ASX climbs; lithium miners decline; Xero rallies

Investors are bullish about the potential backdoor listing of Chemist Warehouse via a merger with Sigma Healthcare and say its overseas store rollout strategy could deliver growth comparable to the blockbuster returns of Bunnings or Domino’s Pizza.

If approved by the competition regulator, the proposed ASX listing will own 864 pharmacies in Australia, split between 503 under the Chemist Warehouse brand and 361 under the Sigma brand, with equivalent earnings before interest and tax of $496 million on sales of $6.7 billion in financial 2023.

“We think it’s one of the most exciting companies we’ve seen for a very long time with one of the best management teams in Australia,” said Oscar Oberg, the lead portfolio manager at Wilson Asset Management, which holds shares in Sigma.

Mr Oberg said the retail giant could enjoy a similar growth trajectory and valuation to ASX success stories such as budget pizza retailer Domino’s, discount jeweller Lovisa, or hardware giant Bunnings.

Over the past five years, Domino’s shares have climbed 35 per cent, Lovisa has more than doubled and Bunnings owner Wesfarmers has jumped more than 74 per cent.

Read more here.

After the initial burst of justifiable excitement generated by a chance to look at a business long hidden from public view, fund managers have started to ponder where, when and how Chemist Warehouse might fit into their portfolios.

And a key question is how potential passive investing flows following its $8.8 billion reverse takeover by Sigma Healthcare should play into their thinking.

The fundies Chanticleer has spoken with in the wake of Monday’s investor call were generally impressed with the big-picture pitch from Chemist Warehouse chief executive and co-founder Mario Verrocchi, and the look inside what is a real Australian success story.

They want a lot more details on the mechanics and the financial position of the business, and several noted the decision to pursue a reverse listing rather than a traditional IPO had allowed Chemist Warehouse to formally introduce itself to the market without a lot of the detail required in an IPO prospectus.

This detail will arrive ahead of Sigma shareholder vote required on aspects of the deal, but for now, we don’t even have a pro forma balance sheet to look at. That makes it tough to do the sort of fundamental analysis fund managers traditionally undertake.

Read Chanticleer here. 

The Australian sharemarket advanced in late trading, led by sharp gains in the interest rate sensitive stocks.

The benchmark S&P/ASX 200 index added 0.5 per cent, or 34.4 points to 7233.4 points near 2:30pm AEDT, buoyed by the information technology and consumer staples sectors. The All Ordinaries rose 0.5 per cent.

Technology stocks were among the best performers, climbing 2.3 per cent. WiseTech rallied 2.8 per cent and Xero up 4.2 per cent.

There was a lacklustre session on Wall Street overnight as investors stayed on the sidelines ahead of key US inflation that will help gauge whether the US is done with raising interest rates.

“There’s so much to come over the next few days, which could determine how markets end the year and start 2024,” said Craig Erlam at Oanda. “The Federal Reserve decision on Wednesday is unlikely to be controversial, but the forecasts, dot plot and press conference that accompany it may well be.”

Stocks edged up ahead of tonight’s US CPI data (Wednesday AEDT) and the Fed’s last meeting of the year on Thursday. The S&P 500 rose 0.4 per cent, Nasdaq was up 0.2 per cent and the Dow Jones added 0.4 per cent.

The only market move of note was bitcoin, which tumbled 7.5 per cent to below $US41,000, following a rally of more than 150 per cent this year.

In commodities, oil steadied just above a five-month low with oversupply concerns in focus after OPEC+ pledges to extend and deepen output cuts failed to halt a slump in prices. Global benchmark Brent traded around $US76 a barrel after rising 2.7 per cent over the prior two sessions.

Energy stocks tracked the move in the crude price, with Santos down 0.4 per cent and Woodside Energy falling 0.1 per cent.

Meanwhile, Reserve Bank governor Michele Bullock, speaking in Sydney this morning, said she believed Australia wasn’t behind the curve in taming inflation.

“I think we are trying to make sure we slow the economy enough to bring inflation down to our target band,” she told the Australian Payments Network Summit.

Stocks on the move

Incitec Pivot edged up 0.5 per cent after Mauro Neves de Moraes was named chief executive. He will assume the CEO and managing director role from January 22.

With Bloomberg

Oil steadied just above a five-month low with oversupply concerns in focus after OPEC+ pledges to extend and deepen output cuts failed to halt a slump in prices.

Global benchmark Brent traded around $US76 a barrel after rising 2.7 per cent over the prior two sessions, while West Texas Intermediate was above $US71. Scepticism that OPEC+ alliance members will fully adhere to the latest round of voluntary reductions, along with surging production from non-OPEC suppliers including the US, has raised fears of a widening surplus.

Timespreads continue to signal that supply is running ahead of demand, with the futures curve for Brent and WTI both back in bearish contango –when later contracts trade at premiums to prompt ones – through to the middle of next year.

The six-month spread for the Brent benchmark was 18 cents a barrel in contango, near the lowest level in a year. It was $1.66 a barrel in the opposite, bullish backwardated structure just a month ago.

Oil has fallen for the last seven weeks, the longest such run since 2018, and is down by around a fifth since late September. On demand, Chinese consumption growth is forecast to slow next year and there’s a chance of a recession in the US.

Outspoken stockbroker Angus Aitken has thrown his weight behind Washington H. Soul Pattinson’s $3 billion bid for Perpetual, and whacked its investment bankers in the process.

In a note to clients on Tuesday morning, seen by Street Talk, Aitken told his clients to buy Perpetual, saying the deal made “complete sense”, and urged the board to engage with Soul Patts.

“What is totally obvious is the current structure of the business isn’t working and needs to come to an end,” he wrote.

“We don’t think IPO/auctions for these divisions get the best result for the shareholders as you might get a person willing to pay slightly more than Souls in cash but you then transfer all that upside to the private equity fund or whoever buys the division and pay a lot of tax.”

Read Street Talk here.

Necessity is the mother of invention in business – and particularly the eat-what-you-kill world of corporate transactions.

Got a blocked deal? Unblock it. Can’t agree a price? Find a way. Regulatory hurdle? Structure around it.

A renegade shareholder in the way? Remove it. And keep pushing, pushing, pushing until you get an outcome.

That’s what happened at Chemist Warehouse, one of the biggest and best privately owned businesses in the country.

The market was not willing or able to digest a multibillion-dollar IPO, so it headed to the ASX boards via the backdoor.

The white whale of Australia’s IPO pipeline, a company that bankers had actively courted since 2015, will still get its listing moment, just not the way initially thought.

Read Chanticleer here.

The Australian sharemarket advanced at lunchtime, led by sharp gains in interest rate sensitive stocks.

The benchmark S&P/ASX 200 index added 0.6 per cent, or 39.5 points to 7238.5 points at midday, buoyed by the information technology and consumer staples sectors.

Technology stocks were among the best performers, climbing 1.2 per cent. WiseTech rallied 1.5 per cent and Xero up 2.1 per cent.

There was a lacklustre session on Wall Street overnight as investors stayed on the sidelines ahead of key US inflation that will help gauge whether the US is done with raising interest rates.

“There’s so much to come over the next few days, which could determine how markets end the year and start 2024,” said Craig Erlam at Oanda. “The Federal Reserve decision on Wednesday is unlikely to be controversial, but the forecasts, dot plot and press conference that accompany it may well be.”

Stocks edged up ahead of tonight’s US CPI data (Wednesday AEDT) and the Fed’s last meeting of the year on Thursday. The S&P 500 rose 0.4 per cent, Nasdaq was up 0.2 per cent and the Dow Jones added 0.4 per cent.

The only market move of note was bitcoin, which tumbled 7.5 per cent to below $US41,000, following a rally of more than 150 per cent this year.

In commodities, oil steadied just above a five-month low with oversupply concerns in focus after OPEC+ pledges to extend and deepen output cuts failed to halt a slump in prices. Global benchmark Brent traded around $US76 a barrel after rising 2.7 per cent over the prior two sessions.

Energy stocks tracked the move in the crude price. Both Woodside Energy and Santos slid 0.6 per cent.

Meanwhile, Reserve Bank governor Michele Bullock, speaking in Sydney this morning, said she believed Australia wasn’t behind the curve in taming inflation.

“I think we are trying to make sure we slow the economy enough to bring inflation down to our target band,” she told the Australian Payments Network Summit.

Stocks on the move

Incitec Pivot edged up 0.2 per cent after Mauro Neves de Moraes was named chief executive. He will assume the CEO and managing director role from January 22.

With Bloomberg

The battle for embattled software stock Whispir is heating up.

Street Talk understands private equity-backed Soprano Design will lodge a second supplementary bidder’s statement on the ASX later today, doubling down on its bid to take Whispir private.

Soprano, a communications software company run by ex-Appen chief executive Mark Brayan, lobbed an all-cash takeover bid for Whispir at 48¢ a share in November. The board rejected the buyout earlier this month, saying it undervalued the company. An independent expert valued Whispir shares in the range of 48.59¢ to 56.49¢.

Whispir also told shareholders it had received a letter of intent from Sydney-based start-up Pendula, which plans to submit a non-binding indicative offer, and on Monday confirmed it was in ongoing talks for an offer at the upper end of a price guide.

Sources said Potentia Capital-backed Soprano will confirm its bid will close on December 21 and tell shareholders that if they accept before December 15, funds can be in their accounts by Christmas.

Read more

Australian shares opened little changed after a lacklustre session on Wall Street overnight as investors stay on the sidelines ahead of key US inflation that will help gauge whether the US is done with raising interest rates.

The S&P/ASX 200 opened down less than 0.1 per cent to 7197.2 in the first 20 minutes of trade, with all 11 industry groups largely unchanged.

“There’s so much to come over the next few days, which could determine how markets end the year and start 2024,” said Craig Erlam at Oanda. “The Federal Reserve decision on Wednesday is unlikely to be controversial, but the forecasts, dot plot and press conference that accompany it may well be.”

Back to target

Overnight on Wall Street, stocks edged up ahead of tonight’s US CPI data (Wednesday AEDT) and the Fed’s last meeting of the year on Thursday. The S&P 500 rose 0.4 per cent, Nasdaq was up 0.2 per cent and the Dow Jones added 0.4 per cent.

The only market move of note was bitcoin, which tumbled 7.5 per cent to below $US41,000, following a rally of more than 150 per cent this year.

Meanwhile, Reserve Bank governor Michele Bullock, speaking in Sydney this morning, said she believed Australia wasn’t behind the curve in taming inflation.

“I think we are trying to make sure we slow the economy enough to bring inflation down to our target band,” she told the Australian Payments Network Summit.

Stocks on the move

Incitec Pivot rose 0.5 per cent to $2.87 after Mauro Neves de Moraes was named chief executive. He will assume the CEO and managing director role from January 22.

With Bloomberg