CEO INSIGHTS – Week Ending 22 December 2017 By NAOS Asset Management

“This acquisition [Fox & Disney] reflects a changing media landscape, increasingly defined by transformative technology and evolving consumer expectations. As we've repeatedly discussed in earnings calls and in other forums, today's empowered consumers want more, more compelling, high-quality entertainment, more access to content, more choice, and more convenience” Robert Iger, CEO, Disney

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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Domestic Economy

“A number of Asian and Chinese corporates are looking at Australia and looking to invest in this market either in their own right or in partnership with other corporates” Steve Hughes, Head of Commercial Banking, HSBC Australia

“As soon as they scratch the surface, they (investors) see that firstly Australia was built on foreign investment and secondly that the number of FIRB (Foreign Investment Review Board) rejections is very low. It is an attractive and easy country to invest in compared to many nations which are making it very difficult for, or have closed the door to, foreign investment” Mitchell Adermann, Head of Agribusiness, HSBC Australia

Wool

“Everything is going our way at the moment. We were making good money at 1000 cents, we have had six or seven cracking seasons and money is as cheap as it is ever going to get” Mark McGufficke, Farm Owner

Cattle

“It has been another good year for the cattle industry. Prices have come back a bit from the highs but they are still very respectable” Howard Smith, President, Cattle Council of Australia

“If the season keeps going the way it is on the east coast and fills in in other parts, I'd expect re-stocker demand will hold prices up. And I've been talking to the processors and they seem positive about demand from overseas customers” Howard Smith, President, Cattle Council of Australia

“The US remains Australia's principle competitor but Brazil and other South American producers are supplying increasing volumes into some Asian markets, namely China” Meat and Livestock Australia

Agriculture

“If you take the last 15 years, we have certainly seen a trend of what were mixed farming enterprises move completely out of livestock to purely cropping. The strength of lamb in particular and wool and cattle in the past two or three years is causing some people to re-think that and go where the money is” Ron Storey, Founder, Australian Crop Forecasters

Healthcare

“Geopolitical challenges and headline volatility, continued to drive uncertainty through the healthcare market” Michael Neidorff, CEO, Centene Corporation

“The healthcare market is growing more complex. Technology and market forces are working to transform the way care is delivered and managed” Michael Neidorff, CEO, Centene Corporation

Mortgage Lending

“The [lending] market has just changed tectonically in the last two years and it's not going to change back any time soon” Greg O'Neill, CEO, La Trobe Financial

Housing

“We are confident that our core renovation and repair markets in Australia and New Zealand are on track to provide ongoing, resilient growth. Strong consumer demand for both retail ‘do-it-yourself’ and trade ‘do-it-for-me’ projects is expected to continue” Patrick Houlihan, MD, DuluxGroup

Snacks

“Snacking is a highly attractive consumer space with growth rates that outpace many centre store categories. In fact, the macro snacking trend is quite literally becoming the way we eat today. The lines between snacks and meals are blurring. Snacking occasions are expanding rapidly and even extending into traditional meals. 90% of consumers snack multiple times per day” Denise Morrison, CEO, Campbell Soup

“With a 13% compounded annual growth rate over the past five years, the ready-to-eat popcorn industry is positioned for continued strong growth. Ready-to-eat popcorns' increasing levels of household penetration combined with on-trend better-for-you attributes lead us to believe the category will continue to be adopted by an expanding breadth of consumers” Patricia Little, CFO, The Hershey Company

Energy

“[Carbon Capture, Utilisation, and Storage] is one of the critical solutions needed to decarbonise energy systems. But CCUS is lagging behind many other low-carbon energy technologies, and this is not good news as climate-change mitigation will become much more difficult and expensive without it. It is also bad news for coal. Without CCUS, coal will be further edged out by other lower and zero-carbon alternatives” Fatih Birol, Executive Director, IEA 

Retail

“Consistent with recent trading updates of other retailers, particularly those retailers with shopping centre exposures, RFG’s domestic franchise revenues continue to track lower than expected. Crust and Donut King have continued to perform to expectation, whereas Michel’s Patisserie, Brumby’s and Gloria Jean’s are trading below expectations” Retail Food Group Market Announcement

“The retail market is expected to remain challenging for the near future” Andre Nell, MD, Retail Food Group

Cloud & Database Software

“We're growing roughly three times as fast as the market. And I've seen market numbers of 2%, 3% and 3.5%” Mark Hurd, CEO, Oracle

Equity Capital Markets

“The anticipated profit increase [in FY18] is largely attributable to a late rush in Equity Capital Markets (ECM) transactions that have either completed, or will complete, before year end” Bell Financial Group 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.