PM Capital’s Kevin Bertoli on why Star Entertainment’s share price will rebound after regulatory overhangs are removed, and why he’s shorting REA and Seek.
Definitely. In the current inflationary environment and the ongoing operational impacts, both positive and negative, caused by the pandemic, forecasting earnings has become more challenging in the short term.
Investor sentiment towards growth companies in the investment phase of their lifecycle has shifted 180 degrees and the sell-off has been largely indiscriminate.Unfortunately, with investors myopically focused on growth, many companies took the bait and invested beyond their means. Now, with investors more focused on profitability, share prices are paying the price.
With hard lessons learnt and expectations rebasing, it’s a good time to have cash to redeploy into the market.Lark is a business we’ve followed closely. The board reshuffle in 2019 was a transformative event for the company, with much-needed renewal at the board level and a complete rethink of the brand strategy.
While the last six months have been a difficult period, the strategy put in place has positioned the business well for the future. It is very difficult to replicate what Lark has: provenance as the first Tasmania whisky house and the involvement of an iconic figure like Bill Lark. These attributes are critical for a luxury product like premium whisky.
Given the moderating growth outlook for both businesses, we considered the valuation being placed on them by the market to be excessive.The Queensland government recently announced an increase in state royalties on coal mining, effective 1 July, 2022. This negatively impacted our metallurgical coal positions: Coronado Resources and Stanmore Resources.The new arrangement adds additional tiers to the existing royalty scheme which apply to revenue rather than operating income.
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