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Will there be more bargain capital raisings like QUB & NAB in 2020?

As expected and highlighted in our previous article, the returns and results have been mixed from the ASX’s most recent spate of capital raisings.

Interestingly, it has been those businesses that were relying on a successful capital raising just to survive that have recovered most strongly. Webjet Limited (ASX: WEB) and Ooh!Media Ltd (ASX: OML) are both up over 100% and Flight Centre Travel Ltd (ASX: FLT) around 49%.

The big question, however, is will these companies require another round of capital before 2020 is out?

With the threat of Job Keeper being pulled, spiking inflation and continued border closures, it’s difficult to see the travel industry recovering anytime soon.

Some of the higher-quality raisings in our view have been Qube Holdings (ASX: QUB) and Ramsay Health (ASX: RHC), which are closing this week. Both companies suggested the proceeds would be used for further acquisitions and organic growth, delivering a return of 35% and 21% each to date.

The outlook is very difficult for the banking sector and its more than likely the other majors will seek to raise in the months ahead, with hundreds of thousands of mortgage repayments put on hold, queries over the commercial property and small business loans.

So what’s the lesson?

The most leverage tends to come from the most desperate businesses, but there are solid profits to be made for those supporting high-quality companies. According to Deal Logic, the ASX had actually seen more capital raised than the NASDAQ or London Exchange in April, interesting given how successful the containment strategy has been in Australia.

Have Australian shareholders benefitted from discounts, or have they lost capital?

In each of the capital raisings we have tracked below, the shareholder has been better off, at least in the short term, except for long-suffering Metcash and QBE investors as we mentioned previously.

NAB remains slightly above water following the recent weakness, whilst anyone willing to invest in travel has done incredibly well. Importantly, these returns reflect only a very short period of time and don’t consider the capital lost prior to their announcement. I’d suggest the companies not showing up on this list are where investors should really be looking.

1st & 2nd derivative sectors

Most have closed this week, so it is more about looking towards those businesses likely to require more capital.

There are a few first derivative sectors that will clearly remain under pressure and may soon be cap-in-hand to investors, including companies in oil and gas, discretionary retailers, and travel companies.

The second derivative sectors is where it gets more interesting and investors need to start thinking longer-term.

How will property owners, particularly retail, apartment and commercial landlords, deal with an influx of rent reduction requests or defaults?

What about smaller lenders?

Or technology companies running at losses?

Many companies, including Woolworths Ltd (ASX: WOW) and Macquarie (ASX: MQG), have sought capital through alternative means, being debt and preferred equity, but there is plenty of water still to go under the bridge.

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The Golden Rules of Investing

We might be experts in retirement, but with combined financial advice experience of 35+ years, we’ve nearly seen it all. 

In mid-2023, our senior team at Wattle Partners Financial Planning put the finishing touches on a brand-new report “The Golden Rules of Investing“.

In this free report, we outline the key principles that determine all of the portfolio construction and investment decisions of Wattle Partners. Collated over decades, this paper should be seen as a work-in-progress, constantly under review in light of the ever-evolving nature of markets. 

You’ll find the free report on my Author page. Simply click the button below to view the Golden Rules.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.


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Wattle Partners is a financial advice firm, servicing clients around Australia, specialising in retirement planning (pre and post retirement). 

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