Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Reporting season: Transurban digs itself into a hole
Suncorp (ASX:SUN) – The insurance heavyweight delivered a strong profit result, above expectations, helping its share price rise by 6.58% in early trade. Group cash earnings came in at $1.064 billion, up 42.1%, and NPAT was $1.033 billion, up 13.1%, and well above the expected $920.5 million. Suncorp said “the result demonstrates the program of simplifying and refocusing Suncorp is gaining traction.”
The board declared a 40c dividend, taking the total yearly dividend to 66c, together with a special 8c dividend and buyback of up to $250m. The profit beat was driven by an increase in profit after tax in Insurance (Australia) (up 42.4%) and Suncorp Bank (up 69.0%). The group reported improved top-line growth, with Insurance (Australia) and New Zealand delivering gross written premium (GWP) growth of 5.5% and 9.2% respectively. This is the best insurance top-line performance in almost a decade. On the COVID side, “the financial impact of COVID-19 was broadly neutral throughout FY21 with lower motor claims frequency offset by additional provisioning for potential business interruption claims,” Suncorp said.
Transurban (ASX:TCL) – The toll road operator has had a tough year. Hampered by COVID-19, average daily traffic numbers fell by 0.40% versus FY20 or 7.0%. COVID-19 hurt all markets, with Melbourne and the Greater Washington area the most affected. The group is, however, taking a massive hit on the troubled West Gate tunnel project, with potential legal action ahead with the Victorian government.
However, a recovery trend is evident throughout FY21, prior to recent lockdowns. The company says its “performance will remain sensitive to future government responses and overall economic conditions.” Transurban posted an overall loss of $287 million, which wasn’t as bad as it had expected. Brokers were expecting a loss of about $302 million. This included a $3.7 billion gain on sale of 50% of Transurban Chesapeake assets, coming in above those assets’ net valuation.
The company said it has a “pipeline of opportunities progressing in core markets with fundin optionality, given resilient business model and balance sheet.” Despite the negative impacts of COVID-19, Transurban held it together and endured the tough times with view for long term growth.
Aurizon Holdings (ASX:AZJ) – The rail haulage operator recorded a solid half-year, posting a NPAT of $531 million, above the expected $512.7m. EBITDA was up 1% to $1.482bn with free cashflow of $734m. Despite challenges with export volume to China, Australian coal has successfully been redirected into alternative markets. Expanding Asian markets support other bulk commodities demand. COVID-19 has had minimal impact on the company’s operations. A highlight was Aurizon’s ability to keep free cashflow stable and maintain it at these levels, despite trade disruptions with China.
FY2022 outlook – On the positive the company has upped guidance; given the focus on free cash flow, guidance has shifted to EBITDA and capex. Bulk commodities’ share of earnings is poised to increase, improving diversification, however, all the company’s forecasts rely on “no material disruptions to commodity supply chains.”
