Following the recent takeover offer for APA at $11 per share, (subject to FIRB review), we see a reasonable risk/reward opportunity to buy both APA and SKI.
A soft backdrop for global bond yields should provide downside protection as investors seek out defensive yield opportunities. Added upside exists in APA if the takeover is given the green light by regulators.
Yield sensitive names remain under pressure as the bond sell-off in the US continues. As bond prices trade lower, the yield is increasing. Higher yields, make interest rate sensitive names like infrastructure and property trusts less appealing.
The sell-off in domestic names such as APA, GMG, GPT, SGP, TLS, TCL, SYD, WFD & SCG has been significant. With many of these names now trading on yields within 4.5 to 6.5% range.
There’s a case to be made for the above stocks to find support as the outlook for interest rates begin to stabilise.