Chris Stott

As reporting season comes to a close, with almost 85% of companies now having reported, the S&P/ASX All Ordinaries Accumulation Index closed up 1.8% for the week. Over 200 companies reported their results this week, representing 21% of the top 200 and 50% of listed small-cap companies. Overall, it has been a satisfactory reporting period with earnings estimates increasing marginally. A common theme is that companies are reinvesting to drive growth through new products, research and development and expansions, and this has been especially prevalent in those that have reported positive results. Over the past two weeks we have made meaningful changes to the portfolio as we capitalise on several new investment opportunities discovered during this period.

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Spotlight on Seven Group Holdings

Seven Group Holdings (ASX: SVW) announced its interim results on Wednesday, reporting underlying earnings before interest and tax of $223.5 million, up 42% on the prior corresponding period. The company upgraded its guidance from between 5 to 10% to 15% earnings growth, reflecting the buoyant conditions in civil infrastructure and the strength in its industrial services businesses WesTrac and Caterpillar. We invested in SVW through WAM Capital, WAM Leaders, WAM Active and Century Australia one year ago as major miners’ maintenance spend began to recover. We believed this would lead to stronger demand for Caterpillar parts and servicing and have been pleased to see this eventuate. SVW recently bought the remaining 50% of Coates Hire in August 2017, which will support the next phase of growth driven by miners purchasing trucks. We first purchased shares in SVW last year at $7 per share, which are now valued at $19 per share. Shares in SVW closed up 15.4% for the week.

Spotlight on Qantas

Qantas (ASX: QAN) reported a record first half profit on Thursday, with underlying profit before tax up 15% to $976 million, beating its own guidance. Record earnings performances from Qantas Domestic and Qantas Loyalty drove strong operating leverage. We own Qantas in the WAM Capital, WAM Leaders, WAM Active and Century Australia investment portfolio and constantly monitor air traffic data. Qantas holds the strongest position in the Australian airline market and we are pleased with the company’s monthly cost disciplines and see the potential for future capital management. Shares in Qantas closed up 9.8% for the week.


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