ORG

Origin energy tabled a weak quarterly, as expected. We established a position very recently, after the April 19th downgrade. As such, we expected a weak print, albeit the higher commodity revenues are an obvious positive. We are in ORG as the “cheap” value-based complement to our much higher quality WPL holding.

TCL

Transurban tabled as investor day (rather than a quarterly updated) where the main emphasis was on the growth pipeline.

We see TCL as a high quality essential infrastructure play, with good growth prospects, recovering earnings, and an improved valuation (these days).

The below graph depicts the recovery in traffic volumes, which is grinding, but getting closer to the prior peak across most geographic exposures.

AWC

The Alumina (AWC) quarterly was mixed, with higher Alumina prices are clear positive, offset by higher than expected costs. Much of that was due to the higher AUD, which we expect to fall, over the longer run. AWC remains compelling value, to our minds, and is our “flagship” commodities exposure (outside of an underweight to BHP) in our portfolios.

COL & WOW

COL enjoyed a strong share price reaction to the quarterly, which was in-line with street expectations, but the share price had, to our minds, suggested an over-extrapolation to the downside by the broader market.

Bear in mind that at the time of the Coles result, management had indicated that things were about as good as they could reasonably get, and that Coles would begin to cycle sales comps (sales compared to the previous corresponding period) that could well result in a negative sales print.

The market didn’t like this, and sold Coles down. Meanwhile, WOW’s management tabled a much rosier outlook, and the share price rallied. The spread in performance from the result became a little over 15%, at which point we decided to further sell down our Woolworths exposure, coming to exit the stock on the basis of a very stretched valuation (it had become an “expensive defensive”) and to upweight our COL exposure, which was a “defensive stock trading at a market multiple”. In particular, we thought the COL commentary was much more realistic and prudent, with WOW’s guidance likely to lead to downside surprises. And, post the release of the quarterlies, that appears to be exactly what’s happened.

Interestingly, COL pointed to the “normalisation” of consumer behaviour, with an increase to shopping centres and CBD stores. This is a) positive for COL, and perhaps a negative for MTS, which has more of a “neighbourhood shopping / local shopping” store network than COL, and b) a positive for our REITs such as DXS, VCX and SCP.

RMD

ResMed tabled a flat quarter, and in a similar way to COL and WOW outlined above, struggled to compete with COVID-boosts during the previous comparison period (in this case $35m of COVID-related sales revenue in 3Q2020).

However the main negative was the $250m provision raised for tax related reasons. Between flatter headline sales, and the additional expense, the stock has traded poorly.

We remain comfortable with RMD over the longer run, providing up with an ultra-high quality company with very good growth prospects in an area of unmet clinical need.