on 23-Feb to US$73.01/t currently (62% Fe, source: marketindex.com.au).