00:00well csl asx treasury wines and zed among australian companies that hit the reset button during the
00:052026 financial year and investors who kept faith uh in some of these restructuring leadership
00:10efforts reaping rewards signs of progress unveiled during earnings season uh seeing some boosts there
00:17to those stocks but let's get a little bit more of an assessment when it comes to this earning
00:21season and the outlook alfreda jonker is a portfolio manager and investment specialist
00:26at alfinity investment management alfred always great to have you with us and i love this
00:30price for perfection delivering for average and overall uninspiring
00:37yes that was probably a little bit dramatic there with my description but i think
00:41it does ring true if you look at the current reporting season here in australia it has been
00:48not necessarily disappointing because overall earnings are coming through sort of in line with
00:53expectations but it really has been commodities dragging most of the sectors up and if you
00:58exclude that average earnings growth for this season is currently sitting around um five percent only
01:05relative to an average of ten percent so overall it doesn't look like a lot's going on but underneath
01:11the hood we have seen quite a bit of dispersion not just across sectors but also within sectors where
01:17companies are beating or raising estimates and those that's just coming in in line so i asked if you
01:23do buy the miners but your top one of your top conviction causes is actually bhp but what we were
01:28talking about earlier how you know these iron ore miners are now copper miners yeah absolutely and it is
01:35one of the key reasons why we have increased our position in bhp if you look at their recent results
01:41more than 50 percent is now copper and copper is one of those space metals that we believe are geared
01:47to
01:47a number of structural trends that's supporting it not just the ai build out but also electrification and
01:55renewables so for us bhp is still one of those yes it is our biggest stock in the on the
02:01asx and it's
02:02probably a little bit of a boring pick but for us it is one where we believe with that balance
02:08sheet
02:08fantastic management and importantly also the capital management that they've just announced
02:13again increasing dividend increasing buyback there's a lot of support for bhp from here so it
02:19definitely does deserve a position in a portfolio in australia yeah the material sector been performing
02:25pretty well as a whole which stands in pretty sharp contrast to what's going on in the other heavyweight
02:29sector on the asx which is financials banks particularly how much of what's going on with the banks is
02:36idiosyncratic and how much is it due to rates rising and all the tax changes we've seen around
02:41the property market yes i think it's probably a combination of all of the above if you look at
02:46all the banks effectively they have reflected in this results season that the consumer in australia
02:53is a bit softer if you think around all the challenges that we are facing here it is you know
02:59higher
02:59interest rates housing prices coming down confidence is just not there so they are seeing that impact
03:05coming through on mortgages so at this point in time pretty much all the big banks are seeing earnings
03:10downgrades and they've come from a period of a lot relatively long period of earnings upgrades so far
03:17as this is a sector where we have been reducing exposure with the preference of some of these other
03:22financials amp macquarie started to look a lot better than what they were over the last few years
03:28and how do you see that property story playing into broader consumer sentiment as well and consumer
03:33stocks i think it is a big deal a big part of the australian wealth is sitting in the property
03:40market
03:41so currently you have already seen a big drop and i think it is also about the expectation from here
03:46a lot of people are standing back not wanting to buy because they expect a lower price and if you
03:53think about the biggest portion of wealth for the australian consumer sitting in housing prices and
03:58you're uncertain of where that's going in an environment where inflation is higher and potentially
04:03interest rates could still increase as well i think it is playing a really big part and that is what
04:09you're picking up in the outlook statements from a lot of companies this reporting season is that more
04:14cautious stone particularly around the consumer and really it's it's a confidence game and at this
04:21point in time there's not a huge amount that's benefiting the australian consumer to be more
04:26confident in what's ahead i wanted to ask your views on on ai because as you point out australia is
04:32kind of
04:32the the anti-ai trade you see the days when the oil price goes up that energy trade comes roaring
04:38back
04:38as well but do you think there are opportunities particularly we know that both sides of government at the
04:43moment are trying to come to bipartisan consensus on what ai data center build out you know guard rails
04:49look like are there opportunities for this economy and australian corporates that might benefit from that
04:56yes i definitely think so um and particularly in that data center space there are many companies
05:02that's busy building our data centers goodman and xdc being two of the bigger ones but there's also
05:08a huge amount of private companies that's building out and that is going to support um construction
05:14commodity companies and i think for us if you look at how we invest in ai globally we sort of
05:21look at
05:22the various different stages of that ai ecosystem and we like to invest in uh sort of different companies
05:28across that so here we do think that the goodman group is a good company longer term growth they are
05:34betting big on on data centers so we do think that is a good option but then on the commodity
05:41side
05:41like we said bhp and the copper a company like a megaport is sort of seen as a bit of
05:46a neo cloud
05:47and then there are those companies that's been adopting ai and rolling out ai products to improve
05:52efficiencies companies like codan ventia services yesterday again talking about their been lanes so we
05:59do think that this is an environment where currently to date in this reporting season more than sixty
06:06percent of the companies have talked about ai and what they're doing the majority of that is about
06:11improving efficiencies reducing costs so i think the overall economy here will benefit eventually
06:18i just think because two percent of our benchmark sits in technology we are not seen as one of the
06:23major beneficiaries of that ai build out to some degree do you see the asx acting as a hedge against
06:31the ai story as well for global investors definitely i think so and you could see that as heidi mentioned
06:37recently every time there is an off ai day australia is benefiting and it's not just well today case
06:44in point exactly today case in point and really it's also benefiting from the asian flows if you think
06:50about taiwan south korea these markets have become ai markets with tsmc and eska hynix and so forth
06:57listed there whereas we don't have that so definitely i think we are seeing as a hedge and time will
07:03probably only tell if that's going to be a good thing or a bad thing overall i think for us
07:08the
07:08important thing is really just stick to your investment process stick to those companies that you're looking
07:12for and have a diversified exposure not just to ai but also those companies that can continue to
07:19improve their earnings profiles from here talk us we're talking about bhb but take us through some
07:25of the other top picks stock wise yeah so i think across the industrials we really like venture services
07:32it really is more a servicing business and what we like about that is that they're quite exposed to a
07:39number of sectors in the economy but more recently they have been tilting back to defense and that is
07:44one where there is a structural underpin not just in australia but globally companies or countries are
07:50spending more on defense and that's a higher margin business for them and as i've mentioned also the ai
07:55overlay that already starting to roll that out so we like that as a beneficiary strong management really
08:02doing a lot on costs and of course also that capital management portion that we're seeing a lot of
08:07so ventia is one and then i think some of the other companies that's really surprised in this
08:12reporting season that we like our names in a sort of financial space like a amp they've come through
08:19quite a difficult period a number of years of earnings downgrades and we think they are now at the
08:24point where they've done a cost reset so we have been seeing a lot of positive revisions coming their
08:31way not just on their strategic wealth business but also i think a lot of what they've done over the
08:37last few years have reset that cost base for them and also expanding on their platform business all
08:44that investment in technology is now coming through so you're seeing that amp north platform benefiting
08:49from flows and then also what we like is that offshore exposure they are recently seeing really good
08:56results from the investment in china and we expect more of that to come through so again capital
09:02management but it's one of those businesses that in a tougher environment they're doing a lot of
09:07self-help and also trading at a reasonable valuation so that's another one that we really like as well
09:13all right alfreda thank you so much for stopping by with your views today that is alfreda jonker
09:17client portfolio manager at alfinity investment management and we have more on australia ahead every
09:23tuesday 10 40 a.m if you're watching in sydney that is 8 40 a.m in hong kong this
09:28is bloomberg
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