Category: Uncategorized

Investors hoping for a “Santa Claus” rally in December to cap off a dismal year were disappointed, with global indices falling between -4% and -6%. A range of negative forces dominated 2022, namely aggressive interest rate hikes to curb inflation, recession fears, the Russia-Ukraine war and rising concerns over rising CV-19 cases in China. 2022 was the worst-performing calendar year since 2008, with equity markets off between -15% and 19%.

The Atlas High Income Property Fund declined -1.1% in December in a broad-based sell-off for real estate assets that saw the wider Listed Property market fall -4% over the month to cap off a -20.5% decline for the 2022 calendar year.
Over the past year, the share prices of the developers declined the most as investors realised that one-off profits and revaluation gains are likely to evaporate in tougher markets. As such, it is not too smart to value this variable source of income at 30 to 40 times! The Atlas Fund has consistently avoided developers in favour of trusts offering consistent, reliable and forecastable income streams.

The Fund declared a quarterly distribution of $0.031 per unit for the December Quarter, a small increase from September’s distribution. The distribution was paid to investors in early January.

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2023

• November saw the recovery continue from September’s lows as equity markets rallied after the US Federal Reserve Chairman indicated that the rate hikes could slow from December onwards. Domestically the RBA raised the cash rate by only 0.25% rather than the expected +0.5%, contributing to the view that the central bank tightening of interest rates is coming to an end. A positive move for interest-rate-sensitive stocks.
• The Atlas High Income Property Fund gained +3.4%, with the share prices of many companies held in the Fund now recovered from the falls seen during the market panic in September. The falls in August and September were based on the assumption that property and infrastructure trusts could not increase revenues with inflation and all had short-term variable rate debt. While some companies structured their debt in this fashion before the GFC, few are in this precarious position in 2022!
• The Fund is populated with Trusts that deliver stable earnings today, revenue that increases in line with inflation and debt hedged for an average of 5 years. As such, inflation and rising debt costs will less impact profits than markets fear. In December, a large number of companies held in the Fund will declare dividends which are expected to show the resilience of company earnings.

Medibank crisis: Will the patient recover or is this terminal?

Medibank says that 480,000 customers had health claims data stolen that contained potentially embarrassing information. A similar damages award to this group of 480,000 would be larger than Medibank’s market cap. Precedent can be helpful when thinking about the potential effects of legal action.

Bank reporting season scorecard

The last three years have been eventful for bank shareholders, with each year bringing a new set of worries predicted to bring the banks to their knees. 2020 saw capital raisings from NAB and Westpac missing its first dividend since the banking crisis of 1893, as experts forecasted 30% declines in house prices and 12% unemployment!

The down-and-out REITs worth buying

Cap rates are a measure that helps evaluate real estate investment, and a higher cap rate results in a lower property value. So the higher the cap rate, the better it is for the investor. Each REIT uses its own cap rate to determine its valuation.