CEO INSIGHTS – Week Ending 15 June 2018 By NAOS Asset Management

“I don't think the FANGs [Facebook, Amazon, Netflix, Google] or the tech stocks are frothy at all. I think relative to the rest of the market never have [these] stocks been this cheap” Julian Robertson, Founder, Tiger Management Corp

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.

Commodities

“While we had the benefit of tailwinds on commodities in FY18, this will look a little different in the year ahead. Globally, the likes of wheat, corn and soybean meal have increased from multi-year lows. In addition, fuel costs are rising” Phil Hand, CEO, Tegel

Advertising

“Facebook has been doing a regional roadshow trying to convince all of the small and medium enterprises that they’re the only thing that exists in the world [to advertise on], which we know to be untrue… they’re holding conferences and town halls all around Australia saying we are the only thing that counts, take all your money off radio” Grant Blackley, CEO, Southern Cross Austereo

Agriculture

“If I was to book cattle in now, you would be really battling to get them in to the major abattoirs until probably early July” Herbie Neville, Alice Springs Agent, Elders

“Tractor sales in May recorded another solid month, maintaining the march towards another record year [8% growth yoy]” Garry Northover, Executive Director, Tractor and Machinery Association

“Australia is already positioned at the premium end of the market for fresh produce in China and, by bringing together the red meat, dairy, wine and horticulture sectors, we can consolidate that position and highlight the strengths of Australian agriculture right across the value chain.” Tony Mahar, CEO, National Farmers Federation

“I know of [butcher] shops trading right beside Woolworths whose turnover grew up to 200 per cent in the past 18 months” Patrick Hutchinson, CEO, Australian Meat Industry Council

Labour market

“There is increasing competition from infrastructure projects. Some of the big engineering and construction projects that are happening across the country are fishing in similar talent pools” Kendra Banks, MD Australia and NZ, Seek

“It's getting harder to bring in temporary skilled workers from overseas, and that's something we have been lobbying [the] government on… We also know that Australians tend to be a bit reluctant to move across the country to take jobs, even good jobs when they are on offer” James Pearson, CEO, Australia Chambers of Commerce and Industry

“If you look around the Australian market, some of the most scarce skilled resources are in cloud, AI, analytics and cyber security, and the demand is not going to get smaller. It is beholden on us to keep upskilling our team to make sure we have the skill set to support the new environment” Dave Curran, Chief Information Officer, Westpac

Recycling

“We've got to get out of this habit of putting things in drums and in containers and sending them to countries to let them deal with our waste issues… We need to invest in time and equipment and people here” John Pollhill, National Development Manager, Envirostream Australia

Global Packaging

“There’s been a strong wave of M&A and consolidation across the packaging sector for a number of years now” Will Frame, MD, Deloitte Corporate Finance Americas

Oil & Gas

“Oil and gas companies are no longer rewarded for simply ‘grabbing land’ and public investors have become more discerning regarding acquisitions” Jon Marinelli, Head of U.S. Energy Investment & Corporate Banking, BMO Capital Markets

Information Technology

“We continue to drive steady adoption of Creative Cloud subscriptions and services by individuals, teams and enterprises across all segments and geographies” Shantanu Narayen, CEO, Adobe

“With close to one billion AR [augmented reality] -enabled devices expected to be in market next year, AR can drive a new wave of digital transformation and creativity” Shantanu Narayen, CEO, Adobe

“You're betting on the explosion of software code over time. Over the last few years you've seen that happen, so I think that trend will likely continue” Trac Pham, Investor Relations, Synopsys

Physical Information Storage

“Our biggest competitors are not another competitor, but our customers because the number of our customers, especially the larger ones, have in-house storage capacity [for physical documents] and, for sure, that affects their speed at which they are actually delivering new boxes to us. If you actually look at what's driving the slightly negative volume growth in the North American or developed markets, it is mainly driven by slower incoming volume from existing customers” William Meaney, President and CEO, Iron Mountain

Commercial Property

“Mums and dads, that is the general public, are not investing in high-risk assets when they put their money into superannuation, they’re investing in modern, core-located, well-tenanted assets… this trend is expected to continue, there will be no softening of demand for commercial property as some anticipate” James Girvan, Director, Capital Transactions, Savills Australia

Global Economy

“There's just a lot of uncertainty – uncertainty in the form of the specifics that will come out in economic policy and any tax reform here in the States, the impact that we're going to see from Brexit, geopolitical issues in the Far East and the Middle East. And so, this uncertainty creates a little bit of caution” Scott Crocco, CFO, Air Products

DIY Tax

“Consistent with prior years, industry results show a slight shift from assisted to DIY. However, like last year, it was moderate” Jeffrey Jones, CEO, H&R Block

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.