ASX 200 LIVE: Shares rise; Guzman y Gomez announces IPO and ASX listing (2024)

Seamless banking transactions need to be slowed to cut down on romance scams and other frauds, the head of financial conglomerate Suncorp says.

Suncorp chief executive Steve Johnston acknowledged on Friday this would not be a customer-friendly move, but it comes with federal regulators finding $2.74 billion was lost in scams in 2023, with almost $201 million of that on romance scams alone.

Mr Johnston, speaking at the Queensland Finance Summit, argued that the ability for scammers to swiftly transfer money in frauds stemmed from the idea to create swift banking transactions and reduce hurdles in the process – what industry calls friction.

“We spent hundreds of millions of dollars in the banking industry creating … frictionless banking,” Mr Johnston said.

“What do you know? Scammers come along – and it’s gone before we can do anything about it... it’s gone to crypto before we can even take the phone call.”

Westpac is suing dozens of its insurers to recoup $400 million in policies the bank believes should have been paid out following the record penalty that was levied against it in 2020 for numerous anti-money laundering failures.

The local banking giant has lobbed legal action against Zurich-based Chubb in the NSW Supreme Court, but a source with knowledge of the situation told AFR Weekend that Westpac, overall, had proceedings under way involving 43 insurers including AXA, Allianz, Zurich and others.

Read the full story here.

Wilson Asset Management senior investment analyst Shaun Weick is uneasy about the valuation of Mexican fast food phenomenon Guzman y Gomez after it revealed plans to list on the ASX on a $2.2 billion valuation.

“I’d say at a headline level the valuation looks very rich,” Mr Weick said. “Other global rollout stories like Lovisa are trading on 12.5 times EBITDA, this is 38 times underlying EBITDA, so my initial view is this looks very expensive. You know, it’s a US rollout story, but listing on 38 times underlying EBITDA with stiff competition from the likes of Chipotle, it won’t be easy.”

The fast-growing franchisor that plans to grow stores in Australia and the US will sport a price-to-earnings ratio of around 574 times its enterprise value to a forecast profit of $3.4 million in financial 2024.

Looking out to FY 2025’s forecasts puts the IPO on a valuation of 32.5 times expected EBTIDA (operating income) of $59.9 million next financial year.

“We don’t have much detail at the moment in terms of what the projections look like for FY25,” Mr Weick said.

“The structure of the deal is new investors are only getting 0.5 to 4 per cent of the company. And there might be a big overhang with a sell-down from current owners in the future.”

Investors are weighing the durability of this year’s bull market in commodities amid warnings of more “frequent and violent price swings” from extreme shortages in base metals.

But brokers say the powerful rally that rocketed copper and gold to record levels will resume after metal prices were hit by profit-taking this week. Copper traded on the London Metal Exchange has since dropped 6 per cent from its record high on May 20 to $US10,159 a tonne.

But the benchmark S&P GSCI, one of the broadest measures of global commodities, is still up 13 per cent this year, and Goldman Sachs believes further gains on metal markets will lift returns close to 20 per cent.

“We remain selectively bullish on commodities because demand growth remains solid,” said Goldman commodity strategist Daan Struyven. “We see more structural upside in industrial metals and gold, and oil’s geopolitical risk premium has shrunk.”

Goldman expects “solid returns” in select metals and oil that would help take total commodity returns to 18 per cent by the end of 2024, from 13 per cent.

Read more here.

It seems fitting that the first part of our interview with veteran fund manager Geoff Wilson takes place as he weaves through New York City on foot, looking for an Uber.

Wilson remembers New York vividly, where he was sent as a 30-year-old broker from middle-class Melbourne, working in the city during the 1987 sharemarket crash. After rubbing shoulders with the corporate giants of the time – John Elliott, Larry Adler and Robert Holmes a Court – he found himself thrust into the Wolf of Wall St culture. “It’s all true,” he admits. “If the world’s a zoo, then New York’s the centre.”

“I remember I arrived on the Friday and went into the office. Someone had ordered a dozen bottles of Moet. We were all drinking Moet. I thought, wow, this is extreme,” Wilson recalls.

Read the full interview here.

Australian shares rose 0.5 per cent at lunchtime amid broad buying after a three-day sell-off was fuelled by slightly hotter-than-expected inflation data for April.

Burritos merchant Guzman y Gomez also flagged plans to hit the ASX boards in June on an enterprise valuation of 32.5 times forecast EBITDA of $59.9 million in financial 2025.

Every ASX sector was higher in the early afternoon except the interest rate sensitive tech and property sectors. Tech tumbled on Wall Street on the back of a sales miss from enterprise software provider and Slack-owner Salesforce.

Gold miners were among the top local performers as the precious metal’s price edged higher to $US2343 an ounce. Northern Star rose 1.9 per cent to $14.24 and Newmont gained 1.7 per cent to $63.05.

The yield on one-year Australian bonds added 4 basis points to 4.42 per cent, and has added 10 basis points since Wednesday. The yield on the US 10-year note slid 7 basis points to 4.55 per cent.

The Dow lost 0.9 per cent, the S&P fell 0.6 per cent, and Nasdaq retreated 1.1 per cent.

The focus for markets globally is the release at 10.30pm Friday AEST of the US personal income, spending and price reports.

Economists expect the personal consumption expenditures price index – the Federal Reserve’s preferred measure of inflation – will rise 0.2 per cent in April.

Stocks in focus

Shares in Telix Pharmaceuticals jumped 14.2 per cent to $17.98 after broker Wilsons issued a positive note on the business. The biotech sensation has climbed around 1380 per cent in five years to a $5.4 billion valuation.

Irish building products group CRH has secured approval from the Foreign Investment Review Board for its $2.1 billion buyout proposal for cement group Adbri.

The Adbri board in February backed the $3.20-per-share offer from CRH, which is listed in New York and London.

Shares in medical imaging group Pro Medicus jumped 3.7 per cent to a record high of $124.50.

Takeover target Namoi Cotton traded flat at 70¢ as suitor Louis Dreyfus extended the deadline on its bid.

Mexican-themed fast food chain Guzman y Gomez plans to list on the ASX in June, paving the way for key backers TDM Growth Partners and Barrenjoey Capital to realise a lucrative payday.

GyG confirmed on Friday it would proceed with a fully underwritten float of 11.1 million shares at $22 apiece or $242.5 million – $42.5 million of which is a sell down by some existing holders – for a $2.2 billion valuation. There is no general public offer.

This week The Australian Financial Review reported that the co-founder of GYG, Robert Hazan, stepped down from the company’s board, as did former McDonald’s Australia executive Steve Jermyn.

Read the full story here.

Citi has resumed coverage on BHP after suspending its rating on the stock, with a “buy” rating and a price target of $48.50.

The broker’s resumption of coverage comes after BHP decided not to proceed with a firm takeover offer for Anglo American.

Citi believes that BHP has the best earnings leverage to copper of the Australian diversified miners, and added that consensus long-term copper price estimates are currently too low.

“In FY24, we estimate BHP is most leveraged to copper at 22 per cent of attributable EBITDA, followed by South32 at 19 per cent and then Rio Tinto at 10 per cent,” said Citi analyst Paul McTaggart.

While acknowledging that iron ore prices are likely to consolidate over the next three to six months, Citi said it remains “mid-term copper bulls”, with the metal on a path to $US12,000 a tonne.

Prices were trading around $US10,159 a tonne on Friday, while shares in BHP eased 0.5 per cent to $44.30.

Funds management royalty including Firetrail, Hyperion, Cooper Investors, Aware Super are all Mexican food store franchisor Guzman y Gomez ahead of its June initial public offer on an enterprise value of $1.95 billion.

The IPO values the business on a punchy price-to-earnings (PE) multiple of 574 times forecast profits of $3.4 million in financial 2024 based on the enterprise value – or 325 times forecast profits of $6 million in financial 2025. The prospectus reveals the burritos merchant had 183 stores in 2024 in Australia, with potential for that to rise to more than 1000.

In a May investor webinar, Hyperion’s growth-focused chief investment officer Jason Orthman said Guzman y Gomez faces much less competition than quick service restaurant rival Domino’s Pizza, also owned by the Brisbane fund manager.

“The reason is Guzman y Gomez is pioneering fast, clean Mexican, and it’s really resonating with the Australian consumer. So the competitive intensity in pizza, burgers and chickens is actually quite high. Guzman y Gomez’s potential growth through a store network is also higher,” said Mr Orthman.

“We believe it has around 200 stores largely in Australia and has the potential to move beyond 1000 stores over time, again supported by Australia.

“Clearly, if the concept resonates as well offshore, there’s actually upside in terms of that global scale as well. And so Hyperion is supporting Guzman y Gomez and is assisting that business and will be an investor as it lists over time and hits the Australian stock exchange.”

Other fund managers are backing the fast-food phenomenon thanks to its wild success in Australia marketing affordable and healthy Mexican-style food to consumers.

Its growth strategy is centred around new company and franchisee-owned store openings, sales and margin growth at existing stores and higher franchisee royalty rates. It’s targeting more than 1000 stores in Australia and growth in the US, Japan, and Singapore.