CEO INSIGHTS – Week Ending 2 June 2017 by NAOS Asset Management

NAOS Asset Management

"Backdoor listings are problem in Australia. There are some examples – Vocus is the only one people keep quoting – where it's worked. But they were a pretty big company by the time they listed, which is different than effectively backdoor listing a start-up because it can't raise money any other way. That's always a massive warning sign” Mike Cannon-Brookes, CEO, Atlassian

As part of the NAOS investment process, we pay particular attention to the comments made by company CEO’s and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.

Financial Markets

"We think that there is too much risk in this market at the moment, we think it's crazy”

Philip Parker, Altair Asset Management Chairman and CIO

"When you speak to people candidly in the banks, they'll tell you very specifically that they are extraordinarily worried about the over-leverage of the Australian population in general"

Philip Parker, Altair Asset Management Chairman and CIO

"Since the GFC, the worse the economy has looked, the more quantitative easing was required, the more the market has gone up ... it's not always the case that stock market returns will correlate with the economic picture”

Julian Beaumont, Investment Director, Bennelong

"The thing is, you can never pick the top or the bottom of the market. The fact that everyone's negative means it'll probably keep going up in the short term"

Geoff Wilson, Chairman, Wilson Asset Management

"Significant market adjustments – whether it's the 1987 crash, the bursting of the tech bubble in 2000 or the global financial crisis – they create phenomenal opportunities for astute investors”

Geoff Wilson, Chairman, Wilson Asset Management

“You open to the general public and I worry that it is a disaster you are creating, so you have to be very careful about the rules you are putting on that stuff”

Mike Cannon-Brookes, CEO, Atlassian

Diagou’s

"We are very positive on the daigou channel and we regard it highly"

Peter Nathan, Australian and NZ head, A2 Milk

“Due to supply issues, we have a number of infant formula lines that may not be available in all stores. Coles is committed to ensuring our customers have access to these products and as a result we are temporarily limiting sales quantities to four units per customer”

Coles Statement

“We have reduced our purchase limit on baby formula from eight cans to four cans to help increase availability for our customers”

Woolworth’s Statement

Australian Real Estate

“It’s all good until it isn’t. It isn’t when interest rates go up”

John Fraser, Australian Treasury Secretary

“When I was buying a house in the seventies it was a far easier process and I don't take any joy that for many families it's a bigger hurdle to jump than we ever imagined,"

John Fraser, Australian Treasury Secretary

“Our projects in Brisbane have been settling well. It takes longer to settle than usual but it's not all doom and gloom"

Luke Hartman, MD, Metro Property

"Consumer sentiment towards housing, as measured by Westpac and the Melbourne Institute, has shown a marked downturn in May"

Tim Lawless, Head of research, Corelogic

Canadian House Prices

Note: Canada has recently had a property boom similar to Australia

“In less than one week we went from having 40 or 50 people coming to an open house to now, when you are lucky to get five people”

Case Feenstra, Managing Director, Royal Le Page Real Estate

“I’ve had situations where buyers are trying to find another buyer to take over their deal. They are nervous that they bought right at the top and prices may come down”

Mark Weisleder, Partner, Real Estate Lawyers

“The frenzy is over. It’s over”

Century 21 brokerage owner Joanne Evans

Global Economy

“The big change from a year ago is far greater optimism at the global level. We've been saying this frankly for 18 months, and it's been picked up by others”

John Fraser, Australian Treasury Secretary

Technology

“Whereas in the past we could make a product with a team of mechanical engineers, now we need software engineers and AI specialists”

Sir James Dyson, Founder, Dyson

"There are a lot of people in the bank who are devoted to tasks that could be automated, and there is a growing awareness of that”

Andrew Thorburn, CEO, NAB

“Jobs will be lost, jobs will evolve and this revolution is going to be classless, and it’s going to affect everyone”

Meg Whitman, CEO, Hewlett Packard

Electricity Prices

"Given the current electricity prices and uncertainty around future supply, we need to consider options for shutting our smelter and refinery and refining at one of our other plants offshore"

Aristotelis Mistakidis, Head Glencore Copper business

"We certainly will be looking at harnessing our own standby energy capacity in the wholesale market”

Ben Burge, Head of Telstra energy division

Retail

“The challenging trading period the Company had expected in the second half has materialised”

Godfreys Market Announcement

Agriculture

“The 2017 Australian almond crop has been lower than industry expectations. Our investigations are ongoing, however initial indications are that the 2017 crop has been more impacted by seasonal conditions than previously forecast”

Select Harvest Market Announcement

Tourism

"We think the time is about right to have some significant expansion. We think the demand is clearly there, too”

Trevor Gerber SYD Chairman on 4th Syd airport terminal

“Sydney Airport is a pan-Asian growth story”

Kerrie Mather, CEO, Sydney Airports

Income Tax & Wages

"The last time the top rate plus the Medicare levy was higher was in 1988-89, when it was 50.25 per cent. Returning to that bygone era would send a very poor signal to all Australian workers: don't bother trying to earn just over two times average full time weekly earnings”

Malcom Turnbull, Australian Prime Minister

“We recognise changes in the market have seen downward pressure on fixed pay levels for CEOs and reductions in overall reward opportunities"

Michael Chaney, Chairman, Wesfarmers

Thank you for reading.

Article contributed by NAOS Asset Management: (VIEW LINK)


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