The following transcript was AI-generated.
Manny Anton
Good morning and welcome to this week's edition of Winston's Weekly, covering all things property. I'm Manny Anton, your host for today's property chat. Winston, as always, welcome back.
Winston Sammut
Thank you.
Manny Anton
I've got to say, I didn't think you could add to your previous shirt, but I think you may have achieved that.
Winston Sammut
I have another one for next week.
Manny Anton
Really? We look forward to that.
Winston Sammut
Great.
Manny Anton
I'm excited. Alright, well look, let's let's start with – Again as has been the case the last the last couple of months, turning to US, the focus has been all again about rates and inflation. They've had quite a bit of data out and it looks like the Fed chairman has been doing his best to assure markets that rates are unlikely to be going up. But he looks to me like he's admitted that they're probably going to remain at current levels for a bit longer than what, the market hoped for. What was your read on some of these numbers that have come out over the last couple of weeks?
Winston Sammut
Well, the Fed has remained sort of true to form in terms of saying that it's all data dependent and so when we get bits of data that doesn't sort of 'fit the frame', we get a lot of volatility in the markets, which is what we've seen over the last week to ten days. Data is dependent primarily on the outlook for inflation. And it's about keeping inflation on the downward path rather than than being flat or steady as it's been over the last couple of releases.
Manny Anton
Yeah, it's interesting because the – that old ugly word which you and I are probably used to from back in the 90's "stagflation" has come up several times in terms of the US. And again, it's just that mixture of data. Some of it that that points to a hot market others that don't necessarily point to a hot market. So you've you've got a little bit of everything going on at the moment. And in fact, overnight the earnings session in the US has been remarkably strong.
Winston Sammut
Yes.
Manny Anton
So you've got corporate earnings, which are looking fine. You know, that's kind of underpinning the market. Technology stocks, they're up something like over 40% year on year in terms of earnings. So it's been quite extraordinary.
Winston Sammut
But the earnings are coming through which which is positive because there was some concern earlier on about the US going into recession, which is now really off the table. So it has a lot to do with with the inflation, numbers, the CPI and the employment numbers. And so they're keeping an eye on that. Is the Fed's keeping an eye on that. And we'll see what happens. But certainly the market is sort of accepting that interest rate cuts are being pushed out further.
Manny Anton
Yeah, absolutely I agree. And and in terms of data, there is a non-farms payroll number due out in the US overnight. So again, that'll just be another another indicator. We'll see what happens with with that one. But I know they're focused on that now for tonight so –
Alright well let's move on to domestic. I just wanted to ask you – I'd like to focus a little bit more on specific companies who have been the biggest movers in our own property sector. Can you talk to us about who the key performers have been and and underperformers have been? And the reasons why? Is there anything –
Winston Sammut
Sure. Sure. Well, the sector was down nearly 8% in the month of April, so it's reasonably volatile once again. And a number of stocks sort of stand out. Obviously, Goodman Group has been the best performer once again, and primarily because a lot of general equity players see that as their only exposure in in REITs, and and so that's that's it's been the best performer. At the other end of the scale, what we've now seen is some of the office managers/fund managers have been under pressure. Stocks like Dexus, stocks like Charter Hall and Centuria Capital. And whilst they have an exposure to office, which the market doesn't sort of – isn't enamored with at the moment, and some of them don't haven't actually been priced correctly in terms of the funds management businesses that they have.
Dexus at the moment, yesterday closed under $7. Its NTA is closer to $10. So it's fairly cheap. It does have office, but it also does have exposure to industrial and medical assets, which is a sector that's gaining popularity. So I think it's probably been a little bit harshly done by. And if when the market turns, I think we'll see a good bouncing in indexes again. So yeah, it's mainly the leaders. We've had quarterlies come out for Stockland and Mirvac and they're either in line with expectations. There's nothing really that's come out that's it's a big negative in that stock. So it's about being patient at the moment.
Manny Anton
So do I take it then – My next question would have been are there any obvious opportunities that you can see some of these value trades? It sounds like Dexas is the one you sort of saying when you look at the NTA. That's pretty obvious.
Winston Sammut
Yeah. And likewise Charter Hall under $12, which is where it is at the moment, around $11.70/$11.80 is probably a reasonable value. So there's a couple of other stocks that are looking okay.
Manny Anton
Yeah, there is a lot of discussion still and we've covered this before a few weeks ago, but there's still a lot of talk in terms of the office sector about that gap that's emerging between Grade A, Grade B. Obviously that's still going on. And, you know, has anything changed on that front? Or is it pretty much the same?
Winston Sammut
Not really. People are looking for quality space, better space, modern amenities, those sorts of things, and they're in favor. But there's a lot of office property that doesn't fit that criteria, and they're the ones that are going to suffer.
Manny Anton
Okay. All right. Checking in on Newmark. What's the latest there? What are the acceptances doing at this point?
Winston Sammut
Bunnings trust extended the period by another week to to this – to today actually! They're over 90% so they'll be able to compulsorily acquire, so it's over and done with effectively given that they're about 92%/93% and they can compulsorily acquire the balance and, so Newmark will effectively be delisted.
Manny Anton
Okay, well that sounds like that's done!
Winston Sammut
That's done. On the other front, which is the Aspen and Eureka takeover. Yesterday Aspen came out and increased its offer. It was .26 of an Aspen share for every Orica share. It's now .28 of an Aspen share it. Now if you look at the last traded price of Aspen and work at what .28 percent of that is it's it's about 48/48.5 cents. The stock is trading at 54. So we'll see how that goes.
Manny Anton
Well, you'd imagine that no one's going to be selling into the bid. They'll be selling into the market if anything.
Winston Sammut
The ones that would probably have accepted and will likely accept is some of the large holders that have got investments in both, because all that all they're doing is I mean, they're already invested in in both they combine and get into one entity. And they view from their perspective that Aspen has got better growth prospects than Eureka, so we'll just have to wait and see.
Manny Anton
Alright. And looking forward to next week, is there anything on the on the property front that you're aware of that's coming up? Any major announcements or anything we should be focusing on?
Winston Sammut
Nothing specific. We're now halfway through / close to halfway through the June quarter. At the end of June, most of the REITs will go X distributions. So we just wait and see what happens on that front. There's nothing specific other than likewise the RBA here is, is very much data dependent as well and we have an RBA meeting next week. Whether anything comes out of it… I suspect the rates will stay where they are for the time being.
Manny Anton
Okay Winston, thank you again for your time as always, a pleasure. We all will come back next week for another for another chat. As I say, we'll be back with another edition of Winston's Weekly next Friday. So until then, have a great day and a wonderful weekend!
Disclaimer: Sequoia Financial Group (ASX:SEQ), the parent company of Finance News Network, owns a 20 per cent interest in Euree Asset Management.
