The week of May the 1st Macquarie held its annual Australian Conference where over 110 listed and private companies presented, educating and updating the market on their businesses and their varying operations. Milford had 14 of the investment team attending the conference listening to the various presentations and having one-on-one meetings with over 35 companies.
Although there was a wide array of companies with materially different business models and varying degrees of success, some of the common trends identified were:
- The retail environment is very difficult. Retailers are yet to feel the pinch of Amazon however this is still a material risk as Amazon matures.
- The housing market in Australia is fragmented but generally cooling. For example: Melbourne medium density is growing rapidly whereas apartments within the same city are struggling.
- Data demand is accelerating and data security will become an increasingly popular and contentious topic.
- The mobile landscape is becoming increasingly competitive. For example, Telstra this week announced their unlimited data plans on mobile devices for $69 per month.
- Demand for well located, industrial assets is sky rocketing due, largely, to the rise of e-commerce. The reason behind this is the need for quick fulfilment of orders – Amazon have set the standard with same day delivery in many of their markets. For example, Goodman Group are building 15 story industrial buildings in Hong Kong.
- The royal commission is a relatively dividing topic however there is definite caution around it’s potential outcomes particularly on how it will impact credit availability.
- The proper recycling of waste produce and the demand for such facilities will increase particularly given the Chinese ban.
- There has been a rebound in the demand for yellow goods and the interest in the mining sector.
Due to the nature of the business presentations and the timing of the conference, most listed companies will provide an update on their year to date financial performance and how this is tracking verse their previously released guidance – this guidance is generally disclosed at their half year results. This time of the year is often referred to as the confession season and in recent years there has been a higher number of disappointing updates than positive.
Despite recent history this Macquarie conference had a positive tint (see graph) showing the signs of an improving economy.
Forming an educated view on how companies will perform versus their guidance and also versus consensus forecasts via fundamental and quantitative research is one of the key tasks of investment analysts and portfolio managers and is critical to successful stock selection.