Winston's Weekly: The start of the December 2023 reporting period

Stock Watch

by Winston Sammut

The following transcript was AI-generated.

Paul Sanger: 
I am Paul Sanger for the Finance News Network. And as always, on a Friday, we are talking today with Winston Sammut, an investor manager at Euree Asset Management. Winston has over 40 years investment experience, including 20 years in the listed property industry. Winston was previously the head of listed securities with the ASX listed property Fund Manager Charter Hall Group.
Winston, welcome back to the network.

Winston Sammut: Thank you Paul.

Paul Sanger: All right, Winston, let's start with an update on the key news in the property sector over the last week. What's been going on?

Winston Sammut: A few things have happened over the last week. Primarily the results started to come out. Yeah, we've had results from some of the smaller entities around and we've had a result from the Mirvac Group as well as Charter Hall Long WALE REIT have had two of the larger ones, the bulk of the big results will be coming out next week.

With that, Vicinity coming out and Dexus. And the market will really be watching the Dexus result primarily to see what's what the valuations are for for their office exposure, which they have a quite a large office exposure, and also the outlook going forward. So some good news we hope will come out next week. But what was actually evident in in the results to date including Mirvac and Charter Hall Long WALE REIT is that cap rates have continued to move to the sense that valuations have continued to fall.

So that's I suppose, an issue for those REITs that have got high levels of gearing. And to that end, we saw that in the announcement from charter Hall Long WALE REIT, they were looking to sell about half a billion dollars worth of assets to get their gearing back to a more acceptable level.

Paul Sanger: And obviously the RBA met on Tuesday. Left rates unchanged. No surprises there. Any takeaways that you got from any commentary that got your interest?

Winston Sammut: Well, the only takeaway are sort of in terms of that announcement was that there was a statement to the effect that there could be another rate rise. And I suppose the RBA really is looking at the data as the data comes out, particularly as it relates to the CPI, retail sales, those sorts of things before they decide on what they do next. But nevertheless, the trend over the course of the year will be for rates to steady, if not necessarily the cash rate to be cut, but at least stabilising. And if we do need another rate rise, the RBA will bring that in.

Paul Sanger: Gotcha, hear you loud and clear. And on a subject very close to your heart - What's the latest on the BWP / Newmark merger?

Winston Sammut: Okay. The latest is that the bidder statement has been released and is being sent to the Newmark investors. It opened on the 8th February and closes I think around the 20th March, in which time they need to decide on whether they want to accept the bid. From the Euree position and the funds that I manage, I was able to pick up the share register on Wednesday, and so now we're looking at options about what we do. We need 5% of the shareholders, security holders to enable us to call an EGM, and that's what I'm working towards.

Paul Sanger: Good to hear. And on last week's chat, we discussed the concern around commercial property positions in the US with several banks showing signs of stress. What's the latest on this? Any other further developments?

Winston Sammut: Well, there's been no real developments other than the the smaller regional banks, I'll call them, in the US which were the ones that were under pressure, have come up again a little bit. So there's not as much of a focus on what's going to happen to those regional banks in terms of their exposure. But you see the regional banks are the ones that have, relative to their size, a very large exposure to commercial property as opposed to the bigger banks in the US where the commercial exposure is is smaller because they're involved in a lot of other assets.

Paul Sanger: And just to finish up, Winston, you mentioned the beginning. So this week or next week we've got some key events and results coming out? Anything else?

Winston Sammut: I should add, that in reality, the results were acceptable. There's no need to panic at this stage. I suppose they've come in line with what was expected. So from that perspective, I expect the sector to continue to look okay over the course of the next 12 months. But the focus will be this week on the on the big entities reporting and in particular the valuations and gearing and so on. So that that will be the case.

Paul Sanger: Winston, as always, it's a pleasure and I can't wait to do next Friday when we we can talk about the results that are coming out next week.

Winston Sammut: Thanks very much Paul, appreciate it.

Paul Sanger: You have a great weekend. Thank you.

Disclaimer: Sequoia Financial Group (ASX:SEQ), the parent company of Finance News Network, owns a 20 per cent interest in Euree Asset Management.

Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?