CEO INSIGHTS – Week Ending 7 September 2018 By NAOS Asset Management

Honey Scandal

"What that news [fake honey scandal] demonstrates is what we talk about a lot in terms of strategy of Bega - that people are increasingly worrying about where their food comes from, who is producing it, how it is produced, sustainability, who is handling it and delivering it to them." Barry Irvin, Executive Chairman, Bega Cheese Group

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.

Data Centres

"We did a lot of work around the [cloud storage] sector and demand for storage across the spectrum from data centres to cloud is exploding" Patrick Elliot, Founder, Next Capital [private equity firm]

"Welcome to the 4th Industrial Revolution. Are you ready for it? We are, and it's only just begun." Craig Scroggie, CEO, NextDC

"In the past, we probably would have seen hyper scale deals in one or 2 megawatts that may have been in the 3-5 year timeframe. We are now seeing the timeframe as 5-10 years and around 15 to 20MW in size." Craig Scroggie, CEO, NextDC

Telecommunications

"There will inevitably be challenges in the remainder of the [NBN] build - some known, some new." Stephen Rue, CEO, NBN Co

"I think that we are creating the most attractive investment in the sector in Australia. It will be a larger ASX-listed telecommunication operation with an enhanced ability to invest, innovate, and compete against these two larger incumbents." Inaki Berroeta, CEO, Vodafone Hutchinson Australia

Agriculture

“We expect a considerable decline in grain production in eastern Australia in FY19 with production again skewed to Victoria and southern New South Wales.” Mark Palmquist, MD, Graincorp

“It is an extremely challenging time for our grower customers." Mark Palmquist, MD, Graincorp

Infant Formula

"In the FY2019 year, we expect a number of challenges, including a slowing in China cross-border growth for infant formula." Andrew Cohen, CEO, Bellamy's

Payment Technology

"During the quarter we've added more payment options like Apple Pay and Afterpay, and Afterpay has been a huge success." Richard Hayne, CEO, Urban Outfitters (USA)

Credit

"The risk [from the banking Royal Commission] is that if banks and financial institutions become so risk averse they slow down the provision of credit to individuals and businesses. That would be the key risk which I hope doesn’t happen." Rob Scott, CEO, Wesfarmers

Retail

"Business is not tough (but) it is not as buoyant as it has been in times gone by." Gerry Harvey, Chairman, Harvey Norman Group

Financial Markets

"The protracted bull market we're experiencing continues to favor growth over value investing. Volatility is low, reducing the opportunities to buy quality stocks at attractive prices." Chris Green, Interim CEO, Perpetual

Share Economy

"In the gig economy, we need to create a new category of employment structure, that guarantees security with flexibility, where entitlements are not based on how many hours you work but on performance." Levi Aron, CEO, Deliveroo Australia

"The trend we're seeing is that people are using it [Airbnb For Work] for bleisure [business leisure] - combining a Friday or Saturday night with business travel." David Holyoke, Head of Global Sales, Airbnb

Tourism

"Fashionability plays a big part in destination choice; particularly amongst travellers in Asia." John O'Sullivan, Managing Director, Tourism Australia

Travel

"During the past two years we've seen a bit of price deflation, as a result of some excess capacity largely, and we've been able to advertise some of the cheapest deals we have ever seen." Graham Turner, Managing Director, Flight Centre

Lithium

“Every single project [new lithium projects], and we've reviewed every single project from the last 10 years, every single project failed to deliver on time and volumes." Ricardo Rodriguez, incoming CEO, SQM (world’s largest lithium producer)

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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