BUSINESS FORECASTING – AUSTRALIA

Pandemic pressure for super mergers

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Original article by Cliona O’Dowd
The Australian – Page: 13 & 17 : 27-Jul-20

The balanced options of Equipsuper and Catholic Super achieved positive returns in 2019-20, despite the impact of the coronavirus pandemic. The two funds merged in 2019, and boast a combined $26bn worth of funds under management. Scott Cameron, the CEO of the Equipsuper -Catholic Super, says his target is still to have $50bn of funds under management within five years. He has flagged another merger deal within months, and expects COVID-19 to lead to further consolidation in the super sector.

CORPORATES
EQUIPSUPER PTY LTD, CATHOLIC SUPER

Shape of banks’ dividend recovery will be more U than V

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Original article by James Eyers
The Australian Financial Review – Page: 16 & 18 : 24-Jul-20

Brendan Sproules of Citigroup expects Australia’s banks to resume paying dividends in the December quarter, at a reduced payout ratio of just 40 per cent. He does not expect banks’ payout ratios to return to pre-coronavirus levels until fiscal 2022. Westpac and the ANZ Bank recently put their interim dividends on hold, while Citigroup expects the Commonwealth Bank and Bendigo & Adelaide Bank to withhold their dividends for the second half of 2019-20.

CORPORATES
CITIGROUP PTY LTD, WESTPAC BANKING CORPORATION – ASX WBC, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED – ASX ANZ, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA, BENDIGO AND ADELAIDE BANK LIMITED – ASX BEN

Fortescue rides iron ore boom

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Original article by Nick Evans
The Australian – Page: 13 & 16 : 14-Jul-20

Data from Port Hedland shows that its iron ore export volumes rose to a record 51.8 million in June, and 281 million tonnes in the year to date. This is six per cent higher than the same period in 2019, and Glynn Lawcock of UBS says Fortescue Metals Group may exceed its guidance of 175 to 177 million tonnes for 2019-20. He adds that the strength of the iron ore price and high shipping volumes could see Fortescue announce a final dividend of $0.98 per share, compared with the consensus forecast of $0.80.

CORPORATES
FORTESCUE METALS GROUP LIMITED – ASX FMG, UBS HOLDINGS PTY LTD

Banks must go harder on costs: KPMG

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Original article by James Frost
The Australian Financial Review – Page: 16 : 9-Jul-20

KPMG partner Hessel Verbeek warns that Australia’s banks face the prospect of single-digit returns on equity in the wake of the coronavirus pandemic. He argues that they will have to be much more aggressive in reducing costs. Verbeek has identified branch closures and product rationalisation as some of the areas that offer scope for cost savings. He notes that overseas banks have been much more active in pursuing such strategies; Australian banks have closed just 14 per cent of their branches since 2015, while British banks have closed 33 per cent.

CORPORATES
KPMG AUSTRALIA PTY LTD

Aussie gas spurs Shell’s $12bn hit

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Original article by Perry Williams
The Australian – Page: 13 & 19 : 1-Jul-20

Macquarie expects more companies in Australia’s energy sector to announce writedowns in the second half of 2020, in the wake of the sharp fall in the crude oil price. Global energy giant Shell has advised of impairment charges of up to $US22bn; this includes a writedown of between $US8bn and $US9bn on its gas business, primarily due to its gas projects in Australia. The price of Brent crude is trading at around $US40 a barrel, and Macquarie notes that Australian energy producers typically use a price of $US70 to $US75 a barrel for impairment testing purposes.

CORPORATES
ROYAL DUTCH SHELL PLC, SHELL COMPANY OF AUSTRALIA LIMITED, MACQUARIE GROUP LIMITED – ASX MQG

More may exit NW Shelf, Woodside warns

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Original article by Perry Williams
The Australian – Page: 13 & 17 : 25-Jun-20

Woodside Petroleum director Ann Pickard says the North West Shelf joint venture worked very well at first, but the competing interests of the six partners have progressively gotten in the way. She says other partners could opt to join Chevron in selling out of the LNG venture, given that the NWS plant is set to begin processing third-party gas as the project’s reserves run down. Former Woodside CEO Don Voelte says Shell and BP could potentially sell their NWS stakes.

CORPORATES
WOODSIDE PETROLEUM LIMITED – ASX WPL, NORTH WEST SHELF LNG PTY LTD, CHEVRON CORPORATION, BP PLC, ROYAL DUTCH SHELL PLC

Bad loans hit small banks hard: Citi

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Original article by Cliona O’Dowd
The Australian – Page: 16 : 16-Jun-20

Citigroup analysts note that Australia’s smaller mortgage lenders have actively pursued increased market share in recent years. However, Citi warns that they are set to be hardest hit by a coronavirus-induced rise in loan losses later in 2020, as such losses tend to be highest during the first 3-4 years of a loan. Citi contends that small lenders will need to focus on capital demands rather than further growing their market share, which in turn is likely to prompt a swing back to large lenders.

CORPORATES
CITIGROUP PTY LTD

Investors need to mind the looming earnings gap

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Original article by Luke Housego
The Australian Financial Review – Page: 29 : 16-Jun-20

The coronavirus pandemic is set to weigh on the financial results of Australian-listed companies, with Morgan Stanley noting that the consensus forecast is for earnings to fall by 15.2 per cent in 2020. The average 12-month forward price-earnings ratios for the S&P/ASX 200 was 18.1 times before the recent sell-off, compared with a long-term average of around 14 times. Jason Steed of Morgan Stanley says a relatively small shift in earnings expectations when P/E ratios are high can prompt a sharp fall in share prices.

CORPORATES
MORGAN STANLEY AUSTRALIA LIMITED, STANDARD AND POOR’S ASX 200 INDEX

Bidders spell out Virgin job cuts to unions

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Original article by Jemima Whyte,Lucas Baird
The Australian Financial Review – Page: 13 & 16 : 4-Jun-20

Bain Capital and Cyrus Capital Partners must submit binding offers for Virgin Australia by 22 June. The two final bidders for the failed airline are under growing pressure to outline their plans for Virgin, including the likely job losses. Unions held talks with Bain and Cyrus on 3 June, and some sources have suggested that more than 20 per cent of Virgin’s employees could be retrenched. BGH Capital is said to have been looking at cutting 2,000 jobs if it had acquired Virgin.

CORPORATES
VIRGIN AUSTRALIA HOLDINGS LIMITED – ASX VAH,BAIN CAPITAL LLC,CYRUS CAPITAL PARTNERS LP,DELOITTE TOUCHE TOHMATSU LIMITED,BGH CAPITAL PTY LTD

Super sector should shrink 80pc: report

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Original article by James Thomson
The Australian Financial Review – Page: 19 : 25-May-20

Management consulting firm Right Lane contends that a major rationalisation of Australia’s superannuation sector is necessary. Associate principal Abhishek Chhikara suggests that there is scope for 3-5 large "generalist" funds and 7-10 niche funds that are focused on specific industries or types of super products. Right Lane estimates that a super fund needs a minimum of 500,000 active members in order to operate efficiently, and ideally they should have between one and two million active members. The firm expects the pandemic to increase the pressure on smaller funds.

CORPORATES
RIGHT LANE CONSULTING