Select Harvests readies $120m raising to buy almond farms

Australia’s largest almond grower and processor is about to get that little bit larger.

It is understood ASX-listed Select Harvests is poised to acquire three almond farms and was readying a $120 million capital raising on Thursday evening to finance the acquisition.

Sources said the raising would be structured as a $40 million placement and $80 million accelerated non-renounceable entitlement offer.

It is understood the raising would be priced at $5.20 a share, which represented a 4.8 per cent discount to Select Harvests’ $5.46 last close.

Bell Potter was underwriter to the raising, while PAC Partners was a joint lead manager and Select Equities was pitching in as a co-manager. Select Harvests was being advised on the deal by Kidder Williams.

It is understood the acquisition of the almond farms – located on the NSW/Victorian border – would increase Select Harvests’ annual production by 4,600 tonnes in its first full year, and increase its total farm size to 9,300 hectares from 7,700 hectares.

The $538 million company was expected to make an announcement to the ASX about the acquisition on Thursday evening and the raising was pegged to launch on Friday morning.

Hay There

Thanks for stopping by the Bega Valley to support farmers.
Three truckloads of donated hay from Victoria arrived in the Bega Valley yesterday. It was kindly donated by Kidder Williams Limited.
David Williams from Kidder Williams says despite the green pastures in the Bega Valley there are some farmers struggling to feed their livestock.
He says they hope this donated hay should get the farmers through the winter season.

Giant steps for Bega’s dairy king and his loyal court jester

On the morning of May 18 last year, when Barry Irvin told his adult autistic son about his shock cancer diagnosis, there was poignant silence in the room.

The youngest of Irvin and his wife Harriet’s three children, Matthew Irvin cannot speak and has a limited capacity to communicate.

The then 27-year-old simply leant forward and gently touched his father’s forehead with his own.

“We don’t know what Matty did and didn’t understand. His needs in life continued to be his needs in life and for him I continued to play that role. Which helps with perspective. Having Matty in my life has meant it is hard to get overwhelmed by anything,’’ Irvin tells The Weekend Australian about the news that rocked the Australian dairy industry, when Bega announced that its executive chairman was taking leave to battle a serious illness.

For many years, the staff at Giant Steps, a charity that runs schools for autistic children in Sydney and Melbourne which Irvin established and now chairs, had wrestled with Matthew’s discomfort with physical contact.

They eventually taught him to show his father affection by bowing before him and allowing him to plant a kiss on his forehead.

Now the six-foot tall Matthew still religiously practises the ritual. But the kiss from his father has been replaced by the touching of their foreheads.

Irvin says that since a young age, his son has also viewed his ­arrival in the household as entertainment, irrespective of his ­father’s demeanour or physical disposition.

Without fail each evening when Irvin set foot in the door, Matthew brought his father his shoes — and then socks if he didn’t get his way — signalling his wish to go for a walk and see the world outside the walls of his home and the Giant Steps school.

“Matty is entirely defenceless,’’ Irvin says.

“He needs me and struggles to understand the most basic of interactions. There is a limited group of people he feels safe with, and I am one of those people.”

That morning last May, as Irvin was bracing himself to undergo life-threatening surgery two days later, his son again trudged away to his bedroom of their home in leafy Lane Cove on Sydney’s North Shore and returned carrying his shoes.

And like many times in his life when it was the last thing he wanted or needed, Irvin still resolved to go walking.

It wasn’t the first time the man known as a legend of the Australian dairy industry, and credited with bringing the iconic Vegemite brand back home after 90 years of American ownership, had gritted his teeth and soldiered on during his eight-month ordeal.

Now he reveals the crucial support of the man who helped him orchestrate the Vegemite deal in early 2017, when Bega paid a whopping $470m to buy most of US food giant Mondelez’s local grocery and cheese businesses.

The brash and ruddy-faced David Williams is founder of corporate advisory firm Kidder Williams, which has carved out a special niche in the food, agriculture and beverage industries.

Barry Irvin and David Williams,speak to Sue Neales at the Global Food Forum in Sydney in 2019. Picture: Hollie Adams for The Australian
Barry Irvin and David Williams,speak to Sue Neales at the Global Food Forum in Sydney in 2019. Picture: Hollie Adams for The Australian

Irvin and Williams have known each other for more than two decades, and for the past 12 years Williams has been Irvin’s most trusted business confidant.

In the dark days of 2019, as Irvin lay gravely ill in a hospital bed in a ward of Sydney’s St Vincent’s Hospital, Williams became a lifesaver.

“David never let me push him away. He never rang and said ‘So sorry to hear about your condition.’ Rather he would ring and say ‘What are you doing, you malingering bastard? I am coming to Sydney next week, do you want to have lunch or dinner?’ ” Irvin now says, sitting alongside Williams in the latter’s favourite Chinese restaurant, Melbourne’s famed Flower Drum, to talk about his battle for the first time.

“And I would say ‘OK’ because that allowed me to feel normal. It was a means of escape.”

Irvin had been told by Meg Barnett, his oncologist at The Kinghorn Cancer Centre in Darlinghurst, that he could indulge in the odd beer or glass of his favourite pinot or chardonnay during his cancer treatment.

Three months into it, when a swath of anti-cancer drugs had leached into every inch of his system, Williams rang his friend to say he had booked dinner for two at the suave Metisse modern French restaurant in Potts Point. There would be no no-shows.

Irvin admits he felt as sick as a dog, but dragged himself out of bed and caught the train across town to the restaurant. When he sat down at the table, Williams ordered him a ginger-infused cocktail, promising: “They tell me this is good for you.”

A few hours later they had torn through more than just a few cocktails. The next day, Irvin had the worst hangover of his life.

“I thought I was going to die. It lasted for three days,’’ he now says with a cringe.

But Williams stresses his lunch and dinner invites with the odd alcoholic indulgence were not some perverse attempt to see his friend enjoy what could have been his last few months on earth.

“We have had several boozy lunches and dinners in Sydney, including when he wasn’t supposed to be doing booze. My attitude was to continually force him to think he is coming back. I said to him once ‘you are a lazy bastard, put your suit on and get back into the office!’ ” Williams now barks.

“I thought he was going to get through this. I genuinely thought if I could get him back to work sooner, it would be better for him. That is why I went hard.”

Difficult conversations

Barry Irvin’s father Alan died of bowel cancer when he was 58 years old. His son had been set on a career in banking until his father’s death compelled him back to the family farm in Bega.

Three decades later, Irvin junior was diagnosed with the same disease only weeks after he celebrated his 58th birthday, and as his 90-year-old mother, Joan, lay ill in hospital fighting her own personal cancer battle.

On the afternoon of May 18 last year, Irvin flew from Sydney to his home town of Bega — where his family still runs the 600ha dairy farm — to visit his mother at the Hillgrove House nursing home.

Amid the drone of the Saab 340 turboprop’s engines in the cabin, he braced himself during the hour-long flight for what would be one of the most difficult conversations of his life.

Irvin and his mother, who he affectionately calls “Joanie”, had enjoyed a robust but special relationship. For decades she cared full-time for Irvin’s only sister, Jan, who passed away in 2015 at the age of 56 after battling Prader-Willi syndrome all her life.

“When Mum was sick, it was hard. But I knew it would break her heart to tell her I was sick. I have always set myself up as the person she didn’t need to worry about,’’ Irvin recalls slowly — with eyes that grow increasingly bloodshot as he speaks.

“She had told me when she was sick that, at 90, she was happy to go. ‘Don’t revive me if something happens to me’ she said. And the hardest thing for me was when I went and told her, she immediately told me ‘I have to be OK until I know you are OK’. I was agonising about the fact that my mother was almost forcing herself to stay alive until she was certain I was OK. That probably upset me more than anything else because I felt I was a burden for her.”

For his return to Sydney, Irvin eschewed a quick plane trip home, preferring to do the six-hour road trip on his own in a brand new bottom-of-the range Subaru Impreza, purchased a day earlier by his long-time personal assistant Faith Behrens to replace his bombed out Subaru WRX.

It was an act that came to characterise his cancer battle.

For every chemotherapy session, Irvin would drive himself from Lane Cove to Darlinghurst.

Upon leaving after three days of treatment, he would often lightly scratch his new car against the pylons in the carpark as he struggled to get his left foot to register his brain’s insistence that it push the brake pedal.

“I lost my fine motor skills and I developed a strategy to wait for someone to come to leave the carpark and I’d ask them to put the ticket in the gate for me,’’ he says.

He was determined to remain active. But isolated.

“The task was reasonably big, given the level of pain after the surgery and the level of chemo that was going to come. I am not someone who wants to be cared for. I am happy to help others,” he says.

“My way of coping with this — even with my family — was to isolate myself and concentrate on the task. I told them ‘I don’t want ­sympathy, the thing that will upset me most will be if you guys get upset!’ I told them: ‘The best way you can help me is to leave me alone’,” he says.

Irvin battled deep feelings of guilt, especially as his now 33-year-old daughter Deborah wanted to stay close and constantly sought his assurance that he was going to be OK.

Her father had always been her rock and was seemingly invincible.

Irvin’s 31-year old son, Andrew, who runs the family’s dairy farm, was more pragmatic.

“When I told him about the cancer he looked at me and said ‘right, I have 1000 questions’. He rang me back the next day and said ‘oh I’m sorry, I hope you are OK, I should have displayed more care rather than focusing on the practicalities’,” Irvin quips.

Harriet Irvin was not surprised by her husband’s stoicism. He asked that she not attend any of his appointments and, through her pain, she respected his wishes.

“She was understanding of it but it was hard on her,’’ Irvin says.

“Once we were in a routine, she was terribly supportive of the routine. She would do what I needed to be done. But one of my learnings is — it is harder on the people around you than it is on you.”

In Irvin’s bubble of doctors, drugs and sleepless nights, David Williams represented normality. As did another of Irvin’s closest friends, former Westpac executive-turned Commonwealth Bank director Rob Whitfield.

Irvin met Whitfield when the latter was running Westpac’s institutional bank. They hiked the Kokoda Trail together, and they were set to walk from Florence to Rome last year before Irvin was struck down.

“Rob would often say, ‘mate, do you want to have lunch? Lots of lovely people wanted to do nice things, but it was David and Rob who knew me well enough to say ‘he needs to separate himself’,” Irvin says.

Another source of solace and inspiration became Giant Steps itself. Irvin was told by his doctors to remain physically active through his treatment, so he started a four-day-a-week weights training program and walked regularly.

Sometimes he would attempt Sydney’s famed Seven Bridges Walk around the harbour, but never made it when he was sick and got told off by his family and doctors for trying.

On many Fridays he would attempt the 12km walk from his home to the Giant Steps school in Gladesville and back.

“I knew I was visiting a caring place, where the staff would always greet me with a smile, sit me down and tell me some lovely stories or ask for some input on our latest fundraising submission and then try and talk me out of walking home,’’ he says of Giant Steps.

“I always left there feeling better than when I arrived, and I always felt like the caring culture we had worked to develop was there, not only for our children and families, but anyone that came through the Giant Steps door.”

Giant Steps director and former Ellerston Capital CEO, Glenn Poswell, says Irvin’s dedication to Giant Steps — which has also included participating in countless charity bike rides — reflects his ­desire for children with autism and those on the spectrum to live as normal lives as they can.

The charity has received $10m in federal funding to develop its Sydney school, and three years ago launched in Melbourne at the Kew Synagogue.

Williams helped write the business plan for that expansion and has raised more than $500,000 to assist the move.

“Giant Steps is world class. They are doing amazing things and changing people’s lives,’’ Poswell says. “Barry has incredible passion, amazing drive. He is incredibly competitive and he is also very ­focused when he needs to be. When he was sick, just being around the environment that Giant Steps offers gave him confidence. It is sanctuary, really. There is a real feel-good factor when you are there.”

The Giant Steps story also carried over into Irvin’s surgical treatments. St Vincent’s renowned colorectal surgeon, Rohan Gett, had attended the annual Giant Steps Ball for more than a decade before he met Irvin for the first time on May 17 last year. He hasn’t left his side since.

The charity had taken the son of one of Gett’s best friends under its wing. He said to Irvin at the end of their initial consultation at St Vincent’s: “You looked after the child of one of my best mates. So I am looking after you.”

Back to business

On January 29 this year, Irvin ­attended his first Bega board meeting in nine months, fittingly at Vegemite’s iconic Port Melbourne factory.

Earlier in the week, when he ­arrived in Melbourne, one of the staff at the Windsor Hotel — his favourite resting place for many years before his illness — cried tears of joy when they saw him.

For Irvin, the meeting was straight down to business.

“I said to the board, ‘I was sick and now I am better!’ ” he says proudly.

Williams, who attended the meeting — and most of the others during Irvin’s absence — knew how much he had been missed by everyone at the company.

“Sometimes you don’t realise what leadership people contribute to an organisation until it changes,” he says.

“ Even I didn’t realise, and I know him better than anyone. The board just wasn’t the same without him there,’’ he says.

“I have an excellent relationship with all the board, I know them all personally and have a long history with a number of them. Without being disrespectful to anybody, for me it was normality restored.”

Irvin and Williams had first met at a conference for rural co-operatives in 1994 when the former was a full-time dairy farmer, and they stayed in touch over the years that followed.

They got closer after Irvin ­became non-executive chairman of Bega Cheese in 2000, but only signed a formal mandate to ­engage Williams’ firm when Irvin became executive chairman of the company in 2007.

Irvin oversaw a deal to for Bega to buy Vegemite in 2017. Picture: Stuart McEvoy for The Australian.
Irvin oversaw a deal to for Bega to buy Vegemite in 2017. Picture: Stuart McEvoy for The Australian.

Williams was integral to Bega’s float on the Australian Securities Exchange in 2011, as well as a swath of corporate transactions over the years.

“The fundamental difference between our relationship and what normally happens in corporate Australia is that he is executive chairman and has been there for 20 years. I am an adviser who is on a retainer and I have known him for more than 20 years,’’ Williams says. “We have this consistency of view and history about where the business is going strategically, operationally and where the opportunities are.”

Irvin is clear that Williams’s advice is always put through an independent process and structure within Bega before it is accepted.

“We have a relationship that has its foundations in business that folds over into a personal trust,” Irvin says.

“There is also an intellectual dynamic between us, if you like.

“We do understand each other and we do understand each other’s boundaries. So when we are trying to work out what is next, it doesn’t take us weeks of meetings. It takes us hours. He understands all my shareholders, whether they are corporate shareholders or farmer shareholders.”

They have also had their share of vigorous debates. “The last thing he wants to hear from me is ‘Barry, what do you think?’ So if I have a preferred position on something, I am going to put it strongly,” says Williams, who regularly refers to Bega in the terms “Us” and “We”.

“That doesn’t mean I am right all of the time.”

Irvin might have lost the feeling in his hands and feet and lost all the fingerprints from his hands as a result of the chemotherapy treatment, but Williams says his friend has more energy than ever, which is a testament to his resilience.

“Someone said to me the other day ‘how is Barry?’ I told them ‘He is out of control!’ I prefer him when he is just a little bit sick,” he says with a wide smile.

Irvin says he will never forget the words of his oncologist Meg Barnett late last year as she handed him his test results.

After delivering her medical spiel, she closed his file and told him what she really thought.

“I am just so delighted because every time you came to see me you put on your best clothes and pretended all was fine when I knew it wasn’t,” she said.

“I had hit you so hard with everything. And towards the end I was worrying whether it was going to work.”

Her candidness was empowering for her patient.

“I understand doctors have to give you the official line. But the unofficial line from her meant a lot to me,’’ Irvin says.

Barry Irvin admits he’s always been a fatalist. He’s never been religious. So even in his darkest days, he was never afraid of dying.

For a moment he recalls his famed bike training on the winding roads of the 1240m Brown Mountain in the Great Dividing Range between Bega and Canberra over the past decade.

It is legend among locals that after his ascent, Irvin regularly went faster than many cars on his trip back down the mountain.

“I used to say to my children and my wife: ‘I am going to die a tragic and spectacular death, ­potentially off Brown Mountain’,” he says with a wide smile.

“So when I got cancer and I told them and they were all bit sad, I told them: ‘This isn’t going to kill me. Because this is neither spectacular, nor tragic.’ ”

Mobile tyre fitter doubles fleet

The online tyres supplier backed by the rich-lister Vidor family’s Toga Group, wealthy Perth heiress Rhonda Wyllie and Melbourne investment banker David Williams is raising $10m to more than double the size of its fleet of service vehicles, as its sales are forecast to hit $100m within two years.

The Mobile Tyre Shop, which operates in all of the nation’s capital cities, allows a customer to order tyres online or over the phone and have them delivered and fitted at their home, place of work or a site of their choice.

Clients include Budget Rent a Car, Europcar and the Royal Flying Doctor Service.

The company’s founder and CEO Travis Osborne, the former manager of Challenger Financial’s property fund, said Mobile Tyre Shop was looking to put $5m of the current fundraising ­towards expanding its fleet of service vans from 40 to 100.

The remainder would be spent on marketing and other growth opportunities.

“The original intent was to hold off (on raising funds) and grow naturally. But over the past year we have had a couple of approaches from private equity and industry players,’’ Mr Osborne said, noting a future listing on the Australian sharemarket was an option.

Last year the firm, which Mr Osborne calls the “Webjet of tyres”, raised $5m from its backers that include the Toga Group, Kidder Williams founder David Williams, the Rhonda Wyllie-backed Viburnum Funds group and the Perth-based private wealth firm Merchant Group.

“Mobile Tyre Shop is for people who don’t want to drive to a tyre shop, leave the car for a day, get a cab to and from the workshop and pay top dollar for tyres. It is a disrupter because it saves you time by doing all that at your home, work or even an airport carpark at the lowest cost,” said Mr Williams, who bought into the company in early 2017.

He and Mr Osborne are the sole directors.

The Australian tyre market is worth over $5.4bn annually and the top five brands — Goodyear, Bridgestone, Tyrepower, Bob Jane and Kmart — control more than half of it.

But in addition to Mobile Tyre Shop, consumers can now buy tyres online through companies such as Beaurepaires, JAX Tyres, Bob Jane and new online sites such as

Last year German automotive e-commerce specialist Delticom claimed the proportion of tyres sold online in Europe would reach 15-20 per cent this year.

One of Europe’s biggest tyre suppliers, ATS Euromaster, is currently running 2600 mobile vans across the continent.

Market research organisation NPD claims online tyre sales grew 34 per cent in the US in 2018, accounting for 21 per cent of all automotive online spending.

“Australia has been very slow to the party because most of the major tyre chains are stuck in their existing brick-and-mortar platforms,” Travis Osborne said.

But other industry executives such as Goodyear and Dunlop Tyres Australia vice-president of retail Scott Wood and Kumho Tyre Australia sales and marketing director David Basha have played down the growth potential of the mobile fitting model.

Mr Basha told online auto site GoAuto late last year that he saw online tyre sales “topping out at around 10 per cent”.

Mr Wood told the same website that he expected mobile tyre-fitting services to remain small-scale in Australia due to the difficulty in offering on-the-spot wheel alignment services. But Mr Osborne said the opportunity for his company was now even greater than it first envisaged given its mobile technicians could replace and balance four tyres in about 45 minutes.

“We are forecasting to hit $100m of sales within the next two years. Surprisingly we operate on a far better margin than a traditional tyre store. We are completely agnostic as far as brands but we are privately funded,” he said.

“I always say that until we have flying cars, we will have a pretty steady market with tyres on cars.

“And with everyone going to SUVs, the tyres on the vehicles are increasingly sophisticated and technical. Our core business is selling good tyres on good cars. We are not at the budget end of the market.”

How two Aussie entrepreneurs are redefining surfing with tech

“No wind, no problem” could be the motto for two of Australia’s latest sports tech entrepreneurs, with Andrew Ross and David Trewern reshaping surfing one wave at a time.From something that can only be done in the right weather conditions at beaches with waves, surfing will become a year-round sport thanks to innovations from Ross, who founded wave park Urbnsurf, and Trewern, whose Fliteboard already has a growing clientele of business and pop culture identities including Katy Perry, Mike Cannon-Brookes, Rod Drury and Shopify founder Tobias Lutke.Ross’ first wave park, which is set to open in Melbourne in early January, near the city’s airport in Tullamarine, will be the first of its kind in the southern hemisphere and cost around $40 million to build.

A vision of Ross’ since 2012, when he met the creators of Spanish wave park tech company Wavegarden, the venture has taken the better part of seven years to come to life.

While in testing mode in the last months, Ross has personally ridden more than 800 waves and 70 barrels, while sharing rides with the likes of Chris Hemsworth and surfing elites Taj Burrow and Tyler Wright.

The former lawyer and investment banker says he wants to create a space that would appeal to professional surfers and beginners alike.

“The challenge was how to create a church to surfing and an environment that would be inviting for a range of different surfers. A measure of success for us will be a bunch of Victorian surfers feeling like we’re their local,” Ross says.

An artist’s impression of the wave park. Urbnsurf

“But we’ve also had the Australian Olympic surfing team here and some elite juniors and they get to do things they rarely get to do in the ocean because they previously haven’t been able to practice over and over again.”

Ross started the business after taking a year off from his corporate jobs when he turned 40 and found a way to unite his profession with his passion.

The wave park takes up 5.4 hectares owned by Melbourne Airport, with the pool taking up 2 hectares – around the size of the Melbourne Cricket Ground oval. It is divided into four sections, catering for beginners to elite surfers and it will have a maximum capacity of 84 surfers per hour.

The site will be powered completely by renewable energy sources and is, according to Ross, the largest recycled concrete structure in the country, made up of concrete from demolished airport runways.

To fund the site, Ross spent a large part of 2017 hitting up investors with the help of corporate adviser David Williams of Kidder Williams. While he would not reveal how much he had raised, it is believed to be upwards of $28 million.

Early investors in the company included Merchant Group’s Andrew Chapman and Veris managing director Adam Lamond.

Chapman was introduced to Ross through his travel agent and has invested $2 million in the wave park.

“Given the broad appeal – from little kids learning, to guys that can seriously surf – I think it’s a great concept that will be embraced by the public everywhere regardless of how close you live to the beach,” he said.

Williams, who intends to be a regular at the wave park, says at first investors didn’t understand why surfers would pay for something they could do for free in the ocean, but he got the raise away, and it was supported by wealthy investors and a hedge fund.

“At the time… there were only two other commercial wave parks operating using technology from [Wavegarden]. However, these had only just opened and had a limited track record with which to convince investors that Urbnsurf would be a success,” he said.


Tackling the other aspect of surfing, the board, Fliteboard is Trewern’s fifth business and his electric flying surfboard (eFoil) has already caught the attention of some of the world’s wealthiest water sports fans.

Counting brothers and SEEK co-founders Andrew and Paul Bassat as investors, alongside Hong Kong’s Lei Zhang of Hillhouse Capital, the company has sold 650 boards to date after beginning to ship them about six months ago.

Described by Shopify founder Tobias Lutke as “the most magical gadget on the planet”, the boards, which sell for $15,950 in Australia, have already been purchased by former Formula One world champion Nico Rosberg, Sydney to Hobart winning skipper Mark Richards, Atlassian co-founder Mike Cannon-Brookes and Social Network Path founder Dave Morin.

With a love of surfing while growing up, the idea for the business came to Trewern during a sabbatical in Byron Bay, having previously spent two decades founding and running digital agency DT (now AKQA) and Republica Education.

Trewern riding one of his Fliteboards. Supplied

“I thought it was going to be a niche of a niche. Hydrafoil surfing with a kite is really, really hard. I initially thought not many people would want to do this, be able to do it and it was going to be expensive,” Trewern says.

“You have to use your core and lower body to control the foil and upper body to control the kite, when you get it all worked out it’s an amazing thing … but what I didn’t realise was how easy this would be for people and how much it would capture people’s imagination.”

The motorised boards mean users can ride them even when there are no waves and its larger hydrofoil wings, designed by the America’s Cup foil designers, mean they’re easier to operate and less sensitive to small movement changes than the similar kite surfing products.

The first prototype was made by Trewern on a 3D printer purchased from Byron Bay’s Aldi supermarket, but the boards are now manufactured using parts from China, Thailand, Australia, Germany and the US.

It is a passion project and he wanted to be uncompromising in his vision like Steve Jobs or Elon Musk, Trewern says. That means that even with the board’s high price tag, it’s still a low-margin product at this stage.

“It’s my fifth business and it’s been more challenging than all the others because it’s a huge undertaking. I was creating a vehicle that had hundreds of parts and had to be custom designed and tested,” he says. “But if entrepreneurs weren’t optimistic, they wouldn’t do anything.”

Consistent small caps: they’re out there — just follow the whistle

Many people I meet say, “Oh, small caps, they’re too risky!” I nod and walk on. Small caps do move a great deal more than their larger counterparts, I admit. When the news reports Telstra had a big day, declining 3 per cent, I think to myself, that’s nothing! Double-digit rises and falls are almost de rigueur in a small cap, which I define as an ASX-listed company with a market cap less than $500m.

When you focus on small caps as a whole, you are forgetting that the big advances in reducing risk from investing have been through diversifying that risk, which means holding stocks that complement each other, otherwise known as reducing correlation.

Because the big companies represent the market, to produce more consistent returns you need to buy stocks that are off the beaten track, so to speak. In stockmarket parlance, “low beta”.

Generating exposure to the market through an index fund provides the cheapest form of diversification, but if you want to reduce your risk further, and generate bigger returns, stocks that have a low correlation to the market are worth thinking about.

Before I get to some of these stocks, it’s important to point out that every stock is going to have a correlation coefficient of at least 0.5, which means the influence of the market is 50 per cent or more on its price movement. If a stock has a correlation coefficient of 1, it moves in line with the market. Conversely if it’s -1 it moves in exactly the opposite direction.

You don’t want to pretend that a stock’s behaviour is going to be separate from the market, although through history there might be the odd incidence of this. What you have to do is be careful in selecting stocks that won’t behave like the market, which to my way of thinking includes those stocks that are not expensive.

Certainly, two stocks that have looked cheap, the junior nickel producer Panoramic Resources (PAN) and the sleep apnoea specialist SomnoMed (SOM) have both spiked 40 per cent-plus in recent weeks, the former on a takeover bid from Independence Group (IGO).

For a company like Panoramic it’s not a diversified producer and has had significant problems resuscitating its Savanah Mine in the east Kimberley region of Western Australia. Consequently, its shares hadn’t moved despite a buoyant nickel price. It recently raised emergency capital to keep the Macquarie creditors from its door. Independence swooped. Name a big cap taken over recently? I can name three or four small caps.

SomnoMed, like so many small caps, is undergoing a turnaround, this one due to some serious strategic missteps. Hence it was cheap. The med-tech is also part of an industry going through a secular growth trend — the treatment of sleep apnoea. It has been attempting to tap into this demand and has recently woken investors up through its success in the US.

Another medical stock I have mentioned often in this column is Medical Developments (MVP), producer of the famed Green Whistle (emergency pain relief analgesic). This company is tapping into demand from around the world for affordable non-opiate-based analgesic pain relief.

Then there is ship builder Austal (ASB). Its earnings are less correlated with the market because of its 20 year-plus purchase cycle. It is unlikely to be affected by month-to-month variations in consumer demand.

The ASX is very concentrated from a market capitalisation perspective. Investors have great opportunities to look at its long tail in order to diversify their portfolios and gain access to stocks that move independently from the BHPs and NABs of this world.

Oh, and the next time I’m told about risky small caps I might offer them the Green Whistle.

Richard Hemming is an independent analyst who edits [email protected]

Call to push China to open its pork market for Australian export

Investment banker David Williams has urged Agriculture Minister Bridget McKenzie to push to sell Australian pork to China to help ease a shortage as a result of its swine flu problem and get in ahead of any US-China trade deal.

Pork is not on the list of agricultural products from Australia which can be exported to China.

But in an interview with The Australian, Mr Williams, the founder of investment bank Kidder Williams, which specialises in agricultural deals, urged Senator McKenzie to lobby China to open up the market for Australian pork.

US President Donald Trump said on Friday that China would be buying some $US40bn to $US50bn in agricultural products from the US as part of a trade deal that could be finalised by the two leaders at the APEC meeting in Chile next month.

Mr Williams said China had shown it was open to quick changes in its import restrictions as it sought to buy more pork from the US to cope with the fallout from its devastating swine flu problem.

“We need to urgently amend the list of agricultural products that can be sold to China,” he said.

“The Chinese are desperate for pork given the cull in the herd in China from African swine flu.

“The Chinese are so desperate they recently said they would be amending the US import list to allow US pork into China at a concessional rate.”

He said this move was made in September at a time when the US and China were “still sparring partners” and had not reached a potential deal for China to buy more US agricultural products.

“This is an indication of how an urgent application to allow Australian pork into China might get a quick reaction,” he said.

Australia should also look at asking the Chinese whether it could help rebuild the Chinese pig stocks once the swine flu problem was over.

“They are slaughtering their herds in China and they clearly can’t get enough,” he said. “They are releasing stocks from their stockpiles but it is not enough.

“Pork producers in Australia have been losing money for three years and access to China would kick start them in a positive way.”

He said China’s push to change its regulations to buy more pork from the US showed that it could “turn on a sixpence” if it wanted to amend its agricultural import licensing arrangements.

China is expected to buy more pork from the US under the trade deal now being finalised.

But he said Australia should move quickly to push China to be allowed to sell pork into its market ahead of any US-China deal which could also cushion the impact of any deal on other Australian agricultural exports to China.

“This could be a big opportunity for Australia to not only make some short term gains but to use it as a basis for having a market going forward,” he said. “Even though it wont be anywhere near what China needs it would help give the Australian pork industry a boost.

“The government has a small window before the trade deal with the US to try and capitalise on it.

“Achieving this would bring a short-term benefit to Aussie farmers that are put on a new list but also lessen any downside when the US and China finally cosy up to each other again,” he said.

The world’s largest pork consumer, China has already been forced to cull more than a million pigs since the outbreak of swine flu more than a year ago. Agricultural specialist Rabobank says China could lose as much as 70 per cent of its domestic pig herd this year as a result of the disease. China has 350 million pigs or a quarter of the world’s stock. With pork prices skyrocketing in China, Beijing released some 30,000 tonnes of pork from its official stockpiles in the lead up to the October 1 national day celebrations and holiday time.

Mr Williams said Australia should also push to expand the list of products sold to China to include blueberries and other fruit.

Williams. David Williams.

WilliamsDavid Williams. Not armed with a Walther PPK or an exploding pen but something nonetheless just as menacing — a rolodex as thick as a telephone book and a penchant for doing deals so personally rewarding that it makes Ahmed Fahour look like an unlucky pauper.

Racing around town in his new Aston Martin DB11, the car made famous by the Bond films, Williams is once again drowning in cash thanks to his latest wheeze, selling off printing and digital media company Wellcom for $265m to South Korea’s Innocean, which is owned by the families behind Hyundai and KIA.

Maybe Williams was just born lucky, but he seems to have a habit of always winning twice or more from the same deal. Not only does he win from the takeover, being a major shareholder in Wellcom through his merchant bank Kidder Williams as well as personal holdings, but his firm is also advising on the takeover. That’s nice. The explanatory booklet for the takeover was released yesterday, showing Wellcom will pay total fees to all its advisers of just under $3m.

Williams is a bit like the guy who can go into a revolving door behind you, and come out of it in front of you.

Of course Williams has a rewarding history with Wellcom and its founder Wayne Sidwell. Williams floated a business called Shomega for Sidwell in 1993 and then sold it to News Corp for PMP in 1996. Come 2001, after Sidwell had served his non-compete and technology had changed, he started from scratch with new technology and the business — Wellcom — was floated by, guess who? Yes, our man Williams.

Williams just has a licence to print money by the looks of it. And the colour of his Aston Martin? Red of course, it goes faster.