CEO INSIGHTS – Week Ending 27 April 2018 By NAOS Asset Management

“The [aviation] market continues to be strong. Global revenue passenger kilometres grew by 5.9% through February year-to-date, with solid growth in domestic and international markets. Air freight volumes also had a strong start to 2018, growing at 7.7% through February” Jamie Miller, CFO, GE

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.

Aviation

“We are seeing significant demand from our customers for Connected Aircraft offerings” Darius Adamczyk, CEO, Honeywell

Australian Property

“The total value of all interest-only loans suggests that about $120 billion of interest-only loans are scheduled to roll over to principal & interest loans each year over the next three years. This annual figure is equivalent to around 7% of the stock of housing credit outstanding” Christopher Kent, Deputy Governor, RBA

Vitamins & Supplements

“The Australian [vitamin] market is broadly flat” Richard Henfrey, CEO, Blackmores

Global Economy

“The majority of our markets are quite strong, our franchises are robust, and we see a lot of opportunity for growth” John Flannery, CEO, GE

“Our end markets are strong. We are experiencing robust commercial activity” Darius Adamczyk, CEO, Honeywell

Automotive

“We expect sound underlying fundamentals for the Australasian [car parts] aftermarket, including relatively low gas prices, an upward trend in miles driven, and an overall healthy Australian economy, [which] will drive continued solid results for our Australasian Automotive business” Paul D. Donahue, CEO, Genuine Parts Company

Toll Road Usage

“Weighted average toll revenue and traffic for the March 2018 quarter increased by 5.4% and 3.4% respectively on the prior corresponding period (pcp), reflecting increased aggregate traffic levels” Macquarie Atlas Roads Market Announcement

Iron ore

“The rebound in steel demand post Chinese New Year was slower than expected. A seasonal lift for the remainder of this quarter is expected to be supportive of steel markets and is key to the ongoing strength in iron ore demand” FMG Quarterly Activities Report

Oil & Gas

“[in relation to oil] The absence of the normal seasonal stock builds in the first quarter clearly demonstrates that supply and demand is now in balance, which combined with increased geopolitical risk is what has driven oil prices up by more than 10% over the past month” Paal Kibsgaard, CEO, Schlumberger

“The oil and gas sector continues to be a pleasant surprise. The rise in oil prices has encouraged drilling and production companies to bring rigs back online, and this adds to the broader industrial demand for our equipment” Matthew Flannery, CFO, United Rentals

“In the international markets, tendering activity remains high and continues to be very competitive, and with a clear move towards performance-based contracts from many of our customers” Paal Kibsgaard, CEO, Schlumberger

Mining Expenditure

“The growth in exploration [mining] expenditure has been across the board and is not being artificially inflated by significant exploration expenditure at the higher end of the market” Report by BDO

Timber

“There is no certainty and no security going forward for the Victorian timber industry, it's not just for the mills — it's for the harvesters, the haulers, for a lot of those towns, these towns rely on timber production” Brian Donchi, Fenning Timbers

Telecommunications

“Very clearly, we are trying to communicate that we see strong demand across all regions and most of our end-markets increasing from our fourth quarter outlook. And so, driving the first quarter race is an increase in our sales volume expectations, which implies we see continued good growth for the balance of the year” Jay Brown, CEO, Crown Castle

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.