Emanuel Datt

Australian companies agreed to more than A$14 billion in takeover proposals in a single day last week. Cleanaway accepted a $9.4 billion offer from Sweden’s EQT, Reliance Worldwide backed a bid from Brookfield and Japan’s Dai-ichi Life offered $11.80 a share for Challenger.

The deals are part of a broader trend. At least 10 ASX listed companies have received approaches from offshore acquirers this year, including Steadfast, Perpetual, Ingenia Communities, IDP Education, BlueScope, oOh!media and Australian Strategic Materials. LSEG data shows foreign takeovers of ASX-listed companies rose more than 200 per cent in the first nine months of 2026, to approximately US$84 billion.

“This trend is changing investor behaviour as takeover activity is a useful signal for investors. Buyers spend months on due diligence before making an offer, then pay a premium for control. When several buyers converge on the same market, it reflects a considered view of what those companies are worth. This year, premiums have ranged from 18 per cent for Challenger to 56 per cent for IDP Education,” says Emanuel Datt, chief investment officer, Datt Capital.

“These bids arrive in a market with a strong long term record,” Datt says. “Research by Dimson, Marsh and Staunton, now published by UBS, ranks Australia first for real returns in US dollar terms from 1900 to 2022, at 6.4 per cent a year, and second in local currency terms, at 6.7 per cent. AMP estimates Australian shares have returned 11.6 per cent a year since 1900, including dividends, compared with 10.1 per cent for US shares.”

The past 17 years have been more difficult. Since October 2009, Australian shares have returned 8.5 per cent a year, compared with 12.9 per cent for global shares in Australian dollar terms. The 2026 Vanguard Index Chart shows a similar gap: over the past decade, Australian shares returned 9.5 per cent a year, while US shares returned 16.3 per cent.

History suggests these cycles do not persist. Australia led in the 1960s, lagged through the 1970s and 1980s and led again during the resources boom of the 2000s. Extended periods of weak relative performance have often been followed by years of recovery.

“Some argue the ASX 200 is expensive, with a price-to-earnings ratio of about 20 compared with a long-term average of 15. But foreign acquirers are not buying the index. They are targeting small and mid sized companies with valuable assets, which is where valuations are lowest,” Datt says.

“This is consistent with the view we have held for some months. Smaller companies are trading at their widest discount to large caps in at least 20 years – about 14 times earnings, compared with 17 to 18 times for the largest stocks. Similar discounts in 2009, 2012 and 2020 closed over the following three to five years. With the Australian dollar around 70 US cents, offshore buyers also have a currency advantage.

“A takeover locks in value for shareholders who own the stock before the bid. Our portfolios focus on companies with valuable assets, sound balance sheets and genuine cash flow, and these qualities keep them attractive to future buyers,” he adds.

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Emanuel Datt

The Intergenerational Report 2026 projects that the number of Australians aged over 85 will triple to 1.9 million by 2065–66. Lack of infrastructure is one of the aged care sector’s biggest challenges, according to Datt Capital chief investment officer Emanuel Datt.

“To accommodate our ageing population, Australia needs a substantial expansion in residential aged care. As the country gets older, spending on healthcare and aged care is accelerating. However with demand rising at an increased pace, places in aged care accommodation are expected to be in short supply,” Datt says.

The residential aged care sector continues to face rising demand, financial pressure and structural change. According to KPMG^[1], the number of people in permanent residential aged care rose 3.4 per cent in FY25 compared with the previous year.

Ageing Australia^[2] estimates the country needs about 10,000 additional residential aged care beds each year to meet demand. Independent analysis by Grant Thornton puts the annual requirement at 6,000 to 11,000 beds. Yet net supply grew by only about 800 beds in FY25.

Aged care providers’ financial performance also improved significantly in FY25, with total income rising 28.9 per cent, according to KPMG. Revenue per resident per day grew faster than the matching rise in expenses, and this drove the improvement.

“We have seen renewed interest in this sector from an investment perspective,” Datt says.

KPMG’s FY25 analysis found that Opal, Bolton Clarke, Estia and Regis kept their positions as market leaders in residential aged care. A Stonepeak-led consortium will acquire a majority stake in residential aged care operator Estia Health from Bain Capital for approximately $2.5 billion in a private market transaction.

“Investors such as Stonepeak regard aged care as an essential service, akin to infrastructure, that provides a regular income stream,” Datt says. “Regis, which is similar in size to Estia, is one of the few ways to invest in this sector on the ASX.

“Most companies do not like high interest rates, but Regis Healthcare, one of Australia’s leading aged care providers, is among the few that benefit from them.”

Occupancy across Regis’s mature homes was 96 per cent in FY26, up from 95.6 per cent the previous year.

“Investing in aged care assets carries risks, mainly connected with government funding and the housing market. But the main source of return runs counter to the usual impact of interest rates on share prices,” Datt adds.

“Regis earns more from new residents when rates rise, and the deposits it holds become more valuable. A long-term shortage of beds supports demand. Private buyers have also paid prices for similar assets that are comparable with those paid for infrastructure projects.”

———

Notes:
[1] KPMG
[2] Ageing Australia

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Emanuel Datt

The government released the Intergenerational Report 2026 offering the outlook for the Australian economy and the budget to 2065–66.

Emanuel Datt, chief investment officer of Datt Capital says “A 40-year forecast is a list of guesses. The task is to sort them by the strength of the evidence. Demographics come first. Everyone who will be over 85 in 2066 is already alive. Their number is set to triple to 1.9 million. Demand for aged care and health services is as close to certain as forecasts allow. The supply of beds, staff and well placed sites is tight and slow to grow. Owners of scarce assets tend to benefit.

“Population maths is simple. Fertility has stayed below the replacement rate of 2.1 for over 50 years. It is set to fall from 1.48 to 1.34. By the 2060s, deaths will outnumber births. From then on, migration will drive all growth. The question is who should come. The answer is young, skilled workers. The median migrant is 26, compared with 38 for the rest of the country. Skilled arrivals in their twenties add to the workforce and tax base for forty years. They lift output per person and the total headcount. Choosing migrants by skills and age is the clearest way to shape both population and GDP. It only works if housing and infrastructure keep up. That is a supply problem to fix, not a reason to cut numbers.

“The AI forecasts need more scepticism. The better debt outlook relies on long-term productivity growth of 1.2 per cent a year, with AI expected to deliver much of it. That may happen, but Australia’s recent record does not support it. What we see now is that AI uses large amounts of energy, data-centre space and key minerals. Australia supplies all three.

“We would also be cautious about expecting tax cuts. The report still shows budget deficits for the next 40 years. Many companies most exposed to these trends are small caps on the ASX. They now trade at the widest gap relative to large caps in 20 years.”

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Emanuel Datt

Datt Capital’s chief investment officer, Emanuel Datt, says this ASX reporting season is exposing dispersion at the stock level and that the underlying results have largely matched guidance and haven’t justified the “doom and gloom” narrative running since March.

“But forward guidance for FY27 has turned more conservative, and that’s because of the recent softening in sentiment. So our positioning is becoming a little more conservative. It’s not a good environment or a bad one, it’s really just a rotation towards conservatism,” says Datt.

“Yesterday we saw that CBA’s results have put them in a far better spot than other banks like Westpac. It really demonstrates the dichotomy between performers and non-performers, and how the market is treating it. Westpac was sold off five-odd per cent, CBA is flat. Any underperformance is being punished by investors taking a risk averse approach to equities right now. It reaffirms the importance of fundamental stock picking,” he says.

“The RBA Governor’s recent comments have reinforced caution amongst investors. The Governor didn’t rule out further rate rises. She said inflation could rear its head again. Markets love certainty on the direction of rates, but my read is that rates will probably stay steady, though the option to hike remains if inflation picks up again. That’s feeding into what we’re seeing in equity markets. I don’t think there’ll be a cutting cycle, because inflation is still front and centre for the RBA.”

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Emanuel Datt

Investment in energy has failed to keep pace with demand for more than a decade and the fallout won’t be a short-lived price spike, but a compounding structural deficit that is forcing investors to rethink their energy exposure today.

“This is a structural deficit, not a cyclical one,” says Emanuel Datt, CIO of Datt Capital. “Oil and gas fields are depleting assets by nature. Every producing field loses output year after year without continuous reinvestment and for more than a decade, the capital required just to hold global production steady has been falling short.

“Years of ESG driven divestment, political pressure and regulatory challenges have starved traditional producers of the capital needed to keep pace with demand, widening the gap between what’s required to sustain supply and what’s actually being spent. The crisis is not a lack of money to find new oil. It is a severe lack of investment to maintain existing production infrastructure.”

Global markets have long relied on spare capacity held by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) and the strategic reserves of countries such as United States, Japan and South Korea to absorb shocks.

“That cushion has worn dangerously thin. Strategic reserves have been drawn down toward floor levels in several countries, while OPEC+ spare capacity has shrunk as member nations struggle to hit their own production targets. This undersupply in energy investment has amplified the risk of more shocks. There is less of a buffer to account for the large supply disruptions, and the closure of the Strait of Hormuz from March 2026 laid that dynamic bare.

“Governments across the developed world discouraged fossil fuel investment before renewables matured enough to fill the gap, leaving a global energy system with less redundancy, less spare capacity and less investment than current demand requires, let alone future growth. Electrification tied to artificial intelligence (AI) infrastructure and broader technology adoption is only adding to the strain.”

In Australia, domestic gas prices are effectively set by liquefied natural gas (LNG) netback pricing to Asia. “Our local electricity costs are likely to stay firm regardless of near-term moves in international prices, compounded by government reluctance to approve new oil and gas developments at precisely the wrong moment,” says Datt.

He also highlights the widening gap between paper markets and physical supply conditions. Futures and algorithmic trading react instantly to headlines, from Washington, from OPEC, from the Middle East, producing volatility that often has little to do with actual supply and demand.

“For investors with a long time horizon and the stomach for short-term swings, that disconnect is an opening. When paper-market selling pushes prices below what physical fundamentals justify, patient capital can buy in at a discount to intrinsic value. Investors can panic and sell based on short-term headlines, whereas seasoned contrarians who are prepared to bear the volatility are able to purchase assets that will structurally benefit in the near term,” notes Datt.

Oil prices spiked sharply through March and April 2026 before pulling back just as sharply, even as the physical supply picture barely moved. Meanwhile the Japan Korea Marker (JKM), the LNG benchmark for East Asia, is tipped to rise materially as the northern hemisphere restocking season approaches, with gas storage across Europe and Asia still running well below seasonal averages.

Australia’s geology, energy infrastructure and engineering capability give it a competitive position that only strengthens as global supply constraints tighten.

Datt draws a parallel with the 1970s, an era of energy shocks, geopolitical discord and stagflation, when energy was one of only two sectors to deliver real returns above inflation. The mechanism, he says, is the same today: physical scarcity, sovereign debt pressure and currency debasement are pushing capital toward tangible, real-world assets.

Datt says, “We view energy as the ultimate safe haven. Capital historically rushes into tangible, irreplaceable real-world assets when fiat systems face structural crises. Nothing runs the physical world like energy.”

Rather than chasing speculative explorers, Datt Capital’s approach favours established producers with strong balance sheets capable of sustaining dividends through volatility.

“We are seeing opportunities in midstream energy, with current positions in New Hope Corporation, Yancoal and Whitehaven Coal. We believe seaborne thermal coal prices will climb materially in the second half of FY2027 as LNG shortages, driven by Qatar’s reduced market access, push European and Asian buyers to compete for scarce supply, with thermal coal stepping in as the substitution fuel of choice.

“We are also looking at upstream oil and gas, where the focus is on companies with high operating leverage, disciplined capital allocation and a track record of returning cash via dividends and buybacks. Over the past decade, Australia’s five largest energy producers have shown that rising energy prices flow almost directly to the bottom line, given the fixed-cost nature of established production infrastructure.

“Ancillary services and equipment providers, by contrast, are seen as less compelling given the commoditised nature of that work and its lower scarcity value relative to upstream and midstream assets.”

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Emanuel Datt

As markets absorb the consequences of a federal budget handed down against a backdrop of persistent inflation, Melbourne-based fund manager Datt Capital says investors are asking the wrong question about interest rates.

“Whether the RBA hikes again is not the primary investment question,” says Emanuel Datt, chief investment officer of Datt Capital. “Markets have largely priced in further tightening. The more important question is duration: how long does the cash rate stay at or above 4.35 per cent?”

The cash rate is back at levels last seen in late 2011 – a comparison Datt says is frequently misread. In 2011, the RBA was in an easing cycle, moving rates lower and giving households and businesses a credible forward expectation of relief. In 2026, the direction is reversed, with market pricing pointing toward 4.7 per cent by year end and no cuts anticipated until 2028.

“Businesses and households are not pricing in relief,” Datt says. “They are stress-testing against the possibility of more restriction.”

That asymmetry changes behaviour in ways nominal rate comparisons cannot capture. Australian household debt to GDP reached approximately 113.7 per cent in mid-2025. The nominal mortgage balances being repriced today are far larger than in 2011, even at equivalent rates, because property prices have risen substantially in the intervening 15 years. Housing costs rose 6.5 per cent year-on-year to March 2026. Electricity prices are up 25 per cent as government rebates roll off.

Roy Morgan modelling^[1] projects mortgage stress affecting 1.6 million Australians, approximately 30 per cent of borrowers, following the May rate hike.^[2]

“Household consumption is expected to take a hit from weaker real incomes as higher prices erode spending power,” Datt says. “This is not a brief tightening correction but a prolonged period of restrictive policy operating against a structurally constrained economy.”

Against this backdrop, Datt says investors should focus on distinguishing businesses that can absorb a sustained high-rate period from those whose earnings are structurally dependent on cheap credit or consumer discretionary spending.

“Businesses best positioned share common traits: low debt relative to earnings, high interest cover ratios, and pricing power that allows them to pass through input costs without losing volume.

“Energy producers and gold-linked businesses benefit directly from the inflationary conditions driving rates higher. Defensive industrials and essential services with contracted revenue streams also carry structural insulation.

“But we remain cautious about highly geared companies rolling over debt at materially higher rates, consumer discretionary businesses exposed to household spending compression and companies with thin margins in competitive industries where pricing power is limited.

Small-cap companies warrant particular scrutiny, Datt says. “While the segment contains businesses with strong earnings quality, the cohort as a whole carries higher refinancing risk and is more sensitive to credit tightening than large-cap peers.”

“We are focussing on duration risk across both fixed income and equities. In fixed income, floating-rate exposure is favoured over long-duration instruments. In equities, quality earnings should take precedence over growth narratives that require continued multiple expansion.

“For investors in or approaching retirement, the depth and timing of drawdowns should matter as much as average returns. A capital preservation approach focused on risk-adjusted returns becomes more important than ever as the cycle extends.

“Diversification across asset classes and geographies is more valuable in a period of domestic stagflation risk than in normal cycles, where correlation assumptions between asset classes hold more reliably,” he says.

———

Notes:
[1] Roy Morgan modelling
[2] https://www.roymorgan.com/findings/10198-mortgage-stress-risk-march-2026

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Emanuel Datt

The current fuel crisis is reshaping how markets interpret energy risk, with fuel scarcity emerging as a more persistent economic constraint rather than a short-term cyclical factor, according to Datt Capital Chief Investment Officer Emanuel Datt.

Datt says, “The energy landscape is disrupted across multiple fronts. Fuel scarcity is probably here to stay for the medium term due to ongoing blockades, constrained refinery output, and export restrictions on key petroleum products.”

Beyond crude oil, Datt highlights broader vulnerabilities across energy, particularly in liquefied natural gas (LNG). Supply disruptions involving Qatar, which accounts for a significant share of global LNG exports, are exacerbating volatility across energy markets.

Domestically, Australia faces its own set of structural challenges, particularly in refined fuel products such as diesel and jet fuel. Datt notes the current situation has underscored the country’s limited refining capacity, leaving it exposed to global supply disruptions.

This vulnerability has prompted government intervention, including increased support for domestic refiners Ampol and Viva Energy. The level at which Federal government support commences for Viva’s Geelong refinery has increased from A$10.2/bbl to A$15.9/bbl refining margin, with the maximum support cap lifted 78% to A$13/bbl.

“The situation demonstrates that energy security is not just a price-driven exercise. Australia is likely to pursue a more balanced approach between imports and domestic production over time.”

Recent government measures, including underwriting oil shipments and relaxing diesel standards, signal a broader pivot away from reliance on market pricing mechanisms towards ensuring physical supply.
“This marks a notable shift in policy thinking. It speaks to the importance of hydrocarbons to a modern economy like Australia, in contrast to the current policy settings with the strong focus on renewables seen just five years ago. While Australia remains resource-rich, the key challenge lies in converting upstream production into usable fuel for domestic consumption, an area likely to see increased policy attention.

“Fuel is an input to almost everything. Higher energy prices will broadly increase the cost of doing business,” adds Datt
“We expect this to flow through in company announcements across the next reporting season. Sectors such as industrials, logistics, miners will have their profits disproportionately affected, whereas financial companies will be bit more insulated. However, I do expect there’ll be a consistent stream of earnings downgrades over the coming quarter.

“We have repositioned our portfolios towards a greater weighting towards energy exposures, because when energy becomes the constraint and demand remains relatively inelastic, we typically see stronger prices over the medium term.

“We are also maintaining elevated cash levels, anticipating potential market weakness and more attractive buying opportunities ahead.”

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Emanuel Datt

Artificial intelligence may be disrupting global equity markets and challenging traditional business models, but Emanuel Datt, Chief Investment Officer of Datt Capital, believes the long-term implications are overwhelmingly positive, particularly for Australian companies.

While the US market has struggled to regain momentum amid rapid AI-driven disruption, Datt argues the narrative is far from “doom and gloom.”

“It’s not all negative,” Datt says. “Ultimately, it’s about increasing productivity and efficiency, which is good for company owners and shareholders. We are already seeing very tangible productivity benefits playing out in real time, especially in the current reporting season.”

He highlights TechnologyOne’s (ASX: TNE) recent upgrade as evidence of real, measurable improvements in productivity and efficiency.

“These are tangible real-world outcomes. It’s not just conceptual anymore. If current performance levels can be maintained, parts of the technology sector now represent better value than they have for years. They’re looking more fairly valued than they have been for a very long time,” he says.

“While AI-driven efficiency gains may result in workforce reductions in some areas, we view this as a broader economic evolution rather than a crisis. With increase in productivity, products and services will ultimately get cheaper. That can reduce inflation and free people up to do something else. This is just a change in the economy and the nature of employment over time.”

“The real shift is that we’re seeing efficiency gains across multiple sectors. And that’s ultimately a positive story for shareholders and for Australia.”

The latest wave of AI product launches has intensified debate around the sustainability of established business models, particularly within software-as-a-service (SaaS).

“However, disruption does not equate to destruction. The current reporting season is showing that companies actively adopting AI are already demonstrating measurable improvements.

“Companies are trimming down their cost base and increasing efficiency across multiple metrics. Historically, operational improvements were often measured in basis points. Now some businesses are reporting gains in percentage points, this is a significant shift for large institutions.

“Even traditionally bureaucratic sectors such as banking are prime beneficiaries. Banks are notorious for being slow to adapt to change and carry excessive overhead and inefficiencies. For institutions of that nature, AI adoption is excellent.”

 The productivity story extends well beyond office-based sectors. Australia’s major miners have been particularly proactive in deploying advanced systems.

“The big miners operate fixed assets, so it’s all about maximising utilisation time,” he says. “Over the past three years we’ve seen increasing adoption of more advanced technology systems to make operations more predictable and efficient.”

Given Australia’s recent productivity challenges, he sees widespread AI implementation as a structural positive for the broader economy and a win-win for the economy.

“The US market is viewed as a leader for good reason, but Australia is very different in virtually every aspect,” he says. “We’re well insulated from the tech boom in AI and well poised to benefit from its adoption.”

“The recent pullback in technology stocks is not evidence of structural weakness but a recalibration. We’ve seen the tech sector punished quite brutally since the start of the year from these fears. But they all seem to be reporting quite well.”

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Emanuel Datt

Reporting season has reminded investors of a plain truth that not all companies are equal. The S&P/ASX 200 has remained steady, but beneath the surface, shares have swung significantly. In markets priced for perfection, even minor disappointments bite according to boutique Australian equities manager, Datt Capital.

September tends to unsettle equities, but October often resets them. Emanuel Datt, CIO Datt Capital notes, “Seasonality provides context but not a forecast. Investors should not retreat on superstition. They should use September’s nerves to build positions in strong franchises and then let October’s reset do the heavy lifting.”

Datt highlights the active edge, especially now. “Today passive funds own the index covering both the winners and laggards. That can work when earnings are broad and valuations are forgiving. With growth slowing and multiples rich “own everything” risks owning too much of the wrong thing.

“In this scenario, active investors should tilt towards rate-sensitive winners and away from crowded or structurally challenged names. Volatility makes this worthwhile as result-day moves have averaged more than 7 per cent this season, among the highest in years. For passive holders, these swings cancel out the returns. As active managers we see dispersion as an opportunity.”

He adds that dispersion will continue to persist. “Two forces argue for wide spreads to continue. Firstly, as Australian super funds channel vast amount of capital into index products, fewer active hands will absorb market related shocks. Liquidity gaps will widen.

“Secondly with the ASX 100 trading at elevated multiples, companies are priced for perfection. So any stumble is severely punished. We saw this in the current reporting season. When you layer September’s unease on top, we see a market that rewards resilience and penalises weakness.”

“To counter these forces, as an active manager, we follow a well-researched playbook. We begin by screening for balance-sheet strength, prioritising companies with net cash or low net debt, robust interest coverage and consistent free cash flow conversion. Our preference is for “self-help” over “blue-sky” stories, meaning we look for credible margin drivers such as diversification, pricing and cost programs, as well as disciplined capital allocation, rather than speculative growth narratives.

“We also lean into forced selling opportunities, using earnings-day gaps and September volatility to scale into high-quality names at more favourable prices. When it comes to cyclicals, we de-risk with discipline holding only those with fortified balance sheets and avoiding companies reliant on the next price upswing to meet covenants.

“We remain nimble in a market of sharp moves, favouring staged entries and exits over point-to-point bets,” Datt says.

For years, the case for passive looked unassailable with low fees, broad exposure and decent outcomes. Today warrants a rethink. “When single-day moves of 10–20 per cent are possible, investors cannot afford to be passengers,” says Datt.

“Stock selection matters again.”

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Emanuel Datt

Geopolitical risks remain high, but markets have so far shown resilience, supported by low unemployment and strong liquidity conditions, providing opportunities for investors that know where to look, according to Emanuel Datt, chief investment officer at boutique Australian equity investment manager Datt Capital.

“For investors, the question is clear: how do you position portfolios when the economic picture is neither boom nor bust, but something more nuanced,” Datt said.

Australian equities may have pushed towards record nominal highs, but when adjusted for inflation, the market still sits about 15 per cent below its 2007 peak. Datt said this anomaly becomes even more striking when comparing small-cap valuations to large‑caps.

“Small cap earnings multiples remain at a material discount to large caps, something highly unusual historically,” Datt said.

Technology and gold stocks may be positioned particularly well in the current environment. Datt said that rather than chasing speculative AI stocks, it was better to look for companies positioned to benefit from the adoption of AI, such as those reducing operational costs through automation.

“With ongoing currency debasement and stimulus settings, gold continues to serve as a reliable store of value in uncertain times. Critical metals, driven by demand for robotics and advanced manufacturing, are another area of interest,” Datt said.

A small cap stock that Datt Capital has recently bought into is fertility services provider Monash IVF. The fund manager believes that despite recent operational challenges, the board has stepped in appropriately.

“We saw Monash IVF as a market leader in a defensive sector with strong demographic tailwinds. The board’s decisive action and the opportunity to invest at a significant discount reinforced our conviction in its long-term potential,” Datt said.

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