September, 2023
The portfolio’s largest overweight positions include Suncorp Group Limited, Flutter Entertainment Plc and Premier Investments Limited. The portfolio’s largest underweight positions include Macquarie Group Ltd (not held), Woolworths Group Ltd (not held), and CSL Limited.
The overweight position in financial services provider Suncorp Group (+2.49%) contributed to relative performance. The share price continued it’s upward trajectory post it’s positive FY23 result which shows Insurance margins increasing excluding covid effects. The stock's recent performance has been impressive, receiving a significant boost towards the end of the month after being upgraded to 'overweight' by JPMorgan from its previous 'neutral' status. Notably, the target price has been raised to A$14.30 from A$14.00, representing a 6% upside to its price at the time of the upgrade.
Seven Group Holdings contributed to performance in September (+12.30%) following on from a solid result in August. Seven Group Holdings represents a quality diversified exposure to ongoing infrastructure and mining investment. The August result delivered improvement in key metrics including margins, cash flows and balance sheet measures. Seven Group Holdings portfolio spans across leading industrial services, media, and energy including names sch as Boral, Westrac, Coates Hire, Skyes, SGH Energy, Allight, Beach Energy and Seven West Media.
The overweight position in casino operator Star Entertainment Group (-34.02%) detracted from relative performance. The stock ended the month lower after the casino operator engaged the equity markets to raise $750m priced at $0.60 a share following Star also recently securing a $450 million debt package with the aim of paying off Star’s existing loans and handling costs at Queens Wharf in Brisbane. The offer price was also lower than the $1.20 a share at which Star last raised $800 million at in February. The raise has provided further clarity on the balance sheet and we are still seeing value in Star’s conservatively stated net tangible asset value.
The overweight to HMC Capital Limited detracted from performance in September (-12.45%). The firm gave back some strong performance earlier in August and July as the market fretted over rate staying higher for longer. This is despite raising $800 million in June for its first Last Mile Logistics Fund,. HMC originally was listed on the ASX in 2019 as a highly geared property fund that owned Masters sites and had a complicated capital structure. Since then, they have bought into healthcare assets and large format retail sites and set up a listed property trust. Targeting $10b in FUM by the end of 2023 and $20 billion over five years, the business continues to evolve.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-13.pdfAugust, 2023
The Fund’s largest overweight positions include Flutter Entertainment Plc, Suncorp Group Limited, and EVT Limited. The Fund’s largest underweight positions include Macquarie Group Ltd, Woolworths Group Ltd, and Transurban Group Ltd all of which are not held.
The overweight to Premier Investments (+16.14%) strongly contributed during August. Premier like most retail has struggled with its share-price since early May as pressures on the consumer increased resulting in negative industry sales, not aided by significant cost headwinds. All while cycling very strong comparative trading outcomes. Market analysts were very uncertain about just how bad FY23 & FY24 outcomes might be. PMV has long been part of our core retail investments- it is a quality business, supported by a particularly strong net cash balance sheet and overseen by engaged and experienced executive leadership personnel. The business also has future growth potential across several offshore geographies with the retail sector normalising post the widespread 2020/2021 covid restrictions. On 21st August 2023, PMV surprised the market with three separate announcements. Firstly with FY23 sales and profit guidance modestly ahead of market consensus but very reassuring nonetheless. Secondly that CEO Richard Murray has resigned effective 15 September 2023 with CFO John Bryce to act as interim CEO for the foreseeable future. Given Solomon Lew’s executive chairmanship and exceedingly strong divisional leadership and Richard’s relatively short tenure in the role, there is little for the market to be concerned with here. And finally, PMV announced a strategic review is to be initiated focussing on the corporate, operating and capital structure of the various brands and businesses held by the company. Future conclusions of this review are difficult to narrow down at this time and are potentially very wide ranging but including that there may be no change at all.
The overweight to Goodman Group contributed strongly to performance in August (+13.73%) as the company reported a solid result and provided an upbeat update highlighting their current and potential investments into data-centre development. We took the opportunity to establish a position in Goodman Group late last year when the market was generally worried about large property groups’ performance in a rising rate environment. However, Goodman’s focus on the Industrial & logistics segment has delivered strong results driven by tenants’ ecommerce expansion and supply chain optimisation in an environment of limited supply of modern and well-located warehouses. We believe that Goodman will continue to grow earnings across its global portfolio supported by profitable development and ongoing rental increases with a conservatively geared balance sheet. Goodman's management team has consistently demonstrated their ability to identify strategic locations, secure long-term leases with blue-chip clients, and maximize property value through efficient operations through the cycle. Finally, Goodman Group is committed to sustainability and responsible corporate practices, aligning with evolving investor values and regulatory requirements. Their green initiatives not only reduce environmental impact but is aligned with blue-chip tenants’ requirements. In conclusion, Goodman Group's best-in-class status, focus on the booming industrial and logistics sector, financial stability, exceptional management team, and commitment to sustainability make it a compelling long-term investment choice in the Australian property market for the right price.
The overweight position in Omni Bridgeway (-25.53%) contributed to relative performance. OBL reported its FY23 results during August. Whilst the revenue and cashflow had been pre-released in July, the profit result for OBL was slightly softer than market expectations due to higher expenses. Overall FY23 was a tough year for OBL with delays in case realisations impacting financial results. The timing of case outcomes are inherently hard to forecast and thus it is not unusual for there to be periods of weaker realisations. We do not believe this reflects any fundamental issues in OBL’s underwriting capability and continue to believe there is significant value in the funds management platform OBL has developed which we expect will start to generate meaningful earnings and cashflow in the years ahead.
The funds overweight to Endeavour Group (-8.28%) detracted from performance over the month. Endeavour has struggled over recent months as it matures into its standalone status after demerger from Woolworths, faces into continuing erratic selldown of the residual WOW shareholding, cycles inconsistent covid impacted trading in its retail and hotel divisions and mostly remains vulnerable to numerous erratic political responses to gaming regulation. Given all these mixed headwinds it has been difficult for the market to discern what normalised future trading might look like. For its part, Endeavour has struggled to articulate its actions and, at this still early stage, to demonstrate outcomes around its existing asset base. As an active investor we purposefully interact and engage with the company, particularly around capital allocation and return hurdles and will continue to do so. Regardless Endeavour possesses significant assets, capable management, and a solid balance sheet. Endeavour is far and away the country’s leading liquor retailer with >1700 outlets around the nation as well as the biggest single hotel operator (but where the approximate 354 hotels are probably only c9% market share within a highly fragmented market) and a growing Paragon Wine Estates vineyard portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-12.pdfJuly, 2023
The Fund’s largest overweight positions include Flutter Entertainment Plc, Suncorp Group Limited, and EVT Limited. The Fund’s largest underweight positions include Macquarie Group Ltd, Woolworths Group Ltd, and Transurban Group Ltd all of which are not held.
The funds overweight to Costa Group contributed to performance over the month as the stock rose 21.7% during July following a bid from private equity firm Paine Schwartz. This certainly vindicated our view that there was substantial value in this agricultural name. We had noted that Paine Schwartz had been creeping up the register and that its attractive asset base made it a potential target. Costa is the leading producer in several agricultural categories including mushrooms, tomatoes and has best-in-class genetics in the berries segment (especially blueberries). We had recently visited China where we believe Costa has substantial growth prospects, especially in the blueberry market where consumption per capita is a fraction of US and Australian levels and where its IP gave it superior product versus peers. An underweight to Macquarie Group was the second largest contributor to returns as the stock fell -1.5%. The stock trades at a significant premium to our assessed valuation and hence the fund does not have a position. We exercise caution as excluding trading and investment income at $7.5 billion and 39% of the group’s income, there was no revenue growth which accounts for our caution in capitalising it into a higher valuation for the business. Flutter PLC was a detractor in July, falling -1.87% in AUD terms. There was no exceptional newsflow and the stock has more or less drifted sideways to slightly down since May. It is worth noting the stock had rallied +26.44% in AUD terms in the prior two months. Post month end, Flutter reported its 1H23 results which were highly anticipated by the market given the potential for its core US division Fanduel to report its maiden half year profit. Pleasingly, Fanduel delivered £0m of EBITDA during the half which materially exceeded the markets expectations. Fanduel remains the key asset within Flutter and as the division inflects from up-front losses to profits, it will drive material earnings growth for the Flutter group. Outside of Fanduel, the manager was pleased with the Flutter results which demonstrated ongoing growth in the key growth markets of Italy and India.
Endeavour Group fell -3.7% during July partly as Consumer Staples fell out of favour and also due to a surprise announcement from the Victorian government which had potential to impact earnings, the market took a short first approach to valuation. The Andrews administration announced on the 17th of July Endeavour de-merged from Woolworths in 2021 and is the largest liquor retail distribution network in Australia with an approximate 40% market share and 1600+ individual stores. It also owns the largest network of hotels with 9% market share offering food, beverages, gaming and accommodation. Endeavour also owns a strong private label drinks business, Pinnacle Drinks as well as Endeavour X, a full and growing suite of digital and fulfillment capabilities and platforms, loyalty propositions and oversight of speciality trading and eCommerce businesses. Despite quality assets the stock trades in line with its 2021 IPO price, at a discount to our appraised value, and offers a solid defensive dividend.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-11.pdfMay, 2023
The Fund’s largest overweight positions include Flutter Entertainment Plc, EVT Limited, and Suncorp Group Limited. The Fund’s largest underweight positions include Transurban Group (not held), Macquarie Group, and CSL.
The overweight position in financial services provider Suncorp Group (+6.6%) contributed to relative performance. The stock's recent performance has been impressive, receiving a significant boost towards the end of the month after being upgraded to 'overweight' by JPMorgan from its previous 'neutral' status. Notably, the target price has been raised to A$14.30 from A$14.00, representing a 6% upside to its price at the time of the upgrade.
The overweight position in Omni Bridgeway (+17.5%) contributed to relative performance. During the month, the company entered into in an agreement to sell a participation in its Fund 1 to Gerchen Capital Partners for an initial payment of $38.0M. The sale includes the deferred fair value of OBL's retained residual interest in the Fund, recorded on its financial statements as $35.7M. The transaction is subject to documentation and is expected to close prior to the end of FY2023. A Net balance of cash proceeds of $30.0M is to be immediately distributed to OBL. The transaction will result in an estimated net gain to the company on closing of approximately $20.3M and the deconsolidation of the Fund. OBL will continue to manage the Fund on behalf of Gerchen Capital Partners subject to certain removal rights.
The overweight position in property and investment company HMC Capital (+9.2%) contributed to relative performance. The stock outperformed following the release of a trading update and outlook. HMC indicated that it has established 3 new scalable growth initiatives in the past 12 months which are taking advantage of compelling opportunities in the current environment. Management noted that the firm is on-track to achieve A$10B AUM target by year-end 2023 (12 months ahead of previous target) following its A$1.2B Healthscope Hospital Portfolio transaction. It also reaffirmed its FY23 Dividend guidance of 12c per share.
The overweight position in retail outlet investment company Premier Investments Ltd (-13.9%) detracted from relative performance. The stock fell on the back of signals of a deteriorating consumer environment from Apr/May-23, as discretionary retail conditions deteriorated in April/May-23, evidenced by four listed retail updates showing sales, on average, moving from -1% y/y in January/February 2023 to -14% y/y in March-May 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-10.pdfApril, 2023
The Fund’s largest overweight positions include Flutter Entertainment Plc, EVT Limited, and Suncorp Group Limited. The Fund’s largest underweight positions include Transurban Group Ltd., Macquarie Group, and Woolworths Group, all of which are not held in the portfolio.
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+12.1%) contributed to relative performance. During the month, it was revealed that the Company is said to be in talks to appoint John Bryant as its new chairman. Bryant is based in the US and serves on Ball Corp and Macy's boards. Reports speculate that this could lead to Flutter giving up its listing on the London Stock Exchange.
The overweight position in building and construction materials provider Boral (+17.0%) contributed to relative performance. On Thursday, 20 April, Boral was reinstated as a 'buy' recommendation by sell-side analyst Bank of America, with a target price of A$4.41 per share, representing a 13% potential upside.
The overweight position in property and investment company HMC Capital (+9.2%) contributed to relative performance. HMC Capital announced it had acquired a 3% stake in Lendlease. The Australian reports that HMC supports Lendlease's current direction but believes a simplified business model would reduce risk and allow for greater focus on core operations. Consequently, HMC suggests that Lendlease should exit more challenging areas such as buildings and minimise exposure to non-core segments like communities and retirement.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/117_pfp.pdfMarch, 2023
The Fund’s largest overweight positions include Flutter Entertainment Plc, EVT Limited, and Suncorp Group Limited. The Fund’s largest underweight positions include Transurban Group Ltd., Macquarie Group, and Woolworths Group, all of which are not held in the portfolio.
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+34.9%) contributed to relative performance. The stock benefitted during the quarter after announcing that it will commence shareholder consultation on an optimal share listing structure based on the Board's view that an additional US listing will yield several long-term strategic and capital market benefits, including; enhancing the group's profile in the US, better enabling the recruitment and retention of US talent, providing access to deeper capital markets and to new US domestic investors, providing greater overall liquidity, and optionality to pursue a primary US listing (one of the criteria for access to US indices). The overweight position in lotteries and Keno operator Lottery Corporation Limited (+16.3%) contributed to relative performance. The market reacted positively to a stronger-than-expected first-half financial result released by the company, reporting an NPAT of $207.3M (vs consensus of $190M) from revenue of $1.92B (vs consensus $1.93B) and an EBITDA of $409.4M (vs consensus of $384.4M). This followed an 8c per share fully franked interim dividend and a fully franked special dividend of 1c per share.
The overweight position in automotive dealership manager Eagers Automotive (+28.9%) contributed to relative performance. The company impressed with an FY underlying operating profit before tax of $405.2M (vs consensus $397.6M), revenue of $8.54B (vs consensus $8.62B), and an underlying NPAT of $283.1M (vs consensus $273.6M). The company noted it had commenced FY2023 with a solid foundation for the year ahead. Demand for new vehicles continues to outstrip supply as the company transitions to a new normal under which the industry operates with a sustainable order bank.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-9.pdfFebruary, 2023
The Fund’s largest overweight positions include Flutter Entertainment Plc, EVT Limited, and Suncorp Group Limited. The Fund’s largest underweight positions include Transurban Group Ltd., Macquarie Group, and Woolworths Group, all of which are not held in the portfolio.
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+9.2%) contributed to relative performance. The stock benefitted during the month after announcing that it will commence shareholder consultation on an optimal share listing structure based on the Board's view that an additional US listing will yield several long-term strategic and capital market benefits, including; enhancing the group's profile in the US, better enabling the recruitment and retention of US talent, providing access to deeper capital markets and to new US domestic investors, providing greater overall liquidity, and optionality to pursue a primary US listing (one of the criteria for access to US indices). The overweight position in lotteries and Keno operator Lottery Corporation Limited (+10.4%) contributed to relative performance. The market reacted positively to a stronger-than-expected first-half financial result by the company, reporting an NPAT of $207.3M (vs consensus of $190M) from revenue of $1.92B (vs consensus $1.93B) and an EBITDA of $409.4M (vs consensus of $384.4M). This followed an 8c per share fully franked interim dividend and a fully franked special dividend of 1c per share.
The overweight position in automotive dealership manager Eagers Automotive (+19.9%) contributed to relative performance. The company impressed with an FY underlying operating profit before tax of $405.2M (vs consensus $397.6M), revenue of $8.54B (vs consensus $8.62B), and an underlying NPAT of $283.1M (vs consensus $273.6M). The company noted it had commenced FY2023 with a solid foundation for the year ahead. Demand for new vehicles continues to outstrip supply as the company transitions to a new normal under which the industry operates with a sustainable order bank. The overweight position in Omni Bridgeway (-25.0%) detracted from relative performance. The stock sold off after its CEO and Managing Director Andrew Saker announced his retirement after more than eight years in the role. Mr Saker will step down after the company’s annual general meeting on October 26, with Raymond van Hulst named as his replacement. The company says Mr van Hulst is an experienced executive, “highly regarded within the global legal risk asset management industry”. This came as the company reported an FY2023 first-half NPAT loss of $30.1M (vs year-ago loss of $8.7M) from total revenue of $170.2M (up 34% from last year).
The overweight position in hospitality and leisure company EVT Ltd. (-7.0%) detracted from relative performance. Despite reporting a normalised NPAT of $39.4M (up 103% from a year ago), investors were dissuaded by the company’s market outlook. Management noted that headwinds are anticipated in the second half of FY2023, stemming from the ongoing impact of energy cost increases, general inflationary cost increases − including salaries and wages, food and beverage, cinema rents − and from recent extreme weather events in New Zealand. Not holding insurance provider QBE Insurance Group (+9.8%) detracted from relative performance. The company reported full-year earnings with NPAT significantly ahead of consensus forecast (FY adjusted cash NPAT of $847M vs consensus of $691.4M). Most of the earnings beat was attributed to higher-than-expected investment income, propelled by stronger fixed-income yields from rising cash rates across the globe. Several sell-side institutions expect this trend to continue over the course of FY2023, despite persisting volatility in markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-8.pdfJanuary, 2023
The Australian equities market had a stellar start to the 2023 calendar year, with strong January performance underpinned mainly by traction behind the disinflation narrative, a rise in soft landing expectations, and hopes for a near-term Federal Reserve pause (and pivot later in 2023). Reopening momentum across China following signs that its latest Covid wave had peaked also helped boost investor sentiment throughout the month. All but one sector (Utilities) ended higher, with Consumer Discretionary, Materials, and REITS being the standout performers. Commodity producers also outperformed amid gains in iron ore following the latest policy support headlines out of China.
December quarter inflation came in hotter-than-expected, with data rising to its highest level since 1990 and trimmed mean inflation climbing to its highest point since the ABS first published this data in 2003. The main contributors to the rise were holiday travel, accommodation, and electricity, leading to expectations that the RBA will hike the cash rate by 25 bp to 3.35% in February. China's reopening momentum also threatened to increase global pricing pressures. While goods inflation showed signs of moderating, services inflation proved stickier with the economy still experiencing a tight labour market. This came as Australian home prices fell 1.0% m/m in January, a slight improvement on December's 1.1% drop.
Australian consumer confidence continued to recover from its lowest reading since April 2020. Retail sales, however, registered its largest fall in a year during December, breaking a run of 11 consecutive gains, and widely attributed to heightened cost of living pressures. The data led markets to peel back the projected peak cash rate to 3.7% from 3.8%, and while a February rate increase is fully priced in, markets pushed out expectations of a follow-up rate hike from March to May.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-7.pdfDecember, 2022
The Fund’s largest overweight positions include Flutter Entertainment Plc, La Francaise des Jeux SA, and Insurance Australia Group. The Fund’s largest underweight positions include CSL, Macquarie Group (not held), and Woolworths Group (not held).
The overweight position in French gambling operator La Francaise des Jeux SA (+27.4%) contributed to relative performance. The company announced during the quarter the finalisation of its acquisition of Aleda, a France-based company specialising in point-of-sale (PoS) systems and processing solutions. The completion of the transaction was subject to the agreement of the French Competition Authority, which authorised the acquisition under conditions on 14 November 2022.
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+16.1%) contributed to relative performance. The stock price was assisted by the announcement that its CFO, Jonathan Hill, is to take on the new Group COO role. Paul Edgecliffe-Johnson, currently CFO and Group Head of Strategy at InterContinental Hotels Group, will join as CFO and Executive Director of the group in H1 of 2023. The company indicated that given Jonathan's expertise, knowledge of the business, and role in shaping Flutter's strategy, he is well-placed to set up the new Group COO function for success.
The overweight position in dairy producer a2 Milk Company (+27.4%) contributed to relative performance. The stock rose sharply after the US FDA granted the company approval to import, sell, and distribute infant formula products into the US market to assist in alleviating current shortages through to 3 January 2023, with a possible extension until October 2025. As a result, a2 estimates it will ship around one million cans of formula into the country during the second half of FY2023 and believes it can supply upwards of nine million cans in the future if required.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-6.pdfNovember, 2022
The Fund’s largest overweight positions include Flutter Entertainment Plc, La Francaise des Jeux SA, and Qantas Airways Limited. The Fund’s largest underweight positions include CSL, Macquarie Group Limited (not held), and Transurban Group Ltd. (not held).
The overweight position in French gambling operator La Francaise des Jeux SA (+15.2%) contributed to relative performance. The company announced during the month its finalisation of the acquisition of Aleda, a France-based company specialising in point-of-sale (PoS) systems and processing solutions. The completion of the transaction was subject to the agreement of the French Competition Authority, which authorised the acquisition under conditions on 14 November 2022.
The overweight position in dairy producer a2 Milk Company (+17.9%) contributed to relative performance. The stock rose sharply after the US FDA granted the company approval to import, sell, and distribute infant formula products into the US market to assist in alleviating current shortages through to 3 January 2023, with a possible extension until October 2025. As a result, a2 estimates it will ship around one million cans of formula into the country during the second half of FY2023 and believes it can supply upwards of nine million cans in the future, if required. The underweight position in James Hardie Industries (-14.1%) contributed to relative performance. The stock fell sharply following the release of its half-year financial results. For the six months ending 30 September, the company reported a 14% increase in sales to US$1,998.5M and a 22% jump in net profit to US$330.5M. However, sales and profit growth slowed from 19% and 34%, respectively, during the first quarter. Based on the challenging macro-economic conditions and housing market uncertainty, management adjusted its fiscal year 2023 Adjusted Net Income guidance range to US$650M-US$710M, from US$730M-US$780M due to a decline in volume expectations. The overweight position in hospitality and leisure company EVT Ltd. (-7.5%) detracted from relative performance. The stock fell despite the absence of any price-sensitive news releases over the month. The declines came after a sharp rise during October on the back of its Q1 trading update, where it reported normalised EBITDA (ex-AASB 16 leases) of $70.6M vs a loss of ($15.5M) over the same period last year.
Not Holding energy producer Origin Energy (+41.1%) detracted from relative performance. The stock price spiked after receiving a non-binding, indicative offer at A$9.00/share cash from Brookfield consortium to acquire the company via a scheme of arrangement. Brookfield would acquire Origin's Energy Markets business, while MidOcean would acquire its Integrated Gas business. Origin has subsequently entered into a confidentiality and exclusivity agreement with the consortium. If the consortium makes a binding offer at $9.00 cash per share, then the Origin Board's current intention is to unanimously recommend that shareholders vote in favour of the proposal.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-5.pdfOctober, 2022
The Fund’s largest overweight positions include Flutter Entertainment Plc, EVT Limited, and Qantas Airways Limited. The Fund’s largest underweight positions include CSL, Macquarie Group Limited (not held), and Transurban Group Ltd. (not held). The overweight position in online betting and gaming provider Flutter Entertainment Plc (+20.8%) contributed to relative performance. The stock was assisted by the announcement that its CFO, Jonathan Hill, is to take on the new Group COO role. Paul Edgecliffe-Johnson, currently CFO and Group Head of Strategy at InterContinental Hotels Group, will join as CFO and Executive Director of the group in H1 of 2023. The company indicated that given Jonathan's expertise, knowledge of the business, and role in shaping Flutter's strategy, he is well placed to set up the new Group COO function for success.
The underweight position in biopharmaceutical company CSL (-1.6%) contributed to relative performance. The stock ended lower despite an optimistic annual general meeting update. The company’s update on its new CSL Vifor business was encouraging and there may be significant potential upside for investors over the next 12 months. CSL is spruiking Vifor as having an extensive suite of products available in a large, underpenetrated market, with a limited number of competitors, and unique industry partnerships. The medium-term revenue growth target of >10% will likely help support medium-term consensus but risks still remain surrounding the durability of its iron therapy franchise beyond the end of the exclusivity period for Ferinject in FY27.
The overweight position in Entertainment, hospitality and leisure company EVT Ltd. (+15.2%) contributed to relative performance. The stock was boosted by its first-quarter trading update, reporting normalised EBITDA (ex-AASB 16 leases) of A$70.6M (vs a $15.5M loss from a year-ago).
Normalised EBITDA from its Entertainment businesses (including CineStar Germany) increased to A$10.0M from A$5.3M in Q1 FY19, Thredbo normalised EBITDA rose +41.7% from Q1 FY19, and Hotels EBITDA rose +5.7% from Q1 FY19. Consolidated revenue was down (0.3%) on the pre-COVID FY19 year, and Thredbo revenue was up +27.7% vs Q1 FY19.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-4.pdfSeptember, 2022
The Fund’s largest overweight positions include Flutter Entertainment Plc, Suncorp Group Limited, and Qantas Airways Limited. The Fund’s largest underweight positions include CSL, Macquarie Group Limited (not held), and Woolworths Group Ltd (not held).
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+18.5%) contributed to relative performance. The stock rallied upon release of a stronger-than-expected half year result. Flutter saw an 11% rise in revenue compared to the first half of 2021, however, adjusted EBITDA fell 19%. Positive revenue momentum was driven by recreational player growth, with average monthly players up 14% at the group level. In the US, its sports betting market share accelerated to 51% in the June quarter, driven by FanDuel's efficient customer acquisition and strong operational execution. However, its UK & Ireland June-half performance reflected safer gambling initiatives.
The overweight position in air transportation services provider Qantas (+12.3%) contributed to relative performance. Qantas printed an FY22 result that saw underlying profit before tax fall broadly in line with consensus forecasts, while top-line sales came in ahead of estimates by ~5%. While no dividend was declared for the year, a $400M share buyback was announced. Analysts pointed to the international segment as the strongest contributor to the result, with freight growth from its e-commerce expansion acting as a hedge against other pressures. Management also provided FY23 EBIT guidance of $425-450M, which would see the airline return to a level of profitability for the first time since the beginning of the pandemic.
The overweight position in retail outlet investment company Premier Investments Ltd (+17.0%) contributed to relative performance. The retailer reported during the quarter a 5.2% increase in global sales for the 12 months ending 30 July, despite the company's stores being closed for a combined 42,675 trading days during the first half. Sales growth was driven partly by strong performances from its key businesses, with Peter Alexander sales up 11.4%, and Smiggle sales up 24.6%. Growth was also supported by strong online sales, increasing 14.3% from the previous year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-3.pdfAugust, 2022
The Fund’s largest overweight positions include Incitec Pivot Limited, Flutter Entertainment Plc, and Qantas Airways Limited. The Fund’s largest underweight positions include Westpac Banking Corporation, Macquarie Group Limited (not held), and Woolworths Group Ltd (not held).
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+27.3%) contributed to relative performance. The stock rallied upon release of a stronger-than-expected half year result. Flutter saw an 11% rise in revenue compared to the first half of 2021, however, adjusted EBITDA fell 19%. Positive revenue momentum was driven by recreational player growth, with average monthly players up 14% at the group level. In the US, its sports betting market share accelerated to 51% in the June quarter, driven by FanDuel's efficient customer acquisition and strong operational execution. However, its UK & Ireland June-half performance reflected safer gambling initiatives.
The overweight position in air transportation services provider Qantas (+16.7%) contributed to relative performance. Qantas printed an FY22 result that saw underlying profit before tax fall broadly in line with consensus forecasts, while top-line sales came in ahead of estimates by ~5%. While no dividend was declared for the year, a $400M share buyback was announced. Analysts pointed to the international segment as the strongest contributor to the result, with freight growth from its e-commerce expansion acting as a hedge against other pressures. Management also provided FY23 EBIT guidance of $425-450M, which would see the airline return to a level of profitability for the first time since the beginning of the pandemic.
The overweight position in dairy producer A2 Milk Company (+22.2%) contributed to relative performance. During the month, the company reported a 19.8% increase in its full-year FY2022 revenue to NZ$1.446.2M, leading to a 42.3% jump in net profit after tax to NZ$114.7M and beating the market consensus estimate of NZ$113.9M. This was driven mainly by double-digit infant formula sales growth from both its China and English label products, reflecting A2’s significant increase in marketing investment, which prompted further gains in brand health metrics and record market shares. Investors were further pleased with the announcement of a NZ$150M on-market share buyback.
The overweight position in French lottery and sports betting operator La Francaise Des Jeux SA (-6.8%) detracted from relative performance. Despite the absence of any company-specific news impacting the stock over the month, it sold off broadly in line with the French CAC 40 total return index, which declined 5.0% over August on the back of continued recessionary concerns. Not holding logistics software provider WiseTech Global (+17.3%) detracted from relative performance. The stock rose sharply after reporting full-year FY22 revenue growth, driven mainly by increased market penetration. This came primarily from Large Global Freight Forwarder rollouts, increased customer usage, the adoption of its technology, and price increases to offset the impacts of inflation. Compared with its full-year FY2021 results, revenue increased 25%, Operating profit increased 70%, NPAT rose 80%, and earnings per share gained 79%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-2.pdfJuly, 2022
The Fund’s largest overweight positions include Incitec Pivot Limited, Flutter Entertainment Plc, and Suncorp Group Limited. The Fund’s largest underweight positions include Westpac Banking Corporation, Macquarie Group Limited, and Woolworths Group Ltd, all of which are not held in the Fund.
The overweight position in automotive dealership manager Eagers Automotive (+28.9%) contributed to relative performance. The stock rallied hard from a first-half market update released during the month, highlighting that it now expects to report an underlying operating PBT of ~ $195M (vs its previous guidance of $183-189M) and statutory net PBT ~$246M (exceeding prior guidance of $225-240M). Management noted that its improved outlook comes despite continuing supply constraints on new car deliveries and reflects the strength of its ongoing business and productivity, the growth of its new car order bank, and its cost-out programs.
Not holding insurance provider QBE Insurance Group (-5.1%) contributed to relative performance. The stock fell on the announcement that it will be recording a US$75M provision in its FY2022 first half financial results to account for expected customer remediation, interest payable, and administration costs, following the results of an ongoing review of policy pricing promises that date back several years. The overweight position in property and investment company Home Consortium (+18.6%) contributed to relative performance. The stock price continued to climb throughout July after releasing details of the launch of its new unlisted open-ended Fund, the Capital Partners Fund. The Fund is reported to have a target size of $500m to $1.5b, with HMC's co-investment capped at $150M. HMC will be entitled to a management fee of 1% pa of net asset value, as well as a performance fee of 20% of returns in excess of a hurdle return of 7% pa of NAV, subject to a high watermark. The Fund will target a return of 15% plus net IRR pa measured over a 3-to-5-year holding period, with a distribution yield of 2-4% pa post the second anniversary of the first close.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp-1.pdfJune, 2022
The Fund’s largest overweight positions include Incitec Pivot Limited, Flutter Entertainment Plc, and Suncorp Group Limited. The Fund’s largest underweight positions include Westpac Banking Corporation, Macquarie Group Limited, and Transurban Group Ltd, all of which are not held in the Fund.
The overweight position in grain distributor GrainCorp (+11.9%) contributed to relative performance. GNC surprised the market by upgrading its FY2022 guidance with Underlying EBITDA increasing to $590-670M (vs prior $480-540M), representing a ~24% forecasted increase in underlying profits. The upgrade follows tailwinds from continued La Niña weather patterns that have provided beneficial planting conditions for the 2022 winter crop and rising global prices from shortages resulting from the Ukraine conflict. As a result, the company expects to see total exports of 8.5Mmt to 9.5Mmt vs 7.9Mmt from last year. The overweight position in healthcare services and hospital operator Ramsay Health Care (+12.4%) contributed to relative performance. The company confirmed during the quarter that it had received a conditional, non-binding, indicative proposal from KKR consortium to acquire the company. Under the proposal, Ramsay shareholders would be entitled to receive $88.00 per share cash, less any ordinary or special dividends paid after the date of the proposal. The Ramsay board has determined it appropriate to provide the Consortium with due diligence on a non-exclusive basis.
Not holding global financial services technology provider Block, Inc. (Chess Depository Interests) (-51.2%) contributed to relative performance. The stock suffered over the quarter on the back of the recent crypto-market decline and the broader US tech sell-off, driven by increasing inflation and aggressive interest rate tightening by the Federal Reserve that has escalated recessionary concerns. This came as the company reported a 22% fall in its March-quarter revenue, resulting from softer cryptocurrency demand. Not holding toll road operator Transurban Group (+8.0%) detracted from relative performance. The company released its March quarter 2022 update, reporting an Average Daily Traffic increase of 0.4% over the March quarter compared to its 2021 March quarter. Management noted that the March quarter again demonstrated traffic recovery in line with the progressive easing of government restrictions and increased economic activity. NSW and QLD traffic also recovered rapidly as weather patterns normalised following the severe rainfall events in late February and early March. The overweight position in property and investment company Home Consortium (-34.6%) detracted from relative performance over the quarter. Despite the absence of any negative stock-specific news impacting the company, the stock fell along with the broader real estate sector following the 25-basis point increase in the cash rate. The RBA noted that cash rates could rise to a more normal level of 2.5% after upgrading its CPI forecasts and projected that headline and underlying inflation could rise to around 6% and 4.75%, respectively, for 2022 before moderating to around 3% by mid-2024.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/127_pfp.pdfAugust, 2021
The Fund’s largest overweight positions include online gaming and betting provider Flutter Entertainment Plc, commercial explosives and fertiliser manufacturing company Incitec Pivot, and financial services provider Suncorp Group. The Fund’s largest underweight positions include CSL, Wesfarmers (not held), and Macquarie Group (not held).
The overweight position in online betting and gaming provider Flutter Entertainment Plc (+14.2%) contributed to relative performance. The stock benefitted from a stronger-than-expected half-year financial result, reporting a 99% increase in revenue and a 221% year-on-year increase in profit before tax. Management attributed its solid performance to the quality of its products and the extensive reach of the FanDuel brand as it remained the number one online sports betting operator in the US. Flutter further noted that its UK and Ireland businesses had also benefitted from shared learnings as the integration between its brands continued to progress well over the period.
The overweight position in hospitality and leisure company Event Hospitality & Entertainment (+19.0%) contributed to relative performance. The stock outperformed upon release of stronger-than-expected full-year financial results. Management highlighted that despite COVID-related lockdowns and restrictions significantly impacting earnings, its cinemas business had seen a strong rebound once venues had reopened, with customers spending more than during pre-COVID times. This led to expectations of an optimistic earnings outlook by management once current restrictions are lifted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/179095058.pdfJuly, 2021
The Fund’s largest overweight positions include online gaming and betting provider Flutter Entertainment Plc, commercial explosives and fertiliser manufacturing company Incitec Pivot, and French Gambling operator La Francaise des Jeux SA. The Fund’s largest underweight positions include CSL, Wesfarmers, and Macquarie Group (not held).
The overweight position in commercial explosives and fertiliser manufacturing company Incitec Pivot (+12.6%) contributed to relative performance. The stock benefitted from the release of an operational update, reporting that its Waggaman ammonia plant in Louisiana has restarted and operating at full production capacity since June, following an extended closure after a significant technical disruption prevented the plant from operating since mid-April.
Not holding payment services provider Afterpay (-18.2%) contributed to relative performance. The stock fell midway through the month after payments company, PayPal Australia, announced its plan to launch a no-late fee 'buy now, pay later' product. Not holding Sydney Airport Ltd (+34.9%) detracted from relative performance. The stock rose sharply following a takeover proposal early in the month. According to its release, Sydney Airport received a conditional non-binding all-cash offer valued at $22.6b from a consortium of infrastructure investors consisting of IFM Investors, Global Infrastructure Management, and QSuper. The consortium put forward an indicative offer of $8.25 per share, representing a 42% premium to its last closing price at the time of the announcement.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/176001259.pdfJune, 2021
The Fund’s largest overweight positions include online gaming and betting provider Flutter Entertainment Plc, French Gambling operator La Francaise des Jeux SA, and casino operator Crown Resorts. The Fund’s largest underweight positions include CSL, Wesfarmers, and Macquarie Group (not held).
The overweight position in French Gambling operator La Francaise des Jeux SA (+33.3%) contributed to relative performance. The stock maintained its strong momentum over the quarter, benefitting from ongoing margin expansion through a rotation towards online sales. This was reinforced following a broker-upgrade to its target price, citing stronger-than-anticipated lottery margins and benefits, which are expected to be derived from the migration to its online platform.
The underweight position in dairy producer a2 Milk Company (-23.4%) contributed to relative performance. The stock fell sharply after downgrading its FY2021 revenue guidance to between NZ$1.2b and NZ$1.25b, with an EBITDA margin of 11% to 12% (down from its previous guidance of NZ$1.4b and EBITDA margin of 24% to 26%). Management warned that it would take some time for the company to rebalance inventory levels and restore channel health. As a result, immediate recovery is not expected, and that a further update for FY2022 will be provided in August.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/174985929.pdfMay, 2021
The Fund’s largest overweight positions include online gaming and betting provider Flutter Entertainment Plc, financial services provider Suncorp Group, and casino operator Crown Resorts. The Fund’s largest underweight positions include CSL, Wesfarmers (not held), and Macquarie Group (not held).
Not holding payment services provider Afterpay (-21.1%) contributed to relative performance. Despite the absence of any materially adverse news directly relating to the company over the month, the stock fell along with the broader tech sector following declining investor confidence spurred by a broader sell-off across US tech stocks. The decline was thought to result from the prospects of higher inflation and concerns of rising interest rates that are likely to adversely impact higher valuation-multiple tech companies.
The overweight position in French Gambling operator La Francaise des Jeux SA (+10.7%) contributed to relative performance. The stock maintained its positive momentum over May, continuing to benefit from ongoing structural growth predominantly through its ongoing margin expansion due to its shift from retail sales to online sales. This was reinforced by a broker upgrade to its target price during the month, citing stronger-than-anticipated lottery margins and benefits which are expected to be derived from the migration to its online platform. The overweight position in online betting and gaming provider Flutter PLC (-8.8%) detracted from relative performance. The stock fell after the company announced that the CEO of its US business FanDuel Group, Matt King, has given notice of his intention to resign from the company. Flutter reported that it will continue to assess its plans to float the business on the US exchange, however, noted that Mr. King's departure will affect the timing of any potential listing. Despite this setback, the Fund continues to hold the stock as we believe its future earnings growth potential from its international segments has yet to be fully recognised by the market.
The overweight position in horticultural business provider Costa Group Holdings (-27.0%) detracted from relative performance. The stock fell abruptly during the month on the back of an underwhelming profit guidance update. Investors were disappointed after management noted that it expects its June-half profit to be only “marginally ahead” of the previous corresponding period (which suffered a significant setback due to the pandemic-affected operating environment last year). This result was reported to be an outcome of challenging domestic conditions which is expected to offset its strong international operations. The Fund continues to hold the stock as we expect to see a strong rebound in its earnings as soon as operating conditions normalise
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/173295074.pdfApril, 2021
The Fund’s largest overweight positions include online gaming and betting provider Flutter Entertainment Plc, financial services provider Suncorp Group, and casino operator Crown Resorts. The Fund’s largest underweight positions include CSL, Wesfarmers (not held), and Macquarie Group (not held).
The overweight position in French Gambling operator La Francaise des Jeux SA (+11.0%) contributed to relative performance. The stock rallied following its first-quarter earnings results, reporting a 12% increase in stakes at €4.6 billion and a 5% increase in revenue of €0.5 billion compared with the first quarter of 2020. This amounted to a 6% increase in stakes and a 4% increase in revenue compared to the first quarter of 2019. Management also reported strong momentum in sports betting at +46% year-on-year (+20% in Q1 of 2019) benefitting from the normalisation of sporting events, while its lottery business incurred more modest growth (+3.8% vs Q1 2020, and +2.2% vs Q1 2019).
The overweight position in steel manufacturer Bluescope Steel (+11.7%) contributed to relative performance. The stock strengthened following an updated FY2021 guidance, with management now expecting its EBIT for the second half to be in the range of $1 billion to $1.08 billion, up from its previously guided range of $750 million - $830 million provided in February. The upgraded guidance was attributed mainly to its US North Star business which has benefited from rapidly rising steel prices and increased demand resulting in stronger spreads. Bluescope’s Australian Steel Products business also assisted its earnings upgrade, benefitting from improved realised domestic and export steel spreads.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/172181178.pdfNovember, 2020
The Fund’s largest overweight positions include casino operator Crown Resorts, online gaming and betting provider Flutter Entertainment PLC, and commercial explosives and fertilizer manufacturing company Incitec Pivot. The Fund’s largest underweight positions include CSL, Wesfarmers, and Macquarie Group (not held). The overweight position in building materials manufacturer Fletcher Building (+39.5%) contributed to relative performance.
The stock spiked after announcing a +54.4% (NZ$80m) year-on-year increase in its EBIT (before significant items) to NZ$227m for the first four months of the financial year. Fletcher also reported a 1% increase in revenues to NZ$2.7b and a 2.9% increase in its Group EBIT margin to 8.4% over the same period. Management noted that robust operating conditions in the residential construction market in both New Zealand and Australia were largely responsible for the sharp rebound in profits over the current financial year. The overweight position in air transportation services provider Qantas (+28.4%) contributed to relative performance. Anticipation of a sooner-than-expected resumption to international travel on the back of optimistic coronavirus trial-results announcements throughout the month boosted investor sentiment. Expectations of a rebound in domestic air travel over the Christmas period was also boosted following reduced government restrictions and the re-opening of state borders.
The overweight position in online betting and gaming provider Flutter (+0.9%) detracted from relative performance. The stock underperformed the broader market despite reporting a September-quarter revenue of £1.33b (vs £1.04b over the past comparative period) and expecting a full-year Group ex-US EBITDA of between £1.28b and £1.35b (vs its prior guidance of between £1.18 and £1.33b). Management, however, reported an EBITDA loss of £160-180mn in FY20 (vs. £140-160mn previously and a consensus of £149m) for its US business, hampering investor sentiment over the month. Despite this underperformance, we continue to hold the stock as we believe its future earnings growth potential from its international segments has yet to be fully recognised by the market.
The overweight position in diversified retailer Woolworths (-3.1%) detracted from relative performance. The stock fell during the month following a strong rotation away from the defensive sectors into the cyclicals, driven by expectations of a strong post-pandemic recovery on the back of declining national infection rates, relaxed state-level restrictions, and the announcement of several better-than-expected coronavirus vaccine trial results. Despite this setback, the Fund continued to hold the stock as we believe it remains attractively valued at its current price given its high-quality assets, conservative balance sheet, and reliable earnings streams.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/162518646.pdfticker: PER0046AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.perpetual.com.au/funds/perpetual-wholesale-industrial-share-fund
Fund Profile
- DOWNLOAD LATEST FUND PROFILE
- https://www.perpetual.com.au/pricing-and-performance/
asset_class: Domestic Equity
asset_category: Australia Large Value
peer_benchmark: Domestic Equity - Large Value Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
Perpetual Wholesale Industrial aims to provide long-term capital growth and regular income through investment predominantly in quality Australian industrial shares and to outperformance the S&P/ASX 300 Industrials accumulation index (before fees and taxes) over rolling three-year periods. Perpetual researches companies of all sizes using consistent share selection criteria. Perpetual’s priority is to select those companies that represent the best investment quality and are appropriately priced.