Question 1: What are my options around the Transurban (TCL) rights issue? Can I sell my rights on the ASX?
Answer: To fund the acquisition of the remaining 49% of the WestConnex motorway project in Sydney, Transurban (TCL) is raising $4 billion through a renounceable entitlement issue. They are being issued on a 1:9 basis – meaning that for every 9 shares you currently own, you will get 1 entitlement, with fractions rounded up to the nearest whole number. The entitlement allows you to buy a new Transurban shares at $13.
You have three choices. Take up your entitlements by purchasing new Transurban shares at $13 – payment is due by 8 October. Secondly, sell your entitlements on the ASX – trading commences today (Thursday) and closes on 1 October – the ticker is TCLR. Finally, do nothing, in which case your entitlements will be auctioned to institutions after 8 October, and you may receive a payment from the proceeds (if any).
Question 2: I intend to take advantage of the CBA share buy back and have just read your article from 16 August (see https://switzerreport.com.au/cbas-buyback-is-a-no-brainer-for-some-shareholders/ [1]). I fall into the category of $80 purchase price and 15% super fund. If I sell my shares in the buyback, when would be the best time to replace them on the market – now, or after the buyback? I am also looking at using the funds to buy into another bank (probably Westpac).
Answer: If you are planning to sell your CBA and fall into the 15% taxpayer/$80 purchase price, your effective selling price is $6.22 higher in the buyback than selling on-market. ($104.22 vs $98.00, assuming a market price of $100).
In terms of a “crystal ball” on the CBA share price, I expect it to be well supported up to, and immediately after the buyback. All things being equal, I would expect it to be higher after the buyback. However, if the market goes down, CBA will go down with it. Market factors will be a bigger influence on direction.
Question 3: Having had a think about long term trends, and put aside Lithium plays as overvalued and prone to technological obsolescence, one of my investment interests is copper. What suggestions do you have for the best copper investment opportunities in the market currently?
Answer: The biggest copper producer in Australia is of course BHP. Its share price tends to reflect what is going on in iron ore rather than copper, although copper accounts for about 20% of BHP’s EBITDA. Another major producer is Newcrest Mining (NCM), but its share price typically reflects the gold price.
Oz Minerals (OZL) is probably the pick, although it also produces gold. Sandfire Resources (SFR) and a junior miner in Aeris Resources (AIS) are also worth considering. Here is a link to a recent article from James Dunn on copper: https://switzerreport.com.au/3-copper-stocks-two-with-fully-franked-dividends/ [2]
Question 4: I have had my eye on Deterra Royalties (DRR) for a while and was re-invigorated post your recent article on it. Of course, the iron ore price has fallen hard since which might or might not change your views. Also I wonder whether the recent signing of the uranium sub deal will annoy China even more and hence risk our iron ore future even more. Anyway, was wondering if you have waivered at all since your review, given the significant changes in the iron ore price/geopolitical issues.
Answer: Yes, I still like Deterra Royalties (DRR) . It is hard to get a handle on whether it has come off enough with the fall in the iron ore price – it will be strongly correlated. Broker forecasts aren’t that helpful at the moment – they are all dated around 21 August – a month ago when the iron ore price was considerably higher. For the record, the range was a low of $4.50 from Citi through to a high of $5.50 from Morgans – a consensus of $4.95. The current ASX price is $3.88 Looking at the price of Deterra a year ago when iron ore was around this level, it suggests that there might be some value in the high 3’s.
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