Question 1: Will the share purchase plan (SPP) for CSL be worth participating in?
Answer: Although the institutional placement price of $273 wasn’t as high as some had hoped, it was a huge capital raising for the Australian market ($6.3bn). My sense is that the market will come to view the Vifor Pharma acquisition very favourably.
With the SPP, you will pay the lesser of the institutional placement price of $273, or a 2% discount on the average trading price on the ASX over the 5 days leading up to the SPP close. The offer is due to close on 7 February.
While it is still some 6 weeks away, my guess is that the SPP will be massively oversubscribed. I intend to apply for my full $30,000.
Question 2: Why did Westpac can its off-market share buyback?
Answer: It hasn’t canned it, but deferred the closing date to 11 February. Importantly, it also changed the tender discount range from 8% to 14% to 0% to 10%.
It did this because it got feedback from the market that the terms were unattractive. Because the Westpac share price has fallen by about 20% since the buyback was announced, and it has a fixed capital component, the fully franked dividend was becoming smaller and smaller. It is the franked dividend (and franking credits) that drives the tax effectiveness of off-market share buybacks.
You may recall that in an answer to a question the previous week, I suggested that you may not want to tender at a discount any higher than 8% – so I can’t say that I was surprised that they felt the need to amend the terms.
Question 3: Douugh (DOU) has a share purchase plan (SPP) at 72 cents at the moment. No brokers cover this stock as far as I can see. What is your view on whether to participate or not?
Answer: If you are a believer in the Company and the founder’s vision, I would probably take them up. If you are on the fence, then given the stock is trading on the ASX at the same price as the SPP, I wouldn’t.
The SPP closes on Thursday 23 December.
The company is holding an online investor briefing on Monday December 20 – maybe you should attend this and then make you’re your mind up from there.
Question 4: Can you look into two stocks that seem to be underperforming in spite of good rating by brokers? The two stocks are Ampol (ALD) and Elders (ELD).
Answer: I am not sure that I agree with your statement that both stocks are underperforming. That said, the broker analysts see upside.
For Ampol, target price of $32.36 compared to last ASX price of $28.09, upside of 15.2%. For Elders, target price of $13.60 compared to last ASX price of $11.62, upside of 17.0%.
Potentially, Ampol gets caught up in the “decarbonisation” agenda, plus the future of petrol retailing (post-EVs). For Elders, as an agricultural stock, always viewed as higher risk and needs a catalyst to continue moving higher.
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