October, 2020
The annual income yield to 30 June 2020 for the Antares Dividend Builder Fund was 3.85% compared to the Benchmark’s 3.21%. While recent dividends have been lower than last year, with some cancelled, we reiterate that it is our objective to deliver income in excess of our benchmark. The fund delivered a return of 4.1% (net of fees) for the month of October 2020.
Australian shares provided a positive surprise with a modest gain in October. The Federal Budget’s announcement of income tax cuts and investment allowances was positively received by investors. News that Melbourne’s virus outbreak appeared to be contained with lockdown restrictions being gradually eased also assisted Australian share prices. Information Technology shares led the market buoyed by a takeover bid for Link Administration and another strong performance from Afterpay. Financial sector shares also surged with optimism that a supportive Federal Budget and Melbourne’s revival would mitigate potential loan losses with business and housing loans deferrals. However the industrials and energy sectors disappointed.
Companies held by the Fund that paid dividends during October included Coca Cola Amatil, Nine Entertainment, Suncorp, Viva Energy and Wesfarmers.
Contributing to capital returns were overweight positions in Coca Cola Amatil (CCL) and Nine Entertainment (NEC) and the decision not to own CSL. Coca-Cola European Partners (CCEP) announced a conditional bid for CCL at $12.75 per share by Scheme of Arrangement, representing a 28%+ premium to the one month volume weighted average CCL share price. NEC’s share price has continued to rise post delivering its results in August. The market is recognising NECs success in transforming a large proportion of its business to a digital subscription model. CSL held an investor briefing in mid-October which saw a subsequent fall in the share price.
Detracting from returns were overweight positions in Aurizon (AZJ) and Amcor (AMC) as well as an underweight holding in CBA. AZJ provided an update on its quarterly rail volumes that were weaker than the market may have expected, although at its full year results in August, AZJ had flagged that it anticipated a slow start to the year. The coal market is weak, with diminished demand in South East Asia as industrial production has struggled to accelerate post the COVID-induced disruptions. Further, while AZJ is trading at a substantial discount to its traditional earnings multiples, many investors are assessing the sustainability of its coal-linked business model. After a strong run, AMC securities pulled back in October on no particular news. The banking sector rose strongly in October with the prospect of a loosening in the responsible lending laws and some hope that bad debts could be not as bad as feared. Australia’s economic data and survey measures continue to deliver mixed signals, with some bright spots. Employment and retail spending softened in September as Melbourne’s virus lockdown weighed on activity. However there were some encouraging signs. Business surveys shows signs of stabilising while consumer sentiment rebounded in October with optimism that the virus was being contained. Late in the month there were signs that Victoria would significantly ease coronavirus restrictions as the number of new cases hit zero. More announcements were made about state borders opening and (one way) flights resumed with New Zealand. The mood was tempered by continuing trade issues with China and uncertainty about how the US election will play out.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/fund-profiles-antares-dividend-builder-1.pdfSeptember, 2020
The annual income yield to 30 June 2020 for the Antares Dividend Builder Fund was 3.85% compared to the Benchmark’s 3.21%. While recent dividends have been lower than last year, with some cancelled, we reiterate that it is our objective to deliver income in excess of our benchmark. The fund delivered a return of -3.0% (net of fees) for the month of September 2020.1 Australian shares performed poorly in September. The Energy sector recorded the largest falls on falling oil prices and expectations for asset write-downs as anti-carbon sentiment increases. Following a strong run over recent months, the Information Technology sector declined in line with a more cautious global appetite. Financial sector shares were also weak with concerns over rising doubtful debts as the ‘Jobkeeper’ and ‘loan repayment deferral’ programs taper off. The only significant bright spot in September was a small gain for the healthcare sector. Companies held by the Fund that paid dividends during September included Alumina, Amcor plc, ANZ, APA Group, Aurizon, CBA, Coles, Iress, Medibank Private, Mirvac, Telstra and Viva Energy. Contributing to capital returns were overweight positions in Nine Entertainment (NEC), Amcor plc (AMC) and Coca Cola Amatil (CCL). Since delivering its results in August, NEC has achieved greater market recognition of the transformation of a large proportion of its business to a digital subscription model. Amcor shares continued to find favour with investors. Demand for packaging remains strong and the weakness in the Australian dollar is supportive for companies with substantial offshore earnings. CCL shares have benefitted from the investor interest in sectors, including hospitality, that will open up post coronavirus-related closures. Detracting from returns was an overweight position in Suncorp (SUN). The Fund did not own CSL or Transurban (TCL) which performed well during September. SUN shares were relegated from the S&P/ASX 20 during September. The insurance sector in general was weaker as investors questioned whether adequate provisions had been made for potential business interruption claims as a result of the coronavirus. CSL is seen as likely to benefit from the development of a coronavirus vaccine and also derives a high proportion of its earnings offshore, a positive given the Australian dollar’s recent weakness. As the US and most of Australia returns to work, TCL’s toll road volumes are expected to increase not only with the return of regular drivers, but with additional usage from commuters who are reluctant to use public transport in the wake of the coronavirus. Australia’s economic signals are mixed. On the plus side, the recent revival in employment continues, with August recording job gains of 111,000 and the unemployment rate edging down from 7.5% to 6.8%. Consumer sentiment also rebounded in September. Countering this is confirmation that the Australian economy is in a deep recession, with the economy contracting by 7% in the June quarter, the largest decline since quarterly data started in 1959. There was further bad news with retail spending falling 4.2% in August given Melbourne’s virus lockdown. Some state borders are opening up but the majority remain closed, with 1 November (after the Queensland election) flagged as the possible opening for QLD/NSW. Victoria remains isolated. In the US, it’s not just the presidential election result, but its validity and timing that is creating uncertainty. President Trump’s confirmation that he has coronavirus has added to confusion around how it will play out. While volatility appears to have diminished, uncertainty remains.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/fund-profiles-antares-dividend-builder.pdfticker: PPL0002AU
commentary_block: Array
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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