As Barclay Sees It - January 2021

Every Tuesday afternoon we publish a collection of topics and give our expert opinion about the Equity Markets.

Shift in bank lending appetites and pushback on Biden's 1.9T Coronavirus Relief Plan highlight the week ahead for the financial markets.

Commercial real estate bank debt expected to decline

Total Australian commercial real estate bank debt reached an all-time high of $261.7 billion in the 2020 calendar year, predominantly fuelled by the booming industrial property sector as well as legacy office and retail commitments. However, the Australian Financial Review recently cited analysis by consultants Plan1, which expect bank lending to decline for both the retail sector and residential development - due to restrictions in lending to high-profile projects and pandemic-related tailwinds. Banks are expected to continue to re-weight their exposure towards industrial assets while non-bank lenders are expected to fill the gaps left by the major lenders.

Democrats may have to focus on more limited coronavirus relief package

Last week, President Biden began his first full day in office as markets await signs of progress in stimulus negotiations. Multiple reports noted Biden's ~$1.9T coronavirus relief plan is already facing some Republican pushback over both the price tag and the recency of a fifth package passed last month. While he could bypass the need for Republican support in the Senate via reconciliation, the process would mark a divisive initial move for a Biden and some Democrats think the quickest and easiest path forward revolves around a bipartisan package limited to funding for vaccine distribution and $1,400 stimulus cheques




HUB24 Limited (ASX: HUB)

HUB24 Limited, together with its subsidiaries, provides wealth management solutions to the financial services industry in Australia. The company has developed and continues to operate HUB24, which is an investment and superannuation platform that provides portfolio administration services for the financial advisors, stockbrokers, accountants and direct consumers.

Earlier last year, the company announced three strategic transactions and an equity raising of $60m, in which significant synergies are expected to be realised through increased scale, platform growth and diversification into non-custody administration. Furthermore, despite the COVID-19 pandemic, HUB24 achieved record December quarterly net inflows of $1.7 billion, up 36.7% from previous December quarter, and has delivered a strong first half for FY21 with average monthly net inflows of $514 million, up 25% from FY20.  

HUB is currently trading at a one-year forward P/E of 22.8x and offers a gross yield of 0.4%




Super Retail Group Limited (ASX: SUL)

Super Retail Group Limited (SUL) is primarily involved in retailing of auto parts and accessories, tools and equipment, retailing of boating, camping, outdoor equipment, fishing equipment and apparel and retailing of sporting equipment and apparel. The Group operates through the following segments: Supercheap Auto, Rebel, BCF, and Macpac.

Despite the COVID-19 pandemic, SUL has seen record results driven by unprecedented consumer demand throughout the period. They had a total sales growth of 23% across the group, where online sales growth increased by 87% to $237m. However, their Macpac segment saw a decline in growth due to the government-mandated store closures in key markets of Melbourne and Auckland. The company also reported earnings guidance for H1 2021 to be in between $174m and $177m, reflecting a 135% - 139% increase when compared to last year.

SUL has continued to position itself extremely well to capture the current unique trading environment, including the reopening of the Australian economy, as households have increasingly shifted to outdoor activities and road travel over the summer period.

SUL is currently trading at a one year forward PE of 10.4x and offers a gross annual yield of 5.8%.




Fisher and Paykel Healthcare Corp Limited (ASX: FPH)

Fisher & Paykel (FPH) is a New Zealand-based company engaged in the design, development, manufacturing and marketing of products and systems for use in respiratory care, acute care, surgery and the treatment of obstructive sleep apnea in homes and hospitals. The company recently provided a trading update, reporting a 73% increase in operating revenue for the 9 months ending 31 Dec 2020, which was mainly driven by growth in their acute and chronic respiratory product segment. Furthermore, the company has continued to see an influx in COVID-19 patients requiring hospitalisation and respiratory treatment, leading to a 113% increase in sales for the company’s Hospital Products unit. 

FPH also noted that they expect revenue and NPAT to be higher than previously stated, however, due to significant uncertainties associated with the course of COVID-19, no formal guidance has been provided and investors will need to wait for its full-year results to find out how it performs.


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