KPMG picks its Australian investment favourites

The uranium sector, big retailers and the aged care sector are likely to be the focus of much of the investment activity across the Tasman this financial year, according to financial services provider KPMG.

"Looking into the new financial year, there are three industries to watch," KPMG executive director, corporate finance, Andrew Leithhead said in KPMG's survey of Australian capital markets for 2004/05.

"In part due to the influence of BHP Billiton's acquisition of WMC, uranium might be the next big thing in terms of capital raisings for the energy and natural resources sector."

Mr Leithhead said that in the consumer sector, further acquisitions of small businesses to fill geographic gaps were probable as well as big food retailers looking for diversification and expansion overseas.

"The health care industry is set for a flurry of activity this year with potential consolidation in the aged care sector coupled with possible large capital raisings as existing players such as Macquarie Capital Alliance and DCA group seek the acquisition-led growth they've previously signalled to the market," he said.

KPMG said although the level of equity raised in 2004/05 fell 6.6 per cent to A$34.9 ($38.79) billion compared to $37.3 billion in 2003/04, investors still held plenty of cash looking for a home.

This was likely to result in a steady flow of share flots, takeovers and placements over the next 12 months.

Mr Leithhead said 2004/05 was characterised by "cash and confidence".

During the first three quarters, company results had been solid, unemployment was low and the property market was strong.

But after the interest rate rise in March 2005, company results took a downturn, the share market softened and the property market eased.

Mr Leithhead said cautious investors were waiting for the right time to invest while others searched for value.

"I believe that the weight of money will provide support for share prices and returns for at least the next 12 months," he said.

The frenzy surrounding the recent listing of gaming firm Tattersall's Ltd on the market showed that investors' interest in floats was not waning.

Mr Leithhead said the sale of the third tranche of shares in telco Telstra was "a major unknown factor for 2005/06".

"When you've got a single transaction that is almost as large as the total equity funds raised in the Australian capital markets in 2004/05, there's no doubt that it will have a big impact regardless of the methods used to break it down to more manageable pieces," he said.

KPMG said the top three industries in 2004/05 for equity raisings were real estate, with $7.6 billion; diversified financials, with $4.9 billion; and transportation, with $4.1 billion.

Share floats were the top means of raising funds in 2004/05, accounting for $9.8 billion or 28 per cent of total equity raised.

Placements came next at $8.8 billion, followed by dividend reinvestment plans at $7.2 billion, and rights and entitlements issues at $5.7 billion.

- AAP