NAOS CEO Insights

CEO INSIGHTS – Week Ending 20 July 2018 By NAOS Asset Management

July 20, 2018

Boom in house renovations

“We are seeing a boom in [house] renovations which is good news for the residential builders facing a moderation in new-home building” Denita Wawn, CEO, Master Builders Association

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.

Housing

“Without a strategic and comprehensive solution, it is likely that the current supply and demand patterns will once again lead to escalating [housing] prices” Doron Peleg, CEO, RiskWise Property Research

“We've seen Melbourne annual lot sales go from over 22,000 [per annum] down to 18,000 because of affordability. But even at 14,000 to 15,000 sales a year it would still be a good market” Nigel Satterley, Chief Executive, Satterley

Trade

“Any all-out trade war will be difficult for all”Amanda Lacaze, CEO, Lynas Corp

Employment

“One of the key sources of worries I have today is not being able to find the right talent in Australia” JS Jacques, CEO, Rio Tinto

Logistics

“It would be fair to expect certainly by 2030 about 50% of our revenues will be coming out of Asia,” Chris Pearce, President, Global Logistics, Toll

“We know there is the growth here in Asia… we expect logistics in this region to grow at about 7% per annum for the next few years and that is more than doubling the expected rate out of Europe and North America” Chris Pearce, President Global Logistics, Toll Group

Healthcare

“We are likely to see peak cycle corporate activity in the global healthcare sector over the next 18 months, as companies flush with cash return to the deal-making table” Shane Evans, Partner, MinterEllison

“We know that Alphabet [Google's parent], Apple, Facebook, Amazon and Microsoft, among others, are all running internal groups where medical professionals are employed to look at opportunities in the healthcare space” Shane Evans, Partner, MinterEllison

Private Health Insurance

“I just want to put NIB and Bupa and Medibank Private on notice that the party's over” Bill Shorten, Party Leader, Australian Labor Party

Advertising

“What we've found is there is a genuine market for paid content. We've found working with a partner like Google we've got a strong growth option around digital advertising, we've found there is a core ad market for print advertising” Greg Hywood, Chairman, Fairfax Media

US economy

“I do think we have confidence in the economy. From small business to middle market, to large corporate, confidence is up, activity is up. On the consumer side of the equation, spend is up, and activity is up there, too. So we do have confidence. Pipelines are strong. We talked to our leaders and our lenders and they're talking to their customers. Things are very positive. Credit is very good, so those are all positive indicators” Andrew Cecere, Chairman, President and CEO, U.S. Bancorp

Soft Drinks

“We can reveal that close to 3.5 million Australians have enjoyed a Coke No Sugar since launch and many of them are now regular drinkers” Lucie Austin, Marketing Director, Coca-Cola Australia

Banking

“Many people still value face-to-face interactions, but customers increasingly expect seamless self-service options that allow them to do their banking when and where they choose” Rowan Munchenberg, MD, Bankwest

“We’re seeing a consistent trend of customers choosing mobile banking over in-branch options for their transaction needs, with an 88% rise in app logins over the past three years” Rowan Munchenberg, MD, Bankwest

Airlines

“With market fuel prices up 10% over the March quarter and 50% versus prior year, our fuel expense increased nearly $600 million for the quarter” Paul Jacobson, CFO, Delta Air Lines

“Corporate revenues grew 10% and were our highest quarterly corporate revenues ever. There were increases across all entities and across all industry sectors. Our corporate demand outlook remains strong. In our most recent survey, 84% of corporate travel managers are expected to maintain or increase their travel spend in the third quarter” Glen Hauenstein, President, Delta Air Lines

E-commerce

“Within our broader advertising efforts, promoted listings continued its strong growth trajectory” Devin Wenig, CEO, eBay

Blockchain

“In emerging areas like blockchain, we've now seeded the market with over 60 active blockchain networks” James Kavanaugh, CFO, IBM

Storage Hardware

“Storage hardware returned to growth this quarter, after facing some sales execution challenges in a competitive market last quarter. This growth was broad based geographically and led by strong growth in all flash arrays [solid state data storage]” James Kavanaugh, CFO, IBM

Tissues and Personal Care

“Despite significant input [pulp & energy] cost increases, we have not seen price increases by competitors” Asaleo Care Market Announcement

“There has been continued intense competition in the Feminine Care and Baby Care markets with significant price discounting. In response, we increased investment in trade spend to support market share and expect this to continue” Asaleo Care Market Announcement

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.

NAOS Insights CEO Insights

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