Investment Matters

What Matters this week: Blue Sky Investments, AGL, AMP

Looking at the general market news over the last two shortened trading weeks:

In the week before Easter a short seller of Blue Sky Investments (a listed fund manager in areas including water rights, real estate, hedge funds and private equity) went hostile, questioning whether asset valuations are real, as well as raising a number of other questions regarding the fund's fee revenue, investment performance and essentially the opacity and sustainability of its operating model.  The company put itself into a trading halt, and provided a cursory response to the allegations.  Post-Easter it has started fighting back with a bit more substance and gusto.  But the market didn't buy it - when it started trading again, share price -19% on Wednesday and -34% yesterday.  Today, the share price is back to -16%. More to play out on this one...

Harbour Energy (US-based, energy focused private equity player) is back.  Chasing Santos that is.  After an initial bid last August fell through, it went quiet for a while.  But this week it has increased the price of their conditional bid, to a sufficient degree (28% premium to the last trading price before the announcement) to convince Santos' Board to allow due diligence.  The Government (FIRB) may take a closer look if it does progress.

AGL Energy is facing apparently Government-engineered heat over the ancient (well, not quite) Liddell coal-fired power station.  AGL competitor Alinta Energy (owned by Hong Kong based family conglomerate CTFE) has (after previously expressing the view that the plant should be replaced with new generation) expressed interest in buying it - at an unnamed price and subject to due diligence (i.e. with a get out of jail free card).  One wonders how much Government subsidy Alinta could wangle as part of any deal...

Murray Goulburn shareholders voted unanimously in favour of the takeover by Canadian dairy company Saputo.  The alternative was a likely collapse.  ACCC has approved the deal but FIRB approval is tba (but expected to be affirmative too).

A couple of respected CEO's announced their retirement in the last two weeks.  First was AMP's long-standing Craig Muller.  Second was cost-conscious jewellery retailer Lovisa's Steve Doyle, who has been at the helm of a successful growth strategy.

Agriculture player (cattle and farmland), the Australian Agricultural Company (or AACo) released a big earnings downgrade.  Asset rich, but earnings (and cash flow) poor.  And apparently with a number of grumpy shareholders (-8.4% on the day of the announcement).

And finally, APRA (Australia's financial regulator) told the boards of banks to defer and withhold bonuses from executives who head up divisions that take on inappropriate risk and allow misconduct to occur.  One thinks that instruction should have been issued, oooh, five years ago...