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The ASX 200 erased early losses on Monday to start August on the front foot, closing up +0.5%, back above the psychological 9000 level. Gains were broad-based, with fewer than 30% of ASX stocks closing lower. Just as importantly, selling pressure was limited; the day’s worst performer, Fortescue (FMG), fell only 3.8%, while six stocks rallied more than 5%, highlighting the market’s underlying strength.
Another takeover approach crossed our screens yesterday, with FleetPartners receiving a bid from private equity-backed SG Fleet Topco at a 27% premium to Friday’s close. While the headline premium is attractive, the implied valuation of around 10x earnings may leave some shareholders questioning whether the offer fully reflects the company’s long-term value. M&A activity remains robust across the ASX, with, for example, BlueScope (BSL), Atlas Arteria (ALX), National Storage REIT (NSR), Insignia Financial Ltd (IFL) and AUB Group (AUB) all attracting takeover interest to a greater or lesser degree in the last year. Private equity and large super funds continue to look for ways to add value to their sizeable funds – they clearly believe pockets of the ASX200 are cheap..
- One of the reasons MM remains constructive on the ASX is that if private equity and other “financial engineers” continue to see compelling value across so many listed companies, the frequent claims that the market is broadly overvalued appear overstated.
Overseas markets were strong overnight as cooling tensions in the Middle East saw a drop in oil prices reducing inflation fears. The “risk on” session saw the Dow surge almost 700 points, posting a new record close while the S&P 500 closed up +1.5% within striking distance of a new high. In Europe, the German DAX gained +1.5%, while the French CAC rose +1.2% as the bulls enjoyed a solid session.
- The SPI futures are calling the ASX200 to open flat this morning despite the strong session on Wall Street, not helped by a ~$1 drop by BHP in US trade – we enjoyed our bounce yesterday.
