6 July 2020

Remuneration Report Analysis and Commentary: PortfolioDirect scores annual remuneration reports from ASX listed companies against a consistent analytical framework designed to help assess which reports are most worthy of shareholder support. 
Contents

Where are we in the Cycle?
Of the five PortfolioDirect cyclical guideposts, three are ‘red’ and two ‘amber’.  ‘Trough Entry’ has been retained as the description of the cyclical positioning with ongoing downside risk to global growth expectations, a persistently high US dollar and a metal price term structure signaling abundant supplies. The international policy stance is more supportive but well short of  fully compensating for the impact of COVID-19 remediation measures.  China’s improved growth momentum leaves the economy with ample excess capacity.         More...

Market Directions
The balance of near term risks to sector investment returns remains negative although credit markets have regained their composure. Rebounding equity prices in the leading US market are optimistically anticipating a quick resolution to earnings uncertainty and return to growth. Pre-coronavirus global growth rates would have already been insufficient to absorb growing mine supplies. Even with production losses, market balances will now tilt more firmly into surplus. Expectations of medium term deficits supporting sector valuations will not be realised. A return to 1990s style sector investment performance - when modest sector equity price gains occurred in the midst of sometimes highly disruptive macro conditions - remains possible after public health risks are brought under control.       More...

Portfolio Performance and Positioning
After losing ground in June, Phase I and Phase II companies posted positive and relatively strong returns over the opening days of July.  Phase II companies, which face the greatest risks from potential demand shrinkage as they are the most indebted companies in the sector, remaining the poorest performing of the three development categories.  Exploration companies retain the strongest leverage to an improvement in market liquidity because of their ongoing need to replenish working capital.   Phase I companies have recovered the majority of losses incurred in the first quarter of 2020. Portfolio models remain biased to the Phase I stock category with maintenance of a large cash position reflecting ongoing downside risks.          More...

Stock Reviews and Rating Analysis 
PortfolioDirect rating reports analyse the quality and risk attributes of proposed mineral developments.  Rating criteria apply to mining and oil and gas stocks at any stage of development.  PortfolioDirect uses a five point rating scale to measure the risk adjusted quality of proposed mineral developments or companies.    
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The 'Steak or Sizzle' blog provides summary judgements on the top performing ASX-listed resources stocks. More...

Although the statements of fact in this report have been added from and are based upon sources the authors of the report believe to be reliable, their accuracy is not guaranteed and any such information may be incomplete or condensed.  To the extent permitted by law, the authors of the report are not liable for any loss or damage arising as a result of reliance placed on the contents of this report.  

All opinions and estimates in this communication constitute judgments by the authors at the report date and are subject to change without notice.  The report publisher is under no obligation to make public any change in view about any matter referred to in this document.    

No references to past investment performance should be taken to indicate anything about future performance.

This communication is directed only to Australian wholesale investors and licensed financial advisers for information purposes and is not intended as an offer or solicitation with respect to the purchase or sale of a security.

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