Question 1: Which Australian companies could be impacted by President Trump’s proposed 25% tariff on steel and aluminium imports into the USA?
Answer: It is hard to think of any ASX listed companies that are significantly impacted. Bluescope Steel (BSL) is Australia’s major producer of steel, although it arguably a net beneficiary as it has significant steel operations in the USA. In fact, it is the USA’s fifth biggest producer of steel.
On the aluminium side, RIO owns a 50% share in the Tomago refinery and has another asset in Victoria. However, aluminium is relatively small in revenue/profitability terms for RIO. Alcoa (AAI) also has refining interests and may be a loser.
Question 2: CSL has copped a bit of a hiding following its profit release. Do you think it is a buy?
Answer: CSL disappointed investors with the performance of its influenza business (CSL Seqirus), although its main CSL Behring (blood plasma) division and CSL Vifor (kidney disease) division performed credibly. Overall, CSL re-affirmed full year profit guidance of sales growth of 5% to 7% and NPAT growth of 10% to 13% in constant currency.
The major brokers maintained their buy recommendations and the consensus target price fell marginally by $2.20 to $329.93. This is 28.4% higher than the last ASX price of $257.01. Remarkably, CSL is now trading on a multiple of around 25 times, cheaper than the Commonwealth Bank’s circa 27 times!!
Is their value in CSL? Yes, I think CSL is reasonable buying at these levels. The caveat is that CSL has been unable to break and hold above $300 – and I don’t see any catalyst for this to change in the short to medium term.
Question 3: I see that Suncorp (SUN) is returning capital of $3 per share and at the same time, doing a share consolidation. Why does it need to do that?
Answer: Suncorp (SUN) completed the sale of Suncorp Bank to ANZ in July. The net proceeds from the sale of $4.1billion are being distributed to shareholders.
The distribution is in two parts. Firstly, a cash payment to shareholders of $3 per share (representing $3.8 billion of the return). Secondly, a special dividend of 22 cents per share (representing $0.3 billion of the return). The dividend will be fully franked.
The capital return of $3 will be paid on 5 March and the special dividend on 14 March.
Following these payments, the shares will be consolidated on the basis of 0.8511. That is, if you own 100 Suncorp shares now, you will receive 85.11 new Suncorp shares (with fractions being rounded up).
The purpose of the consolidation is to ensure that the price of the new Suncorp shares is about the same as the price of the old shares. Because the total share count is being reduced through the consolidation, the price per share should be about the same notwithstanding that $3.8bn has been paid back to shareholders.
Question 4: I can’t believe the CBA share price of around $165. I’m in the DRP (dividend re-investment plan) and I’m thinking that I’d prefer to take the next dividend of $2.25 per share in cash rather than as shares. Is it too late to change my DRP instructions?
Answer: No, it’s not too late. You can change your instructions up until Friday 21 February. You do this by contacting the registry, Link Market Services (now called MUFG Corporate Markets).
