20 Mar VIEWS ON COMPANY VALUATIONS; EFTs IMPACTED; INTERNAL COMMUNICATION A FOCUS
It is the end of a highly unusual week and Day 4 of our COVID-19 insights summary that we hope you are finding useful.
- Debt, not equity, market is what has traders most on edge right now
- Volatility has nearly shut down the market for newly issued debt just as companies need cash more than ever. In the US, cheap debt has seen businesses borrow $16.1 trillion (up from $10.2 trillion a decade ago) but, according to Bloomberg, “now the companies that borrowed big face a reckoning”.
- The front cover of the latest edition of the Economist sums up the impact of coronavirus with a simple image – see below.
Australian company news
- ASIC allows hybrid or virtual AGMs
- This morning ASIC announced that in the current environment, it will not take action on issuers who postpone AGMs for two months. It also supports the use of appropriate technology in holding AGMs meaning companies can host ‘hybrid’ AGMs (with a physical location and online facilities) or a ‘virtual’ AGM, that is conducted solely online. Read the release on ASIC’s website.
- Views on company valuations
- This morning broker Moelis has changed all company ratings to “Under Review” and removed all target prices given market uncertainty and the number of companies withdrawing guidance.
- Fidelity’s Paul Taylor notes today in LiveWire that coronavirus is “one-off” in nature and that “it should be a 1x price / earnings ratio rather than a 15 x price/ earnings ratio impact event”, insisting company earnings hits “should not be capitalised into share prices in perpetuity.”
- ETFs impacted too
- As the value of listed companies falls, ETFs are also being impacted. UBS announced yesterday that it will de-list its nine Australian exchange traded funds from the market, totalling $440m in funds under management, and move them into unlisted managed funds to keep hold of existing investors. See the full article here. (Subscriber access)
- Telco sector is stepping up as demand for connectivity rises
- Telstra announced this morning that it will hold previously announced job reductions, recruit an additional 1,000 temporary contractors to manage call centre volumes, bring forward $500m of capex in to calendar year 2020 to increase capacity in their network and provide relief to small business and consumer customers unable to pay their bills.
- Some deal appetite remains
- In a rare piece of positive news, AAP has been thrown a lifeline as the newswire has been approached by a number of parties to acquire the company.
- Internal communication a focus
- As well as market announcements, there is a higher degree of priority on internal communications at this time, including ways to help with health and wellbeing with more people working from home including this fact sheet from the Australian Psychological Society and the Calm mindfulness website’s free resources.
- It is all about stimulus as the RBA, APRA, Federal Government and big business come together to support the economy.
- RBA governor Philip Lowe’s RBA rate cut and $90bn funding pool to help the banking sector extend cheap loans to small businesses, was immediately topped up with the Federal Government’s plan to inject $15bn through the Australian Office of Financial Management to keep the securitisation markets functioning. Read here. (Subscriber access)
- A strong focus on jobs and keeping the economic cog turning
- Jennifer Westacott’s opinion article in the AFR today discusses the importance of keeping businesses operating, people working and money going into people’s pockets, saying it is imperative to “work harder to make it easier to do business”. Read the full article at the BCA website here.
- Still in problem solving mode
- According to Professor Bruce Chapman, an economist at the ANU, HECS-style loans or income-contingent loans may be considered by the government as way to extend support to people and small businesses to cope with COVID-19.
Our daily briefing is not meant to be a summary of media coverage but rather, insights that may be helpful in understanding how organisations are communicating with stakeholders in a time of crisis – and what comes next. Sign up via email.