25 March 19
Subscribers questions (BBOZ, HUB, PPS, ECX)
25 March 19
Subscribers questions (BBOZ, HUB, PPS, ECX)
24 March 19
Market Matters Weekend Report Sunday 24th March 2019
22 March 19
Some of the ‘dogs’ starting to run (PMV, SGM)
22 March 19
Are there opportunities after the huge macro news of the last 24-hours (EHE, PGH, TLS, SYD, QBE, CBA)
21 March 19
Employment remains strong, although analysts not convinced (PGH, ECX)
21 March 19
Do we catch any of these the falling knives? (HLS, BIN, ECX, PTM, NUF, ELD, GEM,
20 March 19
ASX peppered with landmines today (NUF, FMG, ECX, PTM)
20 March 19
Income Report: A look at high yielding stocks
20 March 19
Overseas Wednesday is back on time! (CTX, FMG, AMZN US, C US, MSFT US, DIS US, FB US)
19 March 19
China snubs Aussie Coal (FMG, NHC, WBC, CTX, WTC, HSO)
The market is trading lower just after the open with the selling that started from 3pm yesterday afternoon continuing. As we touched on this morning, we’ve started to see a number of companies tap the market for fresh equity – Zip Co (Z1P) the latest this morning with an institutional placement. The cynic in me suggests this is a sign that markets have run too hard, too fast and company boards (rightly so) are using that strength to issue new stock .
All sectors are in the red this morning with the ASX 200 trading down at 6144, off from its 6270 recent high. MM remains neutral the ASX200 after its strong rally from late December lows but we are not afraid to buy selective stocks.
Sectors this morning
We were planning a ‘Part 2’ on franking credits today and how it could impact stocks (particularly banks) ahead of a new Labor Government, however there are a number of income focussed deals recently out that need coverage. We’ll aim to revisit franking next week.
ASX 200 Chart
The past week saw the Income Portfolio up by 0.3%. The only big contributor was Perpetual which paid a $1.25 fully franked dividend while only falling 19c. In the current financial year, the portfolio has added 4.37% vs the benchmark (RBA + 4%) which is tracking at 3.83%. Since inception (5/7/2017) the portfolio is up +11.24%, outperforming its benchmark (RBA Cash plus 4%) at +9.27%. On a per annum basis, the portfolio is outperforming its benchmark by 103bps.
MCP Income Opportunities Trust: MOT
Last week we mentioned the new listed investment trust (LIT) launched by Metrics and only yesterday we have the chance to meet with the company and get more detail on the offer. Unfortunately, given demand for this one the bookbuild process is being wrapped up early, by 3pm this afternoon meaning that those who wish to bid into the deal would need to do so through a broker by then. Our desk at Shaw can place bids for those with an account, or those who wish to open one.
Email [email protected] or call (02) 9238 1561
We currently have the MCP Master Income Trust (MXT) in the MM Income Portfolio having added it during the IPO around 12 months ago. This LIT invests in the Australian corporate loan market aiming to provide investors (us) with a return of the RBA cash rate +3.25% - which currently equates to 4.75%, They’ve done well and delivered what they have set out to do in the first 12 months.
MCP Master Income (MXT) Chart
In terms of the new offer from Metrics – (MOT) - Harry described it as MXT’s riskier cousin and that seems a fitting description.
The MCP Income Opportunities Trust (ASX Code MOT) is set to raise $300m, and from what we’re told, they’ve raised that and then some and the deal will close (today) oversubscribed. The trust will invest in a number of different sub trusts with the underlying investments being higher risk credit described as sub investment grade. They pay higher yield but come with a higher level of risk.
The manager has more discretion in MOT than they do in MXT to take advantage of opportunities as they arise, however less structure means returns rely more heavily on the Portfolio Manager getting it right. They will initially target investment across around 30 individual names however they have no cap on size per each individual position, whereas MXT has a 5% cap on any investment, although in realty, their biggest investment is currently running at 2%.
MXT has at least 60% of their holdings in investment grade loans with a few loans higher up the curve whereas MOT won’t. As suggested above, they are targeting the higher bang for buck sort of exposures that can obviously yield better returns but with a greater chance that those returns may not be achieved.
When talking risk we must anchor it to return, or potential return and MOT is targeting an aggressive number, with a total return target of 8-10% per annum, which is high in terms of credit funds.
Distributions to be paid quarterly and the target here is 7% p.a. income (plus a few % capital growth to get the 8-10% total return target). Capital growth will be generated by equity upside. For instance, many loans Metrics deal with allow them to negotiate an equity component whether through attaching options or a free equity. Think restructure or recapitalising credit which gives the creditor leverage into the business.
One interesting aspect, and I think this is sensible is that distributions will not be topped up by capital if there is a shortfall in income from loans.
They charge an annual management fee of 1.45% and a pretty aggressive +15.38% performance fee over RBA + 6% benchmark. Worth noting that if RBA drop rates below 1%, the performance fee will be paid before the income target of 7% is hit and distributed. If the RBA raise rates this becomes a more challenging task and given the broad structure of the Trust and discretion of the Manager it could push them to take more risk to achieve performance targets).
They raising a maximum of $300m to start with, and that’s largely been done.
While this looks an interesting offer we won’t be taking it up in the MM Income Portfolio. We prefer to have lower risk credit exposures mixed with direct equities for the equity style upside rather than focussing on higher risk credit that has a more opaque equity component to it.
Perpetual launches new Income Trust
Another raising in the Income space with Perpetual launching the Perpetual Credit Income Trust that is to be listed on the ASX (subject to approval) under code PCI on the 14th May. While I haven’t met with the managers (I will) , the deal is lower risk than the MOT outlined above and a more traditional credit offering. As a consequence, the return targets / fee structure is aligned with that risk / return profile. The deal looks attractive. Our desk at Shaw can place bids for those with an account, or who wish to open one.
The trust will focus on investment grade assets in the high yield Australian corporate loan market and the global high yield bond market – it’s sort of a cross between MXT and NBI that we own in the MM Income Portfolio. MXT invests in corporate loans in Australia targeting a return of 4.75% while NBI is a global bond manager targeting a 5.25% return. PCI combines both sub asset classes into the one $400m listed investment vehicle.
The trust targets a return of the RBA cash rate plus 3.25%, which is the same target held by MXT, equating to 4.75% net of fees.
Distributions to be paid monthly and the fund should be a good diversifier for those looking for income that is not heavily aligned to equity markets.
They charge an annual management fee of 0.88% and no performance fee.
NB Global Corporate Income Trust
We own this in the MM Income Portfolio and last week they made an announcement around the possibility of issuing new units in the Trust, essentially raising more money to manage. The announcement said….In light of the macroeconomic tailwinds for the asset class, coupled with NBI's consistent performance and ongoing market demand, Neuberger Berman is considering a new capital raise for NBI in the coming months.
It looks like they’ll raise money and we will send details when that occurs. They’ve previously said that an offer of new units will comprise both an entitlement offer for existing unitholders and a public offer for new investors.
The last time we wrote about NBI (click here) we posed the question whether or not corporate bonds were becoming too risky. The chart below highlights two things. The volatility in corporate bonds through the NTA Figure (Blue Line), which is the value of their underlying portfolio and the market price of the Trust (White Line).
NBI has generally traded at a premium to the value of their assets (although less so than MXT which is covered below) – currently priced at $2.03 (as at the 8th) versus NTA of $2.00. If they raise money, which I expect they will, they will likely do so at NTA – therefore paying above NTA on market doesn’t make a lot of sense (other than providing firm access to any raise).
NBI – NTA versus Share price (to 8th March)
Now looking at MXT, we can see 2 main things:
1. Volatility is lower, particularly evident during December when we had some extreme equity / bonds market volatility
2. They trade at a bigger premium to their last assets
MXT have clearly been consistent performers, we own them in the Income Portfolio however we would not buy them here given the premium they now trade to NTA and the increasing number of new entrants in the sector.
MXT – NTA versus Share price (to 8th March)
MOT is an interesting fund, but not for us. We prefer more vanilla debt funds combined with straight equity exposure
The new Perpetual Income Trust is appealing, and should do well
NBI is likely to raise new money – more details to come
Have a great day!
James / Harry & the Market Matters Team
Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.
All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 13/03/2019
Reports and other documents published on this website and email (‘Reports’) are authored by Market Matters and the reports represent the views of Market Matters. The MarketMatters Report is based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.
The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distributions without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor. Market Matters or its author(s) accepts no responsibility for any losses or damages resulting from decisions made from or because of information within this publication. Investing and trading in financial products are always risky, so you should do your own research before buying or selling a financial product.
The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports. Market Matters may publish content sourced from external content providers.
If you rely on a Report, you do so at your own risk. Past performance is not an indication of future performance. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.
Financial Services Guide
Date prepared: Wednesday, 22 November 2017
Last update: Tuesday, 6th November 2018
About this Financial Services Guide (FSG)
This FSG provides you with key information about a range of subscription services offered by:
Marketmatters Pty Ltd (Market Matters) Australian Financial Services Licence No. 488798 ABN (20 137 462 536)
Level 29, Chifley Tower, 2 Chifley Square Sydney 2000
T: 1300 301 868
E: [email protected]
In this FSG, “we”, us” and “our” refer to Market Matters.
Market Matters holds Australian Financial Services Licence No. 488798 (AFSL) and is responsible for any financial services that we provide to you.
This AFSL was issued on 8th September 2016.
The purpose of this FSG is to provide you with information about:
Market Matters operates a website, www.marketmatters.com.au (Website), where customers may, for the payment of a subscription fee, access certain financial information and general advice. In particular, the Website provides:
This FSG relates only to the Website Services.
What financial services we can offer in connection with the Website Services
As holder of AFSL number 488798, in connection with the Website Services we are authorised to provide general financial product advice to both retail and wholesale clients in relation to the following financial products:
The Website Services are comprised of general advice only. That is, none of the advice given on the Website or by provision of the Website Services takes into account any of your objectives, financial situation or needs (Your Personal Circumstances). Before acting on any of the information, advice or Website Services, you must consider the appropriateness of this information in light of Your Personal Circumstances and, if necessary, consult a financial adviser before making any investment decision.
If you are seeking to acquire a specific financial product or security, you should obtain a copy of and consider the Product Disclosure Statement or Prospectus for that product before making any investment decision.
The Website does not provide a trading platform or access to a trading platform. There is no ability to purchase or sell financial products through the Website.
How do I access these services?
You can access these services by going to www.marketmatters.com.au and following the prompts and steps required to sign up for membership. Please read all terms and conditions carefully.
Fees and benefits payable to us and our associates
The Website is a subscription-based service. A monthly fixed subscription fee is payable to Market Matters when you subscribe to the Website which will vary depending on the type of subscription for which you subscribe. At the date of this FSG, the monthly subscription fees are as follows:
Current subscription fees from time to time are provided on the Website.
The Website does not currently feature third party advertising. Market Matters reserve the right to advertise at a future time for which they may receive remuneration. Any such advertising will be independent of any other content on the Website.
All representatives of Market Matters (Market Matters Staff) receive a salary paid by Market Matters. Market Matters Staff may also receive performance-based bonuses which are based on profitability, the number of subscribers and subscription renewal rates.
How do we manage potential conflicts of interest?
Market Matters have implemented policies and procedures to mitigate the risk of conflicts of interest. These include:
Market Matters Staff are encouraged to express independent views and opinions on the topics they write about. This is established through ongoing training, external audits and our conflict of interest and staff trading policies. Market Matters Staff are required to serve the best interests of the subscribers, without consideration of any commercial or personal interests.
How is my personal information dealt with?
If you have a complaint about our services, you should take the following steps:
Contact us and discuss the complaint directly. If you do not feel comfortable discussing the complaint with us or your complaint is not satisfactorily resolved within 2 business days, please telephone Market Matters, on 1300 301 868 and ask to speak with the Complaints Officer. We suggest you put your complaint in writing at this time so that the issues are fully documented and understood by the parties. Your complaint should be addressed to:
The Complaints Officer
Level 29, Chifley Tower, 2 Chifley Square Sydney 2000
Market Matters will review your complaint within 45 days and attempt resolution. If you are still not satisfied with the outcome, you may take your complaint to an external dispute resolution scheme. Market Matters is a member of the scheme operated by the Financial Ombudsman Service. You should write to:
Australian Financial Complaints Authority Limited
GPO Box 3
Melbourne Vic 3001
Phone 1800 931 678.
You may also wish to consult ASIC in relation to your complaint. ASIC’s website contains information on complaining about companies and people and describes the types of complaints handled by ASIC. You can contact ASIC on its free call infoline:
Tel: 1300 300 630 or email [email protected]
We maintain professional indemnity insurance to cover our employees and Authorised Representatives (including us) for the financial services they provide, having regard to the following:
If you require further information about these compensation arrangements please contact us.
Terms and Conditions
This website, www.marketmatters.com.au, is published by Marketmatters Pty Limited (ABN 20 137 462 536) ('Market Matters', 'MM', 'us', 'we', 'our') Australian Financial Services Licence 488798
Financial Services Guide
Market Matters Financial Services Guide (FSG) is located here, and contains important information about the financial services provided by Market Matters. You must read our FSG and consider it in the context of your Personal Circumstances before acting on any advice. By accepting the terms and conditions you are acknowledging that you have read the FSG.
Provision of the Reports
Reports and other documents published on the Market Matter’s website (‘Reports’) are authored by Market Matters. The Reports represent the views of Market Matters based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.
The Reports contain general, as opposed to personal advice. That means they are prepared for multiple distribution without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor.
The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports.
If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.
Past performance is not a reliable indicator of future results. Brokerage costs have not been included in the calculation of performance. As financial products rise and fall in value, returns may be negative. Performance figures are not intended to be a forecast. Market Matters does not guarantee the performance of or returns on any investment.
Employees and/or associates of Market Matters may hold one or more of the stocks reviewed on this website.
Subscriptions and Subscription Prices
To access premium content available on the Market Matters website you must subscribe to one or more membership categories available on the website.
To subscribe to the Market Matters website you must go to the Memberships page of the website, provide the information marked as ‘Mandatory’ and select the payment option for the price quoted (at the time of your transaction). You will then receive a verification email from Market Matters indicating that your subscription and payment have been accepted and you will be able to access the premium content.
Prices published on the Market Matters website are quoted in Australian Dollars (AUD) and are inclusive of GST and/or all other duties and taxes. Market Matters has used reasonable endeavours to ensure that prices for subscription to its services are published accurately on the website but these prices are subject to change and Market Matters reserves the right to change these prices and will notify you of any increase by email (with the price increase to apply from the time the next payment is due).
Marketmatters Pty Ltd (ABN 20 137 462 536) will issue a tax invoice to paying subscribers in relation to any supply that is subject to GST in accordance with A New Tax System (Goods and Services Tax) Act 1999.
Any member is entitled to cancel their membership at any time. In the event a member does wish to cancel their subscription, cancellations must be notified in writing to:
Level 29, Chifley Tower, 2 Chifley Square, Sydney NSW 2000
or by email to: [email protected]
All cancellations of month-by-month subscriptions will be cancelled and not billed again the next month.
All cancellations within 14 days we be entitled to a full refund. Any introductory gifts, such as iPads, must be returned in their original condition before a refund will be made.
All cancellations made after 14 days of subscription commencement will not be entitled to a refund unless in the event of extenuating circumstances, at the sole discretion of Market Matters.
Subscriptions will automatically renew on the expiry date of current subscription. In these instances the subscription will be renewed at the current rate published on the Market Matters web site, using the same credit card that paid for the initial subscription, unless otherwise requested by the subscriber. A subscriber who wishes to cancel after being renewed in this way will have a “14 day cooling off period” in which they can request to discontinue and will receive a full refund for the renewal payment, this can be done in writing to:
Level 29, Chifley Tower, 2 Chifely Square Sydney 2000
or by email to: [email protected]
Market Matters has not reviewed any of the websites which link to this website or to which this website links. Market Matters is not responsible for the content of any other website or pages linked to or linking to its website. Following links to any other websites or pages shall be at the user’s own risk.
Copyright © 2013 Marketmatters Pty Ltd (ABN 20 137 462 536). No part of this website, or its content, may be reproduced in any form without the prior consent of Market Matters.
This Agreement is governed by and is to be construed in accordance with the laws of New South Wales, Australia. You agree to the non-exclusive jurisdiction of the courts of New South Wales, Australia in respect of any proceedings concerning this Agreement. This website is not available to US persons and by accepting these terms you confirm that you are not a US person.