Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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Thematic (Sector/Industry)

Leisure companies under our coverage endured a torrid reporting season, with average fiscal 2017 first-half EBITDA fall of 15% from a year ago. The results were mostly driven by factors specific to each group. Still, whether it is the sentiment impact of an isolated theme park tragedy, competitive intensity in the U.S. leisure market, low airfares, or film popularity, the bottom line is there are many variables beyond management's control in the industry. These factors are the very basis for our…

Leisure companies under our coverage endured a torrid reporting season, with average fiscal 2017 first-half EBITDA fall of 15% from a year ago. The results were mostly driven by factors specific to each group. Still, whether it is the sentiment impact of an isolated theme park tragedy, competitive intensity in the U.S. leisure market, low airfares, or film popularity, the bottom line is there are many variables beyond management's control in the industry. These factors are the very basis for our…

Not Much Fun In Leisure; Ardent Leisure Undervalued While Event Hospitality Worth Monitoring

Director - Research, Consulting and Advisory, BondAdviser

Nicholas Yaxley

Director - Research, Consulting and Advisory

Australian bonds & fixed income research

BondAdviser

BondAdviser is the central reference point for intelligent information on Australian fixed income markets. We help you make informed decisions by providing unbiased research, transparent pricing data, analytics, portfolio tools and education.

BondAdviser has the broadest coverage of retail-accessible ASX-listed and over-the-counter Australian bonds and fixed income securities. We make it easy for you to review and compare investments before you place an order with your broker or dealer.

In <a href="https://www.bondadviser.com.au/blog/the-demand-we-have-been-waiting-for" target="_blank">November 2016</a> we stated a large proportion of redemptions would be reinvested in existing corporate issues to achieve some degree of sectoral diversification away from the banks. Since then, the demand/supply imbalance has squeezed trading margins on corporate hybrids to the point where some security valuations are being stretched from a trading margin risk perspective.Although we expect tight supply dynamics to continue and support expensive valuations, particularly for corporate listed securities, new investors should be aware of the inherent risk. For investors already holding these securities there is probably no reason to sell as scheduled corporate redemptions will continue to intensify demand in a relatively small market. We believe this situation of demand over supply will persist. However, given valuations are not reflective of risk profiles, we will be reviewing our recommendations if corporate hybrid margins continue to tighten.

In November 2016 we stated a large proportion of redemptions would be reinvested in existing corporate issues to achieve some degree of sectoral diversification away from the banks. Since then, the demand/supply imbalance has squeezed trading margins on corporate hybrids to the point where some security valuations are being stretched from a trading margin risk perspective.Although we expect tight supply dynamics to continue and support expensive valuations, particularly for corporate listed securities, new investors should be aware of the inherent risk. For investors already holding these securities there is probably no reason to sell as scheduled corporate redemptions will continue to intensify demand in a relatively small market. We believe this situation of demand over supply will persist. However, given valuations are not reflective of risk profiles, we will be reviewing our recommendations if corporate hybrid margins continue to tighten.

Valuations Stretched on ASX-Listed Corporate Hybrids

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Australia's ASIC releases the aggregated short position data four business days after the reporting day. Data in this insight is up to 13th April, published ~9AM on the 17th April.</li>
<li>The largest industry net increase in the past week was A$1.3bn into "Diversified Banks"; the largest industry net decrease was A$144mn out of "Oil&amp;Gas". Net shorts increased A$5.3bn week-on-week.</li>
<li>Companies mentioned in this regular weekly report include: <a href="https://www.smartkarma.com/entities/commonwealth-bank-of-australia" target="_blank" data-smartkarma-citation="entities:14:1" rel="noopener">Commonwealth Bank of Australia (CBA AU)</a>, <a href="https://www.smartkarma.com/entities/woodside-energy-group-ltd" target="_blank" data-smartkarma-citation="entities:13190:1" rel="noopener">Woodside Energy (WDS AU)</a>, <a href="https://www.smartkarma.com/entities/droneshield-ltd" target="_blank" data-smartkarma-citation="entities:30509:1" rel="noopener">DroneShield (DRO AU)</a>, <a href="https://www.smartkarma.com/entities/straits-resources-ltd" target="_blank" data-smartkarma-citation="entities:12080:1" rel="noopener">Aeris Resources (AIS AU)</a>, and <a href="https://www.smartkarma.com/entities/mcmillan-shakespeare-ltd" target="_blank" data-smartkarma-citation="entities:3023:1" rel="noopener">Mcmillan Shakespeare (MMS AU)</a>.</li>
</ul>


Australia's ASIC releases the aggregated short position data four business days after the reporting day. Data in this insight is up to 13th April, published ~9AM on the 17th April.
The largest industry net increase in the past week was A$1.3bn into "Diversified Banks"; the largest industry net decrease was A$144mn out of "Oil&amp;Gas". Net shorts increased A$5.3bn week-on-week.
Companies mentioned in this regular weekly report include: Commonwealth Bank of Australia (CBA AU), Woodside Energy (WDS AU), DroneShield (DRO AU), Aeris Resources (AIS AU), and Mcmillan Shakespeare (MMS AU).


Aussie Shorts [13th Apr]: CBA, Woodside Energy, DroneShield, Aeris Res., Mcmillan Shakespeare

<ul>
<li>There's little left in <a href="https://www.smartkarma.com/entities/sankei-real-estate-inc" target="_blank" data-smartkarma-citation="entities:35239:1" rel="noopener">Sankei Real Estate (2972 JP)</a> if Murakami-san is the sole blocker, as it gets done with him in the back end OR a big bump.</li>
<li>
<a href="https://www.smartkarma.com/entities/wh-group-ltd" target="_blank" data-smartkarma-citation="entities:13200:1" rel="noopener">WH Group (288 HK)</a> is trading around its highest implied stub, post <a href="https://www.smartkarma.com/entities/smithfield-foods-inc" target="_blank" data-smartkarma-citation="entities:44251:1" rel="noopener">Smithfield Foods (SFD US)</a>'s spin-off. Forward growth drivers are more evident in Smithfield and <a href="https://www.smartkarma.com/entities/henan-shuanghui-investment-development" target="_blank" data-smartkarma-citation="entities:20515:1" rel="noopener">Henan Shuanghui (000895 CH)</a>.</li>
<li>For CSRC to pushback on <a href="https://www.smartkarma.com/entities/enn-energy-holdings-ltd" target="_blank" data-smartkarma-citation="entities:316:1" rel="noopener">ENN Energy (2688 HK)</a>, it would need to clearly articulate, clear friction points surrounding the deal structure and/or systematic A-share market risks. Neither appears apparent.</li>
</ul>


There's little left in Sankei Real Estate (2972 JP) if Murakami-san is the sole blocker, as it gets done with him in the back end OR a big bump.

WH Group (288 HK) is trading around its highest implied stub, post Smithfield Foods (SFD US)'s spin-off. Forward growth drivers are more evident in Smithfield and Henan Shuanghui (000895 CH).
For CSRC to pushback on ENN Energy (2688 HK), it would need to clearly articulate, clear friction points surrounding the deal structure and/or systematic A-share market risks. Neither appears apparent.


Last Week In Event SPACE: Sankei Real Estate, WH Group, ENN Energy, Tekscend Photomask

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Macroeconomics

<ul><li>Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on Tuesday.  Real rates have effectively lifted in the first half of CY2016, with the 25 basis point cut to the OCR in May only partially offsetting the 50 basis point decline in underlying inflation.</li><li>Consequently, Evidente believes that the central bank should deliver another rate cut this week of 25 basis points.  With the Governor’s ten year term about to end in September, surely Mr Stevens will not want to leave a legacy of have tolerated a 50 basis point undershoot on the RBA’s inflation target?</li><li>Since its launch a month ago, the key macro principle guiding Evidente’s model portfolio has been the prospect that interest rates will remain low for an extended period due to the shortfall in aggregate demand.  As a result, the portfolio retains a strong defensive bias, with an overall beta of less than 0.85.  Over the past month, the portfolio delivered alpha of 1.2%, reflecting stock selection within the small cyclical budget, including overweights in MND (+41%), BSL (+32%), MYR (+19%) and PMV (+14%). </li></ul>

Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on Tuesday.  Real rates have effectively lifted in the first half of CY2016, with the 25 basis point cut to the OCR in May only partially offsetting the 50 basis point decline in underlying inflation.Consequently, Evidente believes that the central bank should deliver another rate cut this week of 25 basis points.  With the Governor’s ten year term about to end in September, surely Mr Stevens will not want to leave a legacy of have tolerated a 50 basis point undershoot on the RBA’s inflation target?Since its launch a month ago, the key macro principle guiding Evidente’s model portfolio has been the prospect that interest rates will remain low for an extended period due to the shortfall in aggregate demand.  As a result, the portfolio retains a strong defensive bias, with an overall beta of less than 0.85.  Over the past month, the portfolio delivered alpha of 1.2%, reflecting stock selection within the small cyclical budget, including overweights in MND (+41%), BSL (+32%), MYR (+19%) and PMV (+14%). 

Retain Defensive Bias as the Reluctant Rate Cutter Likely to Deliver More Stimulus

Australia

Flight Centre Travel Group Ltd operates as a retail travel agency in Australia.  The Company operates close to 1200 outlets throughout Australia and internationally including New Zealand, Hong Kong, South Africa, Canada and the United Kingdom. The Company's agencies and brands include Flight Centre, Travel Associates and Student Flights.

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Flight Centre Travel (FLT AU)

Not Much Fun In Leisure; Ardent Leisure Undervalued While Event Hospitality Worth Monitoring

Leisure companies under our coverage endured a torrid reporting season, with average fiscal 2017 first-half EBITDA fall of 15% from a year ago. The...

Morningstar, Inc.

Valuations Stretched on ASX-Listed Corporate Hybrids

In November 2016 we stated a large proportion of redemptions would be reinvested in existing corporate issues to achieve some degree of sectoral...

BondAdviser

Aussie Shorts [13th Apr]: CBA, Woodside Energy, DroneShield, Aeris Res., Mcmillan Shakespeare

Companies mentioned in this regular weekly report include CBA (CBA AU), Woodside Energy (WDS AU), DroneShield (DRO AU), Aeris Resources (AIS AU),...

David Blennerhassett

Last Week In Event SPACE: Sankei Real Estate, WH Group, ENN Energy, Tekscend Photomask

It’s Sunday! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the...

David Blennerhassett

Retain Defensive Bias as the Reluctant Rate Cutter Likely to Deliver More Stimulus

Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on...

Sam Ferraro

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