Latest / ausbiz a.m / 19.10.26 Fergus Humble, Morgans
Transcript
- Juliette Saly: Good morning. It's Monday, the 19th of October. I'm Juliet Sally, and the Australian share market looks set to start the trading week on a relatively steady footing despite a major sell-off on Wall Street. ASX 200 futures pointing to a slight dip. Australia's limited exposure to big US tech stocks providing some insulation, but the contrast is quite stark. The ASX gained 1% last week, while the SP 500 fell 2%, and the NASDAQ plunged. 5.5%, its worst week since last April's tariff-driven sell-off. Now rising oil prices, growing concerns over the returns on massive AI investments of rattled investors with semiconductor stocks taking a particularly heavy hit. Let's discuss more with Fergus Humble from Morgans, who joins me. Good morning, Fergus. So hopefully the fact that we don't have too much tech exposure might insulate us a little bit. Fergus: More enjoy it. Yes. I mean, I think it's it's obviously driven a little bit of underperformance on the ASX for the last two or three years, I would say. but yeah, maybe we're gonna finally benefit from not really having the same level of tech exposure. we've obviously got the the more of a resources and financials strength. So yeah, I mean it might actually finally have some benefit for for have being so underexposed in the tech space. Juliette Saly: Yeah, finally working in our favor. But tell us how you sort of saw the overall sentiment last week on Wall Street, particularly with that five and a half percent drop over the week for NASDAQ. Fergus: Yeah, I think it's all just a bit of sort of it's sort of just starting to come to a head really. I mean, I think this has been something everyone's been concerned about for months and months. but they were just still printing money, so everything was still going the right direction. So I think this is now where the people are expecting now this is where the rubber sort of meets the road and they're wanting to actually see these companies turn a profit. So I think meta reports in the ne in the in the next few days. I think some of the chip manufacturers are reporting in the next few days as well. I think we've got a few big tech names and some of the hyperscalers. So we're going to actually really see whether they've able to turn this huge AI spend into actual revenue. So and I think if and and if they can't, then yeah, I can see this this this stealth this current downturn continuing. But if they've able to sort of turn it around and they've actually be able to some material benefit for the spending, then I can think that maybe the The IMI trade discontinues continues charging on. Juliette Saly: Yeah, and it's coming at an interesting time as well. We know that there has been the flop, if you will, of the the firmest float here in Australia. But last week was a really interesting one for other companies coming to our market and you spoke there about the fact that we have so much resources exposure. What did you make of Glencore CDIs coming to Australia and I guess that overall materials thematic? Fergus: Yeah, I mean I think I mean Glencore's it's come on, it's it's a really high quality company. I mean, it's sort of up there with your BHPs and your Rios as far as their sort of operational expertise. So it's just another really good resources stock. I mean, we've we're bloody we're lousy with with resource with good high quality resources stock on on the ASX. We've got plenty going going on around, but it's always good to have have some CDIs from Glencore. I think We've we've added a bit of exposure to it, just because it's it's very it's very global, it's all over the place and they're really good operators. So yeah, we're we're we like we like Glencore and we're we're adding it into portfolios pretty actively at the moment. Juliette Saly: Now you also had your Morgan's conference last week. Just tell us a little bit about some of the highlights there and and what's on your analyst radar. Fergus: Yeah, so we it was it was interesting. I mean, I think going into it there was some trepidation about obviously the firmness news, but then I mean consumer and business sentiment's been pretty negative. so we weren't we weren't really sure what to expect, but we're sort of quite pleasantly surprised. it was fairly upbeat from just generally from all of the corporates who presented. we had some some really great presentations throughout about fifty so companies. And it was it was honestly from my perspective, it was the sort of industrials companies that really, really impressed. So we had Acro Formwork, who it's always been one of our one of our favorite stocks at at Morgans. Civmec as well. I mean, they're ones I believe I've spoken maybe to you about them before. They're it's sort of an extra if they're a bit of a play on infrastructure and mining as well as a bit of defense. They've got some port contracts as well. And even someone like Wagner's, I I think this is just there's a few companies out there, Wagner's and Acro in particular, who it with this current build out, particularly in Queensland with the Olympics, that they're just going to it's going to be a huge tailwind for those those kind of businesses. So and then the other one, which I mean it's probably a bit more topical with with the AI stuff, is Megaport. I mean, that you saw them, they got smashed last week just off the back of everything else, or the other tech names, but management for Megaport made a really good point in that the main concern with this AI stuff is the debt, the huge debt load that these companies have. And Mike Megaport actually doesn't have any. So they're not really the same, but they're kind of being treated the same. So I think it's going to take a little bit of while a little bit of time maybe for for investors to sort of catch on to that. and then I think, yeah, they'll they'll they'll gonna shoot the lights out, I believe, in their next next report. Juliette Saly: All right, so that's mega point. You mentioned there as well Acro, I know that's one that you you really sort of are liking at the moment. Just tell us a little bit more about, you know, what's your thesis behind that call. Fergus: Yeah, so I mean they're really strong in the sort of the obviously the form work, that's their main thing, but they're also sort of doing like equipment, like heavy equipment higher, and jump forms, and also just general maintenance. So the the Brisbane Brisbane Olympics is their biggest target at the moment. That construction is sort of only just beginning. that's it's which is only going to get more and more busy in that space. but also they mentioned the fact that they're potentially one of the top bidders. top for for the Sydney Harbor Bridge. So that's gonna require a huge amount of work. I'm actually not 100% sure when it's starting, it's 2030 or 2032 or something like that. they the Steve mentioned I wrote this down. He mentioned that if they were getting the number of contracts they expect to get with the Sydney Harbor Bridge maintenance, it could be forty to fifty million dollars of earnings a year for five to six years. So it's a it's a massive contract and a genuinely material sort of contract win if they were to they were to get it. And also there's also Snowy Hydro, which is obviously like sort of a bit of a bad word as far as sort of public spending, but they do have a material contract in that space. And they've they actually had their contract renewed and they've actually had their scope enlarged. So that's that's going to be a big boost for them over the next next probably two years as well. So they've just got a lot of a lot of ongoing contracts all over the place at the moment. but they're also the biggest part as well, they've got a they've also have just like this maintenance business, which is a bit a little lower as far as margins are concerned, but it's rather than having to just go out and win contracts all the time, this is something that's a bit sort of that's it's just sort of growing their their sort of stable earnings base. So it's a it's it's it's becoming a more reliable earner for them. So yeah, it's one of those it's I mean, Acro's always been one of companies where you're kind of waiting for them to win contracts and bring on big big deals, but now they've kind of also got that really strong just maintenance earnings base as well. Juliette Saly: Great, we love a stop pick. And before I let you go, Fergus, you mean you mentioned some of the US earnings, but what else should investors really looking out for this week? Fergus: I think it's we're just checking out the all the news from the hyperscalers. I mean they're the ones who are really driving everything at the moment. So they've driven the stock market up to sort of records in the US. and they also, depending on how they report, they're also potentially gonna be a bit of a cause of a potential downturn, we think. So they're the they're the ones who I mean, we like to sort of play around on the edges on the ASX and all that kind of thing, but at the end of the day, it's the it's the multi sort of trillion dollar. hyperscalers are really gonna determine all of our fates, I think, unfortunately. Juliette Saly: The big voice. All right, Fergus Humble from Morgan's. Thank you as always. Fergus: Right. Juliette Saly: That does it for this morning's Osbiz AM podcast. Remember you can catch us live from 9.45 a.m. Eastern on osbears.com.au