Question 1: How certain are you that the world will transition to electric vehicles? I ask this because I want to either maintain my investment in oil companies or invest in materials used in electric vehicles.
Answer: I think the transition to electric vehicles is well underway. Whether it takes 10 years, 20 years or even 30 years, I don’t know…there are people infinitely more qualified than I am to give you an opinion, but if you believe in “following the dollars”, industry and the market also believe the transition is underway.
Global car manufacturers have virtually stopped investing in traditional cars – new monies are going towards designing and building an electric fleet. Global mining giants such as BHP and Rio are repositioning their portfolios…. away from coal and oil towards the “new age” minerals of copper and nickel.
That said, I don’t think it the case of investing in one or the other because the transition will take time and production of oil and coal will reduce as demand weakens, while production of copper, nickel, lithium and other minerals used in the electric vehicle industry will increase as demand increases. Clearly, coal and oil companies will have a headwind, while the “new age” miners will be supported by a tailwind. Maybe this is a strategy you execute over time.
Question 2: With Newcrest (NCM) under a possible take over from Newmont, do I have to hold Newcrest shares and get Newmont shares to get the US $1.10 dividend?
Answer: The proposal from Newmont allows for the company (Newcrest) (NCM) to pay “a franked special dividend of up to US$1.10 per share on or around the implementation of the scheme of arrangement”. The implementation date will be shortly after the second court hearing – at the end of the process. Effectively, you will need to hold your Newcrest shares right up until the end to get the fully franked dividend.
The timeframe for these types of deals is typically around 6 months. This deal will need to be approved by the Foreign Investment Review Board (FIRB) and may involve the Treasurer. Further, it should be noted that Newcrest has not yet agreed to the proposal – at this point in time, Newmont is doing confirmatory due diligence to see whether it can put forward a binding proposal.
Question 3: What is “bank reporting season”?
Answer: It is the time of year when most banks report their financial results. We are coming up to one next week. The schedule is as follows:
National Australia Bank Thursday 4 May Half-year
ANZ Bank Friday 5 May Half-year
Macquarie Bank Friday 5 May Full -year
Westpac Bank Monday 8 may half-year
Question 4: I read today that the listed property trusts, such as Dexus (DXS), are trading at big discounts to their NTA. What does this mean?
Answer: Yes, they are trading at very big discounts. Take Dexus, its last reported NTA (net tangible asset value) as at 31 December 2022 was $12.01. Today, Dexus is trading on the ASX at $7.74 – an effective discount of 35.5%.
An NTA is essentially the book value of the assets. The assumption is that all assets are sold at market value, all liabilities repaid, the business is wound up and the amount left over is then distributed to unit holders.
The big discount can be interpreted as the market not believing the valuations or more likely, feeling that property valuations are falling. In the commercial office market, this is due to high vacancy rates following the impacts of Covid and many companies handing back-office space as employees work part of the time from home.
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 regards to your circumstances.