Investors look beyond coal as they consider Glencore's Australian debut
Analysts and investors who attended briefings about the listing said that Glencore's copper appetite could outweigh any concerns regarding thermal coal exposure.
Glencore, world's biggest?thermal coke exporter, is planning a secondary listing at the Australian?Securities Exchange?in Oct., aiming to tap into one of the fastest-growing pools in the world of institutional capital for funding its copper growth ambitions, and possibly open the door to large-scale M&A.
Participants at the investor briefings, including JPMorgan Barrenjoey, and UBS, described them as being well attended. The sessions covered Glencore's proposed listing and its implications for business and indexes.
JPMorgan, UBS and Barrenjoey declined to comment.
Gary Nagle, Glencore's CEO, has stated that he believes his $88 billion company will be included in Australia's benchmark S&P/ASX 200 Index within 12 months. This would require the CDIs reaching a market of A$1.5 Billion ($1.06 Billion). For its ASX shares to qualify for the S&P/ASX 100, they would need a minimum market value of A$5.5 billion.
Analysts believe that the stock's momentum could propel it to the top 100 index sooner.
Glyn Lawcock is an analyst with Barrenjoey, a Sydney-based firm.
"Because if the company can achieve the liquidity and market cap size that it requires, it may be included in the ASX 100 as soon as March or April of next year. Once it gets into the 100, all investors in Australia who use it as a benchmark will have to take it seriously.
Australian investors are becoming more comfortable with the secondary listing of CHESS Depositary Interests.
ASX data show that there are now 37 CDIs for metals and mining firms on the ASX. This is up from 22 at the beginning of 2020. Trading activity has also increased sharply. Glencore could find the liquidity they need.
Newmont, Alcoa, and Capstone Copper are the top three global companies that drive liquidity. Newmont's turnover alone is around A$9.0 Billion.
Glencore's attractiveness is that about 30% of their profit comes from copper. Copper is in high demand for electrification, and AI. Analysts estimate that the metal could account for 50% of Glencore's earnings in 2030 if its assets are developed on time.
Andy Forster, senior investment officer at Argo Investments, said that he would welcome another investment opportunity.
COAL HURDLE
Forster said that the prospects for copper growth could be more important than coal concerns in Glencore's investment portfolio. He cited a "general easing of emphasis" by funds in regards to environmental concerns.
There could still be some opposition to a company that relies on thermal coal around 15% of their underlying industrial earnings.
According to RIAA, the view that funds which screen for 'environmental, social, and governance' (ESG), issues have collapsed due to a U.S. move away from climate change is not accurate.
The RIAA confirmed that Australian funds under management, excluding coal investments, grew by 14% last year to A$37.9 Billion.
Estelle Parker, RIAA's co-CEO, said that this could increase in the future as wealth is transferred from older generations to younger ones.
Australia's Productivity Commission estimated in 2021 that approximately A$3.5 trillion worth of assets will be transferred from baby boomers to the next generation by 2050.
Parker stated that younger members "are more interested in where their investments are made, and a popular screening at the consumer level is to exclude fossil fuels."
"Funds are trying to meet this demand and we see quite a few funds now filtering out fossil fuels." (1 Australian dollar = 1.4090 dollars) (Reporting and editing by Melanie Burton)
(source: Reuters)
