Capital raisings weighing, as do weight loss drugs for RMD
EQUITY STRATEGY
Need To Know
- APA/ORA equity raisings (7%/5.9% of market capitalisation) for growth-oriented acquisitions, have left the share prices of both companies trading near the capital raising share price of $8.50 (APA) and $2.70 for ORA.
- Interest rate differentials driving the AUDUSD more so than commodity prices at present.
- New generation of weight loss drugs, has seen the RMD share price fall over 30% since July, leaving the NTM PER reach 21x back at 2016/17 levels.
APA and ORA raised equity for acquisitions, impacting share prices. AUDUSD is influenced by interest rates over commodities, and RMD's stock declined 30% due to new weight loss drugs, with NTM PER near 2016/17 levels.
Figure 1: APA Group (Hold), and Orora (Hold) share prices are trading near the capital raising prices for both companies. Lack of EPS accretion (pre-synergies) in FY1 remains the key debate for both companies.
Figure 2: US real yields, approaching 2.0%, a level not seen since the 2000s. Higher real yields will see investors place a premium on companies that grow earnings ahead of market, without excessive leverage
Figure 3: AU/US interest rate differentials go a long way to explaining the level AUD/USD.
Figure 4: Commodity prices are displaying little influence on AUDUSD at present.
Figure 5: Resmed (Buy) price-earnings ratio (PER) is well below long-term average, levels not seen since ~2017.
Figure 6: Eli Lilly and Novo Nordisk share prices have rallied, whilst Resmed (Buy) has been left behind as weight loss drug euphoria captures the imagination of investors.
Figure 7: Goodman Group’s (Buy) data centre opportunity is larger than the current installed data centre base of global leaders. Presents upside risk to medium-term earnings.
Companies Mentioned
| APA | APA Group |
| GMG | Goodman Group Limited |
| ORA | Orora Limited |
| RMD | Resmed Inc |
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