Buy Hold Sell: 4 stocks with Australia's highest-paid CEOs
With only seven weeks left of 2021, Australians have much to look forward to.
Flowing food and drinks at work Christmas parties, another New Year's night to remember (or forget), a well-deserved break after this hell of a year, and of course, for the lucky few, an annual salary bump.
So in this episode, we're taking a look at some of the companies with Australia's highest-paid CEOs to see if their shareholders were rewarded too.
While many Australian chief executives didn't take home a bonus in FY20, the value of their annual salaries and vested equity interests are sure to turn investors an enviable shade of green.
According to the Australian Council of Superannuation Investors, CSL's Paul Perreault enjoyed a realised pay of more than $43 million during the financial year. Similarly, Macquarie Group CEO Shemara Wikramanayake, Woolworths CEO Brad Banducci and former Ansell CEO Magnus Nicolin received handsome paychecks.
Livewire's Ally Selby is joined by Pengana's Rhett Kessler and Alphinity's Stuart Welch for these fundies thoughts on the future prospects of these burgeoning businesses. And spoiler alert, two stocks, in particular, have caught both of our fundies their attention.
Note: This episode was filmed on Wednesday, 10 November 2021. You can watch, listen, or read an edited transcript below. Ally refers to FY21 in this video, however, these realised pays were from FY20. We are sorry for any inconvenience this causes.
Ally Selby: Hello, and welcome to Livewire's Buy Hold Sell. I’m Ally Selby, and today we'll be filtering the ASX for the country's top-paid CEOs. As you'd probably expect, these CEOs were handsomely rewarded in FY20, but were their shareholders too? Well, to find out and to get the future prospects of these companies, we’re joined by Rhett Kessler from Pengana and Stuart Welch from Alphinity.
CSL Limited (ASX: CSL)
First up, we have biotech darling CSL, whose CEO Paul Perreault earned more than $43 million in realised pay in FY20. For those who don't know, realised pay includes a salary and the value of equity that vested during the year. Stuart, is CSL a buy, hold or sell?
Stuart Welch (HOLD): I think CSL is a hold here. It's a great Australian success story. A well-managed business with a lot of positive attributes, but it has been COVID impacted. The base business is collecting plasma from donors, primarily in the US. And then fractionating it into immunoglobulin for people with immune deficiency and neurological disorders. The key problem during COVID was that the donors just weren't turning up. And that continues to be a bit of a headwind for them today. While it's improving, those collections are still probably lagging or at best, in line with consensus expectations. For that reason, it's a hold for us.
Ally Selby: As Stuart mentioned there, it has had quite a few issues during the COVID crisis. But everything's reopening now. We are shooting in the studio today. Its share price has returned around 3% over the past 12 months. Is it a buy, hold or sell?
Rhett Kessler (BUY): I have to say buy because it's one of the largest holdings in our portfolio. We like it. We think the company is well-positioned to leverage its superior collection dynamics and its superior distribution dynamics across the globe. I'm also very excited about CSL 112, which is the new molecule that hopefully will give me, and hundreds of millions of other people, a pipe clean for my arteries. And Paul's done a good job. I think he has positioned the company really well for the long term. We see these collection issues as a minor speed bump, and they'll continue to throw off a lot of cash.
Macquarie Group (ASX: MQG)
Ally Selby: Next up, we have Macquarie Group, whose CEO’s realised pay was $16.39 million in FY20. It's been a really great 12 months for Macquarie. Its share price has risen more than 47%. Stuart, staying on you. Is it a buy, hold or sell?
Stuart Welch (BUY): I think Macquarie Bank is a buy. It’s an exceptionally well-managed business, that over many years has managed to reinvent itself to capture whatever the new opportunities are in the market at that point in time. And I don't think this point in its evolution is any different. They're certainly set, particularly through the green energy bank, to be a major player in the shift towards net-zero emissions.
In the shorter term, they're benefiting from a lot of strong corporate activity in the Macquarie Capital business. And the volatility we're seeing in energy prices and commodity prices is really supportive of the global markets business that they have as well. A lot of the other businesses are also doing well. The retail side is taking share from the majors with better service levels and standards. In many respects, the business is doing really well and looks pretty reasonably valued. So it's a buy for us.
Ally Selby: Speaking of green investment, it recently announced it will be raising $1.5 billion to step up its green energy investments. Rhett, over to you. Is Macquarie a buy, hold or sell?
Rhett Kessler (BUY): It's a buy. And I think Stuart's covered it exceptionally well. What I can potentially add is that I think there's going to be a global war for talent going forward. And these guys, through their culture and very strong human resources, realised a long time ago that people are their most valuable assets. I think they are leaders in that field. And then everything else Stuart said just means it's a buy.
Woolworths (ASX: WOW)
Ally Selby: Next up, we have Woolworths (ASX: WOW), whose CEO, Brad Banducci, earned a realised pay of $12.67 million in FY20. Rhett, staying on you. Is Woolies a buy, hold or sell?
Rhett Kessler (BUY): It's a buy for us. It's the ultimate inflation hedge. When you're moving boxes at a gross margin of about 35%, the more boxes you move, the more money you make if there's inflation. I also think Brad has certainly focused on data and its contribution to increased distribution and profits. He's doing a great job on that, so yes, we'll continue to back Brad.
Ally Selby: Stuart, over to you. Its share price has risen more than 17% over the past 12 months. Is Woolworths a buy, hold or sell?
Stuart Welch (HOLD): Woolworths has been on a bit of a tear since they spun out the Endeavour drinks and pubs business recently. It's not particularly cheap, trading on about 28 times earnings, and they've jettisoned a lot of businesses, including the pubs business most recently. So, they're back to the ANZ supermarkets and BIG W. The path forward from here is less clear. They have talked about a marketplace and food services, which we’re watching to see how that evolves. I think it's a reasonably fully valued stock, but still okay. We would say to hold.
Ansell (ASX: ANN)
Ally Selby: And last but not least, we have Ansell. Its former CEO, Magnus Nicolin – what a name – took home $7.47 million in FY20. The company also has a new CEO, Neil Salmon, which is also a great name. Stuart, staying with you. Is it a buy, hold or sell?
Stuart Welch (SELL): Ansell is doing a lot of things well, but I would say it's a sell, unfortunately. It's been one of those key COVID beneficiaries that had a huge run-up in profits over the last 12, 18 months, as they sell protective clothing, gloves for both industrial and medical uses. And there was a mad scramble for their product.
But that demand profile is now normalizing, and probably a bit quicker than people expected. So, we're seeing volumes come out of that single-use exam glove space, as prices are coming back rapidly, too. For that reason, we're starting to see earnings expectations filtered down. And I think that's probably going to make it a challenging environment for Ansell over the not-too-distant future.
Ally Selby: As Stuart said there, it's not had the best 12 months. Its share price has fallen around 25%, probably because it was a COVID winner. Could its future turn around? Is it a buy, hold or sell?
Rhett Kessler (SELL): No, that's interesting. The spikes due to COVID have certainly outlined which companies have massive operating leverage on the way up and down. And the reason it fell 25% is that it went up so much. I certainly think that people were factoring in way too high through-the-cycle earnings, and I think it's got more downside. It's got the double whammy of falling revenues, high operational leverage, and then very high input costs. And you've got to be quite brave to be there. So sell, sorry.
Ally Selby: We hope you enjoyed this episode of Buy Hold Sell. If you did, remember to give it a like. And if there are any CEOs mentioned in this episode today who have a spare million to send my way, my details are…
Correction: An earlier version of this article incorrectly stated Gregory Goodman has stepped down from his role as CEO of Goodman Group, making way for Jason Little. This is not true. Gregory Goodman continues in the role. We extend our apologies to Mr Goodman, Mr Little, the Goodman Group and Livewire readers.
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Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.