What's on at Eureka Report and model portfolio updates

Our budget coverage will be coming to you Wednesday and Thursday.

It’s the big week for private investors. Tomorrow (Tuesday May 3) the Treasurer Scott Morrison hands down his first Federal Budget – Robert Gottliebsen and I will be in the Canberra lock-up watching for what might be of interest to Eureka subscribers. Note: Eureka’s Budget coverage will be carried in our regular Wednesday edition – there will NOT be an edition tomorrow evening. Once you have read the coverage we’ll be looking forward to hearing from you in our special Budget webcast which will take place on Thursday May 5 at 2.30pm - (click here to join.)

Don’t miss this special event, I’ll be hosting with Robert and our financial planning expert Dr Doug Turek – we hope you can join us…make a date in the diary!

In common with many recent budgets, the Treasurer’s office has been leaking like a sieve as the government attempts to soften up the electorate for some budget measures which almost certainly will reduce the attractions of the superannuation system.

Here’s a brief list of items highly relevant to Eureka subscribers that we’ll be watching for:

• A potential reduction in the amount you can contribute on a "concessional" pre-tax basis into superannuation each year: It is currently a maximum of $30,000 if you are under 50 or $35,000 if you are over 50.

• A possible cut in the amount you can contribute on a "non-concessional" basis – that is the amount of money on which tax has already been paid that you can put into super in any one year.

• A potential expansion of the group who must pay 30 per cent contributions tax on putting money into super: At present the threshold to find yourself in this group is an annual salary of $300,000 or more – the threshold may be lowered further.

• Transition To Retirement Pensions may be scrapped or made less attractive.

• Personal tax relief: The key potential charge here is for people in the current personal tax bracket who pay 32.5 per cent – the AT0 band for this tax rate is currently $37,000 to $80,000, and the top end of this band may be moved higher, to perhaps $85,000 to soften the effects of so-called "bracket creep" where inflation pushes people into higher tax bands.

• If you – or anyone in your family – has HECs-HELP student loan debts the repayment terms may be about to change:  At present you do not have to start paying back student debt until salary moves above $54,156 a year.

• The temporary budget repair levy, also known as the debt levy - which puts an extra two per cent tax for people earning more than $180,000 - is set to finish on June 30 2017. As opposition leader Bill Shorten has openly speculated he may extend this tax, the Treasurer is expected to formally confirm he will stick to his plan of scrapping it next year.

There is also the possibility the Treasurer may make some amends to people with broken career patterns which will allow them to "make up" superannuation contributions and even the slim possibility that the government will finally make some clear determination on the rules around lump-sums…we’ll have to wait and see.

Growth first model portfolio update

There are no changes to the growth first portfolio this week. In company specific news XTD released its March quarterly. The operational performance was in line with our expectations. The company's strategic focus remains the development of its Contact Light technology as well as overseas Cross track rail screen contracts. Internally management is pleased with the development of Contact Light, but it properly wont be until the second half of this year before we get clarity over its likelihood for success. In terms of overseas contracts managment has stated that it is making steady progress in Asia and North America with the expectation of at least one successful signing in 2016. At 21.5 cents the stock is backed by earnings from existing operations with large potential upside from Contact Light and overseas deals

Income First model portfolio update

Last week the Income First model portfolio provided a couple of standout performances. G8 Education (GEM) has performed well, and is continuing to be rerated by the market. Additionally, Virtus Health (VRT) finished the week on a strong note, after healthy IVF cycle numbers were released by Medicare.

This week marks the start of the banks’ reporting season, with WBC delivering its interim results this morning. Unfortunately, the result was poorly received by the market and we continue to be of the view that the banks are a risk to the portfolio in the short term. We will continue to monitor these results, and make appropriate portfolio recommendations.

LIC model portfolio update

There are no changes to the model portfolio this week. Last week saw the completion of BKI’s Share Purchase Plan and we will know the results of it shortly. The team at PM Capital was out on the road as we mentioned in our last update and it looks like they received the response they were after with the Asian Opportunities Fund increasing nicely in share price to $0.95.

Other news of note for the portfolio it looks like Thorney Opportunities Limited has taken some profit from its incredibly successful investment in Service Stream Limited reducing the Thorney Group’s ownership marginally from 29.58 per cent to 28.32 per cent of the business. Finally, Perpetual Equity Investment Company will be holding an investment update webinar on May 25. For more information click here – webinar details.





Current Share Price

BKI Investment Company





Bailador Technology Investments





Magellan Flagship





PM Capital Asian Opp.





Perpetual Equity Investment Co.





Thorney Opp.





WAM Research





*Not including dilution effect of outstanding options

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