Question 1: What are your thoughts regarding Deterra Royalties (DRR) and Woodside Petroleum (WPL)?
Answer: I wrote about Deterra Royalties (DRR) the other week. It earns a royalty over BHP’s Mining Area C in the Pilbara. Around $4.40, I thought it was a ‘buy”. Here is a link to the story: https://switzerreport.com.au/a-stock-with-a-forecast-5-franked-yield/
Woodside (WPL) is a little trickier. The brokers think the deal with BHP is a winner. The problem though is that there will be more script on issue and potentially more ESG selling. I am also not sure how they achieve synergies of US$400m. Also, the investment decision on Scarborough is still outstanding. At least they now have a CEO!
According to FNArena, the brokers see 35.4% upside – a target price of $27.48 compared to a last ASX price of $20.29.
A hold/long term buy for portfolios. For punters, I am not sure that it has bottomed.
Question 2: What is your opinion on investing in the Westpac Capital Notes 8 offer?
Answer: Apart from being quite long, the indicated margin of 2.9% for the Westpac Capital Notes 8 (WBCPK) is on market – higher than most hybrids trading on the ASX. The nominal term of 11.5 years is long (normal about 9 years), and the terms to Westpac’s call dates of 8 years, 8.25 years, 8.5 years and 8.75 years are also long (normal about 6 years). I think this will go okay, certainly more attractive than the current Macquarie offer.
Question 3: I am a long suffering holder of QBE shares. Following their result announcement, the shares have finally returned to the price I paid for them. Do you think there is any more upside to their share price?
Answer: Yes, I do think there is more upside, and that is notwithstanding the 9.2% gain since QBE reported last week. Unquestionably, one of the better reports which beat all forecasts – with strong top-line growth. Insurance premiums are on the rise! Among the brokers, lots of talk about “QBE turning the corner”.
Back to the brokers, according to FNArena, the consensus target price is $13.99, 10.6% higher than the last ASX price of $12.64. Range is a low of $12.40 through to a high of $14.55. 6 buy recommendations, 1 neutral recommendation.
Question 4: How does the CBA off-market share buyback work for an SMSF where you have the full amount of the transfer balance cap of $1.6m in pension and the remainder in accumulation accounts? I assume that the buyback is progressively less attractive the more super the person has in his/her accumulation account(s)?
Answer: Unless you segregate your assets, the buyback will use your fund’s effective tax rate. It is based on the proportion in pension, and the proportion in accumulation. If you had half in pension and half in accumulation, your effective tax rate is 7.5%. If for example you have $1.6m in pension and $400,000 in accumulation, then your effective tax rate is 3% ((($1.6 x 0%) + ($0.4 x 15%))/$2.0). It will still be very attractive at 3%. Even if the whole amount is in accumulation, the buyback can still be attractive. For worked examples, see https://switzerreport.com.au/cbas-buyback-is-a-no-brainer-for-some-shareholders/
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