Global equity markets experienced a positive February, ending the month higher for the second time this year. In the U.S., the S&P 500 returned +3.2%, after economic growth remained above trend, core CPI increased to 2.2%, however the unemployment rate increased by 10bps to 4.0%. Further tariff increases on $200b worth of Chinese exports were postponed following constructive trade talks between the U.S. and China. In Europe, the Euro STOXX 50, German DAX and FTSE 100 all finished higher, returning +4.4%, +3.1% and +2.3% respectively. Eurozone composite PMI rose slightly to 51.4 but manufacturing PMI fell to 49.2, indicating an outright contraction in manufacturing activity. In the U.K., Prime Minister Theresa May reopened Brexit negotiations with the E.U. after the U.K. parliament voted down the previously agreed Brexit deal. In Australia, the S&P/ASX 300 Accumulation Index returned +6.0%, despite private sector credit growth slowing and dwelling prices decreasing 6.3% over the year, whilst the unemployment rate remained unchanged at 5.0%. Health care (+7.0%), consumer staples (+2.1%), and information technology (+1.7%) were the best performing sectors, whilst communication services (-6.2%), energy (-3.7%) and REITs (-3.2%) were the worst performers. Global bond yields ended February higher. Bulk commodity prices generally rose during the month, with iron ore, hard coking coal and oil prices trading higher, whilst thermal coal and gold declined. The U.S. Dollar gained against all G10 currencies except the British Pound.

Market Outlook

February saw most of our domestic portfolio companies release their half or full year results. The results were generally positive with the companies reporting solid sales and EPS growth. While some of the companies cited adverse macroeconomic conditions and other short-term challenges, we maintain a long-term perspective of a company’s performance and growth potential. REA-AU performed particularly well, delivering a strong result despite a backdrop of challenging domestic property market conditions, further highlighting the strong value proposition the company offers all stakeholders.

We remain confident that the companies in the portfolios will achieve attractive rates of revenue, EPS and DPS growth over the next five years, well ahead of the broader market.

Performance (%)
  1 month2.786.01-3.23
  3 month4.349.86-5.52
  1 year9.316.802.51
  3 years p.a.9.0512.86-3.81
  5 years7.967.280.68
* Benchmark is the S&P/ASX 300 Accumulation Index.
Performance is gross of fees and expenses.
Past performance is not a reliable indicator of future performance

CSL Limited (CSL-AU) released a market update for the first half of FY19, reporting group revenue growth of 9% to $4.5b, gross profit margin expansion of 136bps to 58% and EPS growth of 7% to $2.56 per share. Divisionally, CSL Behring’s revenue was up 6% to $3.6b, with Immunoglobulin (IG) Product revenue up 10% to $1.7b due to an increase in the usage of IG products for chronic therapies. Specialty Product revenue was up 12% to $803m after the sales of HAEGARDA, a transformational Hereditary Angioedema (HAE) product, tripled during the period. Furthermore, CSL-AU’s Seqirus revenue increased 20% to $948m, driven by Influenza vaccine product sales growth of 23% to $874m. Management noted that they are on track to open between 30 to 35 new plasma collection centres and expect FY19 net profit after tax to be at the upper end of the previously provided guidance range of between $1.88b to $1.95b.

REA Group Limited (REA-AU) released a market update for the first half of FY19, reporting group revenue growth of 15% to $469m, EBITDA margin expansion of 193bps to 62% and EPS growth of 20% to 134.1 cents per share. Geographically, Australian revenue (94% of group revenue) increased 15% to $443m, despite a 3% decline in national listing volumes. Revenue from Depth Products was up 16% to $343m, Subscription +4% to $30m, Media, Data & Other +19% to $55m and Financial Services +11% to $15m. REA-AU continued to extend its engagement lead in Australia, with 2.8x the amount of average monthly site visits and 5.0x more time spent on its app compared to its nearest competitor. In Asia, revenue increased 14% to $26m and EBITDA was up 27% to $6m driven by its leading position in both the Malaysian and Indonesian markets. North American revenue, owing to REA-AU’s 20% holding in Move Inc, grew by 11% to USD$240m, with growing its average monthly unique users by 6% to 53m. Management expects lower revenue growth in the second half of FY19 but are targeting for the rate of revenue growth to exceed the rate of cost growth.

Corporate Travel Management Limited (CTD-AU) released a market update for the first half of FY19, reporting revenue growth of 22% to $210m, underlying EBITDA growth of 21% to $65m and EPS growth of 25% to 36 cents per share. Total transaction value (TTV) during the period increased 31% to $2.9b, driven by strong growth across all regions, in particular Asia as the region benefited from a 3-month contribution from the Lotus Travel acquisition. Geographically, ANZ TTV was up 20% to $650m, revenue increased 15% to $58m and underlying EBITDA was up 18% to $22m, after the business continued to win market share in the region. In Asia, TTV was up 60% to $1.1b, revenue increased 47% to $38m and underlying EBITDA was up 34% to $13m, driven by the Lotus Travel acquisition and organically due to the traction CTM technology gained during the period, resulting in numerous client wins and an improved sales pipeline. In North America, TTV was up 16% to $690m, revenue increased 18% to $70m and underlying EBITDA was up 3% to $18m, after completing a $2m investment to develop a technology hub in the region. In Europe, TTV was up 18% to $542m, revenue increased 21% to $43m and underlying EBITDA was up 30% to $17m, as CTD-AU continues to win market share in the region. Management confirmed that the company is on track to meet the top end of the previously provided EBITDA guidance of between $144m to $150m.




Hyperion named AUSTRALIAN FUND MANAGER OF THE YEAR in the Morningstar 2016 Awards, Australia. 

The information in this document was prepared by Hyperion Asset Management Limited (‘Hyperion’), ABN 80 080 135 897 AFSL 238 380, for wholesale investors. The information is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. This document does not take account of any person’s objectives, financial situation or needs and before acting, an investor should consider the appropriateness of the investment having regard to their objectives, financial situation and needs. Any opinions or forecasts reflect the judgment and assumptions of Hyperion and its representatives on the basis of information at the date of publication and may later change without notice. This document is provided to the recipient only and must not be copied or passed on to any other person without the consent of Hyperion Asset Management Limited. Past performance is not an indicator or guarantee of future performance. Investment performance is presented gross of investment management fees and other expenses, including custody. Hyperion Asset Management Limited believes the information contained in this communication is reliable, however, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. To the extent permitted by law, Hyperion disclaims all liability to any person relying on the information in respect of any loss or damage (including consequential loss or damage) however caused, which may be suffered or arise directly or indirectly in respect of such information contained in this communication. Figures provided as at 28th February 2019. Morningstar Awards 2016 (c). Morningstar, Inc. All Rights Reserved. Awarded to Hyperion Asset Management for Fund Manager of the Year, Domestic Equities – Large Caps Category Winner and Domestic Equities – Small Caps Category Winner, Australia.
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