Mar 12, 2015

Japan Post $6.5bn takeover bid for Toll opens floodgates | The Australian

JAPAN Post’s surprise $6.5 billion takeover bid for Toll Holdings is prompting some fund managers to wade deeper into the Australian sharemarket in the expectation of similar deals in the months ahead.
British-based fund manager Tim Dickson, responsible for various Asian equity mandates at British financial powerhouse Invesco Perpetual, said the offer of $9.04 a share for Toll last month, lobbed at a 49 per cent premium, reinforced the importance of not becoming too hung up on valuations.
“We were irritated by it because we have looked at Toll repeatedly over the years and we could never make the valuations stack up,” Mr Dickson said.
“What it shows is the impact of the low-yield world on investors’ mindsets because they were prepared to pay vastly more than we could ever make the valuation come out at.”
Mr Dickson said the takeover offer, the largest bid by a foreign company in Australia in almost five years, showed Japan Post had the financial backing to support such a deal.
It also reinforced the view that Invesco Perpetual should be buying more in Australia.
“There are a lot more high-quality assets and there will be a lot more money flowing in to buy things.”
With strategic aims that were longer term, valuations were not as important to Japan Post over the short term. “We were amazed by what they paid, but it reminds us that for the right assets, people are prepared to pay up,” he said.
Mr Dickson — who was at Citi’s Australian and New Zealand conference in London this week meeting chief executives from top ASX-listed companies — said ­Invesco Perpetual had been underweight on Australian shares but that was changing.
Invesco has £74.6bn ($148bn) of assets under management.
Based at Henley-on-Thames, its focus in the Asia-Pacific region is on the growth prospects for ­individual companies rather than global themes.
Until now, a big issue for investment into Australia has been the currency, with the Australian dollar seen as overvalued.
“Even though there have always been good businesses in Australia, if you are buying the dollar at $1.05 to the US, that is a huge headwind, so that has put us off for quite a while.”
Valuations of companies in Australia had increased, but not enough to deter Invesco Perpetual from further investment.
“We think fair value for the Aussie dollar is probably US75c to US80c. We are there, pretty much, and it is no longer a headwind.”
Invesco’s Asian portfolio also included stocks such as BHP Billiton and Origin Energy.
But the company had a number of real estate investment trusts and companies in other sectors on its radar.
However, banks were out of favour, given the high multiples they were trading at despite strict capital requirements.
“We don’t like the banks at the moment because they are the most expensive banks in the developed world,” Mr Dickson said.

No comments: