26 April 19
Flight Centre lands in a heap (FLT)
26 April 19
Flight Centre lands in a heap (FLT)
26 April 19
Reviewing 5 market themes catching our eye - (BEN, BOQ, FLT, FMG, MMM, NHF, RMD)
24 April 19
Noflation should lead to imminent rate cut (BAL, HLS, EHL, CGC)
24 April 19
Platinum Portfolio Alert – Reduce Telstra (TLS)
24 April 19
Income Report: Will NAB cut its dividend? (NAB)
24 April 19
Reviewing 5 of the World’s largest 10 companies
23 April 19
ASX 200 breaks 6300 – Energy stocks lead the way (TLS, NAB, XRO)
23 April 19
5 stocks MM is watching post Easter (SIQ, SGR, NCM, FMG, LLC)
18 April 19
Unemployment data drags market
18 April 19
Are we seeing the next big sector rotation with healthcare & resources set to be the losers?
The ASX is trading marginally higher this morning coming off a strong session yesterday. Banks in focus following ANZ’s FY18 results this morning (stock +1.44%) while we’ve also seen Corporate Travel (CTD) come back online following a scathing short report from VGI. The stock down -15% currently, however buyers have stepped in on the open to buy weakness.
With a more bullish tone in financial markets, the highly leveraged fund managers are doing well today – Perpetual (PPT) up ~3% a standout while mortgage insurer Genworth (GMA) has added ~1.8% following a trading update.
For the week, the MM Income portfolio fell by -0.91% against a backdrop of the ASX which fell by -0.65%. For the financial year to date, the portfolio is down -1.2% versus its benchmark of RBA cash rate +4% which sits at +1.82%. Since inception (5th July 2017) the portfolio has added 4.73% versus its benchmark of 7.26%. Weakness amongst the retailers has provided the biggest weight towards returns this FY to date.
Bank Reporting – ANZ out today with Full Year results
An inline to slightly better full year result from ANZ this morning with the key points as follows;
There was no growth in either income or expenses for ANZ (excluding large one-offs) from 1H18 to 2H18. The bad debt charge was very low, and their capital position was very high with CET 1 at 11.4%. That implies that ANZ has a lot more room for capital management over and above their current $3bn buyback program.
In short – there’s not a lot to get excited about in terms of the ANZ result other than a very strong capital position and more capital management to come. That said, the stock is cheap, as are the rest of the banks.
ANZ Forward PE – cheap
ANZ Bank (ANZ) Chart
Genworth (GMA) Q3 trading Update
Delivered a trading update today and the headlines were mostly weak, however that’s to be expected. GMA is priced for weak earnings and a deteriorating property market in our view. This is a complicated company and the result needs more attention (which we’ll provide) but for now, a reasonable outcome for GMA today – the stock trading marginally higher on the back of it.
GMA chart packs are always interesting in terms of housing trends. NSW is the blue line leading the charge and importantly the chart puts the recent pullback into perspective.
Total delinquency rates by geography are also important – not just for GMA, but also the banks, retailers and the broader economy. The biggest change in delinquencies yoy can be seen in WA while NSW has come up from a low base.
GMA has been weak of late however we continue to believe a lot of negativity is currently priced in.
Genworth (GMA) Chart
AMP – There’s a lesson here for hybrid holders!
In the past week we’ve seen the AMP share price fall out of bed, down from around $3.30 to $2.31 at close yesterday. While we don’t own AMP stock or hybrids, the share price move has implications for both sets of AMP security holders plus it provides a good case study for the broader hybrid market on a couple of levels. Firstly, AMP have two listed debt securities, the AMPHA which is a subordinated note (safer security) that has first call date coming up on the 17th December 2018, so is shorter dated and is not impacted by the share price decline. This is termed a tier 2 security as it doesn’t add to AMP’s tier 1 regulatory capital.
In simple terms, for a security to be considered tier 1, the capital it provides must be permanent. For the capital to be permanent there needs to be conditions within the security that trigger a conversion into underlying equity / shares thus making the capital permanent. The imbedded trigger events (and there are a couple) have some conditions and the first of them is around the current share price relative to the share price when the hybrid was issued, and this has now come into play for AMP causing the AMPPA to trade down from ~$107 to $101
The price drop in the stock occurred after AMP completed a portfolio review, announced the sale of a heap of assets that would detract from earnings but boost capital while they also delivered a poor trading update. There’s no need to delve into the detail for this note and we simply retain our negative stance on the stock for now (our last update on AMP is HERE), however the drop in the hybrid despite the sale of assets that would actually improve capital and theoretically make AMP ‘less risky’ is the point we’re highlighting.
Bear with us! In the newer versions of tier 1 bank hybrids (issued after 1st January 2013) there are mandatory conversion conditions. The first mandatory conversion condition states that the volume weighted average price (VWAP) of AMP shares on the 25th business day immediately preceding (but not including) the relevant distribution date(i) is more than 56% of the issue date VWAP. In simple terms, the AMP share price would need to be $3.24 or higher for AMP to convert, redeem or roll AMPPA into a new security.
Essentially, the share price decline that we’ve seen in AMP now means that the AMPPA are more akin to a perpetual security with no maturity / end date than a capital note with a prescribed time horizon – that makes it a whole different proposition.
The AMP share price needs to recover back up above $3.24 for holders to have this security either bought back by AMP, converted into equity at $101 or rolled into a new security on the first optional call date of 22 December 2021. Practically however, AMP could issue a redemption notice and roll these securities into a new one, although presumably this would be at a higher margin given the prevailing issues facing the company, plus it would require APRA approval to do so. It’s hard to see APRA standing in the way however it is a possibility.
Why would AMP roll into a new security potentially at a higher rate? To protect reputation and ensure the hybrid market remained accessible to them for future funding, although worth noting they certainly could leave the security out in the market.
Thinking more broadly, this is a condition within all new listed tier 1 hybrid securities issued by the banks. The below table looks at the hybrids we hold, the share price at issue date and the level at which the share price needs to remain above;
Other securities that are closer in terms of share price decline required to fail the first call conversion test is the ANZPF which is 14% above the test given issue date VWAP of $38.18, NABPC is at a similar level while the NABPB is 23% above the trigger given issue date VWAP of $33.86. Worth keeping these levels in mind for holders of those securities.
In terms of risk v reward in general terms, we like hybrids however its simply another example of having a clear understanding of the conditions imbedded in these securities and actively managing them around those conditions.
- Banks remains cheap and the result today + share price move in ANZ highlights this
- The GMA result was okay on first read through
- We have no interest in AMP or the AMP hybrid
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 31/10/2018
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: Friday, 23rd April 2019
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 yearly 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 yearly subscription fees are as follows:
Platinum: $1,238 for 12 months
Platinum: $1,993 for 24 months
Subscription fees vary from time to time and 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 and Contributors 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 NSW 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 (AFCA)
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.