CEO INSIGHTS – Week Ending 18 October 2019 By NAOS Asset Management

"In Australia and around the world, it is a seller's market. If you're selling infrastructure you can get really great prices and there's so much competition for these investments." Mark Machin, CEO, CPPIB [Canada Pension Plan Investment Board]

As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs 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.  

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Advertising & Media

"Media markets have been weak across the first quarter" Market Announcement, Southern Cross Media Ltd

Infrastructure

"In Australia and around the world, it is a seller's market. If you're selling infrastructure you can get really great prices and there's so much competition for these investments." Mark Machin, CEO, CPPIB [Canada Pension Plan Investment Board]

Domestic Retail

“The Company believes this [lower store traffic] is linked to lower general retail demand associated with the recent slowing in housing sales and renovations and a cautious consumer attitude." Market Announcement, Nick Scali Ltd

"We are seeing the improvement in our transactions and an increase in the number of items customers are buying." Market Announcement, The Reject Shop Ltd

Domestic Economy

"Looking ahead, job vacancies and advertisements had declined, suggesting that employment growth would probably moderate over the subsequent few quarters. Members noted that the ongoing subdued growth in wages implied that there continued to be spare capacity in the labour market." October 2019, RBA Minutes

Domestic Property

"Very soon we are going to be in a [housing] supply shortage situation" Susan Lloyd-Hurwitz, CEO, Mirvac Group

"Housing prices are now rising in Sydney and Melbourne after having fallen for 18 months, and there are encouraging signs that the market has stabilized." Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

Finance & Lending

“So we are starting to see a lot of growth in the payday lending space, which is high risk, I mean it meets a need but there are ethical questions about some of that.” Shayne Elliott, CEO, ANZ

“Australian annuity sales continue to be affected by disruption in the retail financial advice market following the Royal Commission." Richard Howes, CEO, Challenger Ltd

"There’s no doubt we are operating in a challenging environment with slow credit growth and historically low interest rates, together with rising regulatory and customer expectations." Matt Baxby, CFO, Bank of Queensland Ltd

Global Economy

“The consumer remains healthy with growth in wages and spending, combined with strong balance sheets and low unemployment levels.” Jamie Dimon, CEO, JP Morgan Chase & Co

“This [strength in the US consumer] is being offset by weakening business sentiment and capital expenditures mostly driven by increasingly complex geopolitical risks, including tensions in global trade.” Jamie Dimon, CEO, JP Morgan Chase & Co

“I don’t see how the transmission of negative interest rates effectuates more activity in Europe. I get the theory but we are seeing the opposite – consumers and banks are pulling back.” Lawrence Fink, CEO, BlackRock Inc

“The environment is highly unpredictable given how much of it is at the mercy of political machinations, whether it's trade negotiations or even the elusive resolution on Brexit.” Mike Corbat, CEO, Citigroup Inc

"This is no secret that the industrial marketplace has weakened in the last 12 months." Daniel Florness, CEO, Fastenal Company [US listed industrial supplies conglomerate]

“The freight environment is difficult. It has been more difficult than people expect from an earnings standpoint.” David Jackson, CEO, Knight-Swift Transportation [largest US trucking company]

Agriculture

"The [meat] industry is operating in an environment where total world meat consumption continues to increase. Over the last two decades, total global consumption has increased by 64% at an average rate of 2% per year for sheep meat and 1% for beef." Anna Campbell, CEO, Red Meat Advisory Council

Energy

"We see gas as a very crucial part in the emissions reduction story" Kevin Gallagher, CEO, Santos Ltd

Technology

"Innovation is now coming from other places, like say Australia, you have Atlassian and Canva. And you now have the likes of India and China, which are huge for e-commerce and digital payments. Innovation is coming from all over the world, due to AI [artificial intelligence] and 5G in particular. It is still Silicon Valley driven, but other countries are complementing it." Eric Yuang, CEO, Zoom Video Communications Inc

Cosmetics

“If you compare the nine months numbers with last years and if you look at them on a geographic basis, you have no change in Asia, the growth is exactly the same. Hardly any change in Europe or in Japan. The big drop is definitely the U.S. where the whole industry in my view has been caught surprised with the drop in the makeup business, which used to be flying for the last 10 years and suddenly became negative in 2019.” Jean-Jacques Guiony, CFO, LVMH [Louis Vuitton Moet Hennessy] Group

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Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.