Investment Matters

Company News

Australian Equities Portfolio

Aristocrat Leisure (positive impact) announced an entitlement offer to fund the acquisition of Playtech.

Playtech provides an online platform utilised by leading betting companies globally. In addition, it operates Snaitech, an Italian based gaming operator with a strong position in online, retail betting and gaming machines.

The acquisition strengthens Aristocrat’s exposure to the technology that underpins a range of global markets and opens complementary growth channels for Aristocrat’s existing gaming content.

It also gives Aristocrat a foothold into the fast-growing real money gaming (RMG) in North America - with the recent legalisation of iGaming and sports betting in several states in the US leading to the rapid growth of the segment.

Due to the company’s strong performance over FY21, and its recent commitment to de-lever its balance sheet (pay down debt) it had a range of possible ways to fund this acquisition. Aristocrat chose to fund the purchase with 80% debt funding. In most cases when a company can undertake an acquisition that the market appreciates, using a high level of debt funding, the market will be very supportive.

We participated in the rights issue on clients’ behalf, which was conducted at an 8.6% discount on a 1 to 20 basis (one share for every 20 existing shares). The institutional rights issue was conducted at $41.85 and was heavily supported. The stock traded up to $47.10 at the end of Thursday (up 3.3% for the week.


Worley (positive impact) is beginning to be recognised as a fundamental player in the energy transition. Shares in the company rose by 8% this week.

A principal reason client’s own Worley is its potential to capture the estimated $140 trillion in investment required over the next 30 years to decarbonise the world’s energy system.

Worley has demonstrated its engineering capability across several complex renewable energy and decarbonisation projects and has the capacity, existing relationships and global scale to be a key player in the energy transition.

A broker note this week re-enforced the long-term growth potential Worley has ahead of it and saw its share price begin to reflect the value we see in the company.

The transition from oil and gas-based work to being part of the renewable economy over the coming years will be crucial to the company’s success.

We note that the current price environment for oil and gas (Brent: US$84) if sustained, may also provide a smoother transition profile.


Shares in Moreton Resources were sold in full this week.

The sale of these securities, whose value had been written down to nil, allows for a realisation event for clients and crystallisation of the position (and the release of associated tax losses).


Property sub-portfolio

Home Consortium Daily Needs REIT (neutral impact) announced it intends to merge with Aventus (ASX: AVN).

The merger will grow assets under management, provides some diversification across property sectors and unlock economies of scale for the combined business.

Furthermore, it grows the asset base under management of Home Consortium (ASX: HMC), another holding in Property sub-portfolios, generating associated management fees and potential future development fees.

The movement in the stock price (-10%) probably captured our view of the transaction, at least from a short-term perspective.

We have always appreciated that the Daily Needs vehicle (HDN), and the Home Consortium (HMC) team that controls it, would be aggressive. The clear view they have expressed is that the future of retail in Australia is far more likely to be defined by smaller local shopping centres, the type we have seen created from the redevelopment of former Masters sites.

We tend to agree for two reasons, low cost for retailers than mega-regional centres, more convenient for customers, and sites that have the flexibility to respond to a future in which fulfilment of online orders will need more local resources (click and collect or local hubs for distribution).

To this end, the HDN portfolio contained the right mix of current assets, as well as a large amount of land that could be developed in the future. The merger with Aventus dilutes that picture.

The Aventus portfolio is less locally focussed and has less (in percentage terms) value locked up in redevelopment. It has more exposure to the Homemaker type centre developments. Arguably HDN has also paid an excessive price for these assets when considering the terms of the merger.

BUT, in many respects, the merger is simply doubling down the same megatrend that envisages these locations growing more valuable (higher rents) than traditional retail locations, and increasingly being sought out for alternative uses that are even more lucrative for the owners.