Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
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The Montgomery Fund was launched on 17 August 2012. In the period to 31 December 2012 The Fund delivered a return of 16.88%, after expenses.
Over the same period the S&P/ ASX 300 Accumulation Index appreciated by 8.68%.
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Despite the global economic slowdown, 2012 was a good year for investors in the major share markets.
The Australian All Ordinaries Index, was in the middle of the pack, appreciating 13.5 percent from 4,111.0 to 4664.6. Virtually the entire gain was recorded in the six months to December 2012.
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With the wipeout in the Billabong (BBG) share price, from a high of $14.00 in mid-2007, the Company has now received its third takeover bid in a year.
President of the America’s Division since 1998, Paul Naude, together with a consortium of financiers, have “dropped in” a $1.10 per share bid, valuing BBG at $527m. This is a slight premium to the deeply discounted 6/7 rights issue at $1.02 per share, which delivered $225m in mid-2012 for debt reduction purposes.
The Board’s response will be interesting. Recently appointed CEO, Launa Inman, has well developed plans in getting Billabong back into the competition.
We have been told there are pockets of operational excellence at Billabong, but these need to be scaled-up across the organisation. The severe under-spend on IT is also being addressed.
The Chinese share market, as measures by the Shanghai Composite Index, spent forty months between late-July 2009 and early- December 2012 declining 44% from 3,478 points to 1,949 points.
In November Fairfax Media sold its specialist agricultural media business in the US for $76m.
Yesterday, Fairfax Media sold out of their 51% stake in the New Zealand based on-line and classifieds site Trade Me for $616m.
In a matter of weeks the Company has raised $690m.
This compares with their net indebtedness of $1.49 billion and 30 June 2011 and $914m at 30 June 2012.
Capitalised at $1.25 billion (2,352m shares on issue X a $0.53 share price), we suspect a number of “value investors” will jump on board as Fairfax Media becomes less financially leveraged.
Montgomery believes Fairfax lost its identifiable competitive advantage to several internet offerings many years ago and we will not be tempted. Having said that, we also believe that a digital transformation is under way and the right people for the job are being mobilised.
As you know we aren’t speculators and our process requires us to see evidence of the turnaround occurring. A demonstrated track record is required if we are going to invest rather than speculate. And as we have pointed out recently the shares are as close to an estimate of intrinsic value as they have ever been in the last decade.
Yesterday, Webjet announced the acquisition of Zuji for US$25m, or 4.6X estimated EBITDA of $5.4m, from Sabre Holdings.
Zuji adds $300m of Total Transaction Value (TTV) and expands Webjet’s footprint in the fast growing Asian travel market. For context, Webjet’s TTV for the year to June 2012 was $768m, up 30% year on year.
Over the past decade many Chinese-based companies have listed in the US. For the larger stocks, such as PetroChina, China Mobile and CNOOC, the American Deposit Receipt (ADR) represents a secondary listing, and often Hong Kong is the primary place of listing.
However for about 200 smaller stocks (with an aggregate market capitalisation of US$84 billion), the US is their primary market.
Prior to 1990 the Reserve Bank of Australia did not publish an official cash rate setting and cash rates going back to 1960 was a proxy of the current measure. Historical data shows the lowest cash rate proxy was 2.89% in January 1960.
As detailed in yesterday’s blog, “data points from manufacturing, the job market and the terms of trade are all pointing to weaker GDP growth”.
Assuming the Reserve Bank of Australia cuts the cash rate from the current “emergency low” level of 3.0% to 2.75% in early 2013 this will be the lowest level in 53 years.
Yesterday, the Reserve Bank of Australia cut their cash rate to 3.0%, down from 4.75% at October 2011, and the lowest level since mid-2009. Data points from manufacturing, the job market and the terms of trade are not cheery reading – all pointing to weaker GDP growth – and we expect the cash rate to fall further in 2013.
On 27 July 2012 I wrote “over the past fifty years, US housing starts have averaged 1.5m per annum. Currently starts are less than half the long-term average. Deutsche Bank is looking for US housing starts to jump to 1.0m by 2014 and to 1.4m by 2016 as follows”.
