What I don't understand is the reception of ASX investors towards stocks like the Gruden Group, thus the sluggish share price of 3.8c. I know the board hasn't did a terrific promoting the change of business eg. no corporate presentation on the Gruden Group compared with ICX's presention on Velpic. However a lot of businesses have not done the same with an awareness presentation one is KRA which today went up by 325%, which is acquiring a disruptive business that will make real estate agents redundant in Australia (brilliant idea). The key risk for KRA is to get to stage of EXE, where shareholders have voted in favour of the deal and the share price is a minimum of 2c and has sufficient funding (doesn't need capital raising for the change).
If any fool knows by now, the key is the digital world of business and the aim is to target the global market, not just the Australian market (read the article below). This is where Australia lacks in terms of innovation and ASX investors are stubborn where they just stick to yield and dividend paying stocks such as the banks or ASX100 picks, where US investors have an bigger appetite for businesses where earning potential is global. Just look at the market caps of Apple ($670b USD or $890b AUD), Google ($420b USD), Netflix ($41b USD), Facebook ($200b USD or $285b AUD), even Chinese company Alibaba listed in the US is $158b USD.
Our leading web businesses such as REA is $5.56b AUD, but I understand that as its just RESTRICTED to the Australian market, but disruptive business 1PG went from 18c when it wanted to change from resources exploration to now a tech business that will disrupt recruitment agencies like Robert Walters and Hays Recruitment has already 1.1b candidate profiles on their platform (Facebook has 1.5b profiles) with clients in the US signing up monthly on their platform. Robert Walters have to open offices in Sydney, Melbourne, Singapore, HK, etc just to expand their reach, what is the costs to maintain their rent of office space let alone staff costs for how many candidates on their platform?? you do the math whats better Robert Walters/Hays or 1PG, yet 1PG when it hit $5.50 per share only had a market cap of $700m, their CEO had ambitions one day to delist in the ASX and list in NY. I think if 1PG lists in the US will probably at least double their market cap, reflects our ASX investors are just stubborn and only believe in companies like CBA etc etc.
I strongly believe CBA is way overvalue on company comparatives:
ICBC the worlds largest bank has a market cap around $220b AUD, but look at its market reach up to 1.3b people, its virtually majority state-owned and rated one of the safest banks in the world and expanding its business in Asia. For a foreign bank to enter the Chinese market, its virtually near impossible, as ANZ is trying to replicate its CEO's experiences with HSBC. Thought Chinese state-owned backed banks have lower earning potential cause of what the govt over there has place restrictions on what banks can lend and not to people who want to own more than 1 property but to borrow for it. Which the govt over their has successfully done to stop the property bubble. But yes there is a big shadow banking industry there, but what's the govt's exposure to it if its SOE banks are safe? Less exposure, apart from the implication the govt there needs to maintain social stability.
CBA has a market cap of $126b AUD, market reach of 23m people plus some in Asia Pacific area? Let alone the ballooning housing bubble Sydney is facing, how many people can afford to repay a mortgage of around 800k in their lifelines with prospects of Australia entering into recession just look at Canada and Brazil, so that means job cuts. Good luck to people paying for $1m properties esp. when they have to borrow to do so.
Makes me think that Australian banks are way overvalued.
I'm happy that the Gruden Group has a bigger market reach to Asia and Australia, rather than KRA's acquisition is just purely in Australia.
Uber and Netflix are showing Australia that the future of business is global, not local
John McDuling
Published: September 8, 2015 - 11:55AM
The stunning success of disruptive companies like Uber and Netflix in Australia is a beautiful thing for consumers. But is it also a serious wake-up call for our economy?
On Monday, we looked at the impact the arrival of Uber in Australia has had on Cabcharge, the dominant player in taxi payments for years.
While there are a few other factors at play, such as government-mandated cuts to surcharges on cab fares, Cabcharge's share price has been cut in half since November 2012, when Uber launched its Australian services.
The overwhelming response from readers has been "good riddance". Competition is a wonderful thing, it's the essence of the capitalist system, and for too long Cabcharge hasn't faced any.
Yet the taxi market is not the only corner of the Australian stockmarket where this type of digital revolution is happening.
Since Netflix officially launched in Australia at the end of March, share prices for all of the free to air TV networks have fallen sharply.
Again, there are other factors at play. But its not merely a coincidence.
Last month, analysts at UBS cut their forecasts for TV companies, citing subscription video on demand (SVOD) services such as Netflix as one of the factors.
Creative destruction is a natural part of the business cycle. New companies emerge and eventually unseat old ones.
But the last wave of digital disruption remained, at least to some extent, within Australia. Companies like Seek, REA Group and Carsales.com.au snared business away from classified advertising giants (like Fairfax Media, the publisher of this website).
The latest wave involves global companies like Uber and Netflix stealing the rug out from under Australian companies.
Again, let me stress, this is no plea for regulation or protectionism to support local companies. Far from it.
It is just evidence that the future of business is global, and the local advantages Australian companies have enjoyed for decades are being rendered obsolete by new technologies.
This is a problem for investors that limit themselves to the Australian stockmarket, as it means there are fewer great companies to invest in.
"If you are invested in these companies getting disrupted you can lose a lot of money," says Jason Sedawie, executive director of Brisbane-based global fund manager Decisive Asset Management.
Yet even if Australian companies want to step up and think global, they face some disadvantages.
Uber and Netflix have patient shareholders willing to fund long periods of losses in their quest for global dominance. Australian investors typically demand profits and dividends.
Many domestic fund managers, who are the biggest shareholders in Australia's biggest companies, hate it when our companies try to expand offshore. That's because there is a long and undistinguished history of Australian companies completely bungling offshore expansion, losing billions of dollars in the process.
But if the foundation of a great economy is great companies, sooner or later this is going to be a problem. So it might be time for a serious change in mindset from our business elite.
