The outlook for Australian residential property platforms; the online shopping surge; NAB's forecasts for minerals and energy; and shareholder strikes.

-Bright outlook for Australian residential property platforms 
-Are you embracing the trend towards online shopping?
-The outlook for Minerals and Energy in 2024
-Shareholders strike-out against executive remuneration 

Bright outlook for Australian residential property platforms 

This week, Bell Potter initiated research coverage on property portals REA Group ((REA)) and Domain Holdings Australia ((DHG)). The broker concluded the primary driver of activity and earnings for both are new residential 'Buy' listings.

Both companies benefit from strong pricing power, given the duopolistic nature of the residential real estate platform market in Australia, and associated network effects, explain the analysts.

The broker anticipates a positive near-term environment for both platforms, with market listings projected to rise in 2024 and 2025 from the cyclical lows experienced in 2023. 'Buy' yields, which are impacted by geographic mix, price increases and depth penetration, are also expected to increase.

In the longer-term, the analysts prefer Hold-rated REA Group (despite a currently full valuation) over Domain, as greater listings and stronger pricing power are expected to generate significantly higher free cash flows over time.

Note: the broker's REA Group target price of $179 was made prior to yesterday's release of first half results. This morning the target was lowered to $174, despite a "strong" update. The Hold rating was maintained.

Domain is assigned a Buy rating (target $3.95), given recent share price underperformance and the broker's positive near-term outlook for the operating environment.

The analysts anticipate REA will plough increasing cash flows back into software/platform development and adjacencies. Both REA and Domain are exposed to adjacent and supplementary revenue streams such as rentals, commercial, data services and mortgage broking.

Another significant potential value driver for REA Group, according to Bell Potter, is the development of new markets such as India.

Are you getting with the strength and shopping online?

The number of people using ecommerce is expected to reach over 3.4bn this year, or 42% of the world's population, according to Altindex.com. As shoppers continue to peruse shopping apps and visit online shops, the global ecommerce industry is set to increase by nearly 16% compared to 2023.

Due to improvements in artificial intelligence, voice search, augmented reality (AR) and virtual reality (VR)-enhanced shopping, along with personalised customer service, customers are increasingly seen turning to ecommerce in preference to bricks-and-mortar stores.

In the five years from 2018 to 2023, ecommerce revenue jumped by 108% to US$3.15trn, and with shoppers increasing by 300m per year, revenues will clearly keep rising. Altindex.com points to data gathered by German online platform Statista showing the industry is forecast to gross US$3.64trn in 2024, or 15.6% more than last year.

The US lags far behind in ecommerce usage by comparison to Asia. Popular Asian shopping destinations include Alibaba, AliExpress, JD.com and Rakuten. 

Statista forecasts US sales will hit US$930bn in 2024, up by 15% on 2023, while the Asian market is expected to increase by 16% to US$1.93trn.

Asia accounts for more than half of global ecommerce revenue, while the US and European shares are circa 25% and 16%, respectively, according to Statista data.

The outlook for Minerals and Energy

Global economic growth is set to slow in 2024, according to National Australia Bank's ((NAB)) February Minerals and Energy Outlook report, largely as a result of the lagged impact of tighter monetary policy upon demand, particularly in the advanced economies. 

Consequently, demand conditions are expected to ease for most commodities, despite the bank's forecast for interest rate cuts of -100 basis points by both the US Federal Reserve and the European Central Bank.

NAB believes growth will slow in the country considered key for commodity demand, China. This decline in growth will partly reflect ongoing softness for domestic consumption and headwinds presented by the slump in the Chinese property sector. 

Property demand has remained subdued in China, despite an easing of policy restrictions, and this trend could last multiple years, cautions the bank.

Emerging Markets (EMs) -including China- are generally facing a challenging global trading environment, according to the bank, which is a major negative given EMs are more trade-dependent than advanced economies.

National Australia Bank's Non-rural Commodity Price Index (in US dollars) is expected to fall by -4.9% in the first quarter of 2024, compared to the prior quarter, largely due to weaker prices for thermal coal and liquefied natural gas (LNG). The Index is expected to fall by around -9.8% in 2024.

As a result of the property construction slump in China, the economics team also forecasts iron ore prices will drift down to average US$110/t a tonne in 2024, from the average of US$119/t in 2023. It's felt current iron ore and copper prices are being supported by expectations for (more) Chinese stimulus.

When comparisons are made to current metals prices, NAB points out copper is notably stronger, with prices remaining above US$8,000/t.

According to Citi, fading hopes for rate cuts from the Federal Reserve in the US, and softer China growth sentiment, have weighed on copper prices so far in February. It's felt the market is correctly interpreting US manufacturing data strength as bearish for metals.

This broker expects cyclical copper consumption will contract further in 2024, with rising debt-service burdens to act as a growing headwind to developed market growth.

While Citi is bullish near-term on anticipation of further incremental policy support in China policy (and the 0-3-month price forecast of US$8,800/t, is maintained), the broker anticipates a softer phase for electric vehicle (EV) and renewables growth, which will offer less of a cushion for prices over 2024.

NAB notes various international study groups forecast market surpluses for most metals in 2024, which should add downward pressure to spot prices for both copper and aluminium.

The bank forecasts copper and aluminium prices will average US$8,125/t and US$2,000/t over 2024, down from the 2023 average of US$8,475t and US$2,250/t, respectively.

Gold prices are projected to average US$2,025/oz in 2024, up from around US$1942/oz in 2023.

Shareholders strike-out against executive remuneration 

In the latest AGM season for the 300 largest companies on the ASX, shareholder strikes against executive remuneration reports nearly doubled compared to the prior year, according to a recent report.

A strike occurs when 25% or more of shareholder votes are cast against the adoption of the board's remuneration report. When a second strike occurs, a successful spill resolution triggers a meeting where the company's directors are required to stand for re-election.

The AGM Intelligence Report 2024, prepared by global consulting firm Georgeson, notes the number of ASX300 companies narrowly avoiding a strike against their remuneration reports grew by 36% to 15 in 2023.

This uptick in strikes provides a significant barometer of investor sentiment toward Australian companies, suggests Paul Murphy, Georgeson's Head of ESG for Asia Pacific, as they provide insights on how key investors and proxy advisers are feeling.

Although investors typically do not unseat non-executive directors after a second strike, Murphy notes "companies can face other consequences, including negative media coverage, higher public scrutiny, and the potential for investors to 'vote with their feet' by removing their investments."

The report also revealed ASX300 companies experienced a significant yearly increase in the volume of shareholder opposition to board-endorsed candidates up for election or re-election.

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