The following transcript generated through AI.
Manny Anton: Hello and welcome to this week’s edition of Winston’s Weekly – covering all things assets. I’m Manny Anton, your host for today’s asset discussion. Winston, as always, welcome back.
Winston Sammut: Thank you.
Manny Anton: All right, let’s get started, like we do with the U. S. markets.
Winston Sammut: Yes, the numbers have been positive and have been seen as positive in terms of expectations that inflation will continue to decline. This is coming down at an ever-slower pace, but nevertheless it is positive news and the market accepts it as such, and bonds have recovered accordingly. And as he rightly pointed out, there is now a greater likelihood of a rate cut in the U. S. In September. That said, because of the question posed to Fed Chair Powell: “Are we going to cut rates?Will rates drop soon?
[He] said, “Well, we don’t expect a rate cut right away. “They still need to see more insights that are consistent with a downward trajectory in inflation. And when it comes to hard-labor markets, the unemployment rate has risen. it rose slightly. This is also a bright spot for rate cuts. But he was also asked if they would cut rates between 30 and 60 days before the election. And he said that they do not look at the political facets of what they do. The bank is focused on knowledge, numbers, and regardless of what’s happening on the political front.
Therefore, I think it is very likely that there will be a rate cut in September, provided that the figures that will be released between now and then continue to imply that inflation is under control.
Manny Anton: Okay, fantastic. I agree, it looks attractive now. And like I said, the asset names seem to have moved.
Residential REITs have performed well, which is generally positive for the REIT market, if rates fall.
Manny Anton: Okay, let’s turn our attention to domestic markets. Now, I think Macquarie released a report on the assets this week. And the report basically advised overweight the A REIT sector. Now I guess that, being Australia’s number one asset manager yourself, or rather fund manager, you will have noticed the report. Can you tell us a little bit about what prompted the switch to Overweight Macquarie?
Winston Sammut: The reasoning behind this resolution is basically to try to give investors a head start. And through that, what I’m saying is that rate cuts are actually going to happen. The market position is improving. We have noticed some deals taking positions in terms of physical transactions, assets traded, and we are very close to the final part of the cycle. That being the case, it’s only appropriate that other people get ahead of the curve, so to speak. and now enter the REIT business, which is trading at a 20-30% reduction to NTA overall. It offers interesting and attractive returns. As far as Macquarie is concerned, costs are therefore expected to be maximum in the future. And get in, instead of waiting for the news to break and for everyone to start uploading.
Manny Anton: Did you make any specific comments in terms of sub-sectors, one versus the other?
Winston Sammut: Again, look, when it comes to the real estate subsectors, there are still questions around offices, as to whether the commercial sector is still doing well. Retail is fine. And of course, everything related to knowledge centers is positive. And that’s helping stocks like Goodman Group, which have indicated they’re looking to enter the sector on a large scale.
Manny Anton: That’s right! Now, let’s move on. We will create a new segment for our weekly chat. What we’re going to do is upload a new segment that will talk about an inventory of the week. Then it won’t be advice. This is for informational purposes only, however, each week Winston will highlight the name of a particular component and give us some data and details about the name itself, what it is exposed to, what the main drivers would be, etc. To be clear: this is not a recommendation on our part to buy or sell inventory, which is not what we do. So, Winston, what’s the first action of the week?
Winston Sammut: The first inventory of the week is Ram Essential Services. The code is REP. Its market capitalization is around $310 million and has exposure primarily to retail, although not discretionary retail. They own community grocery shopping centers as well as some medical assets. And medical assets are attracting investors’ attention. From this perspective, you are exposed to certain real estate subsectors that are performing well right now. Non-discretionary retail is doing well and medical centers are in high demand.
The inventory has been around 60 to 62 cents lately. It has an NTA of $0. 92. It trades with a reduction of around 30% compared to the NTA, but its yield is above 9%, 9. 2%. It will pay a distribution of 1. 4% quarterly. So you’ll pay 5. 6 cents per year, and there’s very little threat to that distribution in the future. Therefore, it is quite an attractive return.
Now, is it imaginable that there is a business activity? Possibly it would be, but right now is not a good time for an entrepreneurial activity when it comes to some of the biggest stocks, taking out a vehicle like RAM. We want to see other measures in terms of reducing interest rates. We want to see REIT debt levels remain stable around this 30% level. But it is a hot stock, at existing levels. And I’m just pointing out that it is in those sectors and in certain subsectors that are in demand right now.
Manny Anton: Okay, great. This is our first inventory of the week. So, looking ahead to next week, as usual, is there anything we want to be aware of, something important?Are there any major real estate listings that we want to be aware of?
Winston Sammut: Well, being aware that we are very close to the publication of the effects, at the beginning of October. Stocks are in lock mode. We receive very little data on the evolution of the stock and its opinion on the scenario at the moment. Management will comment when the effects are known and make appropriate statements. At the moment, we are very calm.
Manny Anton: Winston, it’s fantastic. Thank you for your time and concepts today, as always.
Winston Sammut: A pleasure. THANK YOU.
Manny Anton: And that’ll be it. We’ll be back with the Winston’s Weekly issue next Friday. And until then, have a good day and a good week.
Disclaimer: Sequoia Financial Group (ASX: SEQ), the parent company of Finance News Network, has a 20% stake in Euree Asset Management.
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