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10k Words Equitable Investors May 2025 Apparently, Confucius did not say "One Picture is Worth Ten Thousand Words" after all. It was an advertisement in a 1920s trade journal for the use of images in ads on the sides of streetcars... Private company M&A valuations have converged with those of ASX-listed emerging companies; a structural shift evident in 52-week highs and lows on the ASX sees gains going to a select group, with CBA being one of the few as lacklustre EPS growth is rewarded with P/E multiple expansion and CBA almost singlehandedly holds up MSCI's Australian index. Overall, EPS estimates for Austalian equities have also been lacklustre but, thanks in part to CBA, the Australian P/E is sitting at elevated levels also seen during the COVID-19 epidemic and the dotcom boom. Meanwhile, there was little market conviction in a 50 basis point cut from the RBA in May (which turned out to be the correct positioning with a 25bp cut announced today). IPO markets remain notably weak in 2025. On the tariff front, US price hikes from goods originating in China were quickly evident relative to those originating elsewhere. EBITDA multiples of unlisted Australian mid-market trades (Nexia MM Index) v. ASX trading multiples 
Source: Nexia No. of Australian M&A mid-market transactions and disclosed EBITDA multiple average value by enterprise value (March quarter 2025) 
Source: Nexia S&P/ASX 300 and cumulative 52-week highs - 52-week lows 
Source: SG Hiscock Forecast EPS (next 12m) and forward P/E multiple of Commonwealth Bank of Australia (CBA) 
Source: TIKR CBA contribution to 12-month return on iShares MSCI Australia (EWA)
Source: Koyfin Australia MSCI forward earnings per share (analysts' average forecasts) 
Source: Yardeni Research Australia MSCI forward PE multiple 
Source: Yardeni Research Expectations for a 50 basis point cash rate cut by the RBA in May were just 51% prior to the decision 
Source: ASX Decline in IPOs year-on-year globally in CY2025-to-date 
Source: WSJ, LSEG 2025 Australian IPO tracker
Source: Smallcaps.com.au US consumer price indices by country of origin 
Source: "Tracking the Short-Run Price of US Tariffs," Cavallo et al, May 10, 2025 US retail price indices in affected and unaffected categories 
Source: "Tracking the Short-Run Price of US Tariffs," Cavallo et al, May 10, 2025 May 2025 Edition Funds operated by this manager: Equitable Investors Dragonfly Fund Disclaimer Past performance is not a reliable indicator of future performance. Fund returns are quoted net of all fees, expenses and accrued performance fees. Delivery of this report to a recipient should not be relied on as a representation that there has been no change since the preparation date in the affairs or financial condition of the Fund or the Trustee; or that the information contained in this report remains accurate or complete at any time after the preparation date. Equitable Investors Pty Ltd (EI) does not guarantee or make any representation or warranty as to the accuracy or completeness of the information in this report. To the extent permitted by law, EI disclaims all liability that may otherwise arise due to any information in this report being inaccurate or information being omitted. This report does not take into account the particular investment objectives, financial situation and needs of potential investors. Before making a decision to invest in the Fund the recipient should obtain professional advice. This report does not purport to contain all the information that the recipient may require to evaluate a possible investment in the Fund. The recipient should conduct their own independent analysis of the Fund and refer to the current Information Memorandum, which is available from EI. |
