• Marcus Bogdan

Reducing Brambles (BXB) & Increasing Commonwealth Bank (CBA)

Recent changes to the Blended Australian Equity Portfolio & Australian Equity Income Portfolio

Reducing Brambles Limited (BXB) We have reduced our position in Brambles (BXB) due to the increasingly uncertain operating environment presented by COVID-19 lockdowns. The COVID-19 impact is most evident in its auto containers and Kegstar (Beverages) segments. Social distancing rules have had a major impact on the types of beverages consumed, as evidenced by recent commentary by the Coca-Cola company on global consumption patterns. Despite the impact of COVID-19, Brambles remains a highly defensive business through its exposure to the consumer staples sector. BXB’s balance sheet remains strong with Net Debt/EBITDA <1x and the A$857m buyback should provide ongoing support for stock. Increasing Commonwealth Bank (CBA)

We have added to our position in Commonwealth Bank (CBA). Banks have now gone through a prolonged downward cycle of EPS, DPS and ROE contraction. Valuations are now comparable to overseas counterparts. In our view there is some medium-term valuation support at current prices. CBA remains are preferred bank exposure with the lowest exposure to wholesale funding markets. The most recent banking data released by APRA confirmed that CBA continues to have the highest loan and deposit growth. CBA has the highest weighting to residential lending amongst the major banks which has provided an important buffer in protecting its net interest margin as interest rates have fallen over the past decade. Moreover, CBA has the strongest capital position of the major banks, satisfying the unquestionably strong benchmark of 10.5% of Risk Weighted Assets.

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Blackmore Capital Pty Ltd (ABN 72 622 402 895) (Blackmore Capital) is a Corporate Authorised Representative (CAR) of Artesian Venture Partners Pty Ltd (AFSL 284492)