In the Australian banking sector, the dominance of the "Big Four" banks—Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corporation (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), and National Australia Bank (ASX: NAB) — is a testament to a complex interplay of historical growth, strategic mergers and acquisitions, and significant regulatory shifts.
Private credit, commonly referred to as private debt or non-bank lending, is a growing asset class garnering increasing attention from investors.
Historically, this was space dominated by the big banks. However recent regulatory changes in addition to the Royal Banking Commission have led to traditional lenders exiting the space and limiting their lending activities to big corporates and residential mortgages. In the ever-shifting mood of the ASX, small cap companies often find themselves at the mercy of market sentiment, which can be as fickle as the winds. One only has to look back at headlines within the past two weeks to see alarmist “bear” calls before the US interest rate hold decision.
Takeovers have been a real theme in 2023 for the beaten down ASX small cap sector.
We’ve covered a number of articles and topics in recent months as to why takeovers are occurring. We’ve also recently released a white paper outlining several ASX companies that we believe are prime candidates for a future acquisition given their strategic assets and current valuation. In this article we take a look at three company takeovers at varying stages. The U.S.-listed technology giants have been long-time investor favourites, and with good reason–they have dominant businesses with large addressable markets and incredible financial metrics. They have also been responsible for the overwhelming majority of the S&P 500’s returns this year. According to CNBC, the ‘Magnificent 7’ as they are now known (replacing previous nicknames such as FAANG and FANGMA) have returned 92% on average through October 5, 2023. With the third quarter earnings season unfolding, investor expectations are high and the results will need to be strong to sustain such a rally.
Stand still in the advertising and marketing space and you’ll be left behind.
Over the past quarter-century, the industry landscape has undergone a transformative journey, driven by the seismic shift from paper-based advertising to the digital realm. The advent of the internet, social media, and advanced technology has brought about a revolution in the way businesses connect with their audiences. In this dynamic era of ever-evolving communication channels, understanding the interplay between traditional print and the digital frontier is essential. The stars are aligning for a golden era in private credit.
The recent flurry of interest rate hikes across the globe has returned fixed income to the fore as investors earn meaningful income without needing to take on disproportionate risk. Private credit specifically has acted as a natural hedge against both inflation and higher rates, with most loans originating on floating-rate terms. In fact, private credit today is offering equity-like returns with significantly less risk. As a result, increasing numbers of investors are reallocating their portfolios towards private credit. It is no secret that infrastructure in the United States has long been in need of upgrading and repair. There are countless images and videos showing crumbling highways, overrun and outdated airports, and communities lacking adequate Internet connections. It is also no secret that the Biden administration has made infrastructure spending a statement of its tenure. Between the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), the 117th Congress has committed US$1.25 trillion across the transportation, energy, water resources, and broadband sectors for the next five to 10 years.
In 2002 Wimbledon officials took out pandemic insurance at $3.2 million a year following the outbreak of SARS.
It wasn’t until almost 20 years later when a 1 in 100 year pandemic struck that the move paid off. Covid-19 forced the All England Lawn Tennis Club to cancel the tournament for the first time since WWII and was due to lose around $500 million in revenue. Thanks to the foresight to insure against such an event Wimbeldon recovered a large portion of the loss despite the fact a ball wasn’t served. The ASX has been red hot for takeovers in recent months, as we have highlighted in several articles covering the reasons why takeovers occur, the different strategies that companies employ for takeovers, and several specific takeovers of interest. We also recently released a white paper outlining several ASX companies that we believe are prime candidates for a future acquisition given their strategic assets and current valuation.
SRG Global (ASX: SRG) is an ASX-listed diversified industrial services company, standing at the forefront of innovation with a mission to simplify the complex in the asset lifecycle.
The company operates across diverse market sectors and geographies and over the last few years has undergone a strategic transformation to progress towards an earning profile offering more than two-thirds annuity/recurring earnings through its maintenance work. This shift positions the company for sustainable growth while also returning capital to shareholders through its dividend strategy. So what is SRG Global? In our previous article, we delved deep into the allure of corporate takeovers, highlighting how buyers—both strategic and financial—are perpetually hunting for golden opportunities from their competitors, whether that's acquiring a dynamic innovation, a key division, or even an entire company. As we pivot to dissect whole company transactions, several compelling reasons emerge for why specific businesses become targets. Let's unpack these strategies.
Buying bargains or check out traps? Is it time to consider retail stocks?
There have been plenty of reasons to avoid the consumer discretionary space over the last 12 to 18 months. Does this provide an opportunity? Australian investors are heavily focused on dividends (to the point of being obsessed). This is understandable. The dividend imputation system in Australia ensures that investors receive preferential tax treatment on the dividends they receive from companies they own shares in. This means that investors typically receive a credit for the income tax paid by the corporation, which is 30% for most entities listed on the ASX. Investors may even receive a refund equal to this tax credit if they do not generate sufficient taxable income, such as many self-funded retirees.
Another week, another takeover offer.
This time around it’s Symbio (ASX: SYM) which we first wrote about as a potential takeover target back in July. Sure enough, an initial offer arrived from Superloop (ASX: SLC) in early August, which we covered here. For many new to the share market, the country’s flagship airline is likely one of the first companies that spring to mind as a potential investment (along with a major bank, supermarket and, in Australia, perhaps a big miner). The majority of people have some experience travelling on a plane, they may have an opinion about the quality of the airline’s service versus competitors, and the idea of owning part of the “spirit of Australia” might have some romantic appeal–similar to the notion of flying itself. With Qantas (ASX: QAN) posting record profitability in its August results release and its shares falling more than 20% from their recent highs, many will be asking if this is the time to buy the dip.
With earnings season done and dusted, we take a look back at three of the best performers in what was an overall mixed period for the ASX. We’ve also included one quality company which has had a challenging time post-release and may provide an opportunity for investors should things turn around.
The green energy movement has emerged as a transformative force in the global economy.
Driven by the urgent need to mitigate climate change and reduce our dependence on finite fossil fuel resources, the concepts of recycling, regenerating, and reusing products have gained prominence. These practices are not only environmentally responsible but also present significant economic opportunities for companies operating within the green sector. In this article we’re taking a look at one of TAMIM’s holdings, Close the Loop (ASX: CLG), a small-cap ASX-listed business at the forefront of this movement. One of the biggest fallouts from the banking crisis earlier this year was the merger between Swiss banking giants UBS (SWX: UBSG) and Credit Suisse. Following heavy pressure from authorities worried that Credit Suisse would go under, UBS acquired its former rival for just $3.25 billion back in March. It brought the end to a proud history, with Credit Suisse’s roots dating back to 1856.
Takeover offers continue to roll in for TAMIM.
This time around it’s Cirrus Networks Holdings Limited (ASX: CNW) with an offer from Atturra Limited (ASX: ATA) to acquire 100% of Cirrus’ shares through a Scheme of Arrangement for a price of 5.3 cents per Cirrus share. The move is yet another sign of the increased merger & acquisition activity in the small cap space on the ASX. You can read up on our coverage of the previous takeover offers within the portfolio for Healthia (ASX: HLA) here and Symbio (ASX: SYM) here. Shares in allied healthcare company Healthia (ASX: HLA) rocketed higher last Thursday when it announced the company had received a takeover bid from private equity company Pacific Equity Partners. Private equity companies are essentially investment companies known for buying up entire businesses, make use of large amounts of debt to finance transactions and juice returns, improve the operations (usually through cost-cutting initiatives) and occasionally combining the business with others that they already own.
In what has been a mixed earnings season these three ASX small caps have stood out over the last week showing strong results and resilience in a challenging market.
The anticipation was beyond high going into NVIDIA’s 2Q 2023 earnings result last week. Artificial Intelligence, or AI, has been the phrase on everyone’s lips in the investment community since the launch of ChatGPT late last year, and stocks set to benefit from the AI boom have seen significant returns this year. NVIDIA is the poster child for this AI fascination, and its previous earnings announcement generated incredible hype. Management’s guidance that revenue for the second quarter would be 50% higher than consensus estimates helped propel the stock to more than three times its level at the start of the year, and eclipse the well-publicised trillion-dollar market capitalisation.
ASX Small Cap Analysis: Positive Earnings from ClearView Wealth & Centrepoint Alliance in 202328/8/2023
In the recent ASX reporting season, two small-cap companies, ClearView Wealth and Centrepoint Alliance, showcased promising results. Although their earnings may not dominate headlines like tech giants such as Nvidia (NASDAQ: NVDA), the progress they're making is noteworthy for investors and market analysts alike. In the competitive landscape of Australian financial services, how did the closely-linked Clearview Wealth (ASX: CVW) and Centrepoint Alliance (ASX: CAF) distinguish themselves with their 2023 achievements?
As we discussed in the recent article Second-Level Thinking and US Homebuilders, we’re currently going through a very interesting time in the U.S. housing industry. Renovating and remodelling activity boomed during the pandemic as people confined to their homes made the most of the opportunity to improve their living space–with a little help from their stimulus cheques.
There have been constant questions about whether this level of activity could be sustained, particularly given higher interest rates (which are expected to dampen economic activity) and the threat of a slowdown in consumer spending–at least on goods anyway (spending on services such as travel and concerts continues to hit record highs, as the likes of Booking Holdings (NASDAQ: BKNG), Helloworld Travel (ASX: HLO) and Taylor Swift can attest). |
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