NAOS CEO Insights

CEO INSIGHTS – Week Ending 1 February 2019 By NAOS Asset Management

February 1, 2019
"The malls are dead, there's no foot traffic, everyone's buying cosmetics online but the landlords don't want to hear about it... the retailers want to bring in global brands into their stores, but that means a local Australian brand like mine cannot compete."
Napolean Perdis, CEO, Napolean Perdis
As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.
Global Economy
"Sales in Asia-Pacific declined due to lower demand in China."
Jim Umpleby, CEO, Caterpillar
“The case for raising rates has weakened somewhat."
Jerome Powell, Chairman, US Federal Reserve
"Weak macro-conditions in some emerging markets, was significantly more severe than we originally foresaw, especially in Greater China."
Tim Cook, CEO, Apple
 “Deteriorating macroeconomic conditions, particularly in China, impacted consumer demand for NVIDIA gaming graphics processing units."
Jensen Huan, CEO, NVIDIA
"Employment trends remain strong. The consumer is healthy." [US economy reference]
Stephen Schwarzman, CEO, Blackstone Group
"In the U.S., economic growth remains positive with low unemployment and overall still healthy consumer confidence."
 Ajay Banga, CEO, Mastercard Inc
"Prices are still strong and will remain strong because the fundamentals of gas supply aren't changing."
Ian Davies, CEO, Senex Energy
"The Hornsdale project has generated substantial savings and is likely to pay for itself within a few years. This has generated interest from governments and municipalities to invest in large battery storage projects rather than in conventional peak energy generation."
Tesla Investor Statement
"We have seen some very high prices being paid for purchased debt ledgers (PDLs) by competitors."
Thomas Beregi, CEO, Credit Corp Ltd
"For Westpac, the recent decline in credit growth was due entirely to a reduction in new applications: average approved loan sizes actually increased slightly, while our approval rates remained unchanged.... In essence, our risk appetite hasn't changed – there are just fewer people walking through the door."
Brian Hartzer, CEO, Westpac
“Until recently [milk] commodity prices have been declining for some time. This is in part due to global demand reacting to very strong production from New Zealand carrying into summer, alongside expectations of better production growth out of the Northern Hemisphere.”
Leon Clement, CEO, Synlait
"During the period September through December 2018, we have experienced a significant reduction in valuation instructions from the first-tier lenders. This is a direct result of tighter regulation of credit from APRA as well as the adverse impact of the lenders reaction to the Banking Royal Commission."
Landmark White Market Announcement
"With the upcoming State and Federal elections and continued negative sentiment towards banks, current market sentiment towards property remains cautious."
Landmark White Market Announcement
“[Australian Property] may be as bad as last year, it may be worse. Australia is completely dependent on the Chinese (buyers). It must affect the broader economy.”
Harry Triguboff, Chairman, Meriton
"What we're seeing is an orderly adjustment [house prices] – not the bursting of a bubble — that to date regulators and banks are managing reasonably well."
Brian Hartzer, CEO, Westpac
"TPG Telecom advises that, due to factors outside TPG control, it has decided to cease the roll-out of its mobile network in Australia....In light of the Government’s announcement in late August 2018 that it would prohibit the use of Huawei equipment in 5G networks."
David Teo, Executive Chairman, TPG
"For Resource industries, we believe commodity prices will remain supportive for investment and mining companies will increase their CapEx budgets in 2019."
Jim Umpleby, CEO, Caterpillar Inc
"Automation will be key for new logistics facilities across the broad industry spectrum in 2019.......Businesses are being driven towards automation due to the cost pressures of labour and transport and service pressures of fast and reliable delivery. All industries, even manufacturers, are now having to find ways to deliver direct to consumers and bypassing traditional distribution models to some extent."
Travis Erridge, Co-Founder, TM Insights [warehouse and supply chain consultancy]
"For a couple of years now we've been trying to consolidate our retail structure and there's been enormous costs... if you estimate that we close 20 to 25 stores, there's three staff per store on average, so close to 100 staff may need to be redeployed, however we're looking to actually see whether we can place them in partner businesses like Priceline."
Napolean Perdis, CEO, Napolean Perdis
"The malls are dead, there's no foot traffic, everyone's buying cosmetics online but the landlords don't want to hear about it... the retailers want to bring in global brands into their stores, but that means a local Australian brand like mine cannot compete."
Napolean Perdis, CEO, Napolean Perdis

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Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.

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