Answers by Paul Rickard
If I invest with Vanguard with their Personal Investor Account, do I have the same protection I would enjoy by buying with my broker and with my HIN? Why doesn’t gas pipeline operator APA frank its distribution? What do the brokers think of Seek? Does the Australian share market have a “bank earnings season”?
Question 1: I have been looking into buying ETFs with Vanguard personal investor as they offer fee free trades for buying and $9 for sales. There is no HIN, with the shares held by a custodian subject to Vanguards direction, while you retain beneficial ownership. Would you have the same protection as you would under a HIN on the ASX?
Answer: No, you won’t have the same direct protection from the ASX (fraudulent transfer) to that available if the units were under your own HIN. That said, the custodian (Vanguard), who is the registered owner of the units, will have the protection. And because Vanguard is so big and respected, I don’t think you have anything to worry about. I am absolutely sure that if something went wrong, Vanguard would compensate you for any loss.
There is another disadvantage in having Vanguard hold the units on a custodial basis. Transfer to another party on onto your own HIN won’t be straightforward.
Basically, Vanguard is offering you free brokerage on purchases (and just $9 for a sale) to lock you in.
Question 2: Why is gas pipeline operator APA’s dividend unfranked? Surely the company pays tax in Australia?
Answer: The APA dividend of 30c per unit will have some element of franking. When announcing the provisional distribution in June, APA said: “The actual amount of the final distribution and its tax deferred status will be confirmed following finalisation of the 2025 financial results, which are due for release on 20 August 2025. APA will confirm allocable franking credits when finalising the final distribution with the release of its 2025 financial results.”. That said, the actual level of franking will be low (circa 20%). Although making a profit, APA (as essentially an infrastructure company that owns gas pipelines, gas storage and power generation assets), has a material depreciation and amortisation expense. This reduces the taxable profit of the company (and the tax they need to pay) but doesn’t impact cash flow.
If a company isn’t paying company tax, it can’t frank its distributions. But if cash is increasing, it can afford to pay a distribution to its unitholders.
Question 3: What do the major brokers think of Seek Limited?
Answer: The brokers are moderately bullish on Seek (SEK). Most have “buy” recommendations. The consensus target price is $28.28, about 17.8% higher than the last ASX price of $24.00. The range of price targets is a low of $26.75 from Macquarie through to a high of $30.10 from UBS. With the employment market holding up well in Australia, most brokers expect Seek to deliver within earnings guidance when it reports in a couple of weeks’ time.
Question 4: This week, a number of major banks is the USA are reporting earnings. On Tuesday, Citi, Wells Fargo and JP Morgan Chase reported. Do we have a similar “bank earnings season” in Australia?
Answer: Not really. That’s because some of our banks have financial years ending in June, while others end in September, and half yearly rather than quarterly reports are the focus. BOQ balances at the end of August. In August, CBA and Bendigo will report their full year earnings. CBA is due to report on Wednesday 13 August, while Bendigo will release details on Monday 25 August.