Question 1: I’m looking at purchasing Westpac (WBC) shares but worry how the AUSTRAC civil action in regard to their “serious and systemic anti-money laundering breaches” will impact on the bank and its share price. Your opinion on this would be valued.
Answer: Westpac is clearly trading as the weakest of the major banks. I like Westpac (because it is on a relative basis, historically cheap), but I have been wrong so far (according to the market). To be honest, I am not that worried about the AUSTRAC action that I think is pretty well priced in.
Question 2: I notice Decmil (DCG) has been hammered after disappointing results. I think the market has overreacted greatly. Are they worth a small buy?
Answer: I don’t follow construction and engineering company Decmil (DCG) very closely, nor do any of the major broking firms. They have stopped.
In the absence of detailed company knowledge, I would describe investing in DCG as being for “thrill seekers”.
Three scenarios seem possible:
- The company will fold;
- The company will conduct a heavily discounted capital raising and survive; or
- The company will dig itself out of its current contractual/revenue issues and survive.
I really don’t know which scenario is more likely.
Question 3: I was just curious to get your opinion on the likelihood of Macquarie (MQG) paying their dividend next month, with APRA pressuring the major banks to cut dividends.
Answer: APRA’s directive applies to all banks and insurers.
The main test that banks need to pass in order to pay a dividend is a stress test. This means agreeing downside stress scenarios with APRA, and then passing the test.
Macquarie is very well capitalised, so provided they have time to develop the scenarios with APRA, my guess is that they will pay a dividend. If the three majors choose to suspend their interim dividends, that will put pressure on Macquarie to follow suit. You can read my thoughts here on how this might play out: https://switzer.com.au/the-experts/paul-rickard/boq-suspends-dividend-will-the-majors
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