Investment Matters

What Matters this week

Markets remained highly unexciting this week, with the lack of a +/- 1% daily price move in Australia now extending through all of April and May (thus far). The last day with a movement greater than 1% was in March.  That being said, this lack of daily excitement has not stopped the market nearly regaining its pre-GFC high on Monday last week, when it got to within 1% of its all-time high (if dividends are also included). Up by the escalator ... as the old saying goes. 

Whilst the Hayne Royal Commission kicked back into gear (focusing on business lending) the real news this week tended to be more corporate related.

Santos rejected a more-than $10billion acquisition bid by Harbour Energy, saying the offer undervalued it, given the oil price gains. Santos has now terminated discussions with Harbour. Further, it has been reported that Santos in now showing renewed interest in a $3billion bid for Quadrant Energy, after having initially approached banks in March to put together a funding package to help buy the West Australian energy company’s assets.  Why not look to buy assets in 2018 when prices are higher than during the previous three years…

Healthscope’s under-pressure board denied its two suitors access to the data room as it cut profit guidance. But investors appear to still be betting that BGH Capital’s consortium may sweeten its offer for the private hospital operator. Of course, poorer than expected earnings always lead to a higher offer price…

Sealink the operator of Captain Cook cruises which operates in Sydney Harbour and Perth’s Swan River is believed to have had an informal indicative and non-binding offer for the $385m company.

In positive profit news, James Hardie expects its profit margins to be at the top end of its guidance range this year as it moves to put its recent capacity issues behind it. Shares in the company jumped 4% after it delivered a better than expected full-year profit and upgraded guidance for the year ahead. This follows a profit upgrade last week from CSL.  It's not all bad at the top end of town.

Shareholders (in much short-sold) beauty products business BWX say the owner of the Sukin skin-care brand is in play following an $860m private-equity backed management proposal. BWX has received an unsolicited indicative and conditional proposal from managing director and co-founder John Humble and finance director Aaron Finlay in partnership with Bain Capital Private Equity. The consortium is offering $6.60 a share in cash, or cash and scrip. The offer represents a 50% premium to the last close of BWX. Ouch, ouch, ouch for short sellers! It's not always as easy as it appears…

And finally, whilst the third sitting of the Hayne Royal Commission failed to reach the highs of the previous two sittings (which have resulted in much corporate bloodshed – particularly at AMP) the notion that Australia is any different than the rest of the financial world was surely put to bed this week when Commonwealth Bank was accused of frequently activating thousands of children’s accounts as part of a widespread scam (discovered in 2013 but not reported) by staff to meet aggressive performance targets and earn bonuses.  Eerily similar to the angry 'fake account' scandal that in 2016 brought down previously highly regarded Wells Fargo CEO John Stumpf in the US… In contrast CBA has recently elevated the very person responsible for the part of the bank (at the time this occurred) to turn around the culture and image of the battered CBA… Go figure!