1 00:00:05,880 --> 00:00:08,200 Speaker 1: Welcome to Fearing Greed Q and A, where we ask 2 00:00:08,280 --> 00:00:12,240 Speaker 1: and answer questions about investing, business, economics, politics and more. 3 00:00:12,280 --> 00:00:15,239 Speaker 1: I'm Sean Almer and today what should we expect from 4 00:00:15,280 --> 00:00:19,200 Speaker 1: the upcoming reporting season? Remember this is general information only 5 00:00:19,280 --> 00:00:22,080 Speaker 1: and you should always seek advice before investing. Ben Gilbert 6 00:00:22,160 --> 00:00:25,360 Speaker 1: is the head of Australian research at Jardin. Ben, welcome 7 00:00:25,360 --> 00:00:26,840 Speaker 1: back to Fearing Greed Q and A. 8 00:00:27,120 --> 00:00:28,400 Speaker 2: Thanks Sean, thanks for having me. 9 00:00:28,960 --> 00:00:31,880 Speaker 1: What should we expect over the next four weeks or 10 00:00:31,920 --> 00:00:34,839 Speaker 1: so from reporting season? What are the big themes that 11 00:00:34,880 --> 00:00:35,440 Speaker 1: you're looking for? 12 00:00:36,280 --> 00:00:37,839 Speaker 2: Well, I'm hoping we're going to be able to move 13 00:00:37,840 --> 00:00:41,360 Speaker 2: on from this phrase of cautious optimism towards optimism now 14 00:00:41,440 --> 00:00:43,519 Speaker 2: would be my hope as we moved through reporting season. 15 00:00:43,720 --> 00:00:46,960 Speaker 2: If we look domestically, we're in an easy cycle. Hopefully 16 00:00:47,000 --> 00:00:49,360 Speaker 2: we're looking into another rate cut in August, which by 17 00:00:49,360 --> 00:00:52,400 Speaker 2: all accounts of markets pricing in and the recent CBI 18 00:00:52,479 --> 00:00:55,120 Speaker 2: data are supportive of. So I'm hoping to see company 19 00:00:55,160 --> 00:00:57,720 Speaker 2: speaking a little bit more optimistically around the outlook, particularly 20 00:00:57,760 --> 00:01:00,520 Speaker 2: those on the cyclical side of things. I think there's 21 00:01:00,520 --> 00:01:03,800 Speaker 2: probably a few companies specific themes or border market specific 22 00:01:03,800 --> 00:01:05,759 Speaker 2: things we should be thinking about interest rates. For instance, 23 00:01:05,760 --> 00:01:07,480 Speaker 2: there are probably a bit of a boring topic. Could 24 00:01:07,520 --> 00:01:09,240 Speaker 2: net interest costs coming a little bit low as when 25 00:01:09,280 --> 00:01:11,000 Speaker 2: now entering this seasing cycle, a bit of a source 26 00:01:11,040 --> 00:01:15,040 Speaker 2: of earning surprise, more talk around public spend, building activity, 27 00:01:15,319 --> 00:01:17,200 Speaker 2: more and more money going into those spaces as well 28 00:01:17,240 --> 00:01:20,200 Speaker 2: as that an opportunity. So hopefully I think we're going 29 00:01:20,240 --> 00:01:23,040 Speaker 2: to see some more positive updates, more positive commentarre and outlook, 30 00:01:23,520 --> 00:01:26,760 Speaker 2: and hopefully that translates into positive earnings revisions which are 31 00:01:26,760 --> 00:01:28,800 Speaker 2: good for share prices, which give we some of these 32 00:01:28,880 --> 00:01:30,800 Speaker 2: valuations are sitting. I think is probably going to be needed. 33 00:01:31,520 --> 00:01:35,240 Speaker 1: Okay, tell me some of the exporters. Do you think 34 00:01:35,280 --> 00:01:39,360 Speaker 1: we're going to get much around the politics of the place. 35 00:01:39,400 --> 00:01:42,160 Speaker 1: Do you think that will affect many companies at this point? 36 00:01:42,440 --> 00:01:45,800 Speaker 2: Yeah, Look, we're definitely seeing it happening offshore and some 37 00:01:45,840 --> 00:01:48,040 Speaker 2: of the olds to look at Capri Holdings, Timmy Chew, 38 00:01:48,600 --> 00:01:51,160 Speaker 2: Michael calls these sorts of brands. Recently we're talking about 39 00:01:51,200 --> 00:01:54,360 Speaker 2: impacts of tariffs, So it's definitely impacting companies to the 40 00:01:54,400 --> 00:01:56,120 Speaker 2: extent we're going to see it domestically. Look, I think 41 00:01:56,120 --> 00:01:58,440 Speaker 2: it's going to be hot topic, particularly those that have 42 00:01:58,480 --> 00:02:01,840 Speaker 2: got manufacturing off is offshore or exporting to places like 43 00:02:01,880 --> 00:02:04,600 Speaker 2: the US. So yes, I think we will. To be honest, 44 00:02:04,600 --> 00:02:06,480 Speaker 2: so I think that it's more going to impact around 45 00:02:06,520 --> 00:02:09,440 Speaker 2: demand and if it's impacting confidence down here, and you 46 00:02:09,480 --> 00:02:11,959 Speaker 2: see groups like Flight Center for instance, downgraded a couple 47 00:02:12,000 --> 00:02:14,200 Speaker 2: of weeks ago citing some of the cheap political issues 48 00:02:14,360 --> 00:02:16,359 Speaker 2: and also some of the challenges down in the Middle East. 49 00:02:16,919 --> 00:02:19,720 Speaker 2: But ultimately, look, if the tariffs do go through, it 50 00:02:19,760 --> 00:02:22,760 Speaker 2: puts more capacity into China, it could provide some cheaper 51 00:02:22,760 --> 00:02:25,320 Speaker 2: products into Australia, which ultimately could be positive for the 52 00:02:25,320 --> 00:02:27,079 Speaker 2: consumer and stimulatary for the economy. 53 00:02:27,680 --> 00:02:30,160 Speaker 1: Okay, so I'm taking from all this Ben that you're 54 00:02:30,200 --> 00:02:32,520 Speaker 1: reasonably optimistic about what's going to happen in the next 55 00:02:32,760 --> 00:02:36,080 Speaker 1: four weeks. You mentioned secretly calls and given it very 56 00:02:36,120 --> 00:02:38,919 Speaker 1: much as an interest rate cycle that's moving at the moment. 57 00:02:39,160 --> 00:02:43,000 Speaker 1: Let's talk about some of those secret calls me. Perhaps 58 00:02:43,040 --> 00:02:46,000 Speaker 1: you can give us a few examples of retailers that 59 00:02:46,040 --> 00:02:50,520 Speaker 1: you think sort of either either it's a critical earnings 60 00:02:50,520 --> 00:02:52,800 Speaker 1: period or something that you expect something good from or 61 00:02:52,840 --> 00:02:53,760 Speaker 1: bad from for that matter. 62 00:02:55,040 --> 00:02:56,880 Speaker 2: Look, I think you've got a couple of camps. At 63 00:02:56,880 --> 00:02:58,120 Speaker 2: the moment, you sort of got the has and have 64 00:02:58,240 --> 00:03:00,600 Speaker 2: nots in retail land, and I think if we looked 65 00:03:00,600 --> 00:03:02,160 Speaker 2: at some of the haves, for instance, so you look 66 00:03:02,200 --> 00:03:05,200 Speaker 2: at Jbhife, I look at Harvey Norman Brevel as well 67 00:03:05,240 --> 00:03:07,960 Speaker 2: to a lesser extent, given it's global mix, but they've 68 00:03:07,960 --> 00:03:10,680 Speaker 2: got some real tail winds. One, they're selling products that 69 00:03:10,720 --> 00:03:13,359 Speaker 2: consumers want, and if they've got more disposable income, it's 70 00:03:13,360 --> 00:03:15,079 Speaker 2: always exciting to go up there and buy a new computer, 71 00:03:15,120 --> 00:03:17,360 Speaker 2: by a new piece of tech, by new kettle with 72 00:03:17,400 --> 00:03:19,000 Speaker 2: all the new tech you can get around it now, 73 00:03:19,639 --> 00:03:22,720 Speaker 2: and they've definitely got some tailwinds both from a macros standpoint. Plus, 74 00:03:22,760 --> 00:03:26,000 Speaker 2: you're also seeing some pretty significant benefits coming through from 75 00:03:26,040 --> 00:03:28,480 Speaker 2: all this stuff we bought accumulated through COVID. It's now 76 00:03:28,480 --> 00:03:30,440 Speaker 2: staying to break will. There's new models out to people 77 00:03:30,480 --> 00:03:32,800 Speaker 2: looking to replace it. You're also seeing that with things 78 00:03:32,840 --> 00:03:36,240 Speaker 2: like windows, the old windows is becoming obsolete switching off 79 00:03:36,240 --> 00:03:37,600 Speaker 2: for the next couple of months. It's going to drive 80 00:03:37,600 --> 00:03:40,360 Speaker 2: a whole bunch of demand. So we're pretty positive around 81 00:03:40,360 --> 00:03:43,720 Speaker 2: those spaces. I think they've got some benefits. Fashion space 82 00:03:43,800 --> 00:03:45,880 Speaker 2: is a bit more mixed I think again it's around 83 00:03:45,880 --> 00:03:48,040 Speaker 2: having right product, right time, So it's very much around 84 00:03:48,080 --> 00:03:51,360 Speaker 2: picking who you're backing from a product standpoint consumer. If 85 00:03:51,360 --> 00:03:53,680 Speaker 2: you go through a look more broadly grocery, there's definitely 86 00:03:53,800 --> 00:03:57,520 Speaker 2: challenges in grocery. It's competitive likes of Chemists, Warehouse which 87 00:03:57,560 --> 00:04:00,680 Speaker 2: is now under the Sigma Group. Now yes, Bunnings is 88 00:04:00,720 --> 00:04:03,480 Speaker 2: having and cleaning. They're all pulling demand out of supermarket. 89 00:04:03,520 --> 00:04:05,080 Speaker 2: So I think that's still a challenging space. I don't 90 00:04:05,080 --> 00:04:07,960 Speaker 2: think the necessary can see material or overly positive updates 91 00:04:08,200 --> 00:04:10,560 Speaker 2: from there. And then you've got groups like Travel it's 92 00:04:10,560 --> 00:04:13,080 Speaker 2: been very much down and out. That's some pretty negative updates. 93 00:04:13,080 --> 00:04:16,040 Speaker 2: Stock prices, particularly flight Center's sitting sort of in the 94 00:04:16,040 --> 00:04:19,279 Speaker 2: doll drums. But again it provides opportunity if things turn, 95 00:04:19,480 --> 00:04:21,479 Speaker 2: earnings can come up very very quickly and could provide 96 00:04:21,480 --> 00:04:22,240 Speaker 2: some opportunities. 97 00:04:22,960 --> 00:04:25,720 Speaker 1: I find trouble really interesting. We interviewed Adam Schaub from 98 00:04:25,760 --> 00:04:27,839 Speaker 1: lux Escapes the other day. Now it's not a listed company, 99 00:04:27,960 --> 00:04:29,960 Speaker 1: but they're having a great time because what he said, 100 00:04:30,080 --> 00:04:33,080 Speaker 1: he called them flighties. He said flight Is is struggling, but 101 00:04:33,120 --> 00:04:34,920 Speaker 1: that's because they go long haul. We go short haul. 102 00:04:34,960 --> 00:04:38,520 Speaker 1: Like basically lucks of scapes, does Ballei figi those sorts 103 00:04:38,560 --> 00:04:41,760 Speaker 1: of areas, and they're having a really good time of it. 104 00:04:42,480 --> 00:04:44,680 Speaker 1: What travel had had a good time of it. I 105 00:04:44,720 --> 00:04:47,040 Speaker 1: hadn't realized that Flight Center and some of those guys 106 00:04:47,120 --> 00:04:49,400 Speaker 1: were having such a tough time of it. What's that about. 107 00:04:50,440 --> 00:04:53,520 Speaker 2: Yeah, So Flight Center specifically has been impacted by number 108 00:04:53,560 --> 00:04:55,880 Speaker 2: of issues. There's been some some own goals within there, 109 00:04:55,920 --> 00:04:57,720 Speaker 2: but at the same time, look, it's a phenomenal business, 110 00:04:57,720 --> 00:05:01,679 Speaker 2: got great global reach, very strong position both corporate and leisure. 111 00:05:01,680 --> 00:05:03,880 Speaker 2: We've probably on more so not from a leisure standpoint. 112 00:05:04,400 --> 00:05:06,400 Speaker 2: You look at those situations like out of the Middle East, 113 00:05:06,760 --> 00:05:09,480 Speaker 2: when you have all the TERMOL that we've had happening there, 114 00:05:09,680 --> 00:05:11,560 Speaker 2: it just means people a little bit more concerned or 115 00:05:11,560 --> 00:05:13,640 Speaker 2: conscious about doing some of those longer OL flights, particularly 116 00:05:13,640 --> 00:05:15,600 Speaker 2: if you've got to fly around those regions, so you 117 00:05:15,720 --> 00:05:18,240 Speaker 2: send people either delaying or the firing so they're shorter 118 00:05:18,360 --> 00:05:20,320 Speaker 2: haul or they just won't do those trips. And the 119 00:05:20,360 --> 00:05:23,440 Speaker 2: longer trips typically much more profitable one they're bigger tickets 120 00:05:23,440 --> 00:05:26,640 Speaker 2: to that by accommodation, transfers, car hire, all these sorts 121 00:05:26,640 --> 00:05:29,520 Speaker 2: of things. So that's impact but in theory these things 122 00:05:29,520 --> 00:05:32,000 Speaker 2: should be short term, and trains are true. Consumers still 123 00:05:32,000 --> 00:05:34,320 Speaker 2: want to travel. You look at all the competition out there, 124 00:05:34,360 --> 00:05:36,800 Speaker 2: You look at guitar et cetera coming on. There's big opportunities. 125 00:05:37,240 --> 00:05:39,240 Speaker 2: My dad calls them the ski holidays, the spending kids 126 00:05:39,279 --> 00:05:41,480 Speaker 2: inheritance holidays, and all the boomers are going to spending 127 00:05:41,480 --> 00:05:44,120 Speaker 2: this money. So I think structurally it's an attractive space. 128 00:05:44,520 --> 00:05:46,320 Speaker 2: But there's an enormous amount of leverage that runs through 129 00:05:46,320 --> 00:05:48,960 Speaker 2: the profit loss statements of these groups. Flight Center runs 130 00:05:48,960 --> 00:05:50,920 Speaker 2: on a profit march of less than two percent, so 131 00:05:50,960 --> 00:05:53,400 Speaker 2: smallerds in top plank are big impacts to earnings. But 132 00:05:53,440 --> 00:05:55,880 Speaker 2: it works both ways, and what we're hoping to see 133 00:05:55,880 --> 00:05:58,479 Speaker 2: in the near medium term is that it starts to 134 00:05:58,480 --> 00:06:00,159 Speaker 2: go on the outputs trend and then you can have 135 00:06:00,160 --> 00:06:02,760 Speaker 2: some pre significent growth through the profit loss. 136 00:06:03,120 --> 00:06:05,120 Speaker 1: Okay, in one of the stocks that I've always I mean, 137 00:06:05,160 --> 00:06:08,160 Speaker 1: I followed this dock for years its highes and definite lows. 138 00:06:08,440 --> 00:06:10,400 Speaker 1: Domino has been one of the worst performers though of 139 00:06:10,400 --> 00:06:13,400 Speaker 1: the last financial year of the ASEX two hundred. You've 140 00:06:13,440 --> 00:06:15,640 Speaker 1: got a new eighty four year old executive chair and 141 00:06:15,720 --> 00:06:18,479 Speaker 1: Jack Cowen who certainly knows that business pretty well. Is 142 00:06:18,600 --> 00:06:21,880 Speaker 1: he of Hungry Jack's fame? What happens to that company? 143 00:06:23,279 --> 00:06:25,159 Speaker 2: It's a tough one at the moment, isn't it. It 144 00:06:25,160 --> 00:06:27,440 Speaker 2: feels like it's a little bit ruddless. You've had another 145 00:06:27,480 --> 00:06:31,920 Speaker 2: CEO that's exited. Jack's obviously very well regarded, well respected 146 00:06:32,160 --> 00:06:35,560 Speaker 2: operator in qs are both domestically and globally. But it's 147 00:06:35,600 --> 00:06:37,320 Speaker 2: tough because the questions that do we need to see 148 00:06:37,360 --> 00:06:39,719 Speaker 2: some more fundamental change in the model? You look at 149 00:06:39,760 --> 00:06:41,680 Speaker 2: the Uber and Ordash resolves that have been out recently. 150 00:06:41,720 --> 00:06:44,240 Speaker 2: They're seen twenty percent growth in Autovady in the last 151 00:06:44,279 --> 00:06:46,880 Speaker 2: couple of days. I think the debate is do they 152 00:06:46,920 --> 00:06:48,560 Speaker 2: have to sort of embrace and do they even need 153 00:06:48,600 --> 00:06:51,000 Speaker 2: to be in delivery anymore? I do they do their own? 154 00:06:51,040 --> 00:06:53,919 Speaker 2: Do they go outsource it? Do they focus more own health. 155 00:06:54,200 --> 00:06:56,680 Speaker 2: It's a great business, great franchise. You look at penetration 156 00:06:56,800 --> 00:07:00,560 Speaker 2: markets like Germany and Japan, there's massive opportunity. It's just 157 00:07:00,600 --> 00:07:03,080 Speaker 2: a matter of finding that earn its flaw. Are we 158 00:07:03,160 --> 00:07:05,479 Speaker 2: there yet? I don't know. They're still closing a lot 159 00:07:05,520 --> 00:07:08,440 Speaker 2: of stores into the new year. You look at McDonald's again, 160 00:07:08,480 --> 00:07:11,000 Speaker 2: out recently still talking to weakness in Germany. It's a 161 00:07:11,000 --> 00:07:12,640 Speaker 2: tough one. We're sort of sitting on the fence with 162 00:07:12,720 --> 00:07:15,080 Speaker 2: a neutral at the moment. Definitely can see a lot 163 00:07:15,120 --> 00:07:17,240 Speaker 2: of value of things go right, but I think patience 164 00:07:17,240 --> 00:07:18,000 Speaker 2: is needed. 165 00:07:18,160 --> 00:07:20,080 Speaker 1: And one we're out of time. But just you know, 166 00:07:20,160 --> 00:07:23,480 Speaker 1: one left field suggestion, Ben, that none of us know 167 00:07:23,560 --> 00:07:24,280 Speaker 1: much about. 168 00:07:24,080 --> 00:07:29,600 Speaker 2: But you like well, one left field suggestion, I must 169 00:07:29,640 --> 00:07:31,160 Speaker 2: have been. I still focused the lot around all the 170 00:07:31,160 --> 00:07:34,440 Speaker 2: big CAUP look my bigger picture piece. If we look 171 00:07:34,440 --> 00:07:36,800 Speaker 2: into the future, I think that what we're waiting for 172 00:07:36,840 --> 00:07:39,280 Speaker 2: in Australia is someone to really do health well and 173 00:07:39,360 --> 00:07:42,320 Speaker 2: really bring it all together. I think Wezzy's is well placed. 174 00:07:42,360 --> 00:07:44,560 Speaker 2: I think Sigma's well placed. You look at what some 175 00:07:44,600 --> 00:07:47,600 Speaker 2: of these global groups. Creating a true health ecosystem is 176 00:07:47,640 --> 00:07:49,680 Speaker 2: one that could really create a powerhouse. It hasn't meant 177 00:07:49,680 --> 00:07:51,920 Speaker 2: done in Australia and I've put Sigma and Weezy's at 178 00:07:51,920 --> 00:07:53,760 Speaker 2: the top could do it. But this is the longer term, 179 00:07:53,880 --> 00:07:54,880 Speaker 2: longer term play. 180 00:07:55,200 --> 00:07:56,720 Speaker 1: Ben, thanks for talking to Fearing Greed. 181 00:07:57,040 --> 00:07:57,360 Speaker 2: Thank you. 182 00:07:57,680 --> 00:08:00,440 Speaker 1: That was Ben Gilbert, head of Australian Research at Jardine. 183 00:08:00,480 --> 00:08:03,080 Speaker 1: Remember this is general information only. And you should seek 184 00:08:03,400 --> 00:08:06,320 Speaker 1: advice before investing. If you've got something you'd like to know, 185 00:08:06,400 --> 00:08:09,360 Speaker 1: then send through your question on LinkedIn, Instagram, Facebook, or 186 00:08:09,560 --> 00:08:11,680 Speaker 1: at fearing Greeed dot com dot au. I'm Shana Elma 187 00:08:11,880 --> 00:08:12,080 Speaker 1: and this 188 00:08:12,280 --> 00:08:13,440 Speaker 2: Is fear and Greek Q and a