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Will 2014 be the year of the great government sell-off?

Reported by Tim McArthur, The Motley Fool.
Monday, January 6, 2014
Topics in this article:
Agl Energy,Asx,Cochlear,Commonwealth Bank Of Australia.,Csl,Origin Energy,Toll Holdings,African Energy Resources Limited,Nib Holdings Limited
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The Australian Financial Review (AFR) has reported on an interview conducted with the chairman of the Australian Competition and Consumer Commission (ACCC), Mr Rod Sims. In the interview Mr Sims has called for the Abbott-led Federal Government to sell-off and privatise government-owned assets including Australia Post and Medibank Private and to encourage the states to do likewise with their state-owned energy companies.

The sale of these assets would be a windfall for government coffers and could also add some significant businesses to the stock market should privatisation result in an ASX listing.

As investors saw with the recent privatisation of Royal Mail in the UK, there is certainly demand from investors for freight and logistics assets that boast substantial scale. A privatisation of Australia Post would also draw attention to Toll Holdings (ASX: TOL), both in terms of relative valuation and because of the threat from increased competition by Australia Post in private hands.

According to the AFR, Australia's largest health insurer Medibank Private was valued during John Howard's term as Prime Minister at $4 billion. With private health insurance premiums on the rise, coupled with an aging population and NIB Holdings (ASX: NHF) currently the only option for investors looking to gain listed exposure to the sector, a listing of Medibank Private would be welcomed by investors.

Mr Sims also took aim at Queensland's continued ownership of power generation and energy retail assets. While many states have completed or are nearing completion of privatising their energy assets, Mr Sims argued that efficiency and productivity gains and lower prices could be delivered through further privatisation. Whether the ACCC would look favourably on Origin Energy (ASX: ORG) and AGL Energy (ASX: AGK) picking up any privatised assets is hard to say, however both firms would be impacted either way by further privatisation.

Foolish takeaway

Many government assets which have been privatised and found their way onto the ASX have turned out to be high quality investments. Three standouts are the Commonwealth Bank (ASX: CBA), CSL (ASX: CSL) and Aurizon (ASX: AZJ). Any opportunity investors get to purchase government-owned assets is well worth investigating.

Privatised assets are often monopoly-type assets with strong cash flows.

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Motley Fool contributor Tim McArthur owns shares in Toll Holdings, NIB Holdings and Origin Energy.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

19/12/2014 19:39Sydney, Australia. 19 December,2014
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