Selector June 2011 Quarterly Newsletter

8/13/2019 Selector June 2011 Quarterly Newsletter

1/15

June 2

Select ACN 1 Level Telep

Dear In

a

who

1974,

busin

distin

It is

toda

new?

all pr

conc

there

lose

It ma

spin

are d

perfe

appr

impo

As Br

care

unde

emot

what doing

price.

In thi

burg

cons

and

recor

recor

since

to th

We e

repor

Rega

Tony

Core

11 Selector Qu

or Funds Mana02756347 AFSL 3, 66 Hunter Strone 612 8090

Investor,

ecent

Austrstarted his i

noted that

esses. It may

ction but hist

ather appro

; China, the

” He continu

etty much t

rned about

is somethin

oney.”

not be new

nd investors

ifficult time

ct sense and

ach doesn’t

tant, an inve

andes notes,

hat shares

stand and th

ional when t

they are doi

and will th

”

s quarter’s

oning energ

quences are

hy we are c

ded a 2.6%

ded a declin

the financial

index retur

xtent our be

t.

ds

Scenna

Vincent

arterly Newslet

ement Limited225316 eet Sydney NS610 Web www

lian

Financivestment f

when he in

sound rathe

ory is very m

priate that

S economy,

s “There’s n

e same wo

something.

to really wo

however in

are rattled a

, however

something w

suggest av

stor’s emoti

“I try not to

n the Dow

ink will do w

e price falls

g, I will be in

n decide to

ewsletter w

y market. B

uncertain. I

nfident on t

ositive gain

of 4.8%. W

crisis in 200

of a negativ

t wishes to

er #32

2000, Australi.selectorfund.c

l

Review

intnd manage

vests, he d

r odd that so

uch on his si

hen confro

Europe’s de

othing new g

ries we alw

o me, it’s m

rry about, as

estors are cl

bout the fall

taying focu

e have consi

oiding the i

n to do som

look at Wal

o each day.

ell. That way

from $38 to

a position t

buy more a

e review the

oth are un

n addition

heir business

despite a p

ile the first

, of a positiv

e 0.2% over

ll our invest

ia m.au

erview,

succent busine

esn’t invest

meone woul

de.

ted with th

bt woes and

oing on...the

ys have. I t

ore of a wor

everyone thi

early worrie

out from wh

ed on busi

tently spoke

ssues but r

ething.

l Street, I do

I want to in

I am not goi

$15. Becaus

understand s I won’t be

local banki

ergoing sign

e focus on t

prospects. F

rticularly dif

half gains w

e 3.4% gross

he same per

ors and trust

essful

US

ins, Brandes I

in the shar

d see the ne

e big global

sovereign ris

issues of em

ink it’s a g

ry if investo

nks there is

. Global mar

t may or ma

esses rathe

n about in p

ather contr

n’t want to i

est in busin

ng to get sha

I really kno

why they ha

feeling emo

g sector an

ificant chan

he Fund’s cu

or the 2011

ficult last qu

re eroded, t

compound a

iod is nevert

that you en

estor

CharleInvestment

market; he

d to make s

issues facin

k, he offers

ployment, in

od thing in

s aren’t wo

lue sky and

kets are onc

y not eventu

r than mark

st newslette

lling somet

nvest in sha

esses. Busin

ken out or n

the manag

ve fallen, wh

tional about

cast an ey

ge and the

rrent portfol

inancial yea

arter, where

he Fund’s pe

nnual return

eless very pl

oy this lates

s

Brandes,

artners in

invests in

uch a clear

investors

So, what’s

lation, are

estors are

ried. Then

o one can

again in a

ate. These

ets makes

rs. Such an

ing more

es. I don’t

sses that I

rvous and

ement and

at they are the fall in

e over the

long term

io makeup

, the Fund

the index

rformance

compared

easing.

t quarterly

1


2/15

June 2


Table

Page

Page

Page

Page

Page

Page

Page

11 Selector Qu

or Funds Mana02756347 AFSL 3, 66 Hunter Strone 612 8090

of Contents 1: Letter to i

3: June 2011

4: Portfolio T

5: Banking st

10: Energy s

13: Time’s U

14: Company

arterly Newslet

ement Limited225316 eet Sydney NS610 Web www

vestors

op 10

ocks

ctor

for the Res

visit diary Ju

er #32


rve Bank of

ne Quarter 2

ia m.au

ustralia

011

2


3/15

June 2


June In a s

team

comp

whic

Firstl

over

of th

succe

Third

form

acqui

And f

such

the 2

avoid

the t

busin

Whil

disap

confiimpo

As Ta

one

multi

empl

expe Mark

Gree

colleccreat

the w

Durin

share

have

11 Selector Fu

r Funds Manag02756347 AFSL 3, 66 Hunter Strone 612 8090

2011 imilar vein t

s who run th

anies operat

makes us ve

, many oper

rivals. Secon

business o

ss.

ly, the finan

la,

largely

b

sitions.

inally they u

hey run con

008 financial

ing the painf

op ten busin

ess.

these are

pointments.

ence to

hol

tant discipli

ble 1 illustrat

year forwar

ples and at

yed are high

tations are t

et sentiment

e or ongoin

tively having

wonderful

orld.

g the June

price hit wit

on profits an

d Quarterly Ne

ement Limited 225316 eet Sydney NS610 Web www

o Brandes,

em. As our t

ing in all fac

ry comforta

ate as either

ly, manage

as key exe

ials and the

uilt

around

nderstand th

servative bal

crisis, none

ul dilutive pe

esses held,

all wonde

Understandi

on

when

t

e all investo

es, the majo

estimates

ractive divi

and manag

at this will c

is extremely

commenta

a direct

an

uying oppor

uarter, the

h investors c

d in the case

wsletter #32


e focus our

p 10 busine

ts of indust

le in owning

leaders in t

ent have be

utives, wher

track recor

organic

gro

at the owne

ance sheets

of these busi

riod that aff

hold health

rful busines

ng what ma

e world

is

u

s should stri

rity of these

guiding to

end yields.

ment have s

ontinue for t

cautious at

ry from our

powerful i

tunities, the

Fund’s large

oncerned ab

of Pharmaxi

ia m.au

attention on

ss holdings h

y. Important

them.

eir industry

en instrume

e remunerat

delivered t

th

and

aug

rs of the bus

nd are prud

nesses need

cted so man

cash balan

s traits, th

kes a busin

nsteady is

in

e for.

businesses a

reasonable

Importantl

teered the b

he foreseeab

the present t

Reserve Ban

pact on

inv

also require

exposure to

out the impa

s, the unexp

the busines

ighlight, the

ly they have

or enjoy a c

tal in their

ion is largel

hus far sugg

mented

wit

iness are in

ent with thei

d to raise n

y other liste

es, undersc

y don’t pr

ss worth w

short

not

a

re reporting

earnings gr

, the retur

sinesses pru

le future.

ime and ma

k surroundin

estor confid

nerves of st

healthcare

ct the rising

cted negativ

ses and the

represent a

a few thing

st competiti

uccess eithe

linked to t

ests they ha

compleme

eed the sha

r capital spe

w capital to

companies.

ring the str

otect again

hat it is an

n easy

thing

solid profit n

wth, unde

ns generate

dently in the

ro events, b

g local inter

nce. While

t

el and a bal

elated busi

ustralian cu

e vote from

managemen

collection o

in common

ve advantag

r as founder

e company’

ve a winnin

tary

bolt

o

reholders. A

nding. Durin

survive, thu

In fact, six o

ength of th

t failure o

d having th

to do

but

a

umbers, wit

anding PE

d on capita

past and ou

e they China

st rates, ar

hese period

nced view o

esses took

rrency woul

he Europea

3

f

,

f

r

l

r

,

f


4/15

June 2


Medi

fibros

regul

requi

positi

subst

Table

Finan

Busin

Black

Cochl

Flight IOOF IRESS News ResM

Sirtex

Whit

Worl

The

behin

to ad

drug,

Unde

for a

clinici

regul

woul

mark

Good

At th

comp

profil

11 Selector Fu


ines Agency

is drug Bron

tory bodies

red before a

on by some

antially prot

1: Top 10 Hial Screen ess

ores ar Centre Holdings Corporation ed Medical haven Coal yParsons und continu

d the negati

dress the EM

but more ar

r the appeal

proval to a

ans to exami

tors is expe

be open t

t, thus join

s Administrat

e current sh

any

as

we

c

e compelling.

d Quarterly Ne


(EMA) regar

hitol. While are conser

ny final Euro

0% prior to

cting our do

ldings

Earnings E2010(a) NPAT $m 2N

24.3

155.2

139.9

79.3

57.2

2,770.0 3

190.1

11.3

55.1

291.1

es to hold P

e vote, we r

A’s concerns

und how to

process that

separate bo

ne and repo

cted in Octo

sell Bronch

ing Australia

ion in Febru

re price of

onsider

the

SFM

wsletter #32


ding the co

we had exp

ative in na

pean appro

the EMA dec

nside.

rnings Earn011(e) PAT $m 201NPA26.4 28

180.6 22

170.6 18

110.0 11

62.0 69

,354.3 3,87

212.4 25

7.8 13

18.2 18

351.2 42

harmaxis in

emain confid

, which does

interpret the

is currently

dy – the Sci

t back to th

ber 2011 an

itol through

, which was

ry this year.

$0.93, it is o

share

price

ia m.au

pany’s mar

cted a positi

ure and ad

al was grant

ision at arou

ings Valuatio2(e) $m 2012(ePER

.7 15.3

.6 17.6

.9 10.9

.0 11.9

.2 16.1

9.6 11.8

.8 17.8

.0 21.3

.3 14.6

.7 16.2

the portfoli

ent that the

not to exten

trial data res

under way,

entific Advis

central bod

assuming a

out the 27 c

granted m

ur intention

ell

off

over

eting applic

e decision, ditional reas

ed. As such

nd the $3.00

n Valuation) Div Yield

% 5.0

4.2

4.6

8.0

5.5

1.2

‐

1.4

3.4

3.8

and having

company ha

d to any saf

ults.

Pharmaxis w

ry Group –

of the EMA

positive rec

ountries tha

rketing app

to increase

done

and

t

tion for its f

e were also

surance ma

we reduced

share price

Financial Leverage Net Debt (cash) $M

26.0

17.3

(83.9)

(123.4)

(143.5)

4,611.0

(551.8)

(41.4)

(49.8)

533.0

examined t

an extreme

ty concerns

ill re‐submit

allowing for

. A final deci

ommendatio

t comprise t

roval by the

our Fund’s h

e

company’

lagship cysti

mindful tha

have bee

our portfoli

mark thereb

ROCE Share Price

ROCE % 2011 %

Move38 +21.4

43 ‐1.3

33 +35.8

16 +13.0

221 +7.8

13.0 +30.0

22 ‐19.9

79 +2.5

9 +25.1

17 +33.2

he reasonin

y strong cas

regarding th

its reasonin

experience

sion from th

n, Pharmaxi

he Europea

Therapeuti

olding in th

strong

dat

4


5/15

June 2


Banki Bank

In thi

expe

the r

secto

time.

due t

collec

supp

Over

our

o

busin 1970

Durin

relati

to sh

hurdl

guara

bank

In ba

for d

shoul

bank

illustr

moat

1980

If the

tumu

follo

allow

excha

comp

Dere

back

of co

on ne

in 19

11 Selector Fu


ng profile ng backdrops review we

tations need

tail banks, t

r initially ce

However in

o a string of

tively they h

rter.

the past four

wn

snapsho

ess moat un

s g the 1970’s

onship betw

ow complet

es were yo

ntees. With

rs do.

king circles,

posits and

d not come

enjoyed ver

ating how pr

had become

s re was a de

ltuous time

ing their el

ing the curre

nge licences

etitors, bank

ulation was

half of the d

petition – l

w meaning a

9 owing cre

d Quarterly Ne


take a look

to be recali

e reasons fo

tred on the

more recent

industry con

ave the pote

decades the

on

how

th

erpinning th

and perhap

en a banker

loyalty str

then cons

such a capti

the term spr

ther source

as any surpri

y attractive

ofitable the

.

cade of cha

ll round. Th

ction victor

ncy to find it

and thereaf

s were

force

sold as a po

cade highlig

x lending pr

nd its impact

itors, who w

wsletter #32


at the banki

brated. Whil

r this have v

multitude o

years our r

cerns. In isol

ntial to caus

banking lan

e

banking

w

e traditional

going back

and his cust

tching over

idered for

e audience,

ead refers to

of

funds,

a

se that in k

preads. Also

banking busi

ge for the

e Hawke‐Ke

in 1983. In

own level.

er sixteen n

to

compete

sitive devel

hted some d

ctices. The t

was felt wit

ere mainly t

ia m.au

ng scene in

e the Fund h

ried over th

f better inve

easoning to

tion these t

considerabl

scape has ch

orld

has

cha

banking fran

decades bef

omers. In or

considerabl

loan, acco

banks were

the differen

nd the

level

eping depos

known as n

ness could b

anks it pro

ting Labor

December 1

his was follo

ew banking

for custome

pment and i

isturbing rea

erm negativ

h the collaps

e banks, ove

his country

as never hel

years. Our

stment opp

void this se

ends may n

e heartburn

anged consi

nged

and

h

hise.

ore, banking

er to obtain

years. If a

mpanied by

ble to explo

ce between t

of interest

it

it rates low

t interest m

and how w

ably was th

overnment

983, the Aus

ed by the is

licences in 1

rs and

new

b

n theory it

lities that oft

pledge (uns

of property

r $1.8 billion

and ask whe

d an investm

eluctance to

rtunities av

ctor has fir

t manifest i

ven for the

erably. Belo

w

this

has

was consid

credit, custo

d only if y

all manner

it the relatio

he level of in

charges

its

nd borrowi

rgins, they s

ide and dee

e 1980’s. In

set off a ser

tralian dolla

suing of fort

85. With a

usiness deals

ade sense,

en accompa

ecured lendi

giant Hooke

.

ther investo

ent in any o

invest in thi

ilable at th

ed, primaril

to much bu

most vocal o

we provid

damaged

th

red a specia

mers neede

u met thes

of persona

nship as onl

terest it pay

borrowers. I

g rates high

at above 4%

the bankin

fact it was

ies of event

r was floate

new foreig

string of ne

.

however th

y new level

g) soon too

r Corporatio

5

r

f

f

l

l

,

,

s


6/15

June 2


Bank Shar Cash 2010

2011

2012

Net I2010

2011

2012

Cost 2010

2011

2012

Retu

2010

2011

2012

Core 2010

2011

2012

Cash 2010

2011

2012

Divid

2010

2011

2012 PER (

2010

2011

2012

Divid

2010

2011

2012

Price 2010

2011

201*Sourc 1990

The a

the lo

rest

Nove

to h

bank

11 Selector Fu


Statistics* Price ($) 8 JunNPAT (SM) (e)

(e)

nterest Margins(e)

(e)

o Income Ratio(e)

(e)

n on Equity (%)(e)

(e)

Tier 1 (e)

(e)

EPS (¢) (e)

(e)

end (¢) (e)

(e) x)

(e)

(e)

end Yield (%) (e)

(e)

to Bank Book V(e)

(e) e UBS

s ftermath of

cal property

f the econ

mber 1990 t

ve”. The co

uptcies that

d Quarterly Ne


2011

(%)

(%)

alue (x)

he 1987 sha

market took

my hit the

now famou

nsequences

almost inclu

wsletter #32


ANZ 21.14

5,024

5,623

6,067

2.46

2.45

2.35

45.5

45.5

45.6

15.5

16.4

16.4

8.04

8.68

9.11

194

212

226

126

139

146

10.9

10.0

9.4

6.0

6.6

6.9

1.6

1.5

1.4

re market cr

off immedia

skids in the

sly remark t

of such we

ed one of th

ia m.au

CBA N49.25 2

6,101 4,

6,848 5,

7,318 5,

2.10 2

2.14 2

2.13 2

45.0 4

45.0 4

44.3 4

18.7 1

19.7 1

19.6 1

6.86 6

7.58 7

8.13 7

380 2

421 2

441 2

290 1

319 1

336 1

13.0 1

11.7 9

11.2 9

5.9 6

6.5 7

6.8 7

2.2 1

2.2 1

2.1 1

ash impacte

ely after the

early part

at Australia

re felt deep

e major four

AB W.17 2

581 5,

404 6,

835 6,

.25 2.

.21 2.

.13 2.

5.4 4

5.4 4

.9 40

3.5 16

.9 16

.9 15

.80 7.

.30 8.

.88 8.

13 19

7 20

62 20

52 13

73 15

86 16

1.3 1

.8 10

.2 10

.3 6.

.2 7.

.7 7.

.5 1.

.5 1.

.4 1.

business an

crash, it was

f 1990, lea

was in a rec

and wide,

banks, West

BC C.60

79 2

08 2

66 2

2 2

19 2

16 2

.1 4

.1 4

.2 4

.2 1

.0 1

.6 1

0 7

6 7

0 8

2 ‐

3 ‐

9 ‐

9 ‐

5 ‐

5 ‐

.3

.6

.3

5

d banks in g

short lived

ing Treasur

ession that

leading to

ac.

ombined

1,585

4,184

5,787

.26

.25

.19

4.2

4.2

3.7

6.2

7.0

6.8

.26

.91

.46

eneral. Whil

nd it and th

r Keating i

ustralia “ha

number o

6

f


7/15

June 2


In 19

corpo

Havin

unde

mark

West

gene

redis

focus

the b

55%

inco

inco

exten

2000

Havin

by st

entra

its ne

capit

to pr

howe

to be

Unfo

when

fundi

bank

deliv

repor

to sh

The

wron

very

capitshare

bank

on th

11 Selector Fu


92, the ban

ration, dism

g come clos

taking a seri

t capitalisati

pac’s near d

al. Lessons

overed new

ed on buildi

anks’ succes

(with a costs

e other tha

e. So

despit

ded period o

s g fended off

ong credit d

nts, the ban

ed to raise

l, defined as

tect against

ver if the pas

enough capi

tunately eve

the econo

ng that fuell

needed to

red higher

ted returns

reholders vi

vents post t

g. As it turne

well in com

l

saw

the

bholders who

’ business m

e down, whe

d Quarterly Ne


recorded a

issed staff a

e to insolve

es of acquisi

on.

eath experi

hat had be

ways of m

g profits on

on this fro

to income

interest inc

e the

slip

ea

f strong cred

the crisis of

mand. To

s saw the ne

ore equity. F

Tier 1 and

unexpected

t is any guid

al in reserve

nts since the

ic climate c

d more secu

old against

profits with

f capital em

fully franke

he 2008 fin

d out, things

arison to o

anks

undertchose not t

odel is one o

n write‐offs

wsletter #32


$1.6 billion

d raided its

cy, the ban

ion that no

nce was a

n forgotten

king mone

two fronts,

t, that they

ratio averag

ome) now m

ly in

the

de

it growth an

he previous

eet the nee

ed to ramp

rom a regul

ier 2 capital,

losses. Hol

to the futur

to meet all t

start of this

anges for t

ritisation len

esidential m

lower level

loyed in exc

d dividends.

ancial crisis

went horribl

r offshore

ke

massive

participate.

f leverage, b

ccur en mas

ia m.au

loss, which

own super

survived w

has it place

assive wak

were soon

. While co

by cutting co

now boast o

of 45%), a

aking upwar

ade, banks

underpinne

decade, ban

s of the ma

p its own ba

tor’s point o

measures t

ding a buffer

e, when thin

he dud loans

decade typif

e worse. Th

ding accomp

ortgage loan

of capital

ess of 20% a

highlight ho

y wrong and

ompetitors,

raisings

wit The lessons

oth on the u

e.

as the larg

nnuation fu

ith an injecti

d as the nu

e up call to

remembered

petition wa

sts and liftin

n average o

d non inter

s of 25% of

uickly regro

d by a buoya

s embarked

ket and com

lance sheet

f view, maint

e bank’s fin

for a rainy

s do get nas

written.

how expos

e explosive

anied by a d

s, benefited

employed. I

d indulged i

exposed b

while our ba

the scrabbl

commensu

for investor

p, when sup

est loss for

nd to sustai

on of new c

ber two ba

banks and

as the ban

still prono

g charges. S

erating mar

est income

the banks’ t

uped, benefi

nt housing m

on driving gr

pete effecti

leverage the

aining such

ncial strengt

day makes p

ty there just

d banks and

se of offsho

rop in the ris

them hands

t is little w

n paying the

anks are wh

nks have re

to raise a

rate

earnings unfortunat

r profits are

an Australia

its viability

apital befor

k in terms o

regulators i

king industr

nced, bank

uch has bee

gins of abou

measured a

tal operatin

ting from

a

arket.

owth, fuelle

ely with ne

eby reducin

trict levels o

h and is hel

erfect sense

doesn’t see

investors ar

re wholesal

k capital tha

mely as the

onder banks

vast majorit

en things g

ortedly don

ditional ne

s

dilution

foely are that

on offer an

7

.

f

f

,

’

r


8/15

June 2


And Bank disgr

and l

go fr

The

as it

“Ban

“For

past

equit

brisk

on av

going

As on

could

mark

anym

assu

There

biggeBank

Marc

grew

More

profit

make

and 5

of lo

and

and t

(ROE)

Some

Prud

banki

mont

at wh

11 Selector Fu


ow bashing has ntled custo

x regulatory

m here?

ustralian Fin

inpoints, in

s feel the chll their min

wo decades,

in their

ho

turnover of e

erage, for se

nowhere. Th

e senior ban

get 10 per c

t. Suddenly

ore and it’s

ptions abou

has been a l

r worry.

Hou

of Australia

h. In the dec

between 10

than any ot

s. Mortgage

up 65 per c

0 per cent a

n. The avera

edium busin

he capital th

of

25

per

ce

simple nu

ntial Regula

ng sector in

hs. Applying

ich a bank b

d Quarterly Ne


become a p

ers. Howev

supervision i

ancial Revie

ur opinion t

ill wind of h‐boggling c

house prices

es they

feel

ver ‐larger m

en years. N

e effect on A

er explains,

ent revenue

we hit a wa

really only

t how you m

ot of focus o

ing credit

is

igures show

de and a h

er cent and

er factor a s

are banks’

nt of total a

National Au

ge margin o

ess loans th

at must be h

t but

the

bu

bers illustra

tion Authori

March. Gro

a one percen

rrows mone

wsletter #32


pular sport r if the truth

s off the rad

due diligen

e central iss

using” – Aumplexity, ba

have risen a

richer and

sp

rtgages. Te

w it’s just o

ustralia’s ba

hen mortga

growth “eve

l about two

coming thro

ke money in

the tepid st

growing at

it

total mortg

lf between t

0 per cent e

eries of hous

single bigg

ssets at Com

stralia Bank)

a mortgag

margin is hi

eld. The reta

iness lendin

te the pickl

y, there wa

wth at 6.6

tage point n

and lends i

ia m.au

mong politi

been known

r for the ne

ce article da

ue facing the

tralian Finanks are larg

nd so has the

end more

on

years ago p

er four years

ks will be pr

ge credit gro

if you were

years ago. Y

ugh now,”

banking.”

ate of the bu

s slowest

pa

ge credit gr

he early 199

very year.

ing booms is

st asset cla

monwealth

. They are al

for a big fo

gher, about

il arms of ba

divisions

de

e the banks

s just over

er cent mea

t interest m

– means th

ians, regulat

, the glory d

r term at lea

ed 30 May

banking sect

cial Review ly a play on

size of mort

their

credit

eople stayed

. House pric

found.

wth was run

n’t any good

ou’re not ge

e says.”It

siness credit

e in

30

year

w by 6.6 pe

0’s recession

what has fu

s (including

ank and W

o more prof

ur bank is a

.15 per cent,

nks typically

liver 18

per

c

are in. Acc

$trillion of

ns $66 billi

rgin – the di

entire banki

ors, financial

ys of strong

st. So where

011 is repr

or, that of h

0 May 2011 house price

ages. As pe

cards. This

h

in their mort

s are now ei

ing at 15 pe

. You just ha

tting the ear

oes change

market, but

. The

most

r

cent in the

and the fina

elled the gro

mortgages

stpac, 55 pe

itable than a

neat 1 per c

but so are t

deliver a ret

ent.

ording to t

mortgages

n more mo

fference bet

ng sector ca

analysts an

credit growt

do the bank

duced belo

using.

s. During th

ple get mor

s made

for

gaged house

ther falling o

r cent, a ban

d to be in th

nings growt

a lot of th

ousing is th

cent Reserv

12 months t

ncial crisis, i

wth in banks

offshore the

r cent at AN

ny other typ

nt. For smal

e loan losse

urn on equit

e Australia

itting in th

tgages in 1

een the rat

expect $66

8

,

r

t

’

l


9/15

June 2


millio

was woul

and

There

loans

such

The l

out t

the b

The

going

If you

0.7 o

prett

rate

new

confi

switc

busin

2.05

throu

Havinis ali

4% le

bank

articl

it is w

We c

custo

that

more

leade

share

Bank

the ri

This

plain

11 Selector Fu


n in addition

unning at 15

be $1.5 bill

ost of it wo

is no way a

around, abo

s those of N

ck of new c

e window. O

ank book. M

ank book w

out on poac

’re a Westpa

a percenta

attractive.

f 6.59 per c

mortgage th

m it, but the

ing. And thi

ess bank wh

er cent in M

gh an additio

g just

succee

e and well.

vel experien

ongoing sav

implied, th

orth and the

mmented in

mers from 2

iew and the

importantly

rs have tur

holder equit

have done t

sk of having t

ill not be th

to see that t

d Quarterly Ne


al revenue i

per cent, as

ion. That’s j

ld have gon

increase in

ut $800 billi

AB’s econom

stomers is s

ne of them i

ortgage exit

s sacrosanc

ing raids.

c customer

e point disc

AB will also

ent for custo

rough NAB’s

y are now fo

s is starting

re its home

arch. That c

nal 0.1 of a

ded in

gettin

et interest

ed in earlier

iour we feel

harsh realit

way forward

earlier news

08 onwards

situation is

many have

ned to alt

raisings

and

hemselves e

oo much de

e end of ba

e banks are

wsletter #32


the next 1

it did for m

st under $9

straight to t

business len

on in total.

ist, have bus

nding many

how banks

fees coupled

t. But banks

aying 7.16 p

unt that ev

pay switchin

mers who b

ultra low c

rced to offer

to show up

loan busines

me despite

ercentage p

g a mortgag

argins for

decades. An

that this ass

for banks is

it less obvio

letters that t

would be lo

nlikely to c

e‐thought t

rnative fun

use

of

long

‐

ormous da

t on the bal

king and th

particularly

ia m.au

months fro

ost of the las

0 million th

he banks’ bo

ding will plu

econdly, the

iness credit g

assumptions

treat each ot

with similar

desperate f

er cent on yo

ryone gets)

g fees. Last

ing their mo

ost online s

discounts to

n their resul

s lies, fell fro

elatively ste

int rise to it

rate cut

we

anks averag

d while man

et class will s

that the ban

us.

he brand da

ng lasting. T

ange anytim

eir long ter

ding channe

erm debt

fin

age and bus

nce sheet th

substantial

xposed, car

mortgages

t two decad

t is no long

tom line.

the gap. Fi

rosiest pre

rowing in lin

on how to

her’s existing

rates mean

r new custo

ur variable

then NAB’s r

eek, NAB st

rtgages fro

bsidiary Ub

existing cus

s. The marg

m 2.08 per c

dy funding c

tandard var

can

confirm

around 2%,

may be pu

truggle to ga

king “cow” h

age inflicte

e evidence t

e soon. Busi

exposure t

ls including

ancing.

iness leaders

at is owed to

profits that

ying small a

. If housing

es, the addit

r trickling in

st, there are

ictions of bu

e with housi

ake money

customer b

customers

mers, especi

ortgage (all

ate of 6.97

arted offerin

elsewhere

nk. Banks d

omers to ke

in in Westpa

ent in Septe

osts and We

iable rate las

that

bankin

a far cry fr

ting on hous

in further tr

as been milk

by the bank

hus far cert

ess demand

o banks. Inst

offshore d

clearly now

banks.

re made. B

ounts of ca

redit growt

ional revenu

to the banks

less busines

siness credit

g, not faster

rom bankin

se, known a

arely moved

ally NAB, ar

owing for th

er cent look

a mortgag

nd buy thei

o not like t

p them fro

c’s retail an

ber 2010 t

tpac pushin

t November”

competitio

m the abov

ing being th

ction. As th

ed for all tha

s on busines

inly support

is down an

ead busines

ebt raisings

acknowledg

t the truth i

pital to offse

9

,

,

.

.

r

.

,


10/15

June 2


the p

case yields

perio

availa

tradit

And

degr

Hope

our s

mach

when

And i

all k

repre

majo

indivi

on 23

Bank

futur

warra

sugg

Ener

Why

every

put t

event

down

indus

China

those

equivanno

How

situat

now

beco

11 Selector Fu


ossibility of i

for banks as . However, i

ds. Having p

ble. It now

ional bankin

hile volum

e to which

fully the scar

enior banker

ines. Unfort

it does, it te

nvestors do

ow, that b

sents the lar

banks na

dually ranke

% of the ove

have weat

. However t

nts caution.

st that inves

y is it that just

thing into di

ings into so

s at Japan’s

. Figurativel

trial powerh

announced

in the pre

alent to

40

p

ncement sh

ver while m

ion in Germa

shut down a

es the first

d Quarterly Ne


creasing lev

an investm

our opinion

ulled every

appears th

in the volu

s are unlike

anks drop

s of the last

s but equall

nately they

ds to go wr

eed to take

nks form a

gest single s

ely, Commo

in the top f

rall index.

ered many

heir sizable

t this juncti

ors should p

when all the

array? Perh

me perspect

Fukushima D

speaking t

use, Germa

it has temp

liminary sta

er cent

of

th

uld not be l

ny doubt th

ny is somew

ll its nuclea

major indu

wsletter #32


els of loan d

nt is suppo

we suspect

revenue lev

at changing

es that exist

ly to rebou

heir lending

erious reces

, investors s

certainly giv

ng big time.

heed. A look

material p

ock in the

nwealth Ba

ive in terms

storms in th

xposure to

on the jury is

roceed with

pieces seem

ps we can p

ive. In the c

aiichi nuclea

he nuclear f

y.

rarily suspe

es of deve

e world’s

tot

st on anyon

at this event

hat different

r plants wit

strialised po

ia m.au

efaults. Whil

ted by curr

that the ban

r it is hard

investment

ed some yea

d anytime s

standards t

sion in 1991

hould not th

that impre

at the share

rt of an in

SX200 index

k, Westpac,

f market we

e past and

ajor segme

still out, but

dded cautio

to be falling

ut it down to

ase of the w

r power plan

allout has a

ded approv

lopment. W

al plants

und

e.

will seriousl

. Following it

a phase‐ou

wer to take

the default

nt valuation

ks have ente

to imagine

patterns w

rs back.

oon the rea

o achieve re

re still etch

ink that ban

sion, until s

market ind

estor’s port

with a 13.4

ANZ and

ightings and

e expect th

ts of the ma

already ther

n. SFM

into place a

a fortuitous

orld’s increa

ts have certa

lready sprea

l of nuclear

ith plans to

er constructi

y derail Chin

announcem

t due to be

this step.

levels remai

s and attrac

red an era u

what furthe

ill dictate l

l risk for in

venue and

d in the min

s are never

mething go

x would con

folio. While

% weighting,

ational Aus

collectively r

at they will

rket, particu

e are sufficie

event occur

wakeup call

sing energy

inly thrown

d to China

power proje

build 28 n

on, the

signi

a’s nuclear

ent in late M

wrapped u

ith 17 nuc

n benign, th

tive dividen

like previou

options ar

ss need fo

estors is th

rofit targets

ds of some o

ending profi

s wrong an

irm what w

BHP Billito

the big fou

tralia are al

epresent jus

do so in th

larly housing

nt markers t

s that throw

that helps t

emands, th

things upsid

and Europe’

cts, includin

ew reactors

icance of

th

xpansion th

ay that it wil

by 2022, i

lear reactor

10

r

.

f

r

l

,

s

,

l


11/15

June 2


curre

sittin

gas 1

howe

signif

In Au

minin

Inter

beco

earni

Woo

strea

devel

gas

surfa

one f

Prese

inves

Petro

millio

The s

Britis

8.5 m

The t

Origi

tonn

Finall

four

The

there

almo

genecan c

threa

justif

event

wildc

boo

11 Selector Fu


ntly in place,

at 23 per c

3 per cent a

ver if Germ

icantly and q

stralia, the p

g in particul

ational Ene

e the worl

g $36 billi

side and Oil

. However

opment of

u

hich is most

e, with the

r gas and on

ntly four pla

ment. They

nas of Mala

n tonnes of g

econd, The

Gas) has p

illion tonnes

hird advance

Energy and

s a year usin

the Shell A

illion tonne

umbers inv

still remain

t everyone i

ate an

adeq

hange quite

t down the t

the huge u

ual LNG prici

ards and the

industry.

d Quarterly Ne


atomic ener

nt. This is f

nd wind at

any sticks t

ickly.

litical debat

ar and prom

gy Agency

’s largest p

n annually

Search are

the big sp

nconvention

ly methane i

as being hel

e for water.

ned project

include The

sia and Fren

as a year be

ueensland

rmits to op

of gas

a year

d project is

US based pet

g up to four t

ustralian LN

, however it

lved are mi

serious envir

in agreeme

ate capital

r

suddenly. In

ack but perh

front capita

ng and com

y have a na

wsletter #32


y provides t

llowed by li

.7 per cent.

o this path

around a c

ote cleaner

as given A

roducer and

by then. Li

spending va

end is in t

al gas,

more

s trapped in

d in place by

s in Queensl

Gladstone L

ch petroleu

inning 2015.

urtis LNG p

rate up to fi

with

produc

The Australi

roleum giant

rains, with a

(SALNG) p

is still awaiti

d numbing

onmental co

nt that gas is

eturn. And

a

the case of

aps more im

l spend. And

etitive resp

sty habit of

ia m.au

he German e

nite also at Some may a

it will nee

rbon tax con

energy sour

stralia the

exporter of

ttle wonder

st sums on

he Eastern

familiarly re

the coal sea

water. Whe

nd account

G (GLNG) p

group Tot

oject (QCLN

ve trains but

ion also

exp

n Pacific LN

ConocoPhill

start date of

oject propos

ng environm

and the pla

ncerns that

the energy

the events

i

CSG, the en

portantly are

perhaps the

nses from o

turning up j

conomy with

23%, hard c

rgue that th

to ramp

tinues. This

es including

ig thumbs

liquefied na

then, that

ringing mor

States of A

erred to

as

ms typically

n it is extrac

or almost $

roject, a par

l, targeting

G), owned b

will initially

cted to

start

G (APLNG)

ips – with th

production i

es two train

ntal approv

ers involved

eed to be a

f the future,

n Japan

have

ironmental i

the econom

two big ext

her supplier

st when ev

its largest e

al at 20 per is is a knee

p other en

as led to a c

that of gas

p, predictin

tural gas (L

LNG provid

e productio

ustralia, cen

coal seam

g

300 to 600

ed, there ar

0 billion wo

tnership bet

wo trains to

the BG Gr

build two tr

in

2015.

a joint vent

aim to proc

2014.

s, each with

l.

vast but de

ddressed. Se

all these pr

shown,

acc

ssues may p

ic risks to th

rnal risks re

s. Left field e

ryone is hai

nergy source

cent, natura

erk reaction

ergy source

all to tax coa

. Already th

g that it wil

G) by 2020

ers includin

capacity o

tred on th

s (CSG).

Thi

etres belo

two pipes

th of upfron

een Santos

produce 7.

up (formerl

ins targetin

ure betwee

ess 16 millio

a capacity o

spite all this

condly, whil

jects need t

pted wisdo

ose a seriou

models tha

volve aroun

vents are th

ling the nex

11

,

l ,

l

l

,

,

f

,

s


12/15


13/15

June 2


And t

Citi’s

Fund

“The

defau

go br

To c

restr

steps

His a

that

defau

Time’

We h

Bank

Marc

by th

to pl

what

miss

obviopress

econ

temp

Offse

Austr

minin

cost

Not s

econ

rates

Unfo

the

decisi

won’t

polic

11 Selector Fu


hen the couglobal chief

Willem Buite

notion that

lt would be

oke, countrie

mpare Leh

cture is, I th

in and make

proach is th

orrowed to

lt and invest

s Up for the ave no doub

of Australia

h 2008 and t

e latest mont

y in keeping

is actually h

the big pict

us.

Our

discures families

mic growth

er any desire

ting these

alia’s terms

g projects sti

lowouts and

urprisingly t

my’s outloo

on hold.

tunately, th

BA’s policies

ons. Critical

we stance t

and deserve

d Quarterly Ne


ter view – Cconomist, L

r, offers a co

e are helple

he end of th

s don’t shut

ann with

ink both uni

its own res

t “Europe m

much

will

e

rs would he

Reserve Bant that many

. However o

e more rec

hly update f

things on tr

appening an

re. For mo

ssions

with

and the gen

would slow

for business

oncerns ha

of trade are

ll require ser

project time

e RBA’s lat

k, downgradi

se updates

, plays havo

o any invest

hat the RBA

s a serious r

wsletter #32


iti’s Willem ondon based

unter view.

s and have t

e world as

down, they

hat will ha

nformed an

urces availa

ust move to

ither have

t

ed the losses

of Australiwill disagre

ur concerns

nt March 20

om the RBA

ack but rath

d so enamo

ths, the sig

business

learal populati

and that th

to expand b

e been the

hitting all ti

ious capital i

delays likely

st monthly

ng Australia’

hilst endea

c with thos

ment decisio

has embark

think.

ia m.au

uiter and former

o kick the ca

e know it, is

o not get br

ppen if and

quite irresp

le they can

ards a brea

suffer

fiscal

.” SFM (RBA) with our vi

expressed i

10 articles, s

. Our gripe is

er that the p

red with th

s of econo

ders

couplen are feelin

e constant f

yond conser

coming res

me highs, th

nvestment.

to result in s

pdate in ea

s economic

ouring to pr

running bu

n is the confi

d on in rega

advisor to t

down the r

complete n

ken up, the

when Gree

onsible. If t

ail out the e

it, you own

pain, or

suf

ws regardin

n previous

eem to have

not that mo

olicy makers

ir own econ

ic stress o

with

our

o

led us to on

ocus on inte

vative limits.

ources “bo

ereby drivin

nd the crack

ome not gett

rly July has t

rowth and

omote trans

sinesses and

dence to act

rds to settin

e Internatio

ad because

nsense. Wh

don’t get p

ce, Ireland

e European

ntire euro zo

it, covenant.

er the

cons

g the role o

ewsletters i

some justific

netary policy

are so far r

omic modell

business li

wn

sense

of e realistic co

rest rates s

m”. Unfort

our dollar

s are now ap

ing off the gr

hem less bu

ffectively pu

arency and

managing

and the con

interest rat

nal Monetar

he sovereig

n sovereign

t up for sale

and Portuga

Central Ban

ne.”

Governmen

quences of

the Reserv

ncluding ou

ation judgin

hasn’t a rol

moved fro

ing that the

e have bee

the

growin

nclusion, tha

ttings woul

nately whil

higher, man

pearing, wit

ound.

oyant on th

tting interes

confidence i

aily financia

stant will we

es is just ba

13

.

l

r

l

,


14/15

June 2


As w

that i

more

issue

deter

Com

April

May

11 Selector Fu


wrote in M

n trying to st

productive f

and has le

mined formu

any visit diaNVT N

SVW Se

FLT Fli

FXL Fl

IFL IO

FWD

Fl

ORL Or

PXS Ph

SRX Si

RMD R

SEK Se

REA R

SKE Sk

CPB Ca

COH Co

AGK A

TGA

ThCDD Ca

FLT Fli

SGH Sl

SUL Su

SMX S

CCL Co

BPT B

RMD R

NWS N

SKC Sk

N/A V

ARP

AEPW E

SRX Si

OTH O

PPT Pe

CPB Ca

PXS Ph

d Quarterly Ne


arch 2010, “

em excessiv

ields of the

arnt from it

las”. On the

ry June Quarvitas UBS e

ven Group H

ght Centre U

xigroup UBS

OF Holdings

etwood UBS

oton Group

armaxis Q3

tex manage

sMed Q3 co

ek investor d

A Group Ma

illed Group

mpbell Brot

chlear Macq

L Energy Ma

orn Group

M

rdno Macqu

ght Centre M

ter & Gordo

per Retail Gr

S Managem

ca‐Cola Ama

ach Energy

sMed Macq

ws Corp Q3

y City Entert

lkswagon Gr

B Corporati

M Power M

tex manage

thehouse m

rpetual mar

mpbell Brot

armaxis man

wsletter #32


nfortunatel

behaviour i

conomy. W

s previous

vidence thu

ter 2011 erging com

oldings UBS

BS emerging

emerging co

UBS emergin

emerging

c

BS emergin

onference c

ent hospita

ference call

ay

quarie conf

acquarie co

ers Macqua

uarie confer

cquarie conf

acquarie co

rie conferen

acquarie co

n Macquarie

oup Macqua

ent & Techn

til Macquari

acquarie co

arie confere

conference c

inment Gro

oup Macqua

n Macquarie

cquarie conf

ent site visi

anagement

et update m

ers manage

agement me

ia m.au

, monetary

n one asset remain ho

ctions in ra

s far this doe

anies confer

merging co

companies c

mpanies con

g companies

mpanies con

g companies

ll

l site visit

rence

nference

ie conferenc

nce

erence

ference

ce

ference

conference

rie conferenc

logy Macqu

conference

nference

nce

all

p Macquari

rie conferenc

conference

erence

eeting

anagement

ent results

eting

policy is a bl

lass we cho

eful that th

ising rates

sn’t seem to

ence

panies conf

onference

ference

conference

ference

conference

e

e

rie conferen

conference

e

eeting

eeting

nt tool and

e off invest

RBA is sens

ased on his

be the case.

0

rence 0

0

0

0

0

0

1

1

2

0

0

0

0

0

0

0

0

0

0

0

ce 0

0

0

0

0

0

0

0

0

1

2

2

2

3

the danger i

ent in othe

itive to thes

torically pre

FM

/04/11

/04/11

/04/11

/04/11

/04/11

/04/11

/04/11

/04/11

/04/11

/04/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

/05/11

14

r

‐


15/15

June 2


June

Selec

The i

not

inves

The D

taken

The

indivi

11 Selector Fu


ASZ AS

DTL D

PAB Pa

COF Co

N/A H

SMR St

MTE M

BWD Bl

N/A A

GUF G

or Funds Mformation c

een prepar

ment object

irectors and

in preparing

irectors and

dual compan

d Quarterly Ne


G Group BB

ta#3 BBY IT

trys manage

ffey Internat

nter Immun

nmore Coal

etrocoal RBS

ckwood Cor

bre Energy

ildford Coal

nagement Lontained in

ed taking i

ives, financia

our associat

this docume

our associa

ies mentione

wsletter #32


IT conferen

onference

ment meetin

ional manag

logy IPO pr

RBS coal con

coal confere

p RBS coal co

RBS coal con

RBS coal con

imited Disclahis docume

to account

l situation

or

s take no res

nt.

tes may hol

d in this doc

ia m.au

e

g

ment updat

sentation m

ference

nce

nference

erence

erence

imer t is general

any particu

needs.

ponsibility f

d units in th

ment. SFM

nagement

information

lar Investor

r error or o

e fund and

0

0

0

0

eeting 1

1

1

1

1

1

only. This d

s or class

ission; how

may hold in

/06/11 /06/11

/06/11

/06/11

/06/11

/06/11

/06/11

/06/11

/06/11

/06/11

ocument ha

of Investors

ver all care i

vestments i

15

’

Selector June 2011 Quarterly Newsletter

Documents

Transcript of Selector June 2011 Quarterly Newsletter