Question 1: I own shares in Sydney Airport (SYD). Do you think the takeover bid will succeed? Why isn’t the stock trading near the bid price of $8.25 – it closed today at $7.61? Should I sell on market?.
Answer: The bid for Sydney Airport is really interesting because it is from a group of heavy weight investors (Q Super, IFM Investments and Global Infrastructure Partners). It is conditional on a number of factors, including getting a unanimous recommendation from the existing Sydney Airport Board and the largest shareholder, Uni Super, agreeing to take equity in the new consortium rather than cash. This probably explains why the stock it is trading at a discount to the bid price. I am a bit surprised by the size of the discount, not because I expect another bidder to emerge, but rather, because these investors are serious and I think there is a good chance the bid will succeed.
My advice to Sydney Airport shareholders – take no action in the short term, let the bid play out.
Question 2: I want to invest long term for my grandchildren. Would you consider listed investment companies, or are there better options available?
Answer: You could certainly consider a broad-based LIC (listed investment company) such as AFI (Australian Foundation) or ARG (Argo). However, if investing for your grandchildren, there are going to be tax and ownership issues to consider.
My preference for the grandchildren is to invest in insurance bonds. Tax paid investments, no complications around tax or ownership (if held for more than 10 years), and you can invoke a child advancement policy. Here is a link to some articles on owning shares for minors and insurance bonds: https://switzerreport.com.au/investing-for-your-kids-or-grandkids/ ; https://switzerreport.com.au/investing-for-your-kids-or-grandkids-part-2/
Question 3: What are your thoughts on Nuix? I recently bought some shares in the company and the share price keeps diving.
Answer: I took my medicine on Nuix (NXL) recently. They are no doubt cheap…but it’s not clear what the catalyst for any re-rating is going to be. We need to see a bottom form. My sense is a little more short-term pain.
As for the brokers, there’s only 1 major house that covers the stock. Morgan Stanley has an “overweight” call and a target price of $6.40. When they initiated coverage in January, their target price was $11.
Question 4: The Chinese are now being encouraged to have more children so demand for powdered milk should soar in the next 12 months. Which is the best company to buy into now?
Answer: I think that if you look closely, you’ll find that the Chinese government has been trying to get the birth rate up for some time now…the latest announcement is just another in a series of steps to do this. To date, they haven’t been very successful.
Long term, it might be good for the likes of A2 Milk (A2M) and Bubs Australia (BUB). Short term (next 12 months), I think the impact is negligible. This is potentially a long-term tail wind.
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