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.
AGM season most important in years
According to specialist equity manager Redpoint Investment Management, the current annual general meeting (AGM) season for ASX-listed companies is “arguably more important today than it has been over the past few years.”
After at least 18 months of refusing to offer anything in the way of guidance to shareholders, outlook statements will once again be the focus for investors. Redpoint’s Max Cappetta suggests one of the key issues on which investors should be focusing is “cost pressures sneaking into updates.” He also suggests that investors be highly wary of any drop in revenue growth after the big sell-off in Domino’s Pizza (ASX:DMP) in recent weeks.
With AGM season nearly half-complete, the Redpoint team has raised a number of queries concerning some of Australia’s leading companies. This begins with Seek Ltd (ASX:SEK), which has undertaken a significant restructure but seen its share price surge towards record highs. The team highlights that Seek’s revenue has halved since 2019, and 2020 estimates remain a full 30 per cent below this level, but questions whether the company has made progress in becoming ‘leaner’.
The share price is clearly factoring in a ‘fast reversal’ of falling revenue, currently sitting 50 per cent above pre pandemic highs, but an improvement in profit levels is likely another two years away.
WiseTech Global (ASX:WTC) is up next, after management surprised the market (and the short-sellers) with a bumper profit result for the financial year, sending the shares 75 per cent higher. Following the recovery the company “needs to continue to show it can earn increasing margins for the cargo management software for every $ increase in revenue,” Cappetta says. Comments regarding cargo and volumes will also offer an insight into the evolution of supply chains.
Steel demand is expected to remain strong, supported by Australia’s position as “supplier of choice” to the global steel industry. Continued infrastructure spending will also contribute, however Redpoint says “the prices for many miners have weakened as the iron ore price has fallen given lower demand from Chinese steel mills.”
Investors need to consider “the actual delivered price for each miner’s ore, as this will be different to the benchmark price,” something Fortescue felt recently.
Finally the focus turns to sometime lightning-rod Kogan (ASX:KGN) with Redpoint asking the question: can Kogan maintain its revenue growth (up 100 per cent since 2018) given an end to lockdowns and consumers looking to devote spending back to services? Revenue growth is incredibly important, as the company seeks to maintain margins and overcome cost pressures arising from several missteps in 2020 and 2021.
“These are critical questions when the stock is trading at 30x 2022 earnings having fallen over 50 per cent thus far in 2021,” Cappetta concludes.
