Post on 27-Oct-2015
transcript
VALUATION DASHBOARD
Prices as at Australian Opendamien.klassen@wilsonhtm.com.au +612 8247 3101
Source: Wilson HTM, Bloomberg Source: Bloomberg
Quantitative Strategy - Valuation Dashboard
Current Market Theme - Sovereign Risk
Issued by Wilson HTM Ltd ABN 68 010 529 665 - Australian Financial Services Licence No 238375, a participant of ASX Group and should be read in conjunction with the disclosures and disclaimer in this report. Important disclosures regarding
companies that are subject of this report and an explanation of recommendations can be found at the end of this document.
Tuesday, 17 September 2013
1 Week Price Changes in Major Asset Classes
11.3
6
7
8
9
10
11
12
13
Aug-94 Aug-96 Aug-98 Aug-00 Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12
PE This shows the P/E of the stock at the
10th percentile P/E in the ASX 100 - i.e.
the cheapest stocks
250
236
200
220
240
260
280
300
320
Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13
Italy
Spain
Sovereign risk was the theme for 2012 holding prices back. Going into 2013 sovereign debt has the potential to come to a head but has faded as a market key theme.
The RBA minutes out this morning continue to point to a slow Australian economy, with retail spend, capex plans and employment being weak. The only (domestic) positive the RBA could see was nascent signs of growth in housing construction. One of the concerns over the next year has to be housing prices which continue to increase without sparking a construction boom. At that point the RBA will need to consider which is more important - keeping rates low to encourage growth in a weak Australian economy or restrain interest rates to avoid a (bigger) housing bubble... more to come on this theme over the next few months I fear. The second thing I note this week is the increasing P/Es in the mid caps and at the bargain end of the market (see chart below) - the hunt for value is getting increasingly difficult. Interactive charts are at http://bit.ly/oecTbW
Italy opening up a risk premium
over Spain recently
Chart of the Week: The ASX 100 "Bargain Bin" - 12m forward P/E
Small Ords ASX 200
China US
Eur Japan
AUD / Yen AUD / EUR
AUD / Yuan AUD / USD
US Junk US BBBCorp US 10y+Gov't
US 1-3yGov't Au 1-3yGov't Au 3-5yGov't
Au 10y+Gov't Au BBBCorp
Aust. Resi
-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
Equities
Fixed Interest
FX
Residential Property
Only twice in 20 years has its been
harder to find a bargain - pre financial
crisis and pre-tech boom
Table of Contents
1 Week Chg: ASX 200 +1% Small Ords -0% 1 Week Chg: 90d -2bp 2yr -8bp 10yr -8bp 1 Week AUD Chg: US +1% Jpn +5% Eur +3% China +1%
1 Week Chg: BBB Yield -7bp CDS -1bp 1 Week Chg: 5 Capital City 1 Week Chg: US Aust.Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters, RP Data
+0.3%
1. Valuation Stats – Australian Equities 3. Valuation Stats – International Equities
4. Val’n Stats – Corporate Bonds
2. Valuation Stats – Australian Bonds
6. Valuation Stats – Risk Measures5. Valuation Stats – Aust. Residential Prop.
-34bp-15bp
14.5
350
360
370
380
390
400
10.0
10.5
11.0
11.5
12.0
12.5
13.0
13.5
14.0
14.5
15.0
24-Jun 08-Jul 22-Jul 05-Aug 19-Aug 02-Sep 16-Sep
ASX 200 12m Fwd PE
ASX 200 12m Fwd EPS (RH)
EPS edging lower in
recent weeks,
5.65
110
90
100
110
120
130
140
150
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
6.0
19-Aug 26-Aug 2-Sep 9-Sep 16-Sep
5y BBB Bond Yield (LH)
5y $A Corp. CDS (RH)
Yields and CDS both falling
over the week
2.5 2.6 2.6 2.6
2.5 2.6
2.9
3.3
4.0
2.0
2.5
3.0
3.5
4.0
4.5
O/Night 1m 3m 6m 12m 2Y 3Y 5Y 10Y
60d range
Last Week
Bond Yield Curve (%)
Bank Bills Gov't bonds
Yields falling across the
curve this week
UK
Sth Africa
Euro Stoxx
US S&P 500 Canada
Switz'd
China
Norway
NZ
Japan
India
World X Aust
Spain
Hong Kong
Finland
Italy
Singapore
Germany
US Nasdaq
France
Australia
Holland
7%
9%
11%
13%
15%
17%
19%
21%
9 11 13 15 17 19FY1 P/E Ratio
EPS Growth FY1 to FY2
US 14.4
Aust 14.3
10
12
14
16
18
20
22
24
19-Jul 02-Aug 16-Aug 30-Aug 13-Sep
Implied Vol. (%)
Vix Indices
$580k
$585k
$590k
$595k
4.0%
4.1%
4.2%
4.3%
4.4%
4.5%
16-Aug 23-Aug 30-Aug 6-Sep 13-Sep
Est. Unit Net Yield (LH)
Median 5 City House Price (RH)
Daily prices continue their recent
upward trend US Vix and Australian Vix both
edge lower over the week
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 2
Section 1: Valuation Stats - Australian Equities
12m Forward P/E Distributions
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
19.0
15.1
12.9
11.3
24.1
14.5
5
10
15
20
25
3025th to 75th PE Percentiles Median 10th 90th Wtd Av.
ASX 100 Distribution
The top end of the market as
"frothy" as its been at any time in
the last four years
0%
5%
10%
15%
Aug-94 Aug-95 Aug-96 Aug-97 Aug-98 Aug-99 Aug-00 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13
ASX 100 Small Ords% of index with P/E > 50 (which are
excluded from the above charts)
17.7
13.0
9.5
6.9
22.4
13.4
5
10
15
20
25
30
Small Ords Distribution Interesting to see the weighted
average above the median - i.e.
"larger" small caps are looking more
expensive
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 3
Section 1: Valuation Stats - Australian Equities
Shiller PE (Price / 10 year average inflation adjusted earnings) 12m Forward Earnings Yield (E / P) less 10Y Govt. Bond Yield
Long Term Trailing P/E Ratio (ASX 200) Long Term Trailing Earnings Yield (E / P) less 10Y Govt. Bond Yield
Direct
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
14.8
0
5
10
15
20
25
30
69 73 77 81 85 89 93 97 01 05 09 13
P/E
2.3
-8
-6
-4
-2
0
2
4
6
8
77 81 85 89 93 97 01 05 09 13
2.9
-1
0
1
2
3
4
5
6
7
Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
Equities cheap rel. to bonds
Over the last year
equities have gone
from extremely
cheap vs bonds to
more normally priced
Trailing P/E roughly at "pre-
European crisis" levels
15.9
6
9
12
15
18
21
69 73 77 81 85 89 93 97 01 05 09 13
P/E
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 4
Section 1: Valuation Stats - Australian Equities
2013 EPS Growth – how analyst forecasts have changed 2014 EPS Growth – how analyst forecasts have changed
Key Sector Stats P/Book
Jun-13 Jun-14 Jun-15
12m
FwdFY0
Jun-13 Jun-14 Jun-15 Jun-13 Jun-14 Jun-15
12m
Fwd Jun-13 Jun-14 Jun-15
12m
Fwd Jun-13 Jun-14 Jun-15
12m
Fwd
Size Indices
S&P/ASX 20 16.2 14.7 13.5 14.4 2.3 -3 10 8 4.5 4.7 5.0 4.8 11.8 11.0 10.1 10.8 9.0 8.8 8.1 8.6
S&P/ASX 50 16.0 14.7 13.5 14.4 2.1 -1 10 9 4.4 4.6 4.9 4.7 12.5 11.5 10.4 11.2 9.5 9.1 8.3 8.9
S&P/ASX 100 16.1 14.7 13.5 14.5 2.1 -1 11 10 4.4 4.6 4.9 4.6 12.5 11.5 10.5 11.2 9.4 9.0 8.2 8.8
S&P/ASX 200 16.1 14.7 13.5 14.5 2.0 -2 11 10 4.3 4.5 4.8 4.6 12.5 11.5 10.5 11.2 9.4 8.9 8.2 8.8
S&P/ASX 300 16.0 14.7 13.4 14.4 2.0 -1 12 11 4.3 4.5 4.8 4.5 12.5 11.4 10.4 11.2 9.4 8.9 8.1 8.7
Other Indices
Resources 15.8 13.4 11.5 12.9 1.7 -23 30 20 2.9 3.2 3.5 3.2 11.2 10.0 8.6 9.5 7.9 7.1 6.2 6.9
Adjusted Industrials* 18.0 16.5 14.9 16.4 2.5 4 9 11 3.8 4.1 4.4 4.1 13.0 12.2 11.1 12.1 9.1 8.6 8.0 8.6
Mining excluding BHP & RIO 15.8 14.3 11.8 13.6 1.3 -14 39 30 2.4 2.7 3.2 2.7 13.5 11.3 9.2 10.4 8.9 7.5 6.3 7.2
S&P/ASX Small Ordinaries 15.1 13.6 12.0 13.4 1.4 -8 28 22 3.1 3.5 4.0 3.5 11.9 10.6 9.4 10.4 8.6 7.9 7.0 7.9
S&P/ASX Small Resources 11.4 9.7 7.9 9.0 0.8 -27 256 54 0.7 0.9 1.3 0.9 10.4 6.9 5.3 6.5 6.1 4.5 3.5 4.8
S&P/ASX Small Industrials 15.9 14.8 13.4 14.8 1.8 -6 10 14 3.8 4.2 4.7 4.2 12.2 11.5 10.7 11.4 9.1 8.8 8.2 8.7
Adjusted Small Industrials* 16.1 15.0 13.5 15.0 1.9 -11 8 16 3.5 3.9 4.4 3.9 11.3 11.0 9.9 10.9 8.4 8.1 7.6 8.1
GICS Sectors
S&P/ASX 300 Energy 18.0 17.1 14.0 15.6 1.5 -2 23 26 2.9 3.3 3.5 3.3 15.2 13.4 10.7 11.9 10.3 9.1 7.4 8.4
S&P/ASX 300 Materials 15.6 12.7 11.0 12.4 1.9 -25 30 18 3.0 3.3 3.7 3.3 10.5 9.4 8.3 9.2 7.6 6.8 6.1 6.7
S&P/ASX 300 Industrial 15.9 16.2 15.2 16.0 1.9 13 5 17 3.6 3.9 4.4 3.9 14.0 13.3 12.0 13.1 8.2 7.9 7.3 7.8
S&P/ASX 300 Consumer Discretionary 18.1 16.5 14.8 16.4 2.0 -8 10 12 3.2 3.3 3.7 3.4 12.4 11.8 10.8 11.7 9.7 9.3 8.6 9.3
S&P/ASX 300 Consumer Staples 19.0 18.1 16.6 18.0 2.5 4 6 9 4.2 4.5 4.8 4.5 13.3 12.8 11.8 12.8 10.4 10.0 9.3 10.0
S&P/ASX 300 HealthCare 24.8 20.3 18.1 20.2 4.8 19 24 13 2.1 2.4 2.7 2.4 18.3 16.0 14.3 15.9 15.5 13.6 12.2 13.5
S&P/ASX 300 Information Technology 20.6 18.2 16.2 17.9 4.6 19 11 16 3.6 3.3 3.6 3.3 18.5 13.8 12.5 13.7 11.6 12.5 11.2 12.4
S&P/ASX 300 Utilities 16.4 15.7 14.4 15.5 1.4 7 6 10 5.6 5.7 6.0 5.7 12.8 12.2 11.5 12.1 9.5 9.2 8.6 9.2
S&P/ASX 300 Telecommunication Services 16.1 15.2 14.4 15.2 5.0 12 6 6 5.5 5.8 6.0 5.8 11.5 11.0 10.6 11.0 7.0 6.7 6.6 6.7
S&P/ASX 300 A-REIT 15.3 14.4 13.8 14.3 1.1 -3 6 4 5.5 5.7 5.9 5.8 16.9 15.7 14.8 15.4 16.8 15.7 14.8 15.4
S&P/ASX 300 Financials-x-A-REIT 14.7 13.8 13.0 13.6 2.1 7 6 6 5.2 5.4 5.7 5.4 9.2 9.7 9.3 9.6 9.6 9.9 9.3 9.8
Price/Earn. (x) EPS Growth (%) Yield (%) EV/EBIT (x) EV/EBITDA (x)
10% 8%
30%
6%
0%
5%
10%
15%
20%
25%
30%
35%
Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13
Industrials
Small Industrials
Resources
Financials
Downgrades to
industrial earnings in
recent weeks.
7%
-11%
-23%
7%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13
Industrials
Small Industrials
Resources
Financials
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 5
Section 1: Valuation Stats - Australian Equities
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, * Industrials Less Banks, Insurers, REITs, Infrastructure, Utilities
ASX 100: P/E vs Dividend Yield
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
For interactive version of these charts http://bit.ly/nbPZim
Cheap on both
measures
Expensive on both
measures
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 6
Section 1: Valuation Stats - Australian Equities
Distribution of 12m Forward P/E (ASX100) Small Cap discount – P/E vs Market Cap (measured by median P/E in market cap deciles)
Energy SGM
Mining BSL
Industrials OSH
Financials AGO
Property TCL
Utilities SYD
AGK ILU
TOL BLD
BOQ AZJ JHX
RRL WRT TAH NCM CRZ
SPN PNA DJS WPL WES DUE
NAB CPA QBE TTS AMC ANN SUN
SKI IOF GMG MGR AIO FOX FLT SEK
IAG CTX BEN WBC CFX BHP SHL BXB STO RHC
DOW BPT ORI ALQ CBA PRY WOW QAN CWN CSL AWC
ARI LEI DXS IPL ABC WDC WOR HVN MQG ALL RMD WHC
MTS AUT MIN ANZ GPT AMP GNC CCL CPU EGP HGG COH OZL
FMG CGF LLC MND MYR RIO FDC UGL TLS SGP ASX ORG TWE APA LYC
<6x 6-7x 7-8x 8-9x 9-10x
10-
11x
11-
12x
12-
13x
13-
14x
14-
15x
15-
16x
16-
17x
17-
18x
18-
20x
20-
22x
22-
25x >25x
-ve
EPS
Distribution of 12m Forward P/E (Small Ords) ASX 100 12m Forward P/E less Small Ords 12m Forward P/EEnergy MCR
Mining MCE
Industrials MBN
Financials LNC
Property KAR
Utilities IVA
IFN
IAU
HZN HGO
WSA GRY
KRM GGG
ACR GBG
ALK FMS
MQA FML
EVR ERA
MDL ELM
REA DTE
MAD DML
IGO CPL
SRX COK
AWE CFE
TSE MFG BTR
MIO SGT MPO SUL HIL CSR BSE
SLR MLD COE SKE UXC KCN GWA OMH BRU
NWH PRU TEL RCR ALZ CHC FXL PMV DLX PTM DMP BRL
NFE AJA ANG ROC SWM CMW OGC ENV FBU SEA ARP QUB BBG BND
APN BCI TRY TGS FXJ CDD SGN EVN MMS RIC RFG NUF SXY SAI TRS NVT BLY
EHL SVW FGE SDM SBM BKN DLS NST GRR AAD CCP IIN TOX IMF TPM AMM IVC AQA
TGZ CNU CAB APZ MGX DCG TGA ABP AHE MRM CLO GFF JBH IFL WEB TPI AGI AMX
RSG BDR SAR MML PBG FKP GUD CQR FWD SIP SMX CCV AQG CSV PPT SCP GEM ABU
MAH ASL CDA SFR IMD PRG ORL CDI KMD SXL AAX BWP MTU WTF TME BRG IRE AAC
<6x 6-7x 7-8x 8-9x 9-10x
10-
11x
11-
12x
12-
13x
13-
14x
14-
15x
15-
16x
16-
17x
17-
18x
18-
20x
20-
22x
22-
25x >25x
-ve
EPS
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
P/E
hig
her
wit
hin
gro
up
-->
P/E
hig
her
wit
hin
gro
up
-->
1.1
2.1
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Aug-94 Aug-96 Aug-98 Aug-00 Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12
target range
median vs median
average vs average
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
0 200 400 600 800 1,000 1,200 1,400 1,600
PE Rel (x)
Market Cap ($m)
2003 - Risk on, very little relationship
2008 - Risk off, steep line and strong relationship
Latest
Not many stocks
left at this end
The gap between small
and large caps has closed
sharply
The small ords distribution is
back to being incredibly flat
The relationship between
size and market cap is
quite weak at the
moment
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 7
Section 1: Valuation Stats - Australian Equities
2013 EPS Growth Distribution (ASX 100) 2014 EPS Growth (ASX 100)WES
HVN
AIO
SKI
ANN WOR
NAB AMP STO
GPT ABC RMD
ANN CTX COH PNA
EGP AGK AGK GMG RHC
SHL AMC ORG CFX SEK
CPA SEK ANZ FDC BPT
WDC CBA WDC CGF PRY
BXB WOW DOW CCL CSL QBE
STO LLC ANZ DOW FLT IOF SGP FLT WPL
NCM DUE ABC ASX BPT OSH GMG HGG WOW RRL CPA TWE AWC
TAH SGP RIO MGR WES SKI QBE BOQ TAH WBC BXB AZJ CRZ SGM
ILU IPL MTS MIN WRT CPU RHC ALQ TOL WRT TCL ORI ALL BSL
SGM BHP TTS AMP DJS TWE CFX TLS HGG FOX TCL SPN GPT NAB BEN RIO MQG EGP LYC AGO
AGO PNA GNC ORG ORI WOR HVN DXS WBC IOF RMD MND PRY BSL IAG LLC ASX TLS BOQ BHP IPL CWN AUT ARI ILU
OZL LYC SUN COH BEN MYR SPN JHX APA FMG CRZ MQG CSL RRL AWC MND MTS TTS MYR CBA DXS CTX DUE FOX JHX SYD BLD WHC OZL
WHC UGL SYD QAN ARI WPL CCL BLD CGF TOL CWN LEI AZJ AIO IAG AUT QAN ALQ NCM GNC DJS APA LEI CPU MGR SHL AMC UGL MIN FMG OSH SUN
<-
50%
-50: -
30%
-30: -
20%
-20: -
15%
-15: -
10%
-10: -
5%
-5:
0% 0: 5%
5:
10%
10:
15%
15:
20%
20:
25%
25:
35%
35:
50%
50:
75%
75:
100% - to +
>100
%
<-
50%
-50: -
30%
-30: -
20%
-20: -
15%
-15: -
10%
-10: -
5%
-5:
0% 0: 5%
5:
10%
10:
15%
15:
20%
20:
25%
25:
35%
35:
50%
50:
75%
75:
100% - to +
>100
%
2013 EPS Growth Distribution (Small Ords) 2014 EPS Growth Distribution (Small Ords)SBM Energy Energy ELM
KCN Mining Mining HZN
BBG Industrials Industrials KRM
WSA Financials Financials BSE
EVR Property Property ACR
KRM Utilities Utilities PEM
ALK TAP
TEN PTM NFE
AAC UXC CFE
PDN CQR MAD
KAR ALZ SAR WDR
PEM BTR AQG MCE
NXS PBG IIN ALK
WDR FBU MAH AQA MRM SDL RED
RMS AAD AWE SBM WTF SKE ERA MPO WSA
BLY SIP BCI GEM SLR ALZ TME TOX GRR HGO
CFE NVT AHE ENV PRU PRG ARP QUB DMP MGX AWE IGO
VAH CDI IFL IIN TGS TGZ BRG APN CLO SWM IRE TSE EVN BLY AAC
COK ASL PRG FXL ERA IGO EHL PBG FGE TGA IFL ENV NVT FWD MBN NEN GBG
BND SAR GWA CAB CMW CCP NST SFR ORE NST CHC AHE IVC RIC RCR BND MFG FML MDL
TAP NWH GUD QUB MML CHC BRL SLX BDR BBG GUD MLD CDI DCG GEM AGI CSV NUF MML LNC
RXM SMX NUF RSG SAI SGT WEB ARP JBH FGE ELM SXY RMS MCR CAB CCV PMV TPM AMX PPT BDR OGC RXM TGS
FML FMS HIL TEL SLR BKN PXS PMV DLX PRR DML MFG EVR KAR CNU ANG CQR JBH FXL DLX WEB REA PXS ROC ABU
RED ROC SWM GFF CCV DCG TGA BRG SUL KMD REA SPL GGG NFE NXT KCN IMD FKP BKN ABP AAD PAN UXC TRS IFN SRX SIR IMF
BSE PIR AGI ORE CDD PRU ABP IVC TME MMS PPT MTU MLD CLO AMX IAU OMH SYR SVW APZ FXJ CPL RFG BWP CCP TPI MIO SXY AAX BCI PDN SEA
GBG FXJ COE MIO TRS WTF ORL TPI SRX SKE TOX OGC TPM DTE LNC NXT CSV BTR CDA NWH MMS SFR MSB SGN CMW SUL PIR COE MTU DLS SCP VAH
MCR EVN MAH RIC IRE PAN ANG RFG BWP DMP MSB SVW SDL IFN CDA IVA DLS OMH RSG GRY SDM SMX SIP AJA SGT KMD GFF FBU SAI TRY IVA CSR BRU
AQA EHL AQG AJA APN SXL ACR ABU SGN MBN MRM GRY AMM RCR HGO MCE RFE MQA SLX ORL MQA GGG ASL SPL TEL IAU CDD SXL AMM PTM GWA HIL NXS FMS COK BRL
<-
50%
-50: -
30%
-30: -
20%
-20: -
15%
-15: -
10%
-10: -
5%
-5:
0% 0: 5%
5:
10%
10:
15%
15:
20%
20:
25%
25:
35%
35:
50%
50:
75%
75:
100% - to +
>100
%
<-
50%
-50: -
30%
-30: -
20%
-20: -
15%
-15: -
10%
-10: -
5%
-5:
0% 0: 5%
5:
10%
10:
15%
15:
20%
20:
25%
25:
35%
35:
50%
50:
75%
75:
100% - to +
>100
%
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
EP
S G
row
th h
igh
er
wit
hin
gro
up
-->
EP
S G
row
th h
igh
er
wit
hin
gro
up
-->
About half the companies in the
ASX 100 are forecast to grow
faster than 10%
There is about to be a big cleanout of
many of the stocks in this category
next week with the recent index
changes
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 8
Section 1: Valuation Stats - Australian Equities
Change in 2014 Consensus EPS – ASX 100 over last 1 week
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
For interactive version of these charts
For interactive version of these charts http://bit.ly/nbPZim
Quiet week overall
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 9
Section 1: Valuation Stats - Australian Equities
Change in 2014 Consensus EPS – ASX 100 over last 1 month
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
For interactive version of these charts http://bit.ly/nbPZim
The last month is dominated
by downgrades for large
caps
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 10
Section 1: Valuation Stats - Australian Equities
Change in 2014 Consensus EPS – Small Ordinaries Index over last 1 week
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
For interactive version of these charts http://bit.ly/nbPZim
A mixed week - a fair few upgrades
in iresources
Lots of changes to forecasts for
small resource stocks this week
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 11
Section 1: Valuation Stats - Australian Equities
Change in 2014 Consensus EPS – Small Ordinaries Index over last 1 month
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
For interactive version of these charts http://bit.ly/nbPZim
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 12
Section 2: Valuation Stats - Australian Government Bonds
Bank Bill / Australian Government Bond Yield Curve RBA Cash Rate implied by SFE Interbank Futures (%)
International Yield Curve Steepness (10 Year Yield less 2 Year Yield %) Australian Yield Curve Steepness (10 Year Yield less 2 Year Yield %)
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
2.5 2.6 2.6 2.6
2.5 2.6
2.9
3.3
4.0
2.0
2.5
3.0
3.5
4.0
4.5
5.0
O/Night 1m 3m 6m 12m 2Y 3Y 5Y 10Y
Latest
6m ago
2 years ago
12m ago
2.00
2.25
2.50
2.75
3.00
Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14
This Week
Current RBA Rate
Last Week
Rate hikes in 2014 as mining
capex really begins to slow? Not
likely in my view
-1
0
1
2
3
1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
10y-2y Bonds
-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0
Spain
Italy
US
UK
Mexico
France
Germany
Canada
Australia
Sweden
Japan
China
Brazil
India
Yield curve steepening has been the big
trend. I don't have a problem with this
conceptually, but I think it should have come
from short term rates falling rather than
long term rates rising. I expect a reversal.
at the long end.
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 13
Section 2: Valuation Stats - Australian Government Bonds
International - Real Return on 10Y Bonds Implied Inflation
International Risk / Return Australian Government Bond CDS
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
51.8
0
20
40
60
80
100
120
140
160
180
Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13
Austr. 5 Yr CDS Decent sized
increase recently
from recent lows
US
Canada
UK
France Germany
Italy
Sweden
Australia
-1
0
1
2
3
4
0 1 2 3 4 5 6 7Infla
tio
n Im
plie
d b
y in
fla
tio
n lin
ked b
onds (
%)
10y Bond Rate (%)
Negative real yields
Real yields have increased substantially over the
past few months, all these countries had negative
real yields four months ago
US
Mexico
Brazil
UK
France
Germany
Italy
Spain
Japan
Australia
China
20
40
60
80
100
120
140
160
180
200
0 1 2 3 4 5 6 7 8
5y C
DS
5y Bond Rate (%)
High Yield Low Risk
Low Yield High Risk
Values on edge scaled to fit graph
Highest yield of
the "low risk"
countries
2.4
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Sep-02 Sep-03 Aug-04 Aug-05 Sep-06 Sep-07 Aug-08 Aug-09 Sep-10 Sep-11 Aug-12 Aug-13
Inflation implied by Inflation linked bond pricing (10Y or closest)
Inflation
expectations bounce
back to the middle of
the band
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 14
Section 3: Valuation Stats - International Equities
AUD / USD Australian 12m Fwd P/E relative to World ex Australia
Purchasing Power Parity - OECD 6m equities performance vs 1m price performance
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
1.03
0.90
0.95
1.00
1.05
1.10
1.15
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
0.890
0.932
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13
AUD USD
Consensus Dec-13 F'cast
Switzerland
Norway
Denmark
Australia
Sweden
Canada
NZ
Iceland
Japan
Britain
Euro
S.Korea
Poland
Mexico
Hungary
Turkey
-100 -80 -60 -40 -20 0 20 40 60 80 100
Overvalued
Japan US Nasdaq
Finland Italy
US S&P 500 France South Africa World X Aust
Holland Germany NZ
Euro Stoxx Norway
Spain Hong Kong
Australia Switzerland UK
Canada India
Russia China
Singapore Brazil
-10% -5% 0% 5% 10% 15% 20%
1M Performance
6M Performance
Australia moves down
into 4th place
Some divergent
performance from
emerging markets
The recent bounce in the AUD is
partly improving China, partly
US taper. My medium term
expectation is for further
weakness
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 15
Section 3: Valuation Stats - International Equities
Bloomberg FY 1 P/E Bloomberg FY 1 Yield
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
2.5
2.1
1.3
5.4
4.0
3.7
3.6
3.3
3.2
3.1
2.8
3.5
3.3
1.6
4.5
4.4
4.1
3.9
3.2
3.1
6.2
3.3
3.2
1.7
0 1 2 3 4 5 6 7
World X Aust
US S&P 500
US Nasdaq
Spain
Euro Stoxx
UK
France
Italy
Switzerland
Germany
Holland
Hong Kong
Singapore
Japan
Australia
NZ
Norway
Finland
South Africa
Canada
Russia
Brazil
China
India
12m Fwd Yield (%)
US
Europe
Developed Asia
Commodity Producers
Emerging Markets
Australian yield at
the top
15.0
15.4
18.8
13.0
13.0
13.0
13.2
13.5
14.6
14.8
15.4
11.1
14.7
18.1
12.4
14.7
15.3
15.3
17.2
18.2
9.8
14.2
5 7 9 11 13 15 17 19
World X Aust
US S&P 500
US Nasdaq
Germany
Stoxx
UK
France
Holland
Italy
Spain
Switzerland
Hong Kong
Singapore
Japan
Norway
South Africa
Australia
Canada
NZ
Finland
Russia
China
India
Brazil
12m Fwd P/E (x)
Emerging Markets
Europe
US
Developed Asia
Commodity Producers
In the middle of the
commodity producers
band.
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 16
Section 4: Valuation Stats - Corporate Bonds
US BBB bond yield less 10Y Government bond yield
Australian Corporate CDS spreads ASX 200 Dividend Yield vs BBB bond yield
Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters
1.7
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 00 03 06 09 12
US Recessions BBB Credit Spreads
Market crash / Great Depression
Recession / WWII Outbreak
Oil Crisis (OPEC)
Intensification of Vietnam war
2nd Oil Crisis
Junk Bonds collapse / Gulf war
Asian crisis
Russian Bonds
End of tech boom / Sept 11 / accounting scandals /
'87 stock market crash
Mexican Peso crisis
Bay of Pigs Invasion
% Spread
Credit Crisis
BBB bond value
worsening vs
gov't bonds
110
0
50
100
150
200
250
300
350
400
Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13
Markit iTraxx Austr. 5 Yr Corporate CDS 5.7
4.6
1.1
0
1
2
3
4
5
6
7
8
9
10
Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11
Austr. 5 Yr BBB Yield
ASX 200 12m Fwd Dividend Yield
Difference
Vs gov't bonds, corporate
bonds are about
average, but expensive
vs equities
CDS spreads falling back
recently
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 17
Section 5: Valuation Stats - Australian Residential Property
Recent Price Performance Net Rental Yield* vs Equity Dividends vs Borrowing Costs
HIA New Home Sales
Source (all charts): Wilson HTM, Bloomberg, RBA, RP Data, Rismark, ABS
* Houses and units are adjusted for estimated stamp duty, rental management costs, capital spend, maintenance and other typical costs. Values are adjusted for the profile of typical rental stock.
1.6%
1.1%
-2%
0%
2%
4%
6%
8%
10%
Feb-79 Feb-83 Feb-87 Feb-91 Feb-95 Feb-99 Feb-03 Feb-07 Feb-11
ASX 200 Div Yield less units net yield
Standard variable rate less units net yield
The lower the value, the cheaper property is relative to other assets
Given falling mortgage rates, the
spread between mortgage rates and
yield is below financial crisis lows
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
500
1,500
2,500
3,500
4,500
5,500
6,500
Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Feb-12
New Home Sales (RH)
New Unit Sales (LH)
The interest rate cuts to
date have increased house
prices, but the effect has
not yet flowed through to
new construction
-4%
0%
4%
8%
12%
16%
20%
Feb-79 Feb-83 Feb-87 Feb-91 Feb-95 Feb-99 Feb-03 Feb-07 Feb-11
Net yield
Annual Price Change
Annual prices
(apartments) back to
increasing
RBA seems to have the view that house construction
boom will start soon. While we can see housing
construction "normalising" from its currently low
levels, we think it will take decisive government
action / incentives to get the housing construction
market to make up for the drop off in mining capex.
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 18
Section 6: Valuation Stats - Risk / Sentiment Measures
VIX Indices Bloomberg Financial Conditions Indices
OECD Leading Economic Indicators Citigroup Economic Surprise
Australia
China
US
Europe
Japan
Source (all charts): Wilson HTM, Bloomberg, ABS, OECD
US 14.4 Aust 14.3
10
12
14
16
18
20
22
24
26
28
30
Dec-91 Dec-95 Dec-99 Dec-03 Dec-07 Dec-11
Implied Vol. (%)
Risk / protection expensive
Risk / protection cheap
94
97
100
103
94
97
100
103
Feb-70 Feb-74 Feb-78 Feb-82 Feb-86 Feb-90 Feb-94 Feb-98 Feb-02 Feb-06 Feb-10 Feb-14
94
97
100
103
94
97
100
103
94
97
100
103
-100
-50
0
50
100
-100
-50
0
50
100
Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12
-100
-50
0
50
100
-100
-50
0
50
100
-100
-50
0
50
100
US 1.2
Eur 0.0
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
Dec-91 Dec-94 Dec-97 Dec-00 Dec-03 Dec-06 Dec-09 Dec-12
z-scores
Tighter Conditions
Easier Conditions
Improving in China, US, Europe
Leading indicators more
negative in Australia and
China than elsewhere Economic surprise rolling
over in Australia, Japan
Quantitative Strategy - Valuation Dashboard 17/09/2013 Page 19
17 September 2013
Quantitative Strategy
Valuation Dashboard
Quantitative Strategy - Valuation Dashboard 20
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