360 Capital Group Limited (TGP); Asia Pacific Data Centre Group (AJD); NextDC Limited (NXT):
Data storage operator NextDC has gone on the attack ahead of this week’s vote on a proposal for fund manager 360 Capital to replace the management of Asia Pacific Data Centres. Proxy votes are due in by Wednesday, with the vote on the ouster proposals scheduled for Friday. In the past week, NextDC has bought into the data centres trust – of which it is the sole tenant – and raised its stake to 17 per cent in an effort to defeat the 360 Capital proposals. The listed management platform 360 Capital, which is led by Tony Pitt, has a 19.9 per cent stake and is also offering to buy investors out for $1.80 who don’t want to remain in the listed data facilities trust. While the data centres operator itself remained quiet on Monday, NextDC, led by Craig Scroggie took up the cudgel to reject assertions that it has refused to engage with the Pittled platform. ‘‘It is worth noting that to date 360 Capital has not put forward any formal proposal that NextDC or any other Asia Pacific Data Centre security holder could consider or engage in relation to,’’ it said on Monday. NextDC also hit back against a claim by 360 Capital that directors of the data centres trust may be placed under ‘‘undue pressure by its sole tenant in relation to market rent reviews’’.
Australian Foundation Investment Corporation Limited (AFI); Australia and New Zealand Banking Group (ANZ); Commonwealth Bank of Australia (CBA); National Australia Bank Limited (NAB); Westpac Banking Corporation (WBC):
Australia’s big four banks are likely to have a tougher time over the next few years in generating strong profit growth because the ‘‘traditional patterns’’ will re-appear as the housing market softens and credit growth slows, the boss of Australia’s biggest listed investment company says. Ross Barker, the managing director of Australian Foundation Investment Company, which has an investment portfolio of $6.8 billion and large holdings in the big four, said that while dividend payouts from the big banks were a magnet for investors, they faced an uphill battle in delivering the profit growth needed to sustain them over the longer term. ‘‘It’s a challenging mid-term outlook for them,’’ Mr Barker said. ‘‘At some point the traditional patterns will reestablish themselves,’’ he said. He was referring to a likely tick-up in bad debt levels at the big banks in a slowing housing market as interest rates eventually move to more normal levels, putting households under pressure. Credit growth in Australia won’t be able to match the levels achieved three to four years ago, he said. AFIC is steering clear of adding to its big bank investments at present, which at about 25 per cent of its portfolio is below the broader ASX index weighting of 28 per cent.
BHP Billiton Limited (BHP); Rio Tinto Limited (RIO); Whitehaven Coal Limited (WHC):
Confirmation that Australia’s big four banks have continued to finance coal but with increasing post-Paris climate commitment discrimination fails to address the more profound shift in the way Australian carbon miners will fund their future. Only emerging miners (like, say, Whitehaven Coal) or the marginal and desperate (like, say Adani) rely on Australian banks to get on with business. The big players like BHP, Glencore and Rio Tinto raise capital globally and through treasury operations that then selectively allocate the capital they have collected. And they have also tended to fund new developments through cash flows rather than debt. But there are market forces in play that will further and materially erode the relevance of Australian funding to Australian coal. The local coal sector is deep into the historically familiar consolidation process that has been triggered, in part, by the unusually long pricing trough that followed the unique long boom fathered by China’s move into seaborne minerals and energy markets.
Charter Hall Group (CHC):
Charter Hall is set to become a fully fledged real assets manager as it finalises a deal to take over the running of Westpac-owned Hastings Fund Management and its $14.3 billion infrastructure portfolio. The deal, foreshadowed by Street talk in June, could see Charter Hall, led by David Harrison, pay as much as 10 to 12 times the earnings of the Hastings platform. While the Hastings platform’s earnings vary greatly each year, that multiple could mean an outlay of around $250 million by Charter Hall, according to a Macquarie analysis. The transaction, if finalised as expected, will lift Charter Hall into the ranks of Australia’s major investment managers, such as Queensland funds giant QIC and diversified manager AMP Capital, or Canada’s Brookfield, with $34 billion in assets under management.
Coca-Cola Amatil Limited (CCL):
Street Talk can reveal that three of the five varieties of CCA’s Mount Franklin bottled water are about to be removed from Woolworths so more space can be devoted to its own private label brand Select. Select is cheaper than Mount Franklin and is a winner with shoppers. The move follows the decision by Woolworths not to stock Coca-Cola’s new No Sugar variety of Coke. Soft drinks maker Coca-Cola Amatil is about to suffer another big hit at the hands of supermarket giant Woolworths. Street Talk can reveal that three of the five varieties of Coca-Cola Amatil’s flagship bottled water brand, Mount Franklin, are about to be removed from Woolworths’ shelves as the supermarket owner devotes more shelf space to its own private label products. In Mount Franklin’s space is expected to be Woolworths’ Select brand, which sells for a fraction of the price and is a winner with shoppers who carry off slabs of 24-packs at bargain basement prices in seemingly bigger volumes as the category becomes a household staple.
Wesfarmers Limited (WES):
A Melbourne family have bought a smaller-format Bunnings warehouse in Colac in regional Victoria for $7.8 million ona yield of 6.1per cent. The 6500- square-metre retail property in Bromfield Street in the centre of Colac was offloaded by a trio of local investors, including prominent businessman and timber manufacturer Chris Meade. It sold with an eight-year lease in place to the Wesfarmers-owned retailer. The sale suggests further yield compression in the popular asset class with a smaller Bunnings in Warragul, with a six-year lease, selling for $6.43 million in September on a 6.6 per cent yield.
(Source: AIMS)
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