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Market News 31 October 2016
‘ECB at odds with Economists’ read the headline.
My immediate thought was; ‘how can that be given that economists usually present arguments for a variety of outcomes’?
Investment Opinion
Wynyard – technology company Wynyard has been placed into voluntary administration having failed as a going concern.
As I write I am struggling to think of a more spectacular fall by a company, from a point that wasn’t one of grace but should have been a position of respect, until 2015.
The regulators’ must surely want to take a closer look at behaviour by various responsible persons, over the timeline from last November until now, for this dreadful failure by Wynyard.
Late in 2015 the board of Wynyard decided not to accept new capital raising proposals at a then lower share price (the market was declining) because they had been pledged money at a $2 share price (in the past), or so they believed.
Amongst a clearly overinflated sense of confidence about the company’s options Wynyard decided to wait until the market conditions improved before issuing new shares to raise new money; money that was desperately needed as it turned out.
For reasons known only to them, at this stage, Wynyard decided to ignore the visible financial mismatch in its cash flows where the outflow must have been a scarcely controllable torrent judging by this week’s ‘in administration’ announcement.
Either key people were behaving as if they were blind, or maybe poor financial controls left those key people blind?
Whichever, I find it very difficult to reach any conclusion other than to question the competence of the key decision makers at Wynyard.
When Wynyard split from Jade and raised $65 million in their Initial Public Offering $39 million was used to pay Jade for the intellectual property, rather than operate under licence; this may have been an initial mistake (to capitalise a cost when they cannot do the same with the revenue).
The remaining $26 million was intended to fund growth. In subsequent capital raising placements (three) Wynyard raised about $110 million.
Money Raised in tranches two and three (about $80 million) was predominantly spent by March 2016 and when the company relented (too late) and raised $30 million at 87 cents (pre fees, which were paid in shares) the market was fairly assuming this would fund a lengthy period of time for more growth.
Indeed, I recall an announcement from the Wynyard Managing Director (I think it was) explaining that this new $30 million should fund them through to a point of being cash flow neutral.
That memo must have been drafted on another planet.
In truth the $30 million only delayed the company’s drowning and now I for one wish to see honest disclosure about the sequence that lead us to this point.
The honesty can start with the directors and the MD explaining why they were so confident when over five years revenue increased by two-fold but expenses have increased by five-fold.
It would be nice for past directors to explain the high turnover of the board. I Have intentionally not named directors here, but I have added them to the ‘to be considered’ list attached to our Never Again list so I don’t forget their involvement here.
This company failure has occurred far too soon after a major capital raising by the company and everyone involved will need to explain themselves crisply to the Financial Markets Authority who I hope will now be involved; after all, Wynyard’s behaviour and outcome are hardly consistent with the regulatory Purpose for the sector.
For the sake of reminding readers of the Purpose:
The main purposes of this Act (Financial Market Conduct Act) are to—
(a) Promote the confident and informed participation of businesses, investors, and consumers in the financial markets; and
(b) Promote and facilitate the development of fair, efficient, and transparent financial markets.
Wynyard was already facing a class action from a subset of its shareholders who allege that the company misled investors during the past year so the situation looks pretty grim all round.
Never Again – presumably prompted by our Never Again list the Federal Reserve Bank of New York President William Dudley, and then the Bank of England, looked into establishing a list of people considered to be ‘Bad Bankers’ (bankers who violate ethical codes of conduct) to begin a process of weeding them out of the industry.
The BoE wanted to avoid the ‘rolling bad apples’ who have been able to leave one bank, in some form of disgrace, only to be rehired by another bank shortly after.
Sadly, lawyers advised the regulators that such a list wasn’t really a role for the regulators and that this list was ‘something that the industry should pursue’.
That hasn’t gone very well so far, given that the opportunity already exists.
They’re not bankers but I think Wynyard’s directors (above) stand a very good chance of ending up on our Never Again list.
Anti democratic – Vital Healthcare Property Trust lands on my list for the latest business to come to my attention for failing to provide a facility for online voting.
As I have said, in this day and age, to not offer online voting is to encourage my view that they have an ulterior motive for keeping voting participation down. Both registries in NZ make the service available so to not use it is inappropriate in my view.
Regardless of the external manager’s motivation it is an example of poor governance.
Please report any others that you notice. I’d like to continue reporting such poor form to all investors.
Blockchain – The role of Blockchain distributed ledger programming in our lives is yet to fully reveal itself but it is definitely gaining credibility and thus more likely to feature in the world of commerce.
Central banks are wisely debating the potential for Blockchain to open the door to non-bank participants in the world of financial settlement; think ApplePay without the need for a clearing bank in the background for process payments between parties.
Banks are being forced by this competitive threat to understand and perhaps lead the introduction of Blockchain as a settlement process. Certainly the central banks of the world will be very keen to have regulated entities, like our banks, take a controlling position in any new financial settlement that rolls out across an economy.
National Australia Bank reports that last week it successfully settled a test payment ($10 between staff members) with Canadian Imperial Bank of Commerce via Blockchain technology.
NAB’s Chief Executive made the following statement: ‘We believe that the technology has the potential to not only deliver real-time international payments, but also improved security and efficiency of our payments systems’.
Faster, more secure, more efficient. That is a powerful Trifecta.
The only thing left to hear is ‘more profitable’, if this can be made true, and you are witnessing the genesis of a massive change in global banking.
Recall my recent criticism of major businesses holding back payment to smaller businesses. If service delivery was also confirmed rapidly across a Blockchain style distributed ledger then there would no excuse for payment not to be near immediate also, back across a Blockchain arrangement.
Indeed payment could become a linked part of the service delivery agreement coded into the Blockchain for each agreement (how novel ‘delivery versus payment’ as already occurs on house settlements and in most financial markets arrangements).
I have recently been reading analyst comments wondering what the next major change will be that lifts productivity. They describe various meaningful developments in the past which spurred productivity to sustainably higher levels, including the steam powered industrial era, the motor car, the micro-chip and improved health but they have not yet pointed me to the next driver.
I ponder whether Blockchain distributed ledger technology will be the next dramatic change to push productivity along.
If an economy can accelerate the settlement of goods and services (including financial obligations) then the proportion of lazy capital in that economy should decline, significantly. (Think of all the contractors’ money being retained by Fletcher Building for 60-90 days, which could be put to better use now!)
Based on the comments from the CEO of NAB above it seems reasonable to start considering that all unreasonable delays on the movement of capital can be removed from the financial framework within an economy.
Bookmark ‘Blockchain’ in your online search engine to try and stay abreast of this development. It may appear as a banking ‘App’ on your mobile phone faster than you realise, and thereafter all manner of payment methods.
PS: Adorned with a smile, I have read about the ‘first ever’ Blockchain settlement between banks a few times now. Also last week CBA and Wells Fargo reported a ‘world first’ (for them maybe – Ed) Blockchain settlement between two international branches of the same company.
ASB Bank Marketing – ASB has very quickly mailed out an advertising brochure promoting its new Tier II subordinated bond offer.
What troubles me about this is their decision to mail this promotional material to current holders of other ASB subordinated securities.
The marketing intention and impact are very clear and most recipients will view the material in a good light, but this is the primary reason that I think it is inappropriate; ASB should leave this role of influence to the financial advice community.
The ASB offer will not have a public pool because ASB will not be able to assure themselves of meeting the Anti Money Laundering obligations from applicants in a public pool. This fact reinforces why ASB should have restricted its marketing focus to via the community of Financial Service Providers and not wasted money on their own public promotions. (I see they trimmed your brokerage ratio to pay for the advertising too – Ed).
The brochure covers its backside by directing people to advisers and briefly detailing the complex nature of the securities, which cannot be done appropriately on such a small document.
Interestingly the advertisement fails to mention the minimum application amount ($5,000), and multiple ($1,000) which some over-zealous Financial Markets Authority person took us to task over once during advertising in the past. No doubt FMA consistency will see them thrashing ASB within an inch of their lives too.
For clarity, this paragraph does not criticise the product being offered by ASB, just the bank’s error in promoting it blindly to people who own ASB bank securities.
A research article and investment opinion on the ASB Convertible Note offer is available on our client private page for those of you who have paid for an advisory service.
Investment News
Smoke causes a deal to fire – No matter how distasteful, there are still profits to be had from the cigarette industry and when combined with the very large moves in the value of the British Pound since Brexit the year’s largest takeover (4th biggest of all time) has been proposed.
British American Tobacco (BAT) wishes to spend US$47 Billion buying the 58% of Reynolds American that it does not already own.
‘Our’ generation of investors may still remember parts of Reynold’s history from the RJR Nabisco takeover of the 1980’s, which seemed the height of greed and excess but it was only the beginning of such behaviour for my generation to witness.
RJR Nabisco ultimately split its tobacco and food businesses and now, it seems, the tobacco business is UK bound (at least in ownership) as one outcome of the very large decline in the value of the British Pound, which has dramatically hiked the value of foreign earnings for BAT.
Technology is the fastest changing industry in the world, but investors shouldn’t give up on industries that many would declare to be sunset in nature, because they may well still control dominant proportions of consumer cash.
European Trade – The European Union was founded on collective security and trade, yet security has been easy to breach, causing elevated threats to the public and the desire to increase trade is also underperforming.
BREXIT leaves an obvious failure with respect to the EU’s scale of trade, but the latest item to catch my attention was the EU’s inability to conclude a trade agreement with Canada when it was said that both parties wanted it to proceed.
Both parties, except a regional government in Belgium, being the seat of the European Union itself!
It’s not a great look for the EU.
RBNZ OCR – The Reserve Bank of NZ is now to lay out its forecast for changes to the Official Cash Rate (OCR) in each announcement instead of the track for 90-day interest rates, the measure presented in the past.
Changes to 90-day interest rates move very closely to the lead from the OCR but the RBNZ has decided to remove the occasional noise presented by this measure and simply put out the anticipated OCR track given the current monetary policy inputs.
This development will mean little to financial market participants who manoeuver interest rates all day every day based on changing inputs, and this will still be the case, but the general public will gain a much clearer message about changes to short term interest rates from the RBNZ move for reporting.
The next thing the public needs to learn is to differentiate between the RBNZ announcements about changes to short term interest rates and the likely future for long-term interest rates (often different from each other).
Today, for example, the next move for short-term interest rates is likely to be down in NZ, but the immediate trend for long-term interest rates is up a little.
Ever The Optimist– NZ has been declared the world’s easiest place to do business by the World Bank, edging ahead of Singapore, from a group of 190 countries analysed.
This is excellent news for a small trading nation.
However, we still need to regulate to insist that all entities (non natural persons) must be registered to operate in this country. The Justice Ministry would oversee the register and other government departments such as IRD would have full access to the information.
The entities could elect to meet their Anti Money Laundering obligations to the register and then approve of information sharing to nominated organisations, such as bankers, brokers etc.
It really is time to tighten and centralise this messy disclosure process to support the ‘top of table’ for ease of doing business.
ETO II - Our forestry industry is frequently criticised for not turning ‘trees into toothpicks’ and for thus leaving too much of the value-add opportunity to those who import our trees, but, it remains good news when the industry reports increased export volumes, as they did last week.
Now that we are riding a vein of good news, the industry can presumably finance options for making it better, including growth of any value-add ideas.
ETO III – The Spanish parliament has finally agreed to form a government, again led by Mariano Rajoy of the largest minority, and the past Prime Minister.
This is settling news for Europe, amongst plenty of unsettling news.
Investment Opportunities
ASB Bank – has announced its intention to issue another ‘up to $400 million’ of Tier II subordinated bond to the public, probably in early November.
Regular readers will recognise these securities as being for a 10-year term with an interest rate reset, or repayment, after five years, and the securities can be converted to shares (in CBA Bank) or written off in the event of serious distress (if Non-Viability declared).
To their credit (no pun intended) ASB and CBA have recognised that the early discussions about interest rate setting were too low.
ASB is now describing a credit margin of between +2.70% - 2.80% over the 5 year benchmark swap rate) implies a nominal return for the next five years of about 5.00% - 5.10%.
My view that more information is required from the banks about the structure and management of their capital remains, but with the yield on this offer looking likely to breach 5.00% for a BBB+ credit rated security the return offered now makes more sense than it did last week.
We have a mail list available for those investors wishing to participate in this offer which opens on 3 November and closes on 25 November. (Please contact us by email or phone)
A research article and investment opinion on the ASB Convertible Note offer is available on our client private page for those of you who have paid for an advisory service.
Auckland International Airport – issue of a new seven-year bond was announced and finished last week, as one of the fast moving issues booked by contract note.
The interest rate was set at 3.97 per annum (paid semi-annually).
If you missed this offer and would like to purchase the bond from the secondary market please get in contact with us.
Trustpower (TPW) Bond – TPW has now repaid all bondholders who elected not to retain their ‘old’ bonds.
Applications to invest in the ‘new’ 6-year bond should now be in.
Thank you to all for their patience with this multi-pronged deal offered by TPW.
Z Energy Bond – issue of new 5 and 7 year bonds (1 November 2021 and 2023) at 4.01% and 4.32% respectively is now closed.
Thank you to all who rolled their maturing Z Energy bond, or invested new cash, via Chris Lee & Partners.
Quantum – The Wellington Company plans to offer another property for sale via a syndicated structure.
Details are yet to be confirmed but its imminence has resulted in us opening a contact list for potential investors to join.
Travel
I am indeed travelling… away in the jungle’s of Laos, returning in two weeks.
Edward is in our Wellington office (Level 15, ANZ Tower, 171 Featherston St) on Tuesdays, available to meet new and existing clients who prefer to meet in Wellington - by appointment please.
Edward plans to be in Auckland on 15 November (on Queen Street), Auckland on 16 November (in Albany), Blenheim on 5 December and Nelson on 6 December.
Mike will be in Auckland on 22 November, Tauranga on 28 November and Hamilton on 30 November.
Kevin will be available in Christchurch on 17 November.
Investors wishing to make an appointment are welcome to contact us.
Michael Warrington
Market News 24 October 2016
My Air NZ comments struck a chord last week.
In a small country with barely two degrees of separation, I passed a few of the comments to a friend and asked that he might ensure they reach his contact, the CEO of Air NZ, at some point.
Thanks for the feedback.
Investment Opinion
Bill Pay – Small businesses that provide service to larger businesses, the normal flow of business activity, need to consider how they can add leverage to their negotiated position.
New Zealand’s largest businesses take unfair advantage of smaller businesses by delaying agreed payments simply to extract additional interest income (or interest savings) from the cash held.
A recent headline disclosed that payments are being made at their fastest rate in a decade, which sounds like good news, but the NBR journalist made a point of saying that it was more as result of lower interest rates than robust financial positions of businesses. Many businesses are in a robust state during periods of higher interest rates too so it does seem to be more about the lower benefit from current interest rates that might be spurring accelerated payments.
Lower interest rates have reduced the benefit of holding other people’s money when there is a payout obligation in the near term.
If funds owed under a business agreement were legally considered to be ‘held in trust’ once all conditions of service delivery were met, in the same way as a broker’s trust account, then immediate payment should occur because it would be illegal to retain the funds for the benefit of the larger business’s balance sheet.
Cash flow is vital to business survival and I’ll never perceive it as acceptable for a larger business to retain others funds for a while longer to earn a little more income (or reduce their own costs) just because they can.
The speed with which payment systems are developing, combined with advances in real time gross settlement for banking, means there is no excuse for delayed payment between any parties with financial obligations to each other.
As you can see, this is a small bugbear of mine.
Inflation – Given the headline format of media these days I was surprised last week not to read that ‘Inflation doubles in New Zealand’.
The forecast for Inflation in the third quarter (Sep) in NZ was +0.10%, yet it came in a +0.20%. This coincidentally also become the annual inflation rate, which more than puts into perspective my facetious headline.
When I think back to the early part of my career (30 years ago? – Ed), well yes, in fact for 25 of those 30 years I couldn’t have concluded for you that NZ inflation was likely to reach +0.20% and have economists seriously debating deflation.
Markets don’t appear willing to accept near zero inflation results will remain for an extended period, otherwise the many senior bonds at 4.00% nominal return, being well over 3.00% real return, would be hard to find for investment.
A very wise investment adviser that I had the pleasure of working with, David Wale, once described a reliable 4.00% real return as something that investors should grab with both hands.
It happened once in NZ when our inflation indexed government bonds traded up to 5.00% real yield (when the NZ Debt Management Office promptly refused to issue more) but generally such real returns have seldom been available, reliably.
Today 3.00% real returns seem to surround us.
Current inflation is +0.20% for the year past. The year ahead is causing concern and seems very likely to be a weak number. Surveyed inflation expectations present data of approximately the following: 1 year ahead +1.20%, 3 years ahead +1.50%, 5 years ahead +1.70% and 10 years ahead +1.90%. All of them are declining when you compare a sequence of surveys.
The surveyed inflation ‘expectations’ have been reliably incorrect, always higher than actual inflation, during the current downward spiral.
The Reserve Bank once focused on the ‘2 years ahead’ inflation expectation data, and tried to manipulate these expectations and outcomes, but now they are far more interested in the opinions ten years out, recognising that changes in this data represent more entrenched opinions of today’s decision makers.
If a business begins to accept that inflation over the next 10 years is likely to be well below the central bank’s target then that business will begin to behave differently as they react to ever-weaker pricing expectations. If this behaviour settles in it would surely become deflationary.
I once asked why deflation was so bad, if modest in its rate of change. The economists and analytical folk responded with the dire warnings but I belligerently remained unconvinced that lower prices were a bad thing. Maybe I didn’t want to accept other opinion (sounds like your childhood – Ed).
Won’t lower prices allow a greater proportion of society to afford more of what they need, and perhaps one day what they want? (Assuming we keep people fully employed).
Side Story – I became cross the other day upon meeting a couple of families who (genuinely it seemed) could not justify the cost of a Girl Guide uniform for their daughter who was attending GG. I know this is small beer relative to their family housing, food and transport costs but it was a deflating anecdote. It is not hard to uncover such anecdotes these days.
I have been lead to believe that finding additional resources, adding value to resources, intellectual property and increased productivity were the many drivers of genuinely increasing a countries wealth. Surely relying on inflation to ice over excessive debt levels is a fool’s gold?
While I am on my radical economic theories, I might ask the government to assist the Reserve Bank’s inflation targeting via GST. (It’s late, I think you should get some sleep – Ed)
‘Core’ GST is 15%. Current inflation has fallen sustainably outside the 1.00% - 3.00% inflation target in the Policy Targets Agreement between the government and the RBNZ. Accordingly the government should (could! – Ed) increase ‘marginal’ GST by +0.25% per quarter from 15% to 16% to apply a temporary pressure to the pricing of ‘goods and services’ (wide influence) roughly equivalent to our distance from the inflation target range.
The idea of recurring minor increases is to avoid the one off spike effect that we have experienced three times from GST and to generate a temporary price pressure that can be removed subject to future inflation outcomes.
Let’s assume for this example that the government hasn’t accepted my recent tax policy of increasing GST to 20% to collect more from tourism activity in NZ, and if they do, it would be very clear that they were moving ‘core’ GST, not my new ‘marginal’ GST.
Interestingly I don’t see my ‘marginal’ GST ever having a negative value (GST decline). If inflation breaches the topside of the 1-3% band I’ll expect the RBNZ to tighten monetary conditions and restrict credit growth via capital controls.
Should deflation occur I’d wager that businesses would prefer to avoid price-cutting so as to avoid the impost of additional taxes on the price of their goods and services. If the GST collected became ‘a king’s ransom’ (and Robin Hood was unavailable – Ed) then the government could address changes to the PAYE brackets and perhaps the corporate tax rate.
I’ll bet I am missing something vital here and expect that one or two people will tell me about the gaps in my theory shortly.
Back from Never-Never Land, investors are developing a dislike for yields at and below 4.00% and I have some sympathy for their opinion on this subject, but with inflation struggling well below 1.00% and, as I write, share markets falling in price, perhaps 4.00% nominal interest rates won’t turn out to be too bad.
The inflation survey results above imply that 4.00% from long-term senior bonds are presenting investors with the opportunity for real yields of 2.30% - 2.50% which isn’t too bad, all things considered. The real return gets even better if inflation stays well below 1.00%.
For several years we believed in overinvesting in long-term bonds to protect against interest rate declines. Today conditions are different and don’t seem to warrant overinvestment in any sector (other than cash perhaps) so holding a balanced proportion of long-term bonds still makes good sense.
Post Script – this ramble started out as a news item about the latest inflation release but quickly became a left-field opinion piece; such is the state of mind of the author – Ed.
Investment News
US Interest Rates – members of the board of the US Federal Reserve were progressing toward a point of convincing all around the table of the need, or desire, to further increase the Fed Funds Rate in America.
Then, last week, one of their own data series came out much weaker than they will have hoped for.
The Empire State Index (ESI) unexpectedly fell, declining to a reading of minus 6.8 this month, the lowest since May and down from a minus 2 reading in September. The ESI is a survey of 200 executives from the companies in the manufacturing sector in the New York State.
NY is only one of 52 states, but it is influential and this data led the Vice Chairman of the US Federal Reserve (Stanley Fischer) to lament that increasing interest rates is indeed the preference but doing so is ‘not that simple’.
I think the action of increasing interest rates is reasonably simple but central bankers seem unwilling to expect participants in the economy to manage the subsequent risks of such decisions. Nanny State?
US short term interest rates are well below the 0.50% upper bound of the Fed Funds target so the market is losing confidence in an interest rate hike from the US in December.
In light of this story it does feel odd to say that NZ is about to cut interest rates further within an economy that is performing robustly in anyone’s language.
Risk – There are plenty of types of risk to consider when investing but it is common for investors to ponder ‘what risk am I not seeing?’
I’d wager that Sky City Casino share investors didn’t contemplate the Chinese government clamping down on gambling by its citizens, but it is happening and the Sky City share price has suffered an enormous fall from its recent highs in response.
Chorus – The political importance of the Ultra Fast Broadband (UFB) roll out to the government, and the increasingly dominant role held by Chorus, was confirmed by last weeks announcement that the government agrees to delay some of the Chorus debt repayments in return for Chorus agreeing to ‘free’ installations until 2019.
This is a little like the days when mobile phone companies offered us free hardware if we promised to remain as a customer for an extended period of time. The only difference here is that the Crown funding is cheaper than that confronted by mobile phone companies and it will be hard for customers to move to a different UFB network!
The government has also agreed that if regulators haven’t achieved an agreeable long-term asset-pricing model for Chorus by 2020 then the debt repayments can be deferred even further.
There is a lot to resolve for pricing in this sector but it seems clear that Chorus’ role in the industry is cemented for the remainder of my lifetime.
Having said that, technology changes awfully quickly and maybe our own ‘Rocket Man’ will provide my future wireless Internet highway?
Ever The Optimist – I love the Rocket Lab story, with its founder Peter Beck now named the Ernst Young Entrepreneur of the year.
I look forward to the company’s successful inaugural launch from the Mahia Peninsula.
Investment Opportunities
Trustpower (TPW) Bond – Trustpower has made the following announcement, which will be logical to most readers:
‘TPW has resolved to continue with the demerger process and are currently seeking court orders to proceed. The following timetable has been announced.
Redemption notice given: 20 October (done)
Priority Offer closes: 27 October (TPW090 holders rolling into the new TPW150 bond, 6 years at 4.01%)
Exchange Offer closes: 27 October (Exchange forms to keep your bonds in TPW)
Existing bonds redeemed: 28 October (for any bondholder who has decided against the Exchange offer)
General Offer Closes: 2 November (New cash being invested in the TPW150 bond, 6 years, 4.01%)
New bonds issued: 4 November (all new and replacement bonds in the series)
Essentially, the offer to retain old bonds or invest in the new bond remain available to people but are subject to an extended date line.
TPW has also announced the repayment prices for those who are not participating in the Exchange Offer to retain the ‘old’ bonds (including capital premium plus accrued interest):
TPW090 - $1.0165
TPW100 - $1.0475
TPW110 - $1.0851
TPW120 - $1.0830
In our view all holders of the old bonds should already have submitted their Exchange Forms to ensure retention of their new investment regardless of the date line, and, people wishing to invest in the new bond should already have submitted their application forms to us. There is now a small window for people with cash who wish to invest in the new TPW150 bond to contact us.
Anyone contemplating ‘chasing the bus’ should now know not to give up and to get the late forms in too.
Further, and in my opinion, I’ll wager that Trustpower are as frustrated with their bond trustee (Trustees Executors) as they are with the South Australian weather.
The trustee elected not to sign off on the corporate changes on behalf of bondholders (accept the new, very similar terms) and this resulted in an enormous mail out from TPW to all bondholders seeking a response.
The response has been logical: ‘of course we wish to keep our bonds and yesteryear high interest rates’.
This exercise in herding an enormous flock was then complicated by the South Australian weather event, costing TPW more time and money in communications and quite likely legal time.
I doubt that anyone in the TPW sphere (executives, shareholders, bondholders) are comfortable with the decision of the trustee on this occasion.
Z Energy Bond – is offering new 5 and 7 year bonds (1 November 2021 and 2023) at 4.01% and 4.32% respectively.
The offer closes this week.
Investors must call us to request an allocation and then urgently deliver their investment application form to our offices. (No later than this Wednesday, 26 October).
The application form is available on our website (PDF format).
Air New Zealand Bond – last week issued a new 6-year senior bond at 4.25%.
I applaud AIR for agreeing to a slightly higher margin to ensure $50 million was issued, but a little surprised that they didn’t lift the pricing a little higher to attract the whole $75 million, which itself is a modest sum to raise.
It seems that AIR’s main objective was to leave a ‘place marker’ on the NZX to ensure they can easily issue bonds again under the FMCA rules for issuing same type securities.
If you wish to invest in this bond and missed its placement last week please contact us urgently.
ASB Bank – has announced its intention to issue another ‘up to $400 million’ of Tier II subordinated bond to the public, probably in early November.
Regular readers will recognise these securities as being for a 10-year term with an interest rate reset, or repayment, after five years, and the securities can be converted to shares (in CBA Bank) or written off in the event of serious distress (if Non-Viability declared).
The estimated returns (credit margin estimated between +2.40% - 2.60% over the 5 year benchmark swap rate) implies a nominal return for the next five years of about 4.60% - 4.80% (although this is less than 1.00% over a bank deposit for a 5 year term).
I’ll confess to being less than enthusiastic at seeing ASB back with such an offer, especially with them giving capital markets no steer at all about capital management strategies of the bank which would assist owners of the bank’s other Tier I and Tier II securities to understand the bank’s intentions.
ASB now has three subordinated bonds on issue in NZ:
ASB perpetual preference shares (ASBPA);
ASB perpetual preference shares (ASBPB); and
ASB bank subordinated notes, Tier II capital (ABB030).
Investors have been able to diversify across bank brands within the new subordinated securities risks with ANZ, ASB, Kiwibank, BNZ and Westpac all having issued during the past year or so. There has been no shortage of opportunity to accumulate this risk type and I doubt there will be into the future.
Lack of scarcity will have an influence on the price (reward) of any security.
I haven’t reviewed ASB Bank’s capital status (Core Equity, Additional Tier I and Tier II) but I ponder the view that some of their issuance of these securities is simply a doorway for delivering equity capital to the parent CBA Bank from a market (NZ) that has been cheaper for raising such money than elsewhere in the world.
For the record I have no problem with the very low default risk of ASB Bank and CBA Bank. I am, however, beginning to wonder if pricing rewards measured against a swap rate (derivative) interest rate benchmark is pulling nominal interest rates down to unrealistic levels for real loans (bonds in this case); witness these capital risk securities with returns at less than 1.00% above a senior ranking bank deposit for the same initial period.
Bank deposit interest rates have not been moving in synch with swap rates.
In this newsletter environment I cannot tell people what to buy and sell, but I can say that I expect more information from ASB Bank about capital strategy and I can say to all banks that the market feels oversupplied with these capital instruments.
Quantum – The Wellington Company plans to offer another property for sale via a syndicated structure.
Details are yet to be confirmed but its imminence has resulted in us opening a contact list for potential investors to join.
Travel
Chris will be in Blenheim on Tuesday October 25 and Nelson, October 26.
Edward is in our Wellington office (Level 15, ANZ Tower, 171 Featherston St) on Tuesdays, available to meet new and existing clients who prefer to meet in Wellington - by appointment please.
Edward plans to be in the Wairarapa on October 27, Auckland on 15 November (on Queen Street), Auckland on 16 November (in Albany), Blenheim on 5 December and Nelson on 6 December.
Mike will be in Auckland on 22 November, Tauranga on 28 November and Hamilton on 30 November.
Kevin will be available in Christchurch on 17 November.
Investors wishing to make an appointment are welcome to contact us.
Michael Warrington
Market News 17 October 2016
The Air NZ bond offer and some recent travel focused my attention on this business.
Air NZ online booking system is developing clever algorithms to improve performance and also to extract extra value for the airline, however, they were not clever enough to recognise the laws of physics.
Mr Warrington cannot be in two different places at the same time, even though he booked flights which requested time travel from the airline. (Dr Who was on leave – Ed)
This didn't stop them taking my money though, plus the amendment fee once I woke up to my own poor administration.
This prelude is not why I began thinking about Air NZ.
What I really want to do here is provide Air NZ with a large bouquet for their procedure with unaccompanied minors. They do a fantastic job in a display of high quality customer service.
I have had several experiences now with dropping or collecting unaccompanied children and the airline's service is outstanding. Air NZ understand the need for an unbroken chain of responsibility for a child and insist on careful drop off and collection by family or friends, with identification required at all points.
Air NZ now provides the ‘halflings’ with wristbands and their movements are tracked and reported to the responsible people at both ends of the 'supply chain', sending text messages as each waypoint is passed (check in, boarding, arrival etc.).
Recently when my niece arrived without pockets full of her Mum's cash to share with us I explained to the Air NZ hostess that I didn't recognise the little girl. The hostess smiled as my niece protested and my phone text chimed to report her arrival.
Unlike the dreadful service provided by the unnamed competing airline, Air NZ recognise that family units are often separated or operating in different locations and that often children will want and need to move between those different locations without guardians being able to reasonably move with them.
Last week I complimented the young lady on their service. She smiled and said, 'six kids is easy, our record is 19 on a single flight!'
Air NZ deserves the premium pricing fee for their handling of our precious youngsters.
Investment Opinion
Voting – I think ‘we’ need to be careful about ‘our’ apathy for voting.
Voting in local government elections is very low (39.5%) and voting on company Annual General Meetings is extremely low (less than 5%).
With all due respect to the names who won Mayoralty and council ‘races’ last week it is my view that voting on a name (brand) in politics is weak in terms of reasoning, unlike corporate brands that survive only by delivering customer satisfaction.
Deciding not to vote during AGM’s is typically a mix of feeling one has no influence or a difficulty in processing one’s vote.
On the former point I think it is important to remove the leverage from the decision and more importantly to express your conclusion on the motion presented, just as you do with your single vote in a general election for government.
However, to repeat recent comments of mine, I encourage the public to consider membership of the NZ Shareholders Association because to appoint them as a proxy (with discretion to vote as they see best, on your behalf) is to increase the leverage of your vote.
Access to voting is gradually improving as companies move to the online process. This is now easy to complete on one’s computer or iPad in a short space of time.
My only gripe is that not all companies offer online voting yet, and one or two foolish boards have removed the ‘NZ Shareholders Association’ from the list of common proxies (Chorus, you are a recent example that I noticed).
If we do not vote, when able, we undermine our own outcomes, releasing influence to others to make decisions about preferred courses of action.
In my experience people who make decisions about ‘other people’s money’ invariably act in a self-serving and value destroying way.
Please make more effort to vote.
Post Script – I think online voting is necessary but as it happens I am unconvinced about the claims that online voting will increase participation in the election of politicians. It requires a new approach with the information presented to capture the imagination of younger members of the community.
A faster or more efficient portal means nothing if the material being distributed is unwanted or ineffective.
It is true that the younger generation will prefer technology based voting but in my view voter participation will only increase if those standing convince us to vote. I therefore hope that political candidates learn from the rapid rise in online provision of investment information (reports, AGM’s, other video presentations) and begin presenting me with links to their pitch for election and not template written paragraphs in printed material.
If I lived in Auckland, with little time to attend public sessions, I would like to have clicked on a link within an online voting portal to watch a 5-7 minute video from the likes of Victoria Crone explaining how she would add value to the city.
Smart phones, iPad and laptops are the window to the attention of the young. An online voting system (with multiple doorways to access) would combine the material in one place and thus not require all members of the public to join Facebook or some other portal that many may not otherwise use to listen to the most technically savvy politicians.
Market Decline - We have received an elevated number of calls and emails from clients reacting to the recent declines in share market pricing.
Many have started their communication with, ‘shall I sell because of headline X’.
I never make investment decisions based on headlines.
The retreat in the share market is unsurprising given that this occurs often in markets.
The scale and speed of the decline does create a curiosity to check the drivers of current market pricing, but if an investor’s portfolio is in line with their strategic intention then it is unlikely that such an investor will need to make any changes to their portfolio.
If an investor is holding ‘more shares’ than intended, or ‘more value in a single share’ than intended then I am not surprised to learn they are uncomfortable with recent share market price declines. These people should have, and should still be getting financial advice about appropriate actions to take.
Many have, in a round-about way, asked me to predict tomorrow’s share price behaviour so they can make a new decision about an investment holding. I respond, as I always will, that I cannot make such predictions and they shouldn’t believe anyone who tries to. ‘You are an investor, not a trader’.
Nobody wants to lose value, albeit recently gained value, from an investment but when investing in assets that are regularly revalued (such as shares) one must accept the gyrations in the overall value of a portfolio.
In my view, an investor should be able to contemplate the impact on their circumstances if they were to experience a 20% decline in the value of their investment portfolio, as unlikely as such a move may be. To put this in perspective a 20% decline in the value of a self-managed portfolio would likely require a 40-50% decline in the value of the shares held given that the majority of the fixed interest assets would not lose value (may gain value).
If, in reaction to the market behaviour, the (disappointed) investor would not change the investments held because the outcome would not change their lifestyle, then it is likely that the investor is making decisions on the basis of a sound strategic plan (investment policy), as they always should be.
So, if you have felt the pangs of nervousness as a result of your portfolio and recent share price movements, or a hollow feeling of fear, then it is most definitely a reminder to clarify what your investment policy is and to measure your current investments against it.
If we are authorised to provide a person with financial advice, we will do so.
Fees – The public seem to be distilling the impact of fees to the top of their decision making around investing, as they should for this clarity is valuable and the impact of fees on investment returns is direct.
I was disappointed to read that Kiwisaver fees collected climbed as a proportion (up 28%) but this change reflects the successful public lobbying which asked investors to take more risk with their chosen asset allocation. I haven’t read this latest report but you may recall that last year overall Kiwisaver fees equated to 1.94% of funds under management which is an enormous expense.
Increased risk profile may well be appropriate for many but it is now equally important that fee ratios decline.
One client communicated with me the logical idea that the government should insist that the ‘default’ Kiwisaver providers must also offer the lowest fee structures to be granted such a role by the government.
By contrast the Exchange Traded Funds industry seems to be entering a new war on fees with the largest providers cutting fees that are already extremely low; BlackRock (through its iShares) lead the fight by cutting fees on its largest funds from 0.07%-0.08% down to 0.04%. Charles Schwab followed and cut fees from 0.05% to 0.04% on its largest funds.
Given the low fee principles of Vanguard they are presumably very pleased about this market development and will likely now cut their fees, already set at 0.05% on large funds.
BlackRock hinted that 0% fees are possible, but only as a loss leader in a portfolio of funds, a bit like cheap bread and milk at a supermarket.
I know NZ is small and the opportunity for cost sharing is lower but it is staggering to observe the difference in the fees paid here with those in my previous paragraphs. No human (or robot – Ed) can claim to be sufficiently talented at managing money to claim that they will outperform these major fund managers by 1.90% per annum! (Kiwisaver 2015 costs versus the major ETF suppliers).
The fact that large fund managers can generate sufficient profits off 0.05% fees puts in perspective how enormous a 1.94% annual fee/expense really is.
The most important part of wealth accumulation is the dollar saved (spending less than one earns), thereafter ‘icing’ is applied via investment management and compounding is applied. Saving and compounding do not involve the fund manager; their fee relates only to administration costs and adding the ‘icing’. If the icing costs 1.94%, or anything like it, it is better not to have it (regardless of your position in the sugar debate - Ed).
Long-time readers may recall that I did some maths once which concluded that based on current Kiwisaver industry fees there is a crossover point where the fees charged will be greater than the contributions received from government and employer into a person’s fund!
For the sake of a little balance, I did witness some fee cutting from a NZ fund manager and they deserve to be named; ANZ Bank (and various funds). There may be more but this is the one I spied.
From January 2017 forward they have reduced their fees from roughly 1.45% per annum to roughly 0.85% per annum (small variations across differing funds).
It wasn’t clear to me if this fee included or excluded fees from external managers they use, so I asked. Frustratingly the answer amounted to ‘we can’t answer unless you can pass our security questions for identity purposes’.
Good grief, the political correctness world really is mad. I didn’t ask them to pay me any money or disclose someone else’s fund values, just to disclose fees.
So a bouquet to ANZ for meaningful cuts to their fee structures, with a smaller brick-bat for their silly reply when I tried to clarify the good news item.
I know we beat this drum regularly, with a variety of drum-sticks, but keeping fees down is too important to forget.
Investment News
Sky TV bond – patient holders of the annual reset bond from Sky TV (SKTFA) were repaid today, at the end of the 10-year term and they will be pleased to get this money reinvested for better returns, finally.
It is a strangely satisfying day for me too because I was there, at ANZ, when this bond was issued, poorly as it turned out.
It was not poor because of its annual reset interest rate, which lowered investor returns; this was simply a function of changing market pricing.
It was poor because we managed to get the credit margin wrong at the time so the bond issue was unfilled and it marked a turning point (back upward) for credit margins, consigning the SKTFA to a pricing discount for the rest of its life.
Investor woes were simply compounded by the falling short term interest rates which we hope most investors offset by a strategy of adding some long-term fixed rate investments (remember us chanting ‘Strong, Long and Liquid’).
Anyway, enough of the reminiscing (or nightmare revisited – Ed), I am pleased to see this bond reach its end point.
Flash Crash – Examples of market interference by computer generated trading behaviour are becoming more frequent, and thus more of a concern, as the interference results in the market being less orderly and more volatile.
This, in turn, is a negative trend for the fundamental value of investment of capital in an economy, as opposed to trading opportunities for those positioned in the middle of the market who add nothing to the economy other than the fringe value of liquidity in capital markets.
However, I discussed in recent weeks that decline in market liquidity is occurring, not improvement, as genuine risk takers back away from an environment increasingly dominated (internationally, but less so in NZ) by ‘front running’ computer trading based on algorithms and advance knowledge of market trading information.
The latest disturbing event was the 6% decline in value of the UK Pound in a matter of minutes (Friday night, 7 October) against the US dollar.
From a NZ perspective the cross rate rose from 0.5650 to nearer 0.5900 before returning to a price of about 0.5750. By Wednesday it was rising again, breaching 0.5800 which is good for the occasional Kiwi travellers and does only modest damage to our export sector which the UK closed the door on many years ago.
This scale of volatility though is unhelpful.
Unfortunately these moves are too fast for Kiwi travellers to take advantage of and I doubt your bank would move its cash pricing fast enough for you even if you were watching at the time.
The change in value for the British Pound has been dramatic in anyone’s language but I agree with Lord Mervyn King (retired Bank of England governor) that the falling GBP will assist their economy. The UK is achieving in spades what all other trading nations are fighting to achieve; a weaker currency to support the export sector(s).
Readers will recall the difficulties faced by Greece when they could not devalue their currency and benefit from the price change for its products and services.
The UK has a similarly difficult mountain to climb with its disconnection from the European Union but the sharp decline in the price of the GBP is softening the inevitable near term blow.
Ryman – I see Ryman has purchased an old closed school site in Melbourne for a new retirement complex.
That might provide an opportunity for a reminiscent retirement for some.
Global Debt – The International Monetary Fund reports that global debt is passed US $152 Trillion and it continues to rise.
They report this as being 225% of global GDP.
I frequently read about how inaccurate GDP measures are and the tone of such analysis tends to conclude that it is overstated.
Counting up debt, however, is simple mathematics 101 so will be a highly accurate number.
So, the true ratio is probably much worse than it seems.
Unsurprisingly the IMF is pleading with governments to ‘tackle this serious problem’.
Ever The Optimist – The Government Budget surplus of $1.8 billion is excellent news.
Given New Zealand’s economic activity levels it seems assured that the 2017 fiscal surplus will be larger again.
I don’t understand those who would criticise the very sound financial management by the NZ government (broadly true for both National and Labour during the past 20 years).
My preference is that the NZ government use surpluses to again reduce its nominal debt to about 20 billion (10% of GDP), return to building assets held (acorns, squirrel) for future superannuation (via Guardians of NZ Super Fund, unlike other under-funded nations and companies) and thereafter to address the potential for tax reductions, or changes in tax strategy.
We now need to convince the NZ public to start reducing private debt ratios because they remain excessive.
ETO II – The tourism train rolls on, with no obvious sign of crossroads.
Tourist accommodation was up 6.40% in August (2.45 million guest nights!), to again deliver record numbers for the month of August.
ETO III - Thirty of New Zealand's largest companies are committing to at least 30 percent of their corporate fleets being electric vehicles by 2019, following assistance (tax impacts) from the government.
The hope is that this move will help to supply the market with second hand electric cars to increase public use of electric cars too.
As long as the capital cost of such cars becomes more closely aligned with average car prices, as it should with less engineering (moving parts) then the rising use of EV should begin to have a very good effect on New Zealand’s Current Account, which needs to spend a generation in surplus (in my view).
Investment Opportunities
Trustpower (TPW) Bond – There are two parts to the current Trustpower situation.
The new bond (TPW150, 6 years at 4.01%) closes this week for new investors. If you haven’t invested and wish to do so you must contact us immediately, please.
The actions required relating the demerger (Exchanging bonds) have been extended as a result of the delay to the legal completion of the demerger.
However, in our opinion holders of the ‘old’ Trustpower bonds should continue to submit their ‘Exchange Offer’ documents as soon as possible. Doing so leaves such investors with an unchanged bond holding regardless of the outcome at a corporate level for Trustpower.
Z Energy Bond – has returned to the market with an offer of 5 and 7 year bonds (1 November 2021 and 2023) at 4.01% and 4.32% respectively.
The rollover opportunity from maturing ZEL010 bonds, into these new bonds, closed last Friday. If an investor did not respond to the Exchange offer they will be repaid today.
Investors using new cash must call us now to request an allocation and then have until 26 October to deliver their investment application form to our offices.
The application form is available on our website (PDF format).
Air New Zealand Bond – has announced the offer of a new 6-year bond at 4.10%.
The offer is a fast moving, booked by contract note offer, with Air NZ paying the brokerage expense.
Investors wishing to invest in the new Air NZ bond must contact us to advise the firm amount sought by close of business this Wednesday.
Once our allocation is confirmed we will issue contract notes to investors requesting payment, which will be due by 27 October.
Thank you for your prompt attention to this offer.
King Salmon Ltd Shares – is now closed, fully subscribed. Thank you to those who invested in this offer through Chris Lee & Partners.
Quantum – The Wellington Company plans to offer another property for sale via a syndicated structure.
Details are yet to be confirmed but its imminence has resulted in us opening a contact list for potential investors to join.
Travel
Chris will be in Nelson on Tuesday October 25 and Blenheim, October 26.
Edward is in our Wellington office (Level 15, ANZ Tower, 171 Featherston St) on Tuesdays, available to meet new and existing clients who prefer to meet in Wellington - by appointment please.
Edward plans to be in the Wairarapa on October 27, Auckland on 15 November (on Queen Street), Auckland on 16 November (in Albany), Blenheim on 5 December and Nelson on 6 December.
Mike will be in Auckland on 22 November, Tauranga on 28 November and Hamilton on 30 November.
Investors wishing to make an appointment are welcome to contact us.
Michael Warrington
Market News 10 October 2016
Kevin kindly offered to write Market News this week, enthusiastic to express some views that have been accumulating in his head after discussions with clients and based on market observations.
I quite enjoy the different perspectives seen recently in the contributions from the others working at Chris Lee & Partners.
Kevin writes:
Over the past decade the NZ Superannuation Fund (NZSF), colloquially and respectfully known as the ‘Cullen Fund’, has been one of the world’s best performing sovereign wealth funds.
The NZSF was created in 2003 to help fund the future cost of pension payments as a result of NZ’s aging population with Statistics NZ predicting that our population aged 65 years and over will surpass one million by the late 2020s, nearly double the figure from 2009. (Which reminds investors of the attention being paid to the retirement accommodation sector – Mike)
The Government contributed $14.88 billion to the fund between 2003 and 2009 before deciding to suspend payments until the country’s debt level fell back below 20% of GDP. (Sorry, me again, I’d quite like them to apportion parts of surpluses even with debt at 30% - Mike)
Government contributions are expected to resume again in 2020-21 and from 2032 the Government will begin drawing on the fund to help with NZ Super payments.
Since its inception, 13 years ago, the Super Fund has achieved average annual returns of nearly 10% (after fees/before tax), which includes the carnage to equity markets that accompanied the global financial crisis (2008-2009) but also the strong recovery and gains since the crisis which, for example, has seen the NZX50 Gross Index appreciate by over 17% per annum over the past 5 years.
There have been calls for the creation of a Kiwisaver fund that mirrors the NZSF investment portfolio so that individual New Zealanders can also benefit from the apparent expertise of the super scheme’s fund managers although I suspect that if retirement savers like to do their research and shop around they will find some providers who have achieved equally good results.
For example, Milford’s Active Growth Fund has returned around 13% per annum since the inception of Kiwisaver in 2007 and several of its other funds have produced annualised returns of around 10%, also after tax but before fees.
Interestingly Milford’s growth fund has a much higher weighting to NZ shares versus global shares which probably explains its better performance. The NZSF has 61% allocated to global equities and only 5% to NZ equites whereas Milford has 66% allocated to NZ listed and unlisted companies and only 10% to global equites. This is an excellent example of the impact that asset allocation has on investment performance.
Perhaps those calling for a better option are stuck inside the AMP Growth Fund which, in the same market, has achieved a meagre return of just 3.79% per annum over the same period (Source: AMP Website – AMP Kiwisaver Scheme Returns).
Growth funds have a high allocation to shares, the selection of which normally requires some skill and as much knowledge as can be gained, and the fact that some of AMP’s more conservative and passively managed funds have outperformed its growth fund in a bull market is hard to fathom.
AMP sponsors Paul Henry’s morning TV show and as part of the deal they get regular slots to promote their business and products.
Earlier this year I was watching and their front person was promoting the case to leave your Kiwisaver nest egg with your fund manager post-retirement claiming that ‘’if AMP can achieve you double the return of a bank deposit why wouldn’t you’’.
This factually incorrect claim really annoyed me because AMP was using the credibility of Henry’s show to promote their own products and telling what I’d call ‘porkies’ within the promotion.
People are influenced by what they see and hear on credible programmes, and it appears in this case, wrong.
It was grating to hear such misleading nonsense when comparing it the FMA telling our business it must not describe itself as a sharebroker (possibly misleading people to believe we were NZX members) and we had erred by failing to describe a minimum investment amount in an advertisement offering the public access to a prospectus for an investment offer.
There’s a ‘wood and trees’ issue here.
Even without making allowance for the differing risk profiles of a bank deposit and an AMP managed fund I doubt whether there is a man, women or child in NZ who could not have achieved a better annualised return than 3.79% before tax over the past nine years, by simply investing in bank term deposits (of any term).
Even AMP’s best performing Kiwsaver funds don’t measure up to a bank deposit over this period, let alone provide double the return.
We do not advise on, or derive any income from, Kiwisaver but believe that because of the subsidies available participation is a no-brainer. Retirement saving should be compulsory in my opinion and given our unwise propensity for debt (as a nation) I wouldn’t be offended by an increase in the minimum rate deducted from ones income. Australia is now deducting 9.50% as a minimum, rising to 12% by 2025.
One thing that does concern us about Kiwisaver is that a great number pay very little attention to the underlying performance or fee expense of their fund, with many not knowing what type of fund they are in and some not even knowing who their provider is.
The FMA has gone to some lengths to improve the frequency and quality of reporting by Kiwisaver providers and now savers need to become more engaged and be aware of the type of assets they are exposed to and how their fund is performing relative to other scheme providers. (Mike spied the latest report and may comment from it next week)
Changing providers is simple and should cost nothing.
Since the GFC unconventional global monetary policy experiments have provided a very strong tail-wind for sharemarkets, and equity prices, and this has been very positive for Kiwisaver balances, with all but the lowest risk cash funds having some correlation with equity markets.
In fact over the past 5 or 6 years almost any type of exposure to shares would have been very rewarding for investors and unless you confined your investing to the technology stocks and the small number of other non-performers it would have been almost impossible not to have made some money, on paper anyway.
In the case of investors who bought the power companies, retirement sector, Z Energy, Heartland Bank, the listed property trusts, and old favourites like Auckland Airport, F&P Healthcare, Ebos, Mainfreight, Port of Tauranga, even new industries like Comvita etc, etc, take your pick really, the returns would have been spectacular.
Unlike direct ownership of shares, or holders of units in managed equity funds, Kiwisaver investors can’t cash out if the market turns sour or if they sense trouble. Kiwisaver funds are locked in until age 65.
Kiwisaver investors can however swap between funds or alter asset allocation within a fund to less volatile assets (typically cash and fixed interest) as they near retirement to help mitigate the risk of a major share market correction, should one arrive.
Kiwisaver investors should be well aware by now of how share market corrections can impact growth and even balanced funds, yet many savers nearing retirement still can’t bring themselves to take a more conservative position because in their words ‘’the current returns and growth are simply too good to give up’’.
An average investor may well have said the same thing in early 2007, but would have undoubtedly been feeling awful by early 2009 if no changes had been made to the 2007 portfolio.
This strategy of ‘hold on’ may have held-up OK until now but the four tremors that we have experienced in our share market over the past 12 months, all of which originated in the US or China (two largest economies), have provided some valuable warning signals for equity investors.
If you take a look at how your Kiwisaver, or equity fund, performed during these four periods, August/September 2015, January/February 2016, June 2016 and September 2016, you will get some insight into how your fund might perform if there is a major sharemarket event.
Remember Mike drawing your attention to the $1 decline in Auckland Airport shares in less than a week and the market liquidity influences?
Low and negative interest rates, not earnings growth, have been driving global share markets higher in recent years and although global central banks are sticking grimly to their task of trying to save the day financial markets are currently trading largely on sentiment not fundamentals.
The fact that much of the world has too much debt and no hope of ever repaying it won’t in itself bring the house down.
Nor will the fact that based on earnings many companies now appear overvalued.
The game will be up when the market loses confidence.
What that confidence destroying event will be is anyone’s guess. (otherwise we be alerting you to its presence – Mike)
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In 2014 we ran an article about the European Central Bank (ECB) conducting asset quality reviews and stress testing on 124 Euro banks, before it took over the role as supervisor for the Eurozone banking sector.
At about the same time leading think tank and independent research house The Centre for European Policy Studies (CEPS) conducted its own study on the same banks.
The CEPS were not alone in believing that the ECB’s testing would suffer from political interference and that its published findings would not reflect the true picture. Window dressing, so to speak.
As expected the ECB review concluded that the majority of the Euro banking sector was adequately capitalised and with no significant asset quality issues and they ticked all the boxes for the big banks, including the heavyweight French and German banks (Deutsche Bank anybody? Mike).
They smacked the hands of some of the smaller banks and flexed their muscles at a few others in an attempt to give their process credibility; otherwise they signalled that the European banking sector was in pretty good shape and ready to handle stressed conditions should they eventuate.
Who knows, maybe the naughty little banks who were chastised publicly were offered priority access to the additional liquidity and ‘bond buying’ programmes later established by the ECB in return for accepting the public flogging.
Many leading analysts in Europe, including the CEPS, were not convinced by the ECB’s work.
In fact the CEPS report, which was released before the ECB report, painted a very different picture and started by outlining how flawed risk-weighted asset-based measures are when the banks are allowed to use unrealistic and out of date risk weights. We discussed this at our seminars last year and have spoken about it often in these newsletters.
Their report concluded that many of the major banks in Europe were seriously under-capitalised and they presented a list of the banks they believed had the largest capital shortfalls under both stressed and unstressed capital measures.
Deutsche Bank ranked No 1 on the CEPS list as the most under-capitalised bank of the 124 they tested, and although the big German bank’s regulatory capital ratios were compliant (calculated on risk weighted assets) it attributed a zero risk weighting to 80% of its assets (no percieved risk of failure for any of these loans).
Now, less than two years later, Deutsche Bank requires a major capital injection to help pay fines relating to its involvement in the ‘toxic mortgage festival’ that proceeded the GFC.
Although Deutsche Bank’s current capital shortfall is driven by behavioural issues, not rotten loans, it casts further suspicion on the ECB and its’ ’smoke and mirrors’ type regulatory style as guardian of the European banking sector.
It is little wonder that both Mario Draghi and the ECB have lost much credibility and are now viewed with contempt by a rapidly changing political power base in Europe. Mind you, it is also a little bit rich that German regulators adopt a holier than thou stance in European finance whilst the major German bank is proving to be from quite a different religion.
The Eurozone banks were never made to write-off their piles of non-performing loans at the time of the European debt crisis. Instead the ECB created a facility that allowed the banks to restructure these bad loans, essentially just buying time until the Euro economy recovered.
To do otherwise at the time would have either wiped out too many banks or required an unmanageable amount of new capital, which the Germans probably would not have agreed anyway.
The Europeans are still waiting for that recovery.
So the ECB decided on a postponement strategy, providing the banks with ample liquidity at minimal cost so that they could repair their balance sheets with easy profits.
Of course there has been no economic recovery in the Europe, the opposite in fact, and now the problems are starting to resurface. If the Euro banks had been well-capitalised as the ECB claimed, but which was never true, there would be many better options today.
The prospect of having to bailout Deutsche Bank puts Germany in an awkward position as they have been strong opponents of bailouts for lenders in other countries, most recently the Italian banks where it is reported that once lending to Government entities is deducted roughly 40% of all bank loans are non-performing.
How could the Italian banks possibly have passed the ECB’s stringent testing process, barely two years ago, and now be on the brink of collapse with 40% of their non-government loans going down the gurgler?
For that matter how did Deutsche Bank pass its ECB stress test earlier this year? (The US Department of Justice forgot to give them a head’s up on the imminent multi-billion dollar fine – Mike)
As the biggest bank in Europe Deutsche Bank will be provided with whatever assistance it needs to survive but you would have to think that their current predicament, and the recent demise of the Italian banking sector, will only be the tip of the iceberg of problems in the European banking sector.
One of the biggest concerns about Deutsche Bank is that because of its massive derivatives portfolio, reportedly 75 trillion dollars, it has its tentacles spread right throughout the global financial system, and the bank’s failure would have serious repercussions all around the globe. (The same as the US Federal Reserve’s fears of interwoven financial risks when Long Term Capital failed in 1998 – Mike)
It will be interesting to see if they bail-in the bank’s subordinated bondholders in the event of a rescue package as part of the necessary recapitalisation of Deutsche Bank, they surely should do so.
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The collusion between bankers, politicians, regulators and policy makers continues to flourish in the US and their club-like behaviour was on display again last week at the congressional enquiry into the phony account scandal at Wells Fargo, which involved the creation of around 2 million fake accounts.
It was revealed a few days after the hearing that only 2 of the 22 members of the Senate Committee on Banking, who conducted the enquiry, had not received political donations from either Wells Fargo or its CEO John Stumpf. How awkward that must have been for them.
Not surprisingly Senator Elizabeth Warren, who grilled Stumpf at the hearing, was one of the two Senators who had not accepted payments. No wonder she commanded so much of the speaking time allowed.
At a separate hearing the House Finance Services Committee pressed Fed Chairwoman Janet Yellen to punish Well Fargo & Co for its fraudulent behaviour but she was her typical spineless and pigeon-hearted self and declined to commit to any regulatory penalties.
It is little wonder that middle class Americans, who have observed this greed and corruption on Wall Street for decades, are sharpening their pitch forks and forlornly pinning their hopes on Donald Trump to challenge the financial elite and their crocked ways.
Not only has there been no benefit or trickle-down effect from the rich getting richer, middle class Americans have had to endure nearly 3 decades of declining living standards and declining political standards.
Trump is a product of Americans disdain for the political and financial elite. People like Trump simply don’t rise to prominence in normal times.
Often Trump gives the impression he is trying to lose the election with his outlandish comments and displays.
If he was serious about moving into 1600 Pennsylvania Avenue he might be better to abandon the Clinton character assassination strategy and offer some suggestions on how he might improve the lot for working middle-class Americans.
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After trading below 50 cents in the $1.00 in 2012, amidst the uncertainties of the European sovereign debt and banking crisis, Credit Agricole’s subordinated bonds (CASHA) are now trading at a price that reflects growing market confidence of repayment in December 2017.
At $0.91/$1.00 and a little over 14 months to run, if they are in fact repaid next year, the CASHA bonds still offer a healthy double digit return, although in view of the current Deutsche Bank dilemma and the recent Bank failures in Italy the current pricing seems about right from a risk/reward perspective.
It was always understood, but never written, that the CASHA bonds would be repaid after 10 years.
The same applies for the two Rabobank securities, RBOHA and RCSHA, and market expectation is for repayment of these bonds in October 2017 and June 2019 respectively, which would also represent a 10 year issue life.
ANZ’s subordinated bond (ANBHA) reaches 10 years in April 2018, and is expected to be repaid on that date.
All of the bonds listed above are now priced for repayment on their 10 year anniversaries.
Other issuers of Bank Subs, BNZ, Kiwibank and CBA, have already repaid their ‘old style’ securities.
What makes repayment of these securities seem even more likely is that under the new global regulations for bank capital adequacy, which were introduced in 2013, these bonds lose all equity recognition in NZ as from 1 January 2018, although they retain some equity value on their parent’s balance sheets for several more years. (NZ is phasing out its non-qualifying securities over a much shorter period than required by global regulators).
The only non-compliant securities missing from the above list are, of course, the ASB subordinated bonds, ASBPA & ASBPB, and based on their discounted trading prices these securities are definitely not priced for repayment in 2018.
Why the substantial difference of opinion?
Pricing is of course based purely on markets opinion, ASB Bank has issued no direction, nor they can, it is not permitted by their regulator.
With only a little over 18 months until the first anniversary of the ASBPBs, in May 2018, after which all equity recognition is lost on these securities, it will be very interesting to see how ASB behaves.
It seems very likely to us that RBOHA, CASHA & ANBHA will all have been repaid by that stage (2018), potentially leaving ASB as the only NZ bank with non-Basel III compliant subordinated bonds still on issue, and investors wondering if they should ever provide such capital to them again.
The market is currently pricing in almost zero likelihood that ASB will repay in 2018.
Will the market be right?
Investment Opportunities
Trustpower (TPW) Bond – Trustpower has encountered what they hope will be a minor delay with the demerger of the business, which has affected the dates surrounding the bond holder activity.
In our opinion holders of the ‘old’ Trustpower bonds should continue to submit their ‘Exchange Offer’ documents as soon as possible. Doing so leaves such investors with an unchanged bond holding regardless of the outcome at a corporate level for Trustpower.
New money Investorsfor the new issue of a 6 year bond (TPW150) at 4.01% must continue to submit their applications as this offer remains on schedule to close on 21 October.
Z Energy Bond – has returned to the market with an offer of 5 and 7 year bonds (1 November 2021 and 2023) at 4.01% and 4.32% respectively.
Holders of the maturing ZEL010 bond have been issued with reinvestment forms, should they wish to reinvest. $100 million of the new bonds will be held (first in first served) for investors wishing to rollover from their maturing ZEL010 bonds (15 October 2016). There are $150 million maturing ZEL010 bonds so there will be a little tension around taking action to return one’s reinvestment application form.
The Exchange (rollover) offer closes on 14 October (this Friday) and thus requires urgent attention by ZEL010 bondholders if they wish to reinvest.
Rollover Investors are asked to record ‘Chris Lee & Partners Ltd’ in the broker field before returning the completed application form. Z Energy is paying brokerage on rollovers (as they are with new investments).
Investors using new cash must call us to confirm an allocation and then have until just prior to 28 October(close) to deliver their investment application form to our offices.
We have loaded the application form on our website (PDF format).
Air New Zealand Bond – has announced its intention to offer a new bond to replace its AIR010 bond, which matures on 15 November.
More details will follow next week but one item that I spied was an intention to raise only $75 million of the new bond against a maturing amount of $150 million AIR010.
King Salmon Ltd Shares – King Salmon’s share offer has been formalised and the share price has been set at $1.12.
Our allocation has been exhausted and all application forms should be on there way to us, if not already received.
The offer closes on 14 October.
Quantum – The Wellington Company plans to offer another property for sale via a syndicated structure.
Details are yet to be confirmed but its imminence has resulted in us opening a contact list for potential investors to join.
Travel
Edward is in our Wellington office (Level 15, ANZ Tower, 171 Featherston St) on Tuesdays, available to meet new and existing clients who prefer to meet in Wellington - by appointment please.
Chris will be in Christchurch (Chateau on the Park) on Tuesday October 18 and Wednesday 19 then in Blenheim on Tuesday October 25 and Nelson, October 26.
Edward plans to be in the Wairarapa on October 27, Auckland on 15 November (on Queen Street), Auckland on 16 November (in Albany), Blenheim on 5 December and Nelson on 6 December.
Mike will be in Auckland on 22 November, Tauranga on 28 November and Hamilton on 30 November.
Investors wishing to make an appointment are welcome to contact us.
Michael Warrington
Market News 3 October 2016
The world needs some big picture thinkers.
Elon Musk of Tesla fame and SpaceX Infamy now talks boldly of colonising Mars.
Colonisation hasn’t gone all that well on Earth so making plans for Mars is either brave, or…
Musk’s horizon thinking is to be encouraged, along with a dose of realism.
Good leaders can deliver upon realistic goals but success in the dark involves luck not leadership.
I am pleased that I don’t own shares in Tesla or SpaceX.
Investment Opinion
GST – In the latest of my irregular series of ‘news from Queenstown’ I see a cause for NZ to increase GST to 20%, and simultaneously reduce the lowest PAYE tax rate.
October is, in my mind, a shoulder season for Queenstown when crowds should be down, seats available in restaurants and parking always available, but there are no ‘shoulders’ here any longer. New Zealand’s ever increasing tourist numbers are obvious.
To some extent this is very good news. Tourism should be reliable business for NZ that shouldn’t be hindered by the rising number of trade barriers that concern the World Trade Organisation (WTO). Many people are employed to provide service to the tourists and many investments are generating a return but it all feels like a sugar rush to the casual observer.
I can’t easily identify long term rewards for council, other than development fees (another sugar rush) and rates on properties needed for ever more employees in properties they cannot afford on $15.25 per hour.
I see that the GST (15%) collected by government is good quality, and rising faster than the many helicopters leaving the airport every 60 minutes, but I am quite keen on the idea of increasing this revenue source from the increased flow of tourists. Central government can help council (just as they are in Auckland) to keep this flow of tourists moving by increasing its investment in the likes of the cycle ways, road quality, the airport ring road and the new double bridge across the Kawarau River.
Lower PAYE for the underpaid tourist industry employees will help them afford the rent. There is no chance of them buying their own properties in NZ hot spots.
Tourism is a major ‘export’ for NZ, which requires no ‘shipping’ on our part. Unlike the problem faced by OPEC it is not a fossil fuel and we don’t need to negotiate with anyone else about supply agreements. So let’s up our game and up our GST rate for the centralised benefit of our nation and, through a PAYE cut, share some of the benefit.
For the purposes of update, there are still a very large number of diggers, trucks and tradesmen at work in Queenstown so we can’t be too far off reaching another period of oversupply.
There is however potential for a headline about property development failure to span two property slumps.
Regular readers and Queenstown visitors will recognise the Kawarau Falls development (The old Christian campground at lake Wakatipu sole exit, becoming the source of the Kawarau River) that Hanover unsuccessfully funded for Nigel McKenna (who was equally unsuccessful).
An ODT headline a few days ago reported that the Appeal Court reached a judgement in favour of the Singaporean investors who agreed to buy apartments in Kawarau Falls, but they were never started let alone finished, and the developer’s receivers must return their deposits plus additional costs because the contract to deliver properties was not delivered upon.
After the failure of McKenna’s development there was never an attempt to deliver the apartments but it seems that the receiver wanted to keep the deposits and declare the situation as caveat emptor. I am pleased that the courts found otherwise because the alternative would result in more of the same poor behaviour from developers with other people’s money. (Don’t return deposits from failed projects and can’t repay lenders!)
As I write I am looking across at the same scar on the landscape. It has new diggers on it. It remains a poster for the failure of this site and given how slowly it is progressing the current boom looks likely to peter out (my opinion) before they finish off this latest development attempt.
Meanwhile, up at the Five Mile (Henderson’s hole), things are developing well and quite quickly. Frankton is successfully becoming the industrial and retail (as you and I know it) centre for the district. Queenstown central looks likely to continue its trend toward Gucci, Louis Vuitton and Prada as I have seen in other tourist spots of the world.
The Hon. Bill English (home town just down the road) won’t mind highly priced products being sold because it results in a higher flow of GST into the Consolidated Fund.
Investment News
Deutsche Bank – I only know what I have been reading about this developing story, and there is a lot to learn yet, but DBK is sailing in seriously troubled waters and this situation is rapidly becoming the highest priority concern for European banking regulators. Growth and deflation issues are taking a back seat. Italy has hidden its problems this long so a few more weeks shouldn’t hurt. BREXIT is not a near term concern.
DBK’s share price is now below Euro 10.00 and to put this in perspective its share price low during the Global Financial Crisis was twice the current share price. (The price moved back above EUR 10.00 following news the fine might be only $5-6 billion!)
This DBK story warrants monitoring.
Intueri – I thought education was becoming a ‘growth business’ for NZ but Intueri has proved a spectacular failure in the sector.
I am undecided on whether to be disappointed with a failure in this important sector or to congratulate the government for looking more closely at who it offers resources to and refusing to be taken for a ride, if it spots any such abuse.
I note for the amateur investors that ACC has conceded even the best can make errors. They invested in Intueri and have subsequently sold out, recognising the dismal failure that Intueri has become as an investment.
Hellaby – The takeover offer for Hellaby has drawn an interesting response. Several large investors state that they have agreed to accept the offer but directors of Hellaby say the offer isn’t high enough.
The logical position is to do nothing until you have received the written opinion from your directors, based on an independent valuer’s input.
Low Interest Rates – We are all becoming numb to the prospects of low interest rates. I once commented that they were likely to remain very low for the rest of my career (15 years until National Super, assuming the goal posts aren’t moved).
However, it remains disappointing to read a headline from the Bank of England that interest rates will ‘remain low forever and Quantitative Easing will be in continuous use for monetary policy management’.
My initial reaction was to rebut with a statement that this was inconsistent with the behaviour of a market place, which moves in two different directions.
Then I thought of Japan, the nation that has travelled furthest down the road of financial market interference; recall last week that they now plan to determine what interest rates they will allow for Japanese Government Bonds (JGB). Thus, JGB trading can no longer be considered a market place, but rather a little ticket booth at the front window of the Bank of Japan where one asks the price of the desired transaction and takes what they are given.
Then the BoE statement was further reinforced by the fact that it came from the lady who I recently complimented for achieving the role as head of the London School of Economics (stepping down as deputy governor of the BoE). Her imminent departure from the BoE gives her a free range to express her real opinion unencumbered by subconscious overlay.
Europe and England also engage in QE and thus seem likely to follow Japan’s procedures for monetary policy management.
It is possible, and I’d like to think logical, that investors can be offered credible interest rates when they take higher risks even if the risk free interest rates are held near zero by regulators. We can set this development in train soon in NZ if the Reserve Bank rolls out higher Risk Weighting settings for bank capital for higher risk lending, such as to property investors.
Higher risk interest rates for moderate risk items such as secured mortgages on investor property, of say 5.00% - 5.50%, should pressure interest rates higher on other similar or higher risk lending in NZ.
Perhaps this is how we will escape the 3.50% - 4.00% long term interest rates of today, but Minouche Shafik doesn’t believe it.
Ever The Optimist – Westpac is wisely ditching its cross-selling policy which pressures front line service staff to sell more services to the public when they visit for simple banking tasks.
Westpac has clearly observed the cross-selling disaster at Wells Fargo (US largest bank) where the pressure became so great that staff began opening additoinal accounts without even asking the customers, just to please management and shareholders with statistics.
They have introduced a novel idea: Sales staff will be rewarded based on how well they meet customers’ needs, rather than which products they recommend.
WBC has recognised there is a ‘trust gap’ and thus have also appointed an independent customer advocate with the power to overturn decisions made by its internal dispute resolution team.
Good on them. It’s a start.
ETO II – Whilst the warring parties continue to battle through the courts with the Hawke’s Bay irrigation scheme Canterbury and its Central Plains Water scheme plough ahead with their investment for success.
Shareholders in CPW have invested another $90 million, assisted with funding from Crown Irrigation and the scheme’s banks to push ahead with the $250 million second stage of the scheme.
Readers may recall that Trustpower had originally tried to support the Ruataniwha Irrigation scheme in Hawke’s Bay (with commercial objectives) until the project was derailed. By contrast TPW and CPW are happily co-habitating in Canterbury with TPW’s Lake Coleridge supplying some of the water (and presumably water pressure) to the CPW irrigation scheme.
Several uses for water as it follows its gravitational path is precisely what NZ should be achieving, countrywide.
ETO III – with thanks to the ANZ for their Business Outlook surveying.
‘A net 27.9 percent of firms were optimistic about the general economic outlook over the coming year, up from a net 15.5 percent in August, according to the ANZ Business Outlook. A net 42.4 percent of companies see their own activity expanding, compared to a net 33.7 percent a month earlier.’
Chief Economist Cameron Bagrie expects NZ GDP to increase beyond this year’s 3.50% rate, which would be very impressive indeed.
Investment Opportunities
The many new investment opportunities require a little additional focus from investors in the immediate weeks ahead, especially for holders of Trustpower, Z Energy and Air NZ bonds.
Trustpower (TPW) – All Trustpower bondholders should have received documents from the coming soliciting an important response.
****If you own any Trustpower bond you will be required to take action (very wise to do so)****
TPW090 maturing 15 Dec 2016 – can be rolled in to the new TPW150 maturing 15 Dec 2022 (or repaid on 13 October if you do nothing and want your money bank).
TPW100 maturing 15 Dec 2017 paying 7.10% - can be exchanged into the new TPW130 with the same interest rate and maturity date. You must complete an Exchange form.
TPW110 maturing 15 Sep 2019 paying 6.75% - can be exchanged into the new TPW160 with the same interest rate and maturity date. You must complete an Exchange form.
TPW120 maturing 15 Dec 2021 paying 5.63% - can be exchanged into the new TPW140 with the same interest rate and maturity date. You must complete an Exchange form.
If TPW does not hear from its bond holders it will repay the bonds (all series) on 13 October.
Clients do not pay brokerage costs, however, TPW has generously offered to pay a range of brokerages on all of the above activity so involving us in your actions will be appreciated (please handwrite ‘Chris Lee & Partners’ in the Broker Field).
New Investors – contact us if you wish to invest in the new six year TPW150 bond which set its interest rate at 4.01% and is open now.
Z Energy – has returned to the market with its announcement to offer new 5 and 7 year bonds (1 November 2021 and 2023) to both replace its maturing ZEL010 bonds (15 October 2016) and to raise some additional money (for repaying bank loans).
Interest rates are yet to be set but ZEL has announced minimum rates of 3.95% (5 years) and 4.20% (7 years).
ZEL plans to issue up to $350 million of bonds. $100 million will be held (first in first served) for investors wishing to rollover from their maturing ZEL010 bonds (15 October 2016). There are $150 million maturing ZEL010 bonds so there will be a little tension around taking action to return one’s reinvestment application form.
Rollover Investors are asked to record ‘Chris Lee & Partners Ltd’ in the broker field before returning the completed application form to Link Market Services. Z Energy is paying brokerage on rollovers (as they are with new investments).
Rollover investors do not need to join our mail list as they have a right to rollover.
Investors using new money should contact us to specify an amount and term.
The offer is open now (although we get an allocation for new investors on Friday 7 October).
The Exchange (rollover) offer closes on 14 October and thus requires urgent attention by ZEL010 bondholders if they wish to reinvest. We understand the Exchange Forms will be delivered to all ZEL010 holders (paper or email depending on your preference with the registry).
Investors using new cash have until 28 October (close) to deliver their investment application form to our offices, but as usual we encourage early action and plenty of communication around your intentions (thank you).
We have loaded the application form for new investment on our website (PDF format).
King Salmon Ltd – King Salmon’s share offer has been formalised and the share price has been set at $1.12.
We have received a small allocation. It has been offered to those on our list.
If you wish to invest in this offer now is the time to act.
The offer closes on 14 October.
Air New Zealand – has announced its intention to offer a new bond to replace its AIR010 bond which matures on 15 November.
More details will follow next week but one item that I spied was an intention to raise only $75 million of the new bond against a maturing amount of $150 million AIR010.
Quantum – The Wellington Company plans to offer another property for sale via a syndicated structure.
Details are yet to be confirmed but its imminence has resulted in us opening a contact list for potential investors to join.
Travel
Edward is in our Wellington office (Level 15, ANZ Tower, 171 Featherston St) on Tuesdays, available to meet new and existing clients who prefer to meet in Wellington - by appointment please.
Investors wishing to make an appointment are welcome to contact us.
Michael Warrington
Footnote
SINCE publishing Taking Stock on 29 September I have been contacted by Forsyth Barr. It has stated that it is not and has not been in discussion with Macquarie or any other entity in relation to any buyout.
FB and Martin Hawes advise that Hawes is an authorised financial advisor, not an accountant or life coach and is not a resident of Christchurch. FB and Hawes state that Hawes has no link to Christchurch property developer David Henderson, nor has he had any link or association with Henderson.
Chris Lee
Managing Director
Chris Lee & Partners Ltd
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