CEO INSIGHTS – Week Ending 24 November 2017 By NAOS Asset Management

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“There are 4.8 million Airbnb users in Australia and 122,500 active listings — an increase of 40 per cent over last year” Joe Gebbia, Co-founder, Airbnb

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.

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Commodities

“We are seeing increased demand for coal and expect this to continue, it's really the pricing pressure that sort of made the future outlook uncertain, but for the next three to six months we're very optimistic on coal as well” Raj Naran, MD, ALS Ltd

“As it relates to our commodity business we believe we’re in a true up-cycle and recovery, and the expectation is that will continue to improve” Raj Naran, MD, ALS Ltd

Agriculture

“Persistently high global crop supplies and depressed grain prices continue to be a headwind for Australian growers” Mark Palmquist, MD, GrainCorp

“We are anticipating a smaller canola crop as well as other crops, which could put a little bit of pressure on us on oilseed crush margins from what we experienced in fiscal year 2017” Mark Palmquist, MD, GrainCorp

Craft Beer

“We are still seeing this global shift in beer production from large brewers to smaller brewers. We’re seeing more microbrewers growing where they're really more of a destination that usually involves a restaurant and microbrew” Mark Palmquist, CEO, Graincorp

Dairy

“Each part of the business is performing better than expected” Geoffrey Babidge, CEO, a2 Milk

“We do see some more early signs of stabilization in the infant formula sector…And one of the big trends we see continuing going forward is the shift in consumer preferences into more dairy blends for spreads” Mark Palmquist, CEO, Graincorp

Retail Property

“We are looking to reduce our department store footprint when we can. We have long-term leases in place and that takes a long time. We would love to get back some of the floor space from some of the anchors so we would be able to put in some of the flagships of other retailers” Angus McNaughton, Outgoing CEO, Vicinity Centres

Tourism & Travel

“October international passenger growth remains strong at 5.8% growth versus the prior corresponding period (pcp). This growth continues to be driven by seat capacity increases from new and existing airline customers, in addition to strong load factors. Domestic passenger growth also performed solidly in October, up 2.8%, reflecting growth in both load factors and capacity” Kerrie Mather, MD, Sydney Airport

“There are about 400 million millennials in China who are seeking travel experiences that are the opposite of how their parents travelled. [The millennials] want authentic, genuine experiences and want to stay in local neighbourhoods and shop in local grocery stores and eat at local restaurants” Joe Gebbia, Co-founder, Airbnb

Company Tax

“Australia’s company tax revenue as a share of GDP is the second highest in the OECD after Norway” Grant King, President, Business Council of Australia 

“A small open economy like ours needs inflows of foreign ­capital to fund investments to create high-paying jobs for Australians. Capital won’t come here for a 30 per cent tax rate when there’s 23 per cent on offer across Asia and suggestions of even lower rates in the US and Europe” Diane Smith-Gander, Director, Wesfarmers

US Economy

“Turning to the economic landscape. The home improvement industry remains poised to see solid growth, with job and income gains supporting consumer spending” Robert Niblock, CEO, Lowes

“Housing is also expected to remain a bright spot. Household formation improvement this year is encouraging, and home price appreciation should continue as housing demand outpaces supply, encouraging homeowners to engage in discretionary projects, in addition to ongoing maintenance and repair spending” Robert Niblock, CEO, Lowes

Food & Beverages

“The food and beverage industry is certainly coming under the microscope for more regulation around the world” James Quincey, CEO, Coca-Cola

“I am pleased to report that our sales performance has remained solid so far this financial year. A few weeks ago we reported our sales for the first quarter of the 2018 financial year with good trading momentum and progress against our strategic priorities in all of our businesses” Brad Banducci, CEO, Woolworths

IT

“Lower cost of computing and connectivity are tailwinds that will be with us for some time to come” Blake Moret, CEO, Rockwell Automation

Thank you for reading.

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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