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.
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 tyresales.com.
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
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.
“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.
Fliteboard
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.
“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 undertheradarreport.com.au [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.
Williams. David 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.
Bittersweet: An historic sugar mill back in the hands of growers (ABC)
Australia’s ageing sugar mills, built and operated by cane growers, have gradually been sold to cashed-up foreign investors. But in Mossman growers have defied the trend and bought back their mill.
https://www.abc.net.au/landline/bittersweet:-an-historic-sugar-mill-back-in-the/11402596
ASX Release: Coca Cola Amatil | Sale of SPC Business Completed
Coca-Cola Amatil has announced completion of the sale of the SPC fruit and vegetable processing business (SPC) to Shepparton Partners Collective Pty Ltd and its group of companies (Shepparton Partners Collective), for consideration of $40 million payable at completion. The sale was completed on Friday 28 June 2019.
Taking into account forecasted working capital balances, working capital adjustments to the sale price and costs of disposal, Amatil is expected to record a profit on sale of approximately $14 million. The sale agreement also includes a 4-year earnout structure which, subject to business performance, could result in up to an additional $15 million of sale proceeds at that time.
As previously announced, due to the realisation of recognised deferred tax assets Amatil’s ability to frank dividends will be significantly impacted in the short to medium term.
Group Managing Director of Coca-Cola Amatil, Ms Alison Watkins, said with the completion of the sale of SPC, Amatil will continue to focus on being a beverages powerhouse.
“SPC has been a much-loved part of our portfolio since 2005, and we’re confident it has a bright future in the hands of its new owners,” Ms Watkins said.
“Shepparton Partners Collective recognises the value of SPC’s brands, the opportunities for innovation and category growth in Australia, and its export potential.”
“On behalf of Amatil, I thank everyone at SPC for their commitment to the business and wish them well in continuing to grow their domestic and international markets.”
Since acquiring the SPC business in 2005, Amatil has invested around $250 million including in technology, operational and energy efficiencies, and new equipment. A $100 million co- investment program from 2014 to 2018 also modernised SPC’s tomato and snack cup production and introduced a new aseptic fruit processing system and pouch line at the Shepparton site.
Amatil commenced the divestment process for the SPC fruit and vegetable processing business in November 2018 and received transaction advice from Kidder Williams Limited and legal advice from Gilbert + Tobin Lawyers.
Chris Judd’s podcast Masters of the Market
Click below to listen to Chris Judd’s podcast Masters of the Market, with a special mention of David Williams’ investment journey.
“In this episode I head to Perth to catch up with the Managing Director of the Merchant Group Andrew Chapman. With almost 20 years of experience in the industry, Andrew walks us through his experiences in investing in biotech stocks, medical marijuana and other micro caps.”
https://omny.fm/shows/chris-judd-s-masters-of-the-market/andrew-chapman
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