Question 1: I am thinking of investing in the APA SPP (share purchase plan) and would appreciate your comments. Do you think it will be oversubscribed?
Answer: In regards to the APA share purchase plan (SPP), I wrote about this the other day – here is the link https://switzerreport.com.au/is-a-6-6-yield-for-a-defensive-stock-enough/
Will it be “massively oversubscribed”? I doubt it for two reasons. Firstly, the issue price of no higher than $8.50 is getting close to the current ASX price of $8.60. Secondly, I think most people will view it as an “interesting opportunity” rather than a “compelling opportunity”.
The SPP closes on 15 September. The maximum subscription amount is $30,000, which may be scaled back.
Question 2: I inherited shares some years ago in Insignia Financial (IFL) and am now sitting on a significant loss. In your opinion, is it worth hanging on a bit longer or am I better off taking the loss and moving on?
Answer: I have never been a fan of Insignia Financial (IFL) – the old IOOF – and had forgotten how far the share price has fallen. The reason I don’t like it is that financial advice is a tough business to make money out of – and they are now the biggest operator in the market following the acquisition of the MLC business.
On fundamentals, it looks cheap. It is trading on 8.9x FY24 forecast earnings and 8.1x FY25 forecast earnings.
The brokers are relatively ambivalent about the stock. FN Arena’s precis of the Citi research is interesting:
“Citi’s response to Insignia Financial’s FY23 results, with FY24 guidance and outlook tempered because of higher costs, was “another year of going nowhere”.
Group EBITDA margin is expected to decline in FY24 as management flagged additional costs for cyber security and governance. Citi was already positioned below market consensus and has now further decreased its FY24 EPS estimate by -6%.
The broker’s points out “the stock is destined to remain a value trap for a while yet”.
To summarise: if you are going to hold and wait for a catalyst for a re-rating, you will need to be patient. If you want clear air and something for short term performance, look elsewhere.
Question 3: I purchased Perpetual Limited (PPT) for $25 and after a nice rise it has fallen below $21. Should l hold, hope and wait, or sell at a loss and purchase something else?
Answer: I am not a huge fan of Perpetual and think it has its work cut out digesting the acquisition of Pendal.
However, the brokers are pretty positive. According to FN Arena, there are 5 “buy” recommendations and 1 “neutral” recommendation (zero “sell” recommendations), and the consensus target price is $28.31, a 30.5% premium to the last ASX price of $21.69. The range is a low of $23.50 through to a high of $30.50.
On multiples (forecast PE), it is trading a little bit cheaper than other fund managers such as Magellan or Platinum.
Question 4: I hold shares in Shopping Centres Australia, but I can’t seem to find them on the ASX. Have they changed their name?
Answer: Yes, back in November 2022, they changed their name to Region Group (RGN). To quote the CEO, Anthony Mellowes:
“It allows us to evolve our literal name of Shopping Centres Australasia Property Group (SCA Property Group), to a name where there are no boundaries in what we do; we want to signal a brand evolution – it marks our 10th anniversary, we have just broken into the ASX100, and we want our brand to be aligned to the maturing of our business”.
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