Report
EUR 120.45 For Business Accounts Only

Aussie Equities Month in Review (August 2019)

  • The ASX 200 shrugged off a poor reporting season and fell in line with global markets.
  •  Global stock markets fell by 2.0% due to concerns about global trade.
  •  Healthcare (3.6%), Property (2.3%) and IT (5.0%) were the best performing sectors, while Materials declined on the backs of a large fall in the price of iron ore and a weak FY19 result from BLD.
  •  The strong relative performance of Australia during the past 3 months combined with the large number of downgrades in June and a downgrade to the FY20 outlook means the market is still expensive and trading on stretched PE multiples.
  •  Consistent with the PE expansion and weakening earnings growth backdrop, the volatility of EPS estimates within sectors is relatively large with Healthcare, Materials, Financials and IT and Communication Services all having wider than normal 12-month forward EPS variations for stocks within sectors.
  •  Retail trade data was weak in June and the June quarter, while apartment approvals posted a sharp 18% decline, although the series is notoriously volatile.
  •  In the lead-up and into reporting season, WOW has had the strongest number of upgrades closely followed by MFG, FMG and BPT. In contrast, CBA had the largest number of downgrades followed by S32, WBC, REA and RWC. 

 

Underlyings
Afterpay Limited

Afterpay Touch Group operates a Pay Later business and a Pay Now business, which operates across three divisions: Mobility and Payments, Health and Retail Services. Through Pay Later, Co. focuses on providing a customer and retail centric, omni channel retail service that facilitates commerce between retail merchants and their end-customers. Co. delivers its services by providing a platform that allows retail merchants to offer the ability for customers to buy products on a "buy now, receive now, pay later" basis. Through Pay Now, Co. owns a proprietary software platform (The Touch System Platform) that enables consumers to quickly and simply purchase products.

Beach Energy Limited

Beach Energy is engaged in oil and gas exploration, development and production and investment in the resources industry. Co.'s operating segments include Cooper Basin, which includes oil and gas sales from Australian production; Other Australia, which includes Co.'s interest in all on-shore and off-shore production and exploration tenements within Australia other than the Cooper Basin; and International interests, which includes Co.'s interests in all areas outside Australia and oil and gas sales from Egyptian production. As of June 30 2016, Co. had total proved and probable reserve estimate of 69.8 million barrels of oil equivalent.

Commonwealth Bank of Australia

Commonwealth Bank of Australia provides integrated financial services including retail, business and institutional banking, funds management, superannuation, life insurance, general insurance, broking services and finance company activities. Co. operates in seven segments, Retail banking Services, Business and Private Banking, Institutional Banking and Markets, Wealth Management, New Zealand, Bankwest, as well as International Financial Services and Other Divisions. As of June 30 2016, Co. had total assets of A$933.1 million and total deposits of A$588.0 million.

Fortescue Metals Group Ltd

Fortescue Metals Group is an iron ore producer. As of June 30 2016, Co.'s operations had four mine sites in the Pilbara. The Chichester Hub, which includes the Cloudbreak and Christmas Creek mines, is located in the Chichester Ranges and the Solomon Hub, in the Hamersley Ranges, includes the Firetail and Kings Valley mines. Co. owns and operates an integrated supply chain including its Herb Elliott Port in Port Hedland and a heavy haul railway with over 620km of track. As of June 30 2016, Co.'s total hematite ore proved and probable reserves were 2.17 billion tonnes. Also, as of June 30 2016, Co.'s total magnetite ore proved and probable reserves were 705.0 million tonnes.

Incitec Pivot Limited

Incitec Pivot is engaged in the manufacturing and distribution of industrial explosives, industrial chemicals and fertilisers, and the provision of related service. Co.'s Asia Pacific business consists of the: Dyno Nobel Asia Pacific, which manufactures and sells industrial explosives and related products and services; Southern Cross International, which manufactures ammonium phosphates and is a distributor of its manufactured fertilizer product; and Incitec Pivot Fertilisers, which manufactures and distributes fertilizers in Eastern Australia. Co.'s Americas business comprises the Dyno Nobel Americas, which manufactures and sells industrial explosives and related products and services.

Magellan Financial Group Ltd

Magellan Financial Group is engaged in funds management, providing international investment funds to high net worth and retail investors in Australia and New Zealand, and institutional investors globally. Co.'s main operating company is Magellan Asset Management Limited (MAM). Co.'s key operating segments are: Funds Management, in which MAM undertakes the funds management activities and MFG Services LLC acts as a service company providing MAM with services of investment analysts and distribution personnel; and Principal Investments, which include investments in the ASX Quoted Funds, the Unlisted Magellan Funds, and a select portfolio comprising Australian and international listed companies.

Qantas Airways Limited

Qantas Airways is engaged in the operation of international and domestic air transportation services, the provision of freight services and the operation of a Frequent Flyer loyalty program. Co. comprises following operating segments: Qantas Domestic, Qantas International, and Jetstar Group, all of which comprises its passenger flying businesses; Qantas Freight, which comprises its air cargo and express freight business; and Qantas Loyalty, which comprises its customer loyalty recognition programs.

South32 Ltd.

South32 is engaged in mining and metal production from a portfolio of assets for the commodities of alumina, aluminium, bauxite, energy and metallurgical coal, manganese ore, manganese alloy, nickel, silver, lead and zinc. As of June 30 2016, Co. operated 10 segments, which were comprised of: Worsley Alumina, South Africa Aluminium, Brazil Alumina, Mozal Aluminium, South Africa Energy Coal, Illawarra Metallurgical Coal, Australia Manganese, South Africa Manganese, Cerro Matoso, and Cannington.

Westpac Banking Corporation

Westpac Banking is a banking organization with branches, affiliates and controlled entities throughout Australia, New Zealand, Asia and in the Pacific region. Co. provides a range of banking and financial services in these markets, including consumer, business and institutional banking and wealth management services. Co. is engaged in the provision of financial services including lending, deposit taking, payments services, investment portfolio management and advice, superannuation and funds management, insurance services, leasing finance, general finance, interest rate risk management and foreign exchange services. As of Sep 30 2017, Co. had total assets of A$851,875,000,000.

Provider
Macro Strategy Advisors Pty Ltd
Macro Strategy Advisors Pty Ltd

About  us:

  • The business is a Proprietary Limited Australian company that is owned and fully operated by Shane Lee from a small office in Sydney’s CBD.
  • Shane worked for 17 years in Sydney-based senior research roles (economist, equity strategist and bond strategist) in global and regional investment banks and a domestic commercial bank prior to starting Macro Strategy Advisors. These roles straddled the asset classes making him uniquely positioned to advise multi-asset investors. He worked for the Reserve Bank of Australia (RBA) for 3 years as a housing, commercial property and equity market analyst and a liquidity forecasting specialist.  He worked as a structural engineer in Queensland for 10 years prior to his career at the RBA. 

Aim of our business:

  • To partner with our clients in their aim to maximise returns. We provide timely, independent and thought-provoking research on thematic macro issues that are impacting or could impact financial markets. We aim to produce research that prompts our clients to question their assumptions.

Services:

  • A fortnightly research note.
  • Regular presentations and data support delivered by understanding our clients interests and investment process.
  • We also in work in confidence to investigate, analyse and report on issues at our clients direction. This work is done on a project-by-project basis.
  • As an Australian based business, the main focus is analysing how domestic and global issues impact Australian investors. However, our global and domestic insights are also valued by our offshore clients.

Our Edge:

  • Our low cost base relative to our competitors allows us to provide a quality product at a reasonable cost.
  • We are fully independent and don’t support a banking function or any third party. We have no interests other than providing our clients with the best possible research.
  • Our focus is not point forecasting, but providing rigorous analysis and insight. We don’t routinely focus on the top or bottom 10% of likely outcomes to create a headline.
  • Shane’s background in engineering has provided clients with unique insights into global infrastructure and domestic housing issues.

 

Analysts
Shane Lee

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