Question 1: What is your view of APA Group? The stock is down about 14 % over the past year and down 25 % over the past two years. It seems to be stabilising and it has a high dividend yield. Do you think it is a buy at these levels?
Answer: I think the market’s caution on APA is that it is essentially an operator of regulated assets (gas pipelines and storage), with aspirations to be an energy infrastructure operator and developer. While it has some generation capacity through renewables and ownership of transmission lines, considerable capital will be required if it is to meet its aspiration to be “Australia’s leading ASX listed energy infrastructure operator and developer”.
It is currently viewed as a “bond proxy”, and so gets caught up with movements in bond yields. It has a forecast distribution of 56c per unit, which puts it on a yield of 6.6%. However, there are no franking credits with this.
The analysts see small upside – a target price of $8.81(according to FN Arena), about 4.5% higher than the last ASX price of $8.45.
I quite like the look of APA as a defensive income stock, and it’s in my income portfolio for that reason. The yield is ok, but not outstanding.
Question 2: I read that the non-concessional super cap will increase from $110,000 to $120,000 on July 1. Will the amount under the ‘bring-forward’ rule also increase to $360,000?
Answer: Yes, it will increase from $330,000 to $360,000. This is the amount of your own money you can put into super in one go, effectively three years’ worth of non-concessional contributions in one hit.
There are two important caveats. Firstly, you can’t have triggered the ‘bring-forward’ rule in the previous two financial years. Secondly, your total superannuation balance must be less than $1,660,000 on 30 June 2024.
Question 3: With the deadline looming on 31 May for the takeover of Boral (BLD) by Seven Group (SVW) and the Boral Board recommending acceptance of offer, should I sell Boral shares on the ASX or get $1.70 cash plus 0.1116 SVW shares?
Answer: Firstly, the takeover is a done deal. With Seven Group now holding more than 90% of the shares, it will go to compulsory acquisition.
So, accept the takeover before it closes, or sell the shares on market? Unsurprisingly, you will be “better off” accepting the takeover, by around 20c per share. However, if you do, most of the consideration (about 70%) will be received via shares in Seven Group Holdings (SVW). It will probably be a couple of weeks before these shares appear in your CHESS account.
Given the smallish difference in acquisition amount (about 20c), the critical question is: Do you want (or are comfortable in being) a shareholder in SVW?
If you do, then accept the takeover. If you don’t, then sell on market.
Question 4: I am looking for a pullback in the price of gold to add to some physical gold holdings. I currently hold a position in the ETF ‘GOLD’. If there is a pull back in the gold price, would a hedged position be best, i.e. in the ETF QAU?
Answer: For portfolio reasons, I prefer gold on an unhedged basis because that is how it trades. However, I am also of the view that the Aussie dollar is going to appreciate, so hedging the currency risk and buying QAU makes sense.
In a scenario where US interest rates fall, US dollar weakens (Aussie dollar rises), being currency hedged is going to make more sense.
