What is behind the weakness in Chris Ellison’s Mineral Resources? Would you sell Fisher & Paykel and buy Resmed? When does Transurban go ex-distribution? Should I take part in shareholder class actions?

Question 1:  Can you comment on the weakness in Mineral Resources’ share price? Is it due to the sale of the iron ore road, or concerns about director cross shareholding issues?

Answer: For Mineral Resources (MIN), the sale of a 49% interest in the Onslow Iron project’s haul road to Morgan Stanley Infrastructure Partners for $1.3 billion in consideration was generally considered to be a positive by the broker analysts. They were concerned about the company’s balance sheet and expect the cash injection to strengthen the balance sheet and allow for investments in new projects.  In relation to shareholder matters, potential related party concerns are not unexpected when there is a dominant founder shareholder, such as you have with MinRes in Chris Ellison. The brokers are generally bullish on the company. According to FN Arena, the consensus target price is $74.14, about 11.5% higher than the last ASX price of $66.51. The range is a low of $60 to a high of $84. Recent price falls looks to be a function of ongoing weakness in the iron ore and lithium spot prices.

Question 2: Would you sell Fisher & Paykel (FPH) shares and buy Resmed (RMD)?

Answer: While I am aware of some fund managers who are quite bullish on Fisher & Paykel (FPH), I’ll go with the brokers and say that I prefer Resmed (RMD). According to FN Arena, the consensus target price for Resmed is $35.73, about 12.8% higher than the last ASX price of $31.67. There are 5 “buy” recommendations and 1 “neutral” recommendation. For Fisher & Paykel, the analysts see some downside. They have a target price of $23.05, 16.1% below the last ASX price of $27.49. The risk (unknown) for Resmed is whether the new weight loss drugs will impact sales in the medium term.

Question 3: When does Transurban (TCL) go ex-distribution?

Answer: Because Transurban (TCL) is a stapled unit and practically distributes all its free cash flow, it goes ex-distribution at the end of the financial year (typically 29 June), with the distribution paid in August. The market expects a final distribution in the range 32 cents to 33 cents per unit.

Question 4: I often get letters about shareholder class actions. Should I invest the time to see if I qualify, and then take part?

Answer:  There is generally no “downside” from participating in shareholder class actions, so it makes sense to have a look to see if you qualify and then sign up. Just don’t expect to get “rich” from them. Most shareholder class actions relate to continuous disclosure issues (or lack of disclosure) over a matter that impacted the share price. To be eligible, you generally have to have purchased the company’s shares during the period. Because the impact of the matter is arguable, and high legal costs, class actions tend to be settled by the company and the litigant. Proceeds aren’t enormous, and once the lawyers take their cut, the proceeds available to individual shareholders (members of the class) are often quite modest. Bottom line – it doesn’t cost anything (apart from time) to participate.