1 00:00:05,880 --> 00:00:07,800 Speaker 1: Welcome to Fear and Greed Q and A where we 2 00:00:07,880 --> 00:00:12,039 Speaker 1: ask and answer questions about business, investing, economics, politics and more. 3 00:00:12,119 --> 00:00:15,560 Speaker 1: I'm Sean Aylmer. The standoff between China and BHP over 4 00:00:15,640 --> 00:00:18,639 Speaker 1: iron ore is a reminder, albeit an extreme one, of 5 00:00:18,680 --> 00:00:21,599 Speaker 1: how reliant we are on our relationship with China, our 6 00:00:21,640 --> 00:00:24,160 Speaker 1: biggest training partner. To that end, today I want to 7 00:00:24,160 --> 00:00:26,480 Speaker 1: look at some of the Australian companies on the AX 8 00:00:26,760 --> 00:00:29,120 Speaker 1: that have a lot of exposure to China. Remember this 9 00:00:29,240 --> 00:00:32,360 Speaker 1: is general information only and you should see professional advice 10 00:00:32,479 --> 00:00:36,000 Speaker 1: before making investment decisions. Juin Beilu is co founder and 11 00:00:36,080 --> 00:00:40,599 Speaker 1: lead portfolio manager at investment firm ten Cap. Jin bab 12 00:00:40,680 --> 00:00:41,800 Speaker 1: Welcome back to Fear and Greed. 13 00:00:42,159 --> 00:00:44,199 Speaker 2: Thank you for having me, Sean Okay. 14 00:00:44,240 --> 00:00:47,199 Speaker 1: BHP very much in the news because of the standoff 15 00:00:47,240 --> 00:00:51,640 Speaker 1: with China over iron ore shipments. How much worried should 16 00:00:51,680 --> 00:00:55,760 Speaker 1: we be? What about BHP as an investment option given 17 00:00:55,920 --> 00:00:56,920 Speaker 1: this is happening. 18 00:00:57,200 --> 00:01:00,480 Speaker 2: Yeah, that's right. Look, look I still think that this 19 00:01:00,600 --> 00:01:04,759 Speaker 2: is a negotiation tactic from the China perspective. Remember, iron 20 00:01:04,800 --> 00:01:08,800 Speaker 2: ore prices has held incredibly strong when everyone said it 21 00:01:08,800 --> 00:01:11,240 Speaker 2: should be going down at least twenty percent lower. Every 22 00:01:11,240 --> 00:01:14,839 Speaker 2: analystic's expecting iron ol prices will be ten to fifteen 23 00:01:14,840 --> 00:01:16,840 Speaker 2: percent lower in the next twelve months. So you know, 24 00:01:16,920 --> 00:01:20,120 Speaker 2: it's held up really re strong. And now China is 25 00:01:20,160 --> 00:01:23,960 Speaker 2: wanting to make a stance that you know, negotiating contract 26 00:01:24,000 --> 00:01:26,720 Speaker 2: want bit of a cheaper option, a cheaper iron ore now. 27 00:01:26,800 --> 00:01:28,800 Speaker 2: But there is a bit of confusion of what they 28 00:01:28,880 --> 00:01:32,640 Speaker 2: have halted. They're not really halting the contracted volume. It's 29 00:01:32,680 --> 00:01:35,880 Speaker 2: really the spot volume. So the ones that get sold 30 00:01:35,920 --> 00:01:38,440 Speaker 2: at the higher prices, the current higher prices, not the 31 00:01:38,480 --> 00:01:42,679 Speaker 2: ones they're obligated to deliver. And then you know, BHP, 32 00:01:42,800 --> 00:01:45,680 Speaker 2: the management believes, is a negotiation tactic and we believe 33 00:01:45,720 --> 00:01:46,080 Speaker 2: so too. 34 00:01:46,400 --> 00:01:49,680 Speaker 1: Okay, so beyond this negotiation tactic, what do you think 35 00:01:49,680 --> 00:01:53,120 Speaker 1: the outlook for BHP is, given it is as exposed 36 00:01:53,120 --> 00:01:53,960 Speaker 1: to China. 37 00:01:54,040 --> 00:01:57,280 Speaker 2: Sure, I think the outlook for BHP is actually really good. 38 00:01:57,760 --> 00:01:59,840 Speaker 2: Everyone's sitting there waiting for a share price to come 39 00:01:59,840 --> 00:02:02,240 Speaker 2: by a bit more on this news flow, and clearly 40 00:02:02,240 --> 00:02:05,240 Speaker 2: it hasn't only fallen a little bit, you know, after 41 00:02:05,320 --> 00:02:08,960 Speaker 2: recently quite a good rally because PHP see even though 42 00:02:09,040 --> 00:02:12,000 Speaker 2: sixty five percent of sixty to sixty five percent of 43 00:02:12,400 --> 00:02:14,560 Speaker 2: you know, the earnings come from the iron ore front, 44 00:02:14,600 --> 00:02:17,520 Speaker 2: which is directly related to China, but the other part 45 00:02:17,560 --> 00:02:20,600 Speaker 2: of the business actually forty percent of the business is 46 00:02:20,639 --> 00:02:23,800 Speaker 2: actually copper, and these days you can't get enough of copper. 47 00:02:24,120 --> 00:02:27,080 Speaker 2: There's shortage here and there's a demand everywhere, you know, 48 00:02:27,120 --> 00:02:29,680 Speaker 2: and then the global growth doing bit better. So BHP 49 00:02:29,800 --> 00:02:32,120 Speaker 2: actually looks very attractive here a. 50 00:02:32,240 --> 00:02:34,120 Speaker 1: Two milk one of my kind of I think one 51 00:02:34,120 --> 00:02:36,320 Speaker 1: of the more fascinating stocks over the last five years 52 00:02:36,400 --> 00:02:39,560 Speaker 1: or sixty since we've been doing this show. It absolutely 53 00:02:39,639 --> 00:02:42,800 Speaker 1: surged at one point, then was dumped. It sort of 54 00:02:42,800 --> 00:02:43,560 Speaker 1: come back a bit. 55 00:02:43,800 --> 00:02:46,960 Speaker 2: What's its prospects, Yeah, prospert is actually pretty good. So 56 00:02:47,040 --> 00:02:50,680 Speaker 2: this company has really come through to become a real business, 57 00:02:50,720 --> 00:02:54,080 Speaker 2: branded business that actually sells to a majority of the 58 00:02:54,120 --> 00:02:56,720 Speaker 2: cities now in China three tiers, Tier one, tiers two, 59 00:02:56,720 --> 00:03:00,200 Speaker 2: tier three cities now and built is a proper you know, 60 00:03:00,320 --> 00:03:02,960 Speaker 2: the sales channel compared to many years ago, it used 61 00:03:03,000 --> 00:03:04,720 Speaker 2: to be a diago of people buy some here, shipper 62 00:03:04,760 --> 00:03:07,399 Speaker 2: over there, and then make a margin. So companies done 63 00:03:07,400 --> 00:03:11,400 Speaker 2: really well, keep reinvesting. During the tough times when China 64 00:03:11,720 --> 00:03:16,520 Speaker 2: had birth rate issues, had you know, a consumer slump company, 65 00:03:16,520 --> 00:03:19,960 Speaker 2: continue to reinvest and now it's actually reaping the rewards 66 00:03:20,840 --> 00:03:24,000 Speaker 2: grew double digit, even the baby birth rate hasn't increased. 67 00:03:24,040 --> 00:03:26,959 Speaker 2: But now it actually looks like China Consumer's coming around 68 00:03:27,080 --> 00:03:29,800 Speaker 2: and the growth leverage is phenomenal for this company. 69 00:03:30,400 --> 00:03:33,600 Speaker 1: You mentioned China Consumer there, what do they mean? How 70 00:03:33,639 --> 00:03:35,760 Speaker 1: are they performing at the moment? And I suppose I've 71 00:03:35,800 --> 00:03:37,480 Speaker 1: got Treasury wines in the back of my mind when 72 00:03:37,480 --> 00:03:40,560 Speaker 1: I say that very much a consumer based company. Obviously 73 00:03:40,560 --> 00:03:43,440 Speaker 1: we have the tariff issue with China that's rebounded. They're 74 00:03:43,440 --> 00:03:46,680 Speaker 1: selling back, Treasury is selling back into China, but it 75 00:03:46,720 --> 00:03:48,480 Speaker 1: does depend a lot on the Chinese consumer. 76 00:03:48,880 --> 00:03:51,720 Speaker 2: That's right. China Consumer actually is doing a little bit better, 77 00:03:51,840 --> 00:03:54,480 Speaker 2: even though their housing is still pretty tough, but it 78 00:03:54,560 --> 00:03:57,480 Speaker 2: stopped getting a whole lot worse. So China Consumer is 79 00:03:57,520 --> 00:04:00,920 Speaker 2: turning the corner. Usually I take a a barometer for 80 00:04:01,040 --> 00:04:04,520 Speaker 2: China consumer confidence is actually their share market. Their share 81 00:04:04,520 --> 00:04:06,839 Speaker 2: market has been one of the best performing so far 82 00:04:06,920 --> 00:04:09,560 Speaker 2: this year. You know, off the lower base, but consumer 83 00:04:09,720 --> 00:04:12,960 Speaker 2: is definitely feeling stronger and better, but not red hot, 84 00:04:13,080 --> 00:04:15,920 Speaker 2: but they are feeling stronger. They are spending. They're spending 85 00:04:15,920 --> 00:04:18,160 Speaker 2: a lot on the white goods. They are traveling a 86 00:04:18,240 --> 00:04:20,680 Speaker 2: little bit, but they are a little bit selective with 87 00:04:21,160 --> 00:04:24,039 Speaker 2: some of the you know, more discretionary. And now with 88 00:04:24,120 --> 00:04:27,160 Speaker 2: the Treasury Wine is actually quite interesting. There is a 89 00:04:27,160 --> 00:04:30,800 Speaker 2: few issues with this company. So even though China tariff 90 00:04:30,880 --> 00:04:34,039 Speaker 2: is gone, Chinese you know, rushed back to buy the 91 00:04:34,120 --> 00:04:36,880 Speaker 2: Treasury which is you know, growing really well the China market. 92 00:04:37,279 --> 00:04:40,440 Speaker 2: But the thing is, more recently, Chinese government has now 93 00:04:40,480 --> 00:04:43,640 Speaker 2: put out this policy saying that lunchtime country. They don't 94 00:04:43,640 --> 00:04:46,760 Speaker 2: want that lunch type country. They essentially say, Chinese up. 95 00:04:46,800 --> 00:04:48,880 Speaker 2: They don't want to see the officials you know, be 96 00:04:48,960 --> 00:04:52,360 Speaker 2: drinking at lunchtime, which is you know, probably a sensible policy, 97 00:04:53,080 --> 00:04:55,160 Speaker 2: that's right, given most of the things they drink are 98 00:04:55,200 --> 00:04:58,320 Speaker 2: white liquor are very very high alcohol content. So that 99 00:04:58,400 --> 00:05:01,279 Speaker 2: has created a bit of indigestion for the alcoholic market. 100 00:05:01,880 --> 00:05:05,120 Speaker 2: And you know, Treasury Wine seems to hasn't been impacted 101 00:05:05,160 --> 00:05:07,080 Speaker 2: all that marsh, you know, because they're still catching up 102 00:05:07,240 --> 00:05:09,599 Speaker 2: into you know, all these lost volume over the last 103 00:05:09,600 --> 00:05:11,599 Speaker 2: few years. But it seems to be hitting a bit 104 00:05:11,640 --> 00:05:15,839 Speaker 2: of an issue with the alcoholic beverage space and also 105 00:05:15,920 --> 00:05:18,960 Speaker 2: Treasury I think the bigger problem is just globally, you know, 106 00:05:19,160 --> 00:05:21,799 Speaker 2: especially in the US, people just not drinking, young people 107 00:05:21,880 --> 00:05:25,039 Speaker 2: just not drinking enough. Why especially the commercial the cheaper 108 00:05:25,120 --> 00:05:27,080 Speaker 2: end of the why you know, the young people they're 109 00:05:27,080 --> 00:05:29,960 Speaker 2: in the US, they're having all these you know, marijuana 110 00:05:29,960 --> 00:05:33,000 Speaker 2: spices drink and that is just competing away some of 111 00:05:33,040 --> 00:05:35,279 Speaker 2: the lower end space. So yeah, it's going through a 112 00:05:35,279 --> 00:05:38,680 Speaker 2: bit of challenging period, you know, but look at the brand. 113 00:05:38,760 --> 00:05:41,839 Speaker 2: Paan Fall is still very very strong. Does represent quite 114 00:05:41,839 --> 00:05:43,279 Speaker 2: an interesting value at the moment. 115 00:05:43,880 --> 00:05:46,000 Speaker 1: Okay, so let's move away from China. There's just a 116 00:05:46,040 --> 00:05:49,240 Speaker 1: few stocks that I'm interested in. Sigma Healthcare, did the 117 00:05:49,279 --> 00:05:51,680 Speaker 1: merger with Chemist Warehouse. Can that just keep running? I 118 00:05:51,680 --> 00:05:53,800 Speaker 1: mean it's sort of it's come off a little bit 119 00:05:53,839 --> 00:05:56,840 Speaker 1: where it's steadied perhaps is a better way of putting 120 00:05:56,880 --> 00:05:59,880 Speaker 1: it in more recent times. Can it keep running? 121 00:06:00,600 --> 00:06:03,760 Speaker 2: Look, I can keep running the underlying don't worry about 122 00:06:03,800 --> 00:06:05,400 Speaker 2: the share pard don't look at the share price chart 123 00:06:05,600 --> 00:06:07,960 Speaker 2: that if you look at the underlying earnings, it's been 124 00:06:08,000 --> 00:06:10,760 Speaker 2: growing from strength to strength to strength. Now the share 125 00:06:10,839 --> 00:06:13,200 Speaker 2: price chart is kind of you know, there's a lot 126 00:06:13,240 --> 00:06:15,960 Speaker 2: of there are a lot of rich chemists out there, 127 00:06:16,520 --> 00:06:20,080 Speaker 2: and what has happened is that after the listing, you know, 128 00:06:20,160 --> 00:06:23,080 Speaker 2: many of them were selling bit by bit so and 129 00:06:23,120 --> 00:06:24,920 Speaker 2: then because there are so many of them, so they 130 00:06:24,920 --> 00:06:27,359 Speaker 2: creates a bit of indigestion for you know, for the 131 00:06:27,400 --> 00:06:31,000 Speaker 2: share price. But that's about it. But the earning itself 132 00:06:31,080 --> 00:06:33,239 Speaker 2: keeps going from strength to a straight and they're rolling 133 00:06:33,240 --> 00:06:37,000 Speaker 2: out stores. They've got international growth expansion. Uh, their you know, 134 00:06:37,080 --> 00:06:39,400 Speaker 2: core Stor is growing very strong. And then the price 135 00:06:39,440 --> 00:06:43,680 Speaker 2: differential between Woolworth or supermarket and Chemists Warehouse is now 136 00:06:43,720 --> 00:06:46,640 Speaker 2: widened against so they delivering good value for people. Just 137 00:06:46,680 --> 00:06:48,360 Speaker 2: means people are going to keep going back to that 138 00:06:48,760 --> 00:06:49,360 Speaker 2: to the store. 139 00:06:49,720 --> 00:06:51,560 Speaker 1: Okay, let's go to the other end of the spectrum 140 00:06:51,560 --> 00:06:55,800 Speaker 1: and we'll keep the idea of overse's rollouts going. Dominoes. Dominoes. 141 00:06:55,920 --> 00:06:59,960 Speaker 1: Dominoes now has Jack Cowan of Hungry Jack Fine running 142 00:07:00,360 --> 00:07:04,160 Speaker 1: the store itself. It's share prices off ninety percent. 143 00:07:03,880 --> 00:07:05,599 Speaker 2: Or more more than ninety percent. 144 00:07:06,200 --> 00:07:08,479 Speaker 1: Yeah, what I mean what becomes of Dominis? 145 00:07:09,080 --> 00:07:12,160 Speaker 2: Yeah, I actually think domino looks very interesting at this stage. Look, 146 00:07:12,200 --> 00:07:13,920 Speaker 2: it might take six months, that might take a little 147 00:07:13,960 --> 00:07:18,080 Speaker 2: bit longer, but aside from the management has recognized it's 148 00:07:18,160 --> 00:07:22,440 Speaker 2: overseas expension strategy. Perhaps it was way too ambitious. Just 149 00:07:22,480 --> 00:07:24,840 Speaker 2: focus on what's schedule to get the things right here 150 00:07:24,880 --> 00:07:27,440 Speaker 2: in Australia, and I think that strategy is right. So 151 00:07:27,600 --> 00:07:30,480 Speaker 2: now they're reviewing what's happening, what's going to happen in Japan, 152 00:07:31,040 --> 00:07:33,600 Speaker 2: They you know, France and Europe seems to be doing 153 00:07:33,640 --> 00:07:35,800 Speaker 2: a bit better, and they're focusing on all the money 154 00:07:35,920 --> 00:07:38,160 Speaker 2: that's not necessary to be spent. They're trying to cut 155 00:07:38,160 --> 00:07:40,680 Speaker 2: it back, and they do spend a lot of money 156 00:07:40,680 --> 00:07:42,760 Speaker 2: on for example, like one hundred million dollars on those 157 00:07:42,800 --> 00:07:46,160 Speaker 2: technology and things just not necessary, doing things smartly, and 158 00:07:46,200 --> 00:07:49,000 Speaker 2: they reinvest back into the franchise sea here in Australia 159 00:07:49,160 --> 00:07:51,119 Speaker 2: and when they do well, they roll out more stores 160 00:07:51,160 --> 00:07:53,120 Speaker 2: and they will grow. So I do think it is 161 00:07:53,320 --> 00:07:56,120 Speaker 2: very cheap for earning that is very very low as well, 162 00:07:56,240 --> 00:07:59,120 Speaker 2: and there's not much expectations by the analysts, so you 163 00:07:59,160 --> 00:08:00,800 Speaker 2: don't need to do much really just to get a 164 00:08:00,840 --> 00:08:03,600 Speaker 2: double digit growth. This is like Collin's Food four month 165 00:08:03,640 --> 00:08:06,080 Speaker 2: ago before he Rallly forty percent. I think this is 166 00:08:06,160 --> 00:08:07,520 Speaker 2: Domino It's coming. 167 00:08:07,600 --> 00:08:09,160 Speaker 1: Do you know. I hope that's Jimbo. I hope that's 168 00:08:09,160 --> 00:08:11,239 Speaker 1: the case, because I've been thinking about that for Dominoes 169 00:08:11,280 --> 00:08:14,840 Speaker 1: for a while and hasn't happened yet. But we'll see pizza. 170 00:08:15,000 --> 00:08:16,560 Speaker 2: The pizza is actually getting bit better. 171 00:08:17,040 --> 00:08:20,200 Speaker 1: Is that right? Oh? Fair enough? I mean we're sort 172 00:08:20,200 --> 00:08:21,560 Speaker 1: of running out of time. But a couple of stocks 173 00:08:21,600 --> 00:08:23,360 Speaker 1: I want to quickly mention that have done really well. 174 00:08:23,960 --> 00:08:27,160 Speaker 1: Harvey Norman Consumer Discretionery, you know, along with JB High Fire, 175 00:08:27,200 --> 00:08:30,720 Speaker 1: those stocks have really run recently. Can Harvey Norman keep going? 176 00:08:30,960 --> 00:08:33,600 Speaker 2: Yeah, that definitely can keep going. The housing is very 177 00:08:33,720 --> 00:08:37,040 Speaker 2: is absolutely in that early turnaround face and housing related 178 00:08:37,120 --> 00:08:39,160 Speaker 2: the retail sector. You know, as people get new houses, 179 00:08:39,200 --> 00:08:41,640 Speaker 2: they buying new furniture and the like, and that's just 180 00:08:41,720 --> 00:08:44,240 Speaker 2: at the early stage. Next twelve month we will have 181 00:08:44,400 --> 00:08:48,439 Speaker 2: incredible Earninge's growth. And we all know analysts are never 182 00:08:48,480 --> 00:08:51,840 Speaker 2: good at estmate estimating operating leverage on the up or downside. 183 00:08:51,880 --> 00:08:54,520 Speaker 2: So this is upside. So Ernie's will continue to get upgrader. 184 00:08:54,600 --> 00:08:55,959 Speaker 2: You will look cheap in twelve month time. 185 00:08:56,120 --> 00:08:58,520 Speaker 1: Yeah, okay, in last three sixty we're all tracking our children. 186 00:08:58,520 --> 00:09:00,000 Speaker 1: We'll have stopped doing that minor a bit old now, 187 00:09:00,440 --> 00:09:04,160 Speaker 1: But last three sixty another stock which has run really hard. 188 00:09:04,720 --> 00:09:06,320 Speaker 1: What's the prognosis for that one. 189 00:09:06,760 --> 00:09:09,240 Speaker 2: I think that still looks good. The companies at the 190 00:09:09,240 --> 00:09:13,079 Speaker 2: tipping point of monetizing it's huge user base. I use 191 00:09:13,120 --> 00:09:16,360 Speaker 2: three times a day, and my kids they set up 192 00:09:16,400 --> 00:09:19,320 Speaker 2: recircles with their friends. They check check check probably five 193 00:09:19,360 --> 00:09:22,160 Speaker 2: times a day. And so they just started monetizing it 194 00:09:22,440 --> 00:09:24,760 Speaker 2: very early days. You know, one is through paid and 195 00:09:24,800 --> 00:09:27,600 Speaker 2: two is through you know, different verticals, and three is 196 00:09:27,640 --> 00:09:31,079 Speaker 2: through advertising revenue opportunity very early days, and I think 197 00:09:31,120 --> 00:09:34,280 Speaker 2: that opportunity is phenomenal. So it's something that you probably 198 00:09:34,320 --> 00:09:37,120 Speaker 2: want to always have in your portfolio. It's a structural grower. 199 00:09:37,520 --> 00:09:39,199 Speaker 1: June Beai, thanks for talking to Fear and Greed. 200 00:09:39,559 --> 00:09:40,400 Speaker 2: Thank you for having me. 201 00:09:40,760 --> 00:09:44,120 Speaker 1: That was June Bailu, co founder and lead portfolio manager 202 00:09:44,160 --> 00:09:46,880 Speaker 1: at investment firm Tencap. Just a reminder to please seek 203 00:09:46,880 --> 00:09:50,120 Speaker 1: professional advice before making investment decisions. If you've got something 204 00:09:50,160 --> 00:09:53,760 Speaker 1: you'd like to know, then send through your question on LinkedIn, Instagram, Facebook, 205 00:09:53,800 --> 00:09:56,880 Speaker 1: or at Fearangreed dot com dot au. I'm Sean Aelma 206 00:09:56,920 --> 00:09:58,880 Speaker 1: and this is Fear and Greed Q and day