Investment in Western-Australia

[Springbok]

I found these on Moneyweb this morning. Kokkie Kooyman is from Sanlam Investment Management, while David Shapiro is from Sasfin. Maybe the guys and girls from Perth can comment on this? Would be nice to hear your views!

Investment in Western-Australia

MONEYWEB: Mark in Pietermaritzburg joins us now. Good evening, Mark.

MARK: Good evening there. I’d like to ask him a question about Western Australia. I believe they have a growth rate of around about 14% per annum at the moment which, if I’m not mistaken appears to be a little bit ahead of China at 9% or 11%. What are the companies that one could potentially look at investing in that particular area? The other thing of interest is that there's, from what I’ve been told, 5 000 new people hitting Perth per month, and that to get a house you have to wait 24 months for completion on construction. So there's massive shortages in building materials, and Australia as well being short of natural timber and things nowadays with the green people gaining power, it looks like there’s a lot of opportunity there. Can I listen on the radio?

MONEYWEB: Sure, Mark. Kokkie, would you like to have a go at that one?

KOKKIE KOOYMAN: You could have asked me about any country in the world, and you ask Western Australia. Funnily enough, Australia is one of the few countries we actually haven’t looked at, because Australian banks and companies have always looked marginally too expensive. We’ve actually been to New Zealand to look at some companies there. But just off the cuff, Western Australia – and I’ll actually look it up to make sure – but Australia’s had a tremendous mortgage boom. The house market has been very strong, and so much so that they’ve raised interest rates just again now I think last week, or interest rates are at record highs where they’re trying to curb the strong consumer-lending growth. In fact, Australia house prices and debt in terms of mortgage debt is higher than the US and the UK. And most probably Western Australia – I don’t know what the mining activity is there …

MONEYWEB: That’s what it is. That’s all it is. It's mining, mining and more mining and in fact the most boring city in the world, Perth. Beautiful, pretty, but even more boring that Bloemfontein – with no disrespect to Bloemfontein.

KOKKIE KOOYMAN: So it's the two combined. The whole country’s done well and then mining. If you look at other countries that are benefiting, just think about it, what’s causing the gold price and the platinum price – it's just India and China. And I just came back from India now last week and India is just starting. I had Cees Bruggemans with me from FirstRand and Cees was saying “this is China twenty years ago”. So if you just think of the demand for platinum and demand for gold, I’m also one of those guys that believes in …

MONEYWEB: They don’t have too much of that in Western Australia. They’re more …

KOKKIE KOOYMAN: But they benefit from that demand, you see.

DAVID SHAPIRO: Comes through to them, yes.

MONEYWEB: To WA? Western Australia?

DAVID SHAPIRO: Sure.

MONEYWEB: They’ve got no platinum.

DAVID SHAPIRO: No, not platinum, but they’ve got iron ore – I think they’ve got all the base minerals are there.

MONEYWEB: Oh, so you’re talking about a general …

DAVID SHAPIRO: And they’re very close. They’re close to China.

KOKKIE KOOYMAN: We’ve been looking at other countries that are also benefiting and that are cheaper, and actually even further back, like Indonesia and Thailand. Vietnam is actually just exploding as well. So there your valuations are better than Australia, and also the same benefit.

MONEYWEB: But Kokkie, getting back to the specific question on Western Australia and the way that it has been growing at 14% a year, it's off a very low base, though.

KOKKIE KOOYMAN: True, it's like the Karoo. You know, Sutherland could most probably grow at that rate as well if we discover whatever there.

DAVID SHAPIRO: Well I think it's all the miners coming into Perth, trying to find homes. You know, it's all the industries around the mines.

MONEYWEB: There's also a euphemism for a Perth entrepreneur. When you’re starting to look, the whole [indistinct] story, which we spoke about a bit earlier, was engineered by Perth entrepreneurs.

KOKKIE KOOYMAN: But you know, guys, what’s interesting if you look at Rustenburg you mostly would find the same growth rate. Rustenburg – every time I go there I’m amazed as to the growth rate and property values – how it's increased, and it's also just the platinum mines. So must be the same phenomenon.

MONEYWEB: Very good point. In fact, I was talking to the guys from Caxton recently, Kokkie, and they have got businesses, as you know, in all the small towns, and they will tell you Rustenburg, Witbank, Middelburg – Rustenburg with platinum, Witbank and Middelburg with coal, Nelspruit, George – are booming. And they really are growing at a much, much faster than the national average.

DAVID SHAPIRO: And, remember, we spoke to Spar the other night. That’s where the big Spars are coming. We think that Norwood here or in Cape Town – that’s not where the growth is. There's tremendous growth in those companies out in the country in areas that we’ve ignored.

MONEYWEB: So instead of going to Perth, rather pack your bags for Witbank. What’s wrong with that one?

[Charl - Rather pack your bags for Witbank instead of Perth? yeah right....]

And another question about Western-Australia property:

DAMIEN: Hi. Just one thing on the Western Australia story, the property market in Western Australia. I was there last year in December and most of the property is along the coastline. So that whole coastline area is overpopulated with housing, residential areas, and all that kind of thing, and that’s why there is such a squeeze on property in that area, because everybody wants a house on the coast and there’s only so much space on the coast, and it just kills the traffic. You should see the traffic there, even in December.

MONEYWEB: Even in Perth?

DAMIEN: Yes. I like Perth, I really do. I find it an amazing city. It’s really, really calm.

DAVID SHAPIRO: Pleasantville.

MONEYWEB: Very, very calm – there we go, Damien.

DAVID SHAPIRO: Everybody walks around with a smile.

DAMIEN: Absolutely.

MONEYWEB: Okey dokey, and what about the place just around the corner?

DAMIEN: Freemantle?

MONEYWEB: Yes.

DAMIEN: Well, actually Freemantle and Perth are now almost one city now. There is no real distinction between the two cities at all. It's all now joined up, all the way down to that what’s it Geographe Bay. It's kind of town after town after town.

DAVID SHAPIRO: Is that the Swan River?

DAMIEN: Swan River area, that whole area. It's booming, it's really. Yes, Western Australia is a place to look at.

MONEYWEB: Did you have an opportunity to meet any of the Western Australian entrepreneurs, though?

DAMIEN: Yes, actually I did. Quite a lot of them. It's actually surprising …

MONEYWEB: You got all the fingers on your hands?

DAMIEN: The dichotomy in Western Australia is strange – there’s a lot of foreigners there, especially from Europe. And most of those European guys are the guys driving it.

MONEYWEB: The one thing I will never forget about Western Australia and Perth was whenever you go to a meeting you take your lawyer with you. And it's standard practice.

DAMIEN: That’s exactly what I heard, as well.

MONEYWEB: Well, we did it.

DAMIEN: You have to be very careful. You have to cross your t’s and dot you i's and watch what you say. They’re very serious about financial fraud there, as well. Extremely serious.