Speaker 1: Hello, and welcome to the Australians Money Puzzle podcast. I'm
Speaker 1: James Kirby, the world editre at The Australian, and I
Speaker 1: want to come aboard everybody. Well, we're into the final
Speaker 1: week of regular podcasts and today I want to open
Speaker 1: up the show a little. We want to talk about
Speaker 1: all things investing on the markets. Listed investments, banks, big companies,
Speaker 1: big industrials. Property trusts, which are folks, if you're interested
Speaker 1: in property on the listed side have become one of
Speaker 1: the hottest areas of the year. The property trusts are
Speaker 1: up about twenty five percent this year on the market,
Speaker 1: which is quite a strong performance recovery performance. And two
Speaker 1: of the more interesting stocks of the entire year are
Speaker 1: the Goodman Group and also Digico, that big float, which
Speaker 1: both are property trusts. But there are also proxies of
Speaker 1: course for AI. So now, my colleague, Associate Editor of Business,
Speaker 1: Eric Johnson's just emerged from the annual CEO survey that
Speaker 1: we do at The Australian, where you get an exceptional
Speaker 1: sort of line into dozens of leading CEOs from the
Speaker 1: top two hundred. He's just been through that and I
Speaker 1: thought it would be a great idea to have him
Speaker 1: on the show and talk about what are the key
Speaker 1: person the key CEOs in Australia and those same people
Speaker 1: who are presented both the risk and opportunity to us
Speaker 1: as investors. What are they thinking at the moment, what
Speaker 1: are they thinking about the year ahead and what does
Speaker 1: it tell us as investors. Great to have him back
Speaker 1: on the show. How are you Eric?
Speaker 2: Thanks very much, James, Really good to be here.
Speaker 1: Good to have you on. Just in very broad terms,
Speaker 1: what's the mood? What's the mood with these people considering
Speaker 1: they've just had a fantastic year if they're listed.
Speaker 2: Yeah, look, so we spoke to it's approximately seven, just
Speaker 2: over seventy of Australia's leading CEOs from every corner of
Speaker 2: the market that you could think of, so from property, manufacturing, mining,
Speaker 2: to banking, financial services, wealth management, super advisory, you name it,
Speaker 2: we spoke to them. If you were to sum it
Speaker 2: up in distill it in just to really pure form,
Speaker 2: I think the term would be cautious optimism going into
Speaker 2: twenty twenty five. So the hardest period that they had,
Speaker 2: when I say they the companies themselves, so what they
Speaker 2: were seeing in their own businesses was pretty much the
Speaker 2: September quarter, coming out of the June quarter, September quarter,
Speaker 2: and they've sort of come through this period looking ahead
Speaker 2: and looking into twenty twenty five. And these are the
Speaker 2: CEOs thinking, okay, look what do we got ahead of
Speaker 2: its now. Some of them like, for example, like let's
Speaker 2: start from the very top. Okay, one of the biggest
Speaker 2: companies in Australia, Comme Weth Bank. Like Matt Common, the
Speaker 2: CEO of common Wealth Bank. He's saying, so he's again
Speaker 2: that theme of cautious optimism. He thinks interest rates are
Speaker 2: going to start falling much quicker than many expect. He
Speaker 2: hasn't put a specific timing around it, but it's certainly
Speaker 2: early in the new year. However, what he is seeing,
Speaker 2: this is Matt Common of Komon Weth Bank years of
Speaker 2: low growth, high costs, so inflation is really hurting his
Speaker 2: customer base and that's sort of knocked confidence around. So
Speaker 2: when we get some of that relief, which is inflation
Speaker 2: pulling back, which we're starting to signs of, when we
Speaker 2: get relief in rates, his expectation is that we'll bring
Speaker 2: back the confidence and therefore people will start borrowing again.
Speaker 2: So another theme that we're really sort of seeing going
Speaker 2: into next year is also the idea companies now thinking
Speaker 2: we've had this inflationary environment. It is hurting our customer base.
Speaker 2: But they're also thinking about their own business and productivity
Speaker 2: measures for productivity, how can they how can they grow
Speaker 2: their business?
Speaker 1: They're very weak by historical and international standards.
Speaker 2: Yeah, so with that, they're thinking about the tools and
Speaker 2: the leavers that they can play, how they can play
Speaker 2: a role. So we have seen some quite large wage
Speaker 2: rises in recent years, so they're looking to capture that.
Speaker 2: And that's not and by all means, this is no
Speaker 2: one's saying we're going to whole cell cut costs or
Speaker 2: anything like that. Everyone's talking about investing and people are
Speaker 2: companies are talking about investing in the tools, particularly technology,
Speaker 2: to allow their workforce to achieve more from what they
Speaker 2: have today.
Speaker 1: And is an AI theme, Yeah very much.
Speaker 2: And that is and everyone's talking about AI. Is you
Speaker 2: know this thing? But now it's what we're looking at
Speaker 2: this year is the rubber hitting the road on AI.
Speaker 1: The conversion of the promise. If it converts from promise.
Speaker 2: That's right, So how is it going to start impacting
Speaker 2: into my own business? So Australian Super. So that's just
Speaker 2: that's the nation's biggest super fund. Probably many of your
Speaker 2: listeners are members as well, just by default. The boss
Speaker 2: of Australian Super Paul Schroder, saying he believes that AI
Speaker 2: has some real productivity potential for the Australian economy. So
Speaker 2: the idea of automating processes this is like menial tasks
Speaker 2: that are happening back officers. This unleashes people to do
Speaker 2: igh and value work, personalization of products and services and
Speaker 2: streamline compliance. All that's going to deliver productivity gains.
Speaker 1: So there's two big themes there then, one being the
Speaker 1: if you like, the revival perhaps of the economy to
Speaker 1: some extent, and the revival of financing of the economy
Speaker 1: and lending to the economy by the major financials. And
Speaker 1: then also this idea about productivity. And most investors don't
Speaker 1: necessarily care about productivity, it's not something they obsessed about,
Speaker 1: but the CEOs that run the listed companies certainly do
Speaker 1: because because basically you have to get more value for
Speaker 1: the wages that you pay. So I'm just thinking just
Speaker 1: going back on looking at these two areas then, as
Speaker 1: from a listed perspective. From an investor perspective, we think
Speaker 1: about the banks. So they mentioned Matt at the Combank
Speaker 1: looking out over at this economy which is somewhat subdued,
Speaker 1: though even there as very low unemployment rates. His own
Speaker 1: bank then is flying right. It's fifty percent over priced
Speaker 1: according to the consensus targets in the market. It's running
Speaker 1: at about one hundred and fifty dollars. The brokers are
Speaker 1: saying it's worth about one hundred. This stock itself surprised
Speaker 1: everybody because not so much that the Australian economy smashed
Speaker 1: it out of the park. But it wasn't as bad
Speaker 1: as they thought, so the bank was able to write
Speaker 1: back some of the provisioning and that underpin the better
Speaker 1: earnings and people expected for the big banks. Just ticking
Speaker 1: out that layer, Eric, if we could just talk about
Speaker 1: bank stocks for a moment. We have Combank, which is
Speaker 1: sort of the King Kong of the bank sector and
Speaker 1: would seem to be the most overpriced according to the analysts.
Speaker 1: And then there are three other banks making up the
Speaker 1: Big four, and a new broom growing through those banks,
Speaker 1: new CEOs coming in at Day and Z of course,
Speaker 1: and a Z and Westpac, And so what do you
Speaker 1: think the outlook for bank stocks might be coming off
Speaker 1: what the CEOs are saying. It would be very hard
Speaker 1: for them to do that all over again next year.
Speaker 1: You'd imagine, I mean, o the stocks, i'd regardless of
Speaker 1: their performance on the street, if you know what I mean.
Speaker 2: And CBA, as you pointed out, is a really interesting case,
Speaker 2: and that was just flying. It's been one of the
Speaker 2: hottest stocks in the world. But that in itself means
Speaker 2: that CBA is also one of the most expensive bank
Speaker 2: stocks in the world. There are no stock market analysts
Speaker 2: and has a buy recommendation on CBA, not because I
Speaker 2: think it's a it's not because I think it's a
Speaker 2: bad business. They just say it's too expensive. It's way
Speaker 2: too expensive for the share price, is too expensive for
Speaker 2: the earnings to support what it is. However, they have
Speaker 2: been wrong the entire way up for CBA.
Speaker 1: They've been wrong. They've been wrong from one hundred dollars
Speaker 1: to one hundred and fifty.
Speaker 2: That's right, So they've been wrong at one hundred and ten.
Speaker 2: There are wrong at one hundred and twenty and so on.
Speaker 2: So there's soul surgeon going on in analysts look with CBA,
Speaker 2: there is a bit of crowding out. CBA is a
Speaker 2: play on Australia. It's safe, it's a safe investment because
Speaker 2: just the shiit size of it. It represents almost like
Speaker 2: twenty percent of the economy in terms of mortgages and
Speaker 2: business loans and so on. And you've seen a lot
Speaker 2: of index funds also so back CBA, but also just
Speaker 2: a lot of passive money just sitting in CBA. So
Speaker 2: the real action going into twenty twenty five is going
Speaker 2: to be in the non CBA banks. And as you
Speaker 2: pointed out, so we've got each of these banks have
Speaker 2: got new CEOs, So Westpac, NAB and aan z Ainz's
Speaker 2: new CEO, Shane Elliott, will step down in July, so
Speaker 2: it's a little bit further down the track.
Speaker 1: The change of the guard are then at the big banks.
Speaker 2: Yeah, two of those appointments at west Pac and NAB
Speaker 2: they're virtually internal. Virtually they are internal appointments. So the strategy,
Speaker 2: all things being equal, when you look as an investor,
Speaker 2: you know what you're getting that the strategy is going
Speaker 2: to be the same. Maybe some tweaks here and there,
Speaker 2: but you're not going to see any shifts, any changes.
Speaker 2: Westpac is an interesting story because it's been It's Anthony
Speaker 2: Miller started this week as new CEO, and it's been
Speaker 2: really through this period of introspection since it had its
Speaker 2: ods Track scandal leading into the COVID pandemic. So it's
Speaker 2: been sort of thrown off its balanced for those years,
Speaker 2: totally internally focused, competitive where it can, but it's coming
Speaker 2: out of the other side of that. It's winning over regulators,
Speaker 2: which means there's a potential for it to. It's been
Speaker 2: operating under a capital penalty so that that potentially comes off,
Speaker 2: so it might get a little bit of a bump there.
Speaker 2: So there's more potential in a company like Westpac. Then
Speaker 2: you see, I can get the settings right because it
Speaker 2: hasn't had that surge up the Combank has. It's not
Speaker 2: going to be another combank that's just been a remarkable run.
Speaker 2: Combank is like that because it's also well run. It's
Speaker 2: highly efficient, it's well run. You know what you're getting,
Speaker 2: and it's predictable.
Speaker 1: Okay, I just what do I do? Might hold it
Speaker 1: right there? We take a short break and we'll come
Speaker 1: back and we'll take a look at outside the banking sector.
Speaker 1: But listeners, I'm sure that was useful to you on
Speaker 1: the four banks. So interestingly, internal appointments being being particularly
Speaker 1: popular with these banks because they are conservative and investors
Speaker 1: like certainty. And there is, if you like, the role
Speaker 1: model of that common who was taken internally some years
Speaker 1: ago at a time when it was a very debatable
Speaker 1: thing to do, because Combank, from a reputation point of view,
Speaker 1: very low at a very low eb around the time
Speaker 1: of the Heyin Rold commission, and his chair quite bravely
Speaker 1: stuck with an internal appointment. So this is why the
Speaker 1: banks do that. Now. The only issue, as Eric is saying,
Speaker 1: is that there's nothing wrong with our banks. They're perfectly fine,
Speaker 1: and their numbers are perfectly fine. Their problem is that
Speaker 1: they've been so enthusiastically bought up by investors that it's
Speaker 1: going to be very hard to justify the price levels
Speaker 1: there at all. Right, we'll be back in a moment
Speaker 1: and we're going to take a look at outside the banks.
Speaker 1: We're going to take a look who's who in among
Speaker 1: the big miners and some of the bigger industries. Back
Speaker 1: in the moment, Hello, and welcome back to the Australian's
Speaker 1: Money Puzzle podcast. I'm James Kirby, Wealth editor at The
Speaker 1: Australia talking to a colleague from The Australian, Eric Johnson,
Speaker 1: Associate Business Editor. He has been running the knobs and
Speaker 1: talking to many dozens of the top CEOs in the
Speaker 1: country and I thought would be really good idea to
Speaker 1: take a look at who they are and what difference
Speaker 1: they make at stocks. I suppose are we talked about
Speaker 1: the banks there, that's an area of the market where
Speaker 1: the personality of the CEO is least important. By that,
Speaker 1: I mean a good blue chip company. The theory is
Speaker 1: that the boss should be able to be run over
Speaker 1: by a bus and the share price shouldn't be affected.
Speaker 1: I mean that was traditionally inside big blue chip companies,
Speaker 1: the sort of brutal concept. But the idea was obviously
Speaker 1: that the company was more than a single person. Now
Speaker 1: that's less so as you move away from banks and
Speaker 1: you go to other parts of the economy, even the
Speaker 1: big miners. Now the big two, the very big two
Speaker 1: obviously being Rio and BHP art to that extent, the
Speaker 1: blue chip in that manner as well. And though we're
Speaker 1: all very fond of the CEOs and we like them.
Speaker 1: They could be run over by a bus and they
Speaker 1: would be replaced, and you would hope that the share
Speaker 1: price wouldn't go off the rails. Now that wouldn't be
Speaker 1: the case necessarily a fortescue where forest is still very important,
Speaker 1: or minrais for Chris Ellison is very important. This was
Speaker 1: very important. I tell us what the big mining CEOs
Speaker 1: have been, what their view has been or energy and
Speaker 1: resources in that area? Is the view cautiously optimistic? I
Speaker 1: would expect that they might be hoping for a better
Speaker 1: year because they were the weakest part of the market
Speaker 1: last year in terms of the overall return of stocks.
Speaker 1: We had terrific year on banks, consumer discretionary, marvelous year
Speaker 1: for it though it's a relatively small part of the
Speaker 1: market in terms of market cap. But when you look
Speaker 1: at the energy and materials it was quite weak. I
Speaker 1: mean energy was substantially down by about twenty percent, which
Speaker 1: were certainly not used to at all. But they had
Speaker 1: a very weak They had a very weak year, and
Speaker 1: materials weren't much better minus thirteen percent. This is a market,
Speaker 1: by the way, folks that went up eating so keep
Speaker 1: that in mind. So is there an elevated optimism from
Speaker 1: the mining and resource energy people compared to the rest
Speaker 1: of the market. Have you any sense of that.
Speaker 2: Oh, look, when we started off talking about the term
Speaker 2: cautious and with the miners, the emphasis, if you want
Speaker 2: to draw a line, is probably more on the cautious
Speaker 2: part of that phrase, particularly with those two big material stocks.
Speaker 2: So it's BHP and RIO, they're pretty much like for like,
Speaker 2: except Rio has the aluminum play and that's a big differentiator.
Speaker 2: BHP is probably more exposed to copper. In coming years,
Speaker 2: it's going to have it's going to have potash. That's
Speaker 2: a fertilizer play, which RIO doesn't have, which would be
Speaker 2: an interesting one. How that changes going into this year.
Speaker 2: And often it's funny when you speak to the CEOs
Speaker 2: of these companies and they're thinking so long term, they're
Speaker 2: not even thinking about You ask them, wow, what do
Speaker 2: you think about the outlook? How's the coming year? And
Speaker 2: they think what they are think.
Speaker 1: They're thinking about minds. They're going to build an eye
Speaker 1: of time ten.
Speaker 2: Or fifteen years time. They're thinking kilometers ahead, but where
Speaker 2: it is. But the theme is obviously China is the
Speaker 2: driver of that, and China there is no doubt it's
Speaker 2: not troubled, but it's certainly slowed. It's aiming for about
Speaker 2: five percent growth this year. Whether it's sort of whether
Speaker 2: it sort of hits that remains to be seen. But look,
Speaker 2: activity is coming off in China, in particularly in the
Speaker 2: consumer sector, and you can see the authorities they're trying
Speaker 2: to pull some different levers. Nothing's really going to start
Speaker 2: to happen until there's going to there's a change of
Speaker 2: president in the US, So Trump comes in China starts
Speaker 2: seeing what the landscape is, so it'll be a bit
Speaker 2: premature for China to move before that. Then the other thing,
Speaker 2: to the other factor which really complicates things is this
Speaker 2: idea of Trump putting tariffs in and then there's retaliation.
Speaker 2: That trigger is a trade war. That trigger is a
Speaker 2: slow down in activity in the global global world. So
Speaker 2: again that may mean that players like b HPN, rio
Speaker 2: sound sell less copper, sell less iron or But you
Speaker 2: don't buy these You don't buy these stocks for what
Speaker 2: they're going to do in twelve months time. You buy
Speaker 2: these stocks for what they're doing in five years time.
Speaker 2: So if you speak to them, what are they thinking about,
Speaker 2: what are they really thinking about? It's copper. It all
Speaker 2: comes down to copper, and they just see this huge right,
Speaker 2: they just see a huge deficiting copper from the end
Speaker 2: of this decade and the world not having enough accessible
Speaker 2: copper supplies, and that's where they're trying to get onto. Okay,
Speaker 2: your listeners are very big fans of gold. I'm sure
Speaker 2: you've got a lot of gold. Yeah, well, look Northern Northern,
Speaker 2: Northern Star Stuart Tonkin of Northern Stars Resources a gold
Speaker 2: This is kind of interesting, so let's talk gold. He said,
Speaker 2: we saw a bit of a pullback in the gold
Speaker 2: price shortly after the US election, which was right. However,
Speaker 2: he doesn't see that lasting for long over time. He
Speaker 2: says Trump presidency likely leader trade tensions and increased US
Speaker 2: government spending, which is likely to support a strong gold
Speaker 2: price in both US store and Aussie dollar currency. So
Speaker 2: he's trying to equate gold with bitcoin. So he's saying
Speaker 2: that he reckons an ounce of goal will be worth
Speaker 2: at least zero point one bitcoin in coming years. So
Speaker 2: I'm not sure what that equation is, but I want
Speaker 2: to watch.
Speaker 1: I think your gold CEOs will always be of the
Speaker 1: opinion that God is going to go up. Everyone Gould
Speaker 1: says that, but they were. I mean, certainly Northern Star did.
Speaker 1: It had a very good year, as gold did. Then
Speaker 1: there was some real surprises. There was that amazing story
Speaker 1: during the year of Resolute and the CEO Toal hadn't
Speaker 1: been being detained in Wizambique. So you have this surprises,
Speaker 1: don't you. Even if we take it that the outlook
Speaker 1: for gold is good, even if we take it that
Speaker 1: it is the perfect setting for continued rise in the
Speaker 1: gold price, particularly with the arrival of Trump, where we
Speaker 1: could safely assume that his second and third year won't
Speaker 1: be quite as won't be the honeymoon, that maybe his
Speaker 1: first and second month will be as that any Republican
Speaker 1: president or any president would face. That. So on that basis,
Speaker 1: instability arrives. On that basis people refer to gold. But
Speaker 1: the issue for gold is really it's operational risk, isn't it.
Speaker 1: With these guys, with these different miners and these different CEOs,
Speaker 1: that seems to be that the real differentiator for Australian miners.
Speaker 1: At least I can ask you something about stock's been
Speaker 1: taken off the market. I really I wasn't joking about Newcrest.
Speaker 1: I mean if you think about it, until people are
Speaker 1: kicking themselves. They had this superb opportunity, the biggest gold
Speaker 1: stock in Australia, and you know, they come in and
Speaker 1: the Americans basically come in and buy at the perfect time,
Speaker 1: just as goes about to steam along. Similarly, we have
Speaker 1: the private equity They just take one private equity player,
Speaker 1: just one bain. So they come in, they buy Virgin Airlines,
Speaker 1: then they buy STA and the hcare outfit and this
Speaker 1: week being the last working week of the year, they
Speaker 1: snap up Insignia, the old IAF which has all sorts
Speaker 1: of assets, but it also has things like chad Forth
Speaker 1: actually the dominant, the biggest player on our top one
Speaker 1: hundred and fifty advisors list. Part I'm making Eric is
Speaker 1: that we're investors. We're looking and we're listening to these
Speaker 1: CEOs about their outlook, and we're very They're very important
Speaker 1: because they drive the companies. And then there's them, and
Speaker 1: then there are private equity operators sitting in New York,
Speaker 1: and nor do they look at the Australian market and
Speaker 1: the cherry pick there's no seems to me, there's no
Speaker 1: particular theme an airline and hecare operator, a wealth Manager,
Speaker 1: they just and Sydney Airport of course a big loss
Speaker 1: once upon a time, along with the Newcrest School. These
Speaker 1: are big absences when the when the market loses them,
Speaker 1: will we lose more in the in the new year?
Speaker 1: And how can a private investor, how do they? How
Speaker 1: do they faces? Are they any sense of what's coming
Speaker 1: down the line? Will there be more of it? Of
Speaker 1: the private equity arming if you like, just basically carving
Speaker 1: useful chunks out of the ax.
Speaker 2: I think you and when you talk about there's no
Speaker 2: theme about about which which areas hot or not? But
Speaker 2: I think that the theme is value and the thing
Speaker 2: time and time again, your listeners have to remember much
Speaker 2: most of the value happens when people go in when
Speaker 2: people are running the other way. And that's the theme
Speaker 2: that that keeps repeating through time. I remember as a
Speaker 2: junior journalist going up to Secutor Road, to the old
Speaker 2: New Crest head headquarters when they announce her results and
Speaker 2: no one was interested that. And this was when gold
Speaker 2: was trumbling along and write two hundred dollars an ounce
Speaker 2: or something like that, and no one had any interest
Speaker 2: in it. But as an investor in over time, you
Speaker 2: have to ask is this the way that the world
Speaker 2: is going to stay forever? And also with companies as well,
Speaker 2: Ampcor which is still listed, but now it's moved. It's
Speaker 2: listing to the United States, one of the worlds now
Speaker 2: one of the world's biggest packaging companies. Again, in the
Speaker 2: early two thousands, no one wanted to go near this
Speaker 2: thing because it had a lot of internal troubles and
Speaker 2: a lot of internal problems. Every broker had a sell
Speaker 2: recommendation on it. Likewise, you've seen a massive turnaround in
Speaker 2: a company called ZIPC that's the buy now, pay later company.
Speaker 2: It's been one of the best performers on the ASEX.
Speaker 2: And again two years ago, no one wanted to go
Speaker 2: near these stocks, and rightly so. There were some really
Speaker 2: unusual business models going on there. But if you can
Speaker 2: sort out and this is where the private equity often
Speaker 2: looks for value, if you can sort out what the
Speaker 2: value is, then your way. And then we're talking about
Speaker 2: rec respects. So even in airlines, you ask yourself about thematics.
Speaker 2: Will Australia be a one airline country? Now? Why it's
Speaker 2: a big economy. We do a lot of travel, do
Speaker 2: a lot of domestic travel, so that's if you can
Speaker 2: trade the trough, you can ride the top.
Speaker 1: Okay, can I ask you one thing about people, and
Speaker 1: you're talking to CEOs, to what extent do you, as
Speaker 1: someone who corpors it very closely, to what extent do
Speaker 1: you believe or take on board how important the key
Speaker 1: person is. You mentioned a couple of companies there that
Speaker 1: really came around. You mentioned Acre, which, as you say,
Speaker 1: was drifting, and then Ken McKenzie came along and he
Speaker 1: was just amazing and he got fantastic operational numbers out
Speaker 1: of that company, which transferred to Fantastic ship Press Performance.
Speaker 1: You mentioned ZIP, which has leaved very much with Larry Diamond.
Speaker 1: We have other companies on the market, and then in
Speaker 1: the next apport we're going to talk about the property trust.
Speaker 1: But how important is the CEO? Is the CEO at
Speaker 1: the average Australian listed company more or less important than
Speaker 1: they used to be? How crucial are they on But
Speaker 1: if someone looks at a company, they can analyze the numbers.
Speaker 1: But ultimately that's the that's the quant part. The qualitative
Speaker 1: part is it's run by people. How important is the CEO?
Speaker 2: I think? And you put it out like the aim
Speaker 2: of a top company is for the CEO, although it's
Speaker 2: bad for them if they fall under the bus or
Speaker 2: the or the Swanston Street tram. That then then the
Speaker 2: company keeps taking along as though nothing happened. There was
Speaker 2: a saying, and this is about comm Wealth Bank too.
Speaker 2: So the thing about com Wealth Bank is it's a
Speaker 2: big engine. It's a big it's a big train going
Speaker 2: down the tracks and all you've got to do as
Speaker 2: a CEO is just keep the oil topped up, an
Speaker 2: eye on that and he'll just keep going and going.
Speaker 2: And so that's the thing. So does the CEO have
Speaker 2: an influence? Well, look, the CEO sets sets the tone
Speaker 2: and sets the culture. Is responsible for the culture and
Speaker 2: so is it a high performance culture? Is it a
Speaker 2: culture that is focused? And they do have a role
Speaker 2: in doing that to do the people that turn up
Speaker 2: to the building every day do they know what their
Speaker 2: job is? And I think that's a really important thing.
Speaker 2: And then there's a separate thing to this as well
Speaker 2: that we and I know that your listeners would be
Speaker 2: really thinking about these. A lot is founder lead companies
Speaker 2: and there's quite still quite a few founder lead companies
Speaker 2: with founders involved on the AX and they and they
Speaker 2: certainly are performed, but we always have this disruption when
Speaker 2: it's time for the founder to hand over the reins.
Speaker 2: So even in Fordescue, when we saw Andrew Forrest to
Speaker 2: your forest build up Ford Toescue build up magnificently, he
Speaker 2: stepped back handed it over to CEOs. It was moving
Speaker 2: for quite a while, and then with sort of succession
Speaker 2: of troubles and Andrew Forrest jumping in and trying to
Speaker 2: manage it as well. So it's still his company. And
Speaker 2: then obviously the min res when there is issues, like
Speaker 2: the CEO still drives it as a very entrepreneurial company.
Speaker 2: But then sometimes when companies get big, they need different
Speaker 2: skill sets, they need managers that can manage, they can
Speaker 2: need predictability. We spoke about these big mining companies. These
Speaker 2: CEOs are thinking years out, so they're not thinking about today.
Speaker 2: So really interesting one to watch founder led companies. There's
Speaker 2: two of just to point out to your listeners, both
Speaker 2: Melbourne based companies. One pro Medicus based in Richmond. The
Speaker 2: biggest company you've never heard of in Australia, which it's.
Speaker 1: Probably favored by institutions.
Speaker 2: I think it's now to about fifteen or sixteen billion
Speaker 2: dollars in terms of market cap. It shares it just gone.
Speaker 2: It sells imaging software, which sounds pretty pretty dull, but
Speaker 2: just ruthlessly targets high end health networks in the United
Speaker 2: States and radiology imaging software that it develops.
Speaker 1: And there's no CEO. There's a CEO obviously there that
Speaker 1: is Integrant, and.
Speaker 2: There's a CEO. One is a is a commercial director.
Speaker 2: The other one is interesting to watch is ARB. You
Speaker 2: would have I know that when you drive around the
Speaker 2: streets are brighton with your with your Toyota high Likes.
Speaker 1: I have never been in. I've never been in a
Speaker 1: high Lox, but I have a spin in one. But anyway, yes,
Speaker 1: I know what they are. I know what a r
Speaker 1: BR I get your jok.
Speaker 2: Yes, so they supply all the accessories for full drives
Speaker 2: and newts like the one that you have when you
Speaker 2: drive around the streets are.
Speaker 1: Brighton stock great Stock. Deny it for a moment.
Speaker 2: This was started in in a garage in Melbourne's eastern suburbs,
Speaker 2: I think in Ringwood, and now it's sort of you know,
Speaker 2: sells it's it's products around the world. Still operates in
Speaker 2: kill Sithe for all of Melbourne's East and it has
Speaker 2: managed to do the succession quite smarisly too in recent years.
Speaker 2: So just so it can happen m M.
Speaker 1: Okay, So a r B is not led by the
Speaker 1: it's not led by the original person that that built
Speaker 1: them anymore.
Speaker 2: Nope, I see they are on the board. They are
Speaker 2: still involved in the board and obviously it's shareholded.
Speaker 1: Okay, very good. Look, we're going to take you short break, folks,
Speaker 1: and we're going to come back and look at the
Speaker 1: property scene and Property Trust in particular, and some pretty
Speaker 1: big personalities there. I can tell you that that are integral.
Speaker 1: Would almost underestimate how important they are to the wider stuff.
Speaker 1: Back in the moment. Hello, welcome back to the Australian's
Speaker 1: Money Puzzle. I'm James Kirby talking to Eric Johnson. Hey, Eric,
Speaker 1: two stocks have been just aching to ask you about.
Speaker 1: One is Goodman, the amazing Goodman Group and Greg Goodman,
Speaker 1: who has personified this company. And it would seem though
Speaker 1: no company is run by one person, but they certainly
Speaker 1: can be led by one person, and he has led
Speaker 1: Goodman through thick and thin and early in the game
Speaker 1: rebranded this Property Trust as a logistics player and a
Speaker 1: player that was able to harness, if you like, or
Speaker 1: exploit the move to online that it was an advantage
Speaker 1: rather than a disadvantage. And that's of course, it's just
Speaker 1: been one of the best stocks in the market. It's
Speaker 1: also a stoffwhare that is so closely identified with the leader.
Speaker 1: I mean, we have Jerry Harvey at Harvey Norman with
Speaker 1: Greg Goodman at Goodman Group. Is that a situation where
Speaker 1: the CEO is almost too important for the company.
Speaker 2: It is, and you would hope that he builds a
Speaker 2: structure around him, so every say, I should be thinking
Speaker 2: about it their exit from day from day one, how
Speaker 2: to build that structure around them so he can hand
Speaker 2: it over and by seeing his company through good and
Speaker 2: good and bad. And it was really knocked around during
Speaker 2: the GFC Goodman Group. It had too much it was
Speaker 2: holding too much debt as a property trust and that
Speaker 2: really changed the direction that Greg Goodman took on that
Speaker 2: company on the journey he and now it has this
Speaker 2: incredible moat around it in terms of the infrastructure that
Speaker 2: it builds, the warehousing and they just developed these big
Speaker 2: warehouses and they're very hard to replicate and they.
Speaker 1: Had to have the Warren Buffett Molt the of the infrastructure,
Speaker 1: their own infrastructure.
Speaker 2: And they're not just tin sheds out in the paddic.
Speaker 2: These are like because there's power. There's also there's also
Speaker 2: automation inside them as well that Goodman provides. So from
Speaker 2: a company X, I can just turn up and there's
Speaker 2: my warehouse and it's got all the automation ord ready
Speaker 2: to go, and Goodman manages all this and it's really
Speaker 2: really out there. They're a really important company transition. I
Speaker 2: think so because the business model is predictable now, so
Speaker 2: he's not out there making the deals. He's certainly crunching
Speaker 2: the numbers, but it doesn't trade on his name on
Speaker 2: He doesn't need to open doors anymore because the model
Speaker 2: has proven, the model is established, and I think that's
Speaker 2: a difference. There's always an entrepreneurial streak with founder CEOs
Speaker 2: and they use that to open doors necessarily because that's
Speaker 2: what they've been doing all their life, trying to open doors.
Speaker 2: I think that's a difference now with Goodman.
Speaker 1: Okay, it's become institutionalized in the best sense of the word.
Speaker 1: I want to look to questions because the first question
Speaker 1: I want to pick out is smack on a most
Speaker 1: delightful segue into the questions. This week, it's from George. George,
Speaker 1: I'm sure and this is never advice, it's only information
Speaker 1: and observation. But you might be relieved rather than nooid.
Speaker 1: Now anyway, George is an original piece of corresponding which
Speaker 1: is probably oh ten days old. Lets it's about Digiico,
Speaker 1: which was the biggest float of the year folks, as
Speaker 1: you'll probably know, and that was a property trust Digico.
Speaker 1: So here's George's question. I'm extremely annoyed, to say the least,
Speaker 1: the country's biggest bank has deliberately chosen to shaft retail
Speaker 1: investors in favor of the big end of town. And
Speaker 1: he mentions comsec here, we're appointed joint lead co managers
Speaker 1: of the upcoming Digito IPO tip to be the biggest
Speaker 1: float on the AX for years, And indeed that is true, George.
Speaker 1: The only problem was, of course, it floated. We're talking
Speaker 1: on Tuesday. It floated last Friday, great expectations. I think
Speaker 1: it was midday. I actually remember I tuned in at Miday,
Speaker 1: Justice se because it was coming on of five dollars
Speaker 1: and guess what it went nowhere. So anyway, in Georgie's case,
Speaker 1: he says, being a client, I thought I could access
Speaker 1: the float, but I was told retail clients like myself
Speaker 1: missed out because the broker allocation was all farmed out
Speaker 1: to sophisticated investors maybe concept, consect and advice. How many
Speaker 1: of those sophistications investors took up only the prospectus minimum
Speaker 1: application of two thousand borth of shares and amount set
Speaker 1: sufficiently low that it was obviously aimed at retail investors. Okay,
Speaker 1: two things here. One nine times out of ten, the
Speaker 1: Georges of this world are correct. You would be furious
Speaker 1: when you want to be in an ipo, you know
Speaker 1: it's coming down the line, you think it looks good,
Speaker 1: and you don't get stuck. Now, I'm sure, comes secor
Speaker 1: Anni Broke, we'll have an explanation for why one person
Speaker 1: didn't get stuck. And there is a procedure in how
Speaker 1: you lay out these IPOs. But what's particularly interesting with
Speaker 1: George's question is that on this occasion, it would seem
Speaker 1: so far he would have been better off that he
Speaker 1: didn't get the stop, because he would have been a
Speaker 1: loss straight away. And in fact, that the Digico is
Speaker 1: still below its IPO price, which was five bucks. I
Speaker 1: think it is still below.
Speaker 2: Eric for fifty.
Speaker 1: Yeah, four fifty. Well, that's I'm disappointing, isn't it. What
Speaker 1: does that tell us about property to us? And in
Speaker 1: this case it had the CEO figure. The person behind
Speaker 1: the float certainly was a man called David de Pillow,
Speaker 1: who has had great success so far. But this has
Speaker 1: not been a great success in its initial phase of
Speaker 1: the float. And who knows, this time next year we
Speaker 1: may be sitting here saying, well it was even better
Speaker 1: by at four fifty, but we don't know. What we
Speaker 1: do know is that it was a failure. The biggest
Speaker 1: float of the year appears to be a failure. What's
Speaker 1: that tell us about the market and the whole enterprise
Speaker 1: of Digiko?
Speaker 2: Yeah, look, I think this is more stock specific. And
Speaker 2: although George points out about the sophisticated investors, it was
Speaker 2: interesting with this one. It wasn't sold to institutional investors.
Speaker 2: So in a perfect world, when you take a company
Speaker 2: to market, you want big institutional investors, a mix of
Speaker 2: big institutional investors as well as retail shareholders. So and
Speaker 2: this one didn't for whatever reason, it didn't seem to
Speaker 2: be marketed among the big institutions, so there's the big
Speaker 2: fund managers. So it was became a real retail stock.
Speaker 2: And it's the institutions can are the ones that can
Speaker 2: sort of shift the dial in terms of support. Digit
Speaker 2: Co was is looking at trying to capitalize on the
Speaker 2: booming data centers that is around at the moment. This
Speaker 2: is we have heard about mcquarie by selling its air
Speaker 2: trunk business, you know for incredible.
Speaker 1: Next DC of course always been mentioned on the show here, yeah, yeah, yep.
Speaker 2: So so you know there's a real there's a real
Speaker 2: thing going on and all the data that we're demanding
Speaker 2: in AI is going to pull into it. Not all
Speaker 2: data centers are the like. Not all data centers of
Speaker 2: the same summer commodities, and we spoke about Goodman. Goodman
Speaker 2: are and obviously in data centers as well, but they
Speaker 2: provide all the power and all the infrastructure around it
Speaker 2: as well. So so Digico with with that. So it's
Speaker 2: interesting what the real business is underneath. Look, who knows.
Speaker 2: I think for your listeners, they've got to do their
Speaker 2: homework and saying and really get into the into the
Speaker 2: depths of it. And saying what are the contracts?
Speaker 1: Like this was a rapid rule up basically of corect
Speaker 1: center assets, wasn't it? And to some extent it came
Speaker 1: to the market quickly, and I think without doubt it
Speaker 1: was timed to get in before the end of the year.
Speaker 1: It was literally the last what are the last rocking.
Speaker 2: Days that in terms of like analyzing it, you look
Speaker 2: at who are there, who is Digitico's customers, when are
Speaker 2: their contracts renewing? What it will there be a step
Speaker 2: up in contract or you know, let's say they do
Speaker 2: I don't know, let's say they do have a contract
Speaker 2: with Microsoft. Will it just roll over in five years time?
Speaker 2: Or will Microsoft go to the next person? What's their
Speaker 2: point of friends from the likes of good Men or
Speaker 2: Amazon also find the same thing or even next day. See,
Speaker 2: so that's what That's what I'm work.
Speaker 1: You have to do instantly, Okay, okay, terrific And I
Speaker 1: suppose look, one of the lessons here, folks is and
Speaker 1: we always say it on the show that there's a
Speaker 1: difference between investing and speculating, and there's an invest and
Speaker 1: there's a difference between investing in trading or betting and
Speaker 1: to some extent in IPO, and I'm not talking about
Speaker 1: Digito and in particular im talking about any Ipo IPO.
Speaker 1: With Blue Sky Ipo, there is there is no trading
Speaker 1: history because it hasn't been a stock and it's a different,
Speaker 1: very different world when you enter into the public space.
Speaker 1: And some entrepreneurs and CEOs that we've talked about the
Speaker 1: importance of CEOs to do. Some CEOs are terrific as
Speaker 1: long as the company is private and they are smart
Speaker 1: enough to know that they shouldn't actually ever go public.
Speaker 1: And sometimes you question why people go public if they
Speaker 1: if they've been perfectly happy for many years. Sometimes it's
Speaker 1: a way to get cash out. Sometimes it's a way
Speaker 1: to let other people in the business get some skin
Speaker 1: in the game, which is probably the healthiest way you see.
Speaker 1: And sometimes it's just an opportunity for people to say, look, ah,
Speaker 1: from here on, you know, I want to maximize what's
Speaker 1: left of my time in the business and what I've
Speaker 1: built up. And it's a way for them to have
Speaker 1: what the brokers I like to call a liquidity event,
Speaker 1: which is a lovely word which really means everyone gets
Speaker 1: PiZZ of money liquidity event. But the liquidity event didn't
Speaker 1: really happen at the Digitco, but maybe it will. Hopefully
Speaker 1: it isn't a sign that the cautious optimism for the
Speaker 1: year ahead is too enthusiastic and not sufficiently cautious. We'll
Speaker 1: find out. We'll find out in the months ahead. For
Speaker 1: the moment. Thank you very much, Eric Johnson for coming
Speaker 1: on the show. Great to have you on.
Speaker 2: Thanks James, great to be here.
Speaker 1: Great to have Eric on. Eric. As you know is
Speaker 1: it talks to the top people all the time and
Speaker 1: it's very important to know what they are thinking because
Speaker 1: they are running big stocks.
Speaker 2: Before you go, we'll just encourage you all listeners. It's
Speaker 2: all online on the Australian dot com some of their
Speaker 2: responses for this CEO survey, So if you have a
Speaker 2: specific company you're interested, you can click right through and
Speaker 2: find their responses.
Speaker 1: Oh yeah, and you want to know what the CEO
Speaker 1: has to say? Okay, very good, all right, and the
Speaker 1: emails please the money puzzle at the Australian dot Com
Speaker 1: dot AU. Today's show was produced by Lea Samog