BHP Billiton Limited (BHP):
BHP Billiton has told Australian shareholders that it will act counter-cyclically when spending money on projects, acquisitions or shareholder returns. The messaging has been delivered to shareholders over the past two weeks since BHP chief executive Andrew Mackenzie briefed European investors in Barcelona on May 16, and comes as activist investor Elliott Associates continues to lobby for a change of strategy. K2 Asset Management’s joint chief investment officer David Poppenbeek was one of the Australian investors to meet with BHP executives in recent weeks, and was left with the clear impression that BHP would strive to act counter-cyclically. ‘‘One of the important things that the Elliott dialogue has crystallised for Australian shareholders is that BHP is now committing itself to this countercyclical capital allocation which is very important,’’ he told The Australian Financial Review. ‘‘If BHP truly embrace the countercyclical approach to capital management then when commodities rise above long run averages Australian shareholders should receive 50 per cent of profits plus fully-franked special dividends. Conversely if commodity prices fall then you would expect BHP to take stock and maybe look for cheap acquisitions, so it is the complete reverse to what we have been used to over the last 15 years. If Mackenzie can continue to drive this home to the board and management then we would like to think Australian shareholders will find it more beneficial.’’ Baroness Shriti Vadera has emerged as the British market’s latest hot tip to inherit the chair of BHP Billiton when Jac Nasser vacates the job some time before August. London is a leaky market but not every leak is worth a whole lot. Back in March it was the font of supposedly informed speculation that former Westpac boss Gail Kelly would inherit a mantle held by only two men, Nasser and his predecessor Don Argus.
Bank of Queensland Limited (BOQ):
The prudential regulator should consider forging a different path to the Basel Committee on Banking Supervision if it imposes an ‘‘aggregate floor’’ on risk weights used by major banks, as this would impede competition, reduce transparency and undermine Australia’s quest to have an ‘‘unquestionably strong’’ banking system. That’s the view of Bank of Queensland chief financial officer Anthony Rose, who was responding to a speech delivered in London last week by BCBS secretary-general William Coen, who said the Basel committee had chosen ‘‘an aggregate output floor’’ in its delayed Basel 4 reforms because it was ‘‘simple and straightforward’’. (The level of the floor has not yet been determined.) Bank ‘‘risk weights’’ are arcane but important because they determine how many dollars of capital need to be held to meet a given capital ratio. (‘‘Riskweighted assets’’, or RWA, is the denominator of that ratio.) If RWAs are too low because a bank is not assessing the riskiness of loans strenuously enough, their reported capital ratio will be too high. Big banks, including the big four in Australia, can use their own internal models to determine the level of risk weights, which are lower than those used by smaller banks that must operate using a ‘‘standardised model’’. The discrepancy means big banks can write the same loan at a higher return on equity.
Bluescope Steel Limited (BSL):
BlueScope Steel and Shell have emerged as potential contenders to seek funding for carbon capture and storage projects but their interest has little to do with coal-fired power and is seen limited by the absence of a carbon price. The preliminary support voiced for the government’s move to include CCS within the funding remit of the Clean Energy Finance Corporation has underscored the technology’s use in carbon-intensive industries outside power generation where renewables play no part. BlueScope chief executive Paul O’Malley described CCS as a ‘‘promising technology’’ that could be used by itself or together with others, such as biomass and alternative ironmaking technologies.
Investa Office Fund (IOF):
Shareholders in Investa Office Fund rejected the listed trust’s proposal to buy a joint stake in its own management platform through a $45 million deal with its unlisted sister fund. At a shareholder meeting in Sydney on Wednesday, proxy votes came in at 55.97 per cent against and 43.27 per cent for, scuttling the plan and giving potential takeover suiter Cromwell Property Group some further clear air to launch an official bid. IOF chairman Richard Longes said he accepted the vote, but that ‘‘There is no such thing as never’’ when it comes to offering another proposal some time into the future. ‘‘However I don’t think the investors want to be put through that again,’’ he said.
(Source: AIMS)
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