Question 1: Based on the current share price, the Bank of Queensland (BOQ) entitlements look extremely attractive. What is your longer term view for the merged group – i.e. BOQ and ME Bank
Answer: It is a non-renounceable entitlement, so you need to act. Priced at $7.35 per new share, on the basis of 1 new share for every 3.34 shares owned, the offer closes next Wednesday, 10 March. Based on the current share price of $9.00 for BOQ, you would be mad not to take it up. If you don’t like BOQ, just sell some of your existing shares.
Does the acquisition of ME Bank make sense? The market says “yes” and has given it a huge tick, which is often the case with the market’s first take on acquisitions. However, about 50% of acquisitions fail – so I don’t put much faith in the market’s assessment. In this case, I am a little more circumspect because this is going to involve some major technology challenges – and to be honest, this is not BOQ’s strong suit. The synergies of $70 to $80m look optimistic.
Participating in the entitlement and oversubscription makes sense. Taking some profit on BOQ also appeals.
Question 2: A2 Milk (A2M) was a recommended buy a short time ago. The stock has gone from a high of around $20 down to under $10 . What do you think the future holds for this stock ?
Answer: I got the timing on A2 Milk wrong – I wasn’t expecting there to be three downgrades – obviously, Management was drinking their own “Kool-Aid”. I am still wary that there might be another because the new CEO might do what many CEOs do on appointment and that is “clear the decks”.
That said, I still think A2 Milk is a great company with a tremendous brand position. The penetration is has made in China selling via “Mother & Baby Stores” is a significant achievement, and in time, parts of the diagou trade will return. I am a holder. According to FN Arena, the analysts have a target price of $9.20, about 2.1% lower than the last ASX price of $9.40.
Question 3: I am the holder of 4,500 AMP shares that cost me $5 a share . Do you see any hope of my clawing this back in the future, as they are now trading at around $ 1.44? . I have also lodged a claim with Maurice Blackburn Lawyers AMP Shareholder Class Action.
Answer: Regrettably, I don’t think you will ever see $5.00 again. In the short term, I think the best you can expect is around $1.80 to $2.00 per share. That will be the value when AMP is fully broken up, which is inevitable.
Question 4: Are ETFs (exchange traded funds) for the banks and financials worth considering esp. for long term investors (>5 years, non- SMSF)? If so, can you suggest 2 or 3 such ETFs?
Answer: There are two ETFs available on the ASX – QFN from BetaShares and MVB from VanEck. QFN tracks the whole financials index, which in addition to the banks, includes insurance companies such as IAG , QBE and MPL, and diversified financials such as AMP, Macquarie and Magellan. MVB is a rules based ETF, approx. 20% in each of ANZ, CBA, NAB and Westpac, 15% in Macquarie, and the balance in BOQ and BEN.
ETFs are a very valid alternative to investing directly.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
