Shaw and Partners co-chief executive officer Earl Evans announced the appointment of two new advisers on Wednesday, continuing the stockbroking firm's rampant hiring spree. 

John Wardman from Macquarie Private Wealth has joined the Sydney office while Brisbane-based Luke Koekoek has been poached from Morgan Stanley Private Wealth after six years with the bank. 

"John has spent the last 13 years with MPW and has over 25 years' experience in our industry and a very solid book of business," Evans said in an internal email. "John's trailing 12 months was over $800,000 and he has an extensive network of contacts/clients that will add great value to the firm."

It's understood Koekoek, who worked at Macquarie Private Wealth prior to Morgan Stanley, will start at Shaw in a few weeks time.

"Luke was a top producer at MS as he was at MPW with close to $1 million in revenue, largely from fee based accounts," Evans said, 

As reported by Street Talk earlier this month, Shaw and Partners posted a 17 per cent increase in net profit to $1.3 million for the 12 months ended June 30.

Dividends paid amounted to $900,000 over the year, up from $720,000 in the prior period, accounts lodged with the corporate regulator showed.

Revenue jumped to $62.8 million for the year from $49.7 million, buoyed by higher stockbroking, portfolio management and corporate finance revenue. Floats that Shaw helped manage include National Veterinary Care, Medlab Clinical and Shaver Shop Group.

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The nation's biggest banks face revenue headwinds, potentially higher loan losses and shortfalls in core capital, according to analysts at CLSA. 

In a preview of the upcoming bank profit reporting season, CLSA analysts Brian Johnson and Ed Henning paint a sombre picture of the earnings climate for Australia's large banks. 

Commonwealth Bank of Australia is the outlier in reporting season among the Big Four, as the other three have a September 30 year end. Macquarie Group ruled off its first-half on September 30. 

In a note to clients, Johnson and Henning say the nation's largest lenders confront the risk of "significant CET1 (Common Equity Tier 1) capital shortfalls."  

This comes as the Basel Committee on Banking Supervision finalises proposed reforms and the Australian Prudential Regulation Authority finalises its interpretation of David Murray's Financial System Inquiry.

The FSI said Australian banks should be "unquestionably strong" and capitalised in the "top quartile" of internationally active banks.

National Australia Bank kicks of reporting season for the banks on October 27. CLSA has an " Underweight" rating on the sector as a whole, despite rating Macquarie a "High-Conviction Buy" and NAB offshoot Clydesdale Bank (now called CYB Group) a "Buy."

CLSA also highlighted an erosion of bank's pricing power, potential for higher loan losses and slower credit growth as among earnings headwinds.

"If we are approaching the end of the Australian interest rate cutting cycle, and longer term global bond rates are already rising as the inevitable rise in US policy rates, then the prospect of even a stabilisation in real asset values (let alone a decline) suggests Australian system credit growth could slow," the analysts said.

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Brokers have started formally rustling up interest in Inghams Group's initial public offering, releasing terms to fund managers on Wednesday. 

According to the termsheet, the company will seek to raise $767.6 million to $1.12 billion with final pricing to be determined at a bookbuild on November 2 and 3.  

The price range was set at $3.57 to $4.14 a share, which was 13.5-times to 15.5-times forecast profit. 

The price also implied 9.2-times to 10.3-times EBITDA, on an enterprise value-to-earnings before interest, tax, depreciation and amortisation basis. 

If successful, Inghams would list on November 7. 

Pricing was in line with market expectations. Street Talk revealed plans to price the IPO at 13.5-times to 15.5-times forecast profit on Tuesday. 

The offer size represented 214.7 million to 270.8 million shares while the forecast yield was 4.4 per cent to 5 per cent, depending on the final price. 

Inghams' brokers include joint global coordinators Credit Suisse, Macquarie Capital and UBS, and lead managers Citi, Goldman Sachs and Morgan Stanley. 

Inghams management, headed by Mick McMahon, will meet potential investors over the coming three weeks. 

As Street Talk also reported on Wednesday, AustralianSuper is believed to have pre-committed to the deal. 

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One of Australia's biggest investors, industry superannuation fund giant AustralianSuper, is believed to be the fund committing to take as much as a $150 million stake in chicken producer and initial public offering-hopeful Inghams Group. 

In Inghams prospectus lodged on Wednesday morning, the chicken producer said a long-only Australian superannuation fund was buying up to 10 per cent of Inghams' up front. 

That fund is believed to be AustralianSuper, one of the country's biggest investors with more than $100 billion invested on behalf of more than 2 million members. 

Sources said AustralianSuper's commitment was for up to $150 million, depending on the final price, and at least $100 million across the price range. 

The AustralianSuper stake, combined with private equity firm TPG's decision to keep a 25 per cent to 40 per cent stake, means other institutional investors and retail investors will be offered up to about $900 million of stock at the IPO. 

It's understood AustralianSuper approached Inghams about taking the stake. Sources said TPG and its bookrunners did not run a formal cornerstone process. 

The money manager has stepped up its active equity investment program in recent years, and is now investing directly in Australian and offshore equities as well as mandating third-party funds managers. 

Interestingly, AustralianSuper was also the largest domestic in private hospital operator Healthscope at the time of its $2.25 billion float in 2014. Healthscope was also owned by TPG, along with rival private equity firm The Carlyle Group, and is up more than 50 per cent since listing. 

As first reported by Street Talk on Tuesday, TPG Asia is seeking to sell 50 per cent and 70 per cent of its holding, which means it is likely to retain 25 per cent to 40 per cent of Inghams shares on listing. 

Inghams is a household chicken producer in Australia and New Zealand that was founded in 1918.

The pitch to investors

In pre-marketing to institutional investors, Inghams was pitched as a margin expansion story, with management one year into a five year transformation program. Brokers have estimated that organisational efficiencies implemented could bring $160 million to $200 million of gross EBITDA benefits across automation, procurement, labour, network rationalisation and supply chain management.

Investors will be quick to compare it to ASX and NZX-listed Tegel, which is also Inghams' arch rival in New Zealand. 

Inghams' IPO has been priced at 13.5-times to 15.5-times forecast profit, while Tegel trades at about 12.times. 

Although the brokers will be reminding fund managers that Inghams is a much bigger business in a much bigger market; there were 1,144 million tonnes of chicken consumed in Australia in FY15 compared to 194 million tonnes in New Zealand. Inghams expects $2.4 billion revenue in the 2017 financial year, while Tegel expects about $600 million. 

The other comparable is Costa Group. Both businesses have highly industrialised supply chains, minimising agricultural risk. Costa is taking berry-growing to a protected crop model, while Inghams has strong oversight and control over growing conditions. 

Costa trades at about 18-times forecast profit, while the ASX general industrials index - which excludes banks, infrastructure and property - is trading at 18.4-times median 2017 profit forecasts. 

Inghams also comes to market expecting 18.9 per cent earnings per share growth in the 2017 financial year - which is more than double the ASX200 - and about a 4 per cent dividend yield  

Inghams' joint lead managers are Macquarie Capital, Goldman Sachs, UBS, Morgan Stanley, Credit Suisse and Citi.

 

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Vocus Communications chairman David Spence will front shareholders on Wednesday to explain the latest twist at the telecommunications company.  

James Spenceley and Tony Grist – the men who built one-time market darlings Vocus Communications and Amcom Telecommunications – are gone from the company's board.

The pair resigned after Vocus' board held a special meeting in Melbourne on Tuesday to consider an "alternative leadership" proposal put forward by non-executive director Grist, and later supported by Spenceley.

Grist's aim was to see Horth replaced and a "board leadership" review over the next year. It is understood that meant replacing David Spence as chairman and reconsidering Craig Farrow's role as deputy chairman. 

Sources said the move was building for a number of weeks and the special meeting of directors was designed to bring it to a head. 

In the background, Vocus shares were being sold heavily from above $9 in late May to below $6 as some longer-term shareholders including Spenceley sold down and hedge funds moved in. A couple of sell-side analysts also took aim, questioning the company's outlook in the NBNCo world, and even its financial statements.

The motion was defeated 6-2 at the meeting. 

Grist and Spenceley resigned.

Chairman's message to investors

Spence, a former OzEmail managing director, is expected to to explain the situation to key shareholders, and reiterate his and board's united support for current chief executive officer Geoff Horth. 

He is expected to remind them that Horth was appointed CEO when Vocus and M2 Group came together in a company-changing deal only last year and was intended to be the man who would oversee the integration.

Horth was seen to be the best man at putting all the pieces together; Vocus, M2, Amcom and now Nextgen Networks. 

On most fronts, the integration has only just begun. And it's something shareholders are keeping a close eye on. 

Vocus shares expected lower

Still, the board upheaval is expected to shock investors on Wednesday morning.

It would not surprise to see the shares open down 10 per cent or more, adding to the pain of recent weeks.

Spence will be doing his best to ensure shareholders that Horth has the full support of the board and the instability should be over.

It'll be interesting to see what unfolds. Both Spenceley and Grist were well regarded by small cap fundies who made a lot of money investing alongside the pair in the past decade.

Spence is expected to point out Horth's record. He led M2 as chief executive for 4½ years and was chief operating officer for another two years. Over that time, shareholders made about five-times their money investing in the company, while he also led the integration of a handful of acquisitions including dodo, Commander, CallPlus Group and others.

Meanwhile, Vocus is expected to kick off a search for two directors to replace the outgoing Spenceley and Grist.

Timing is everything

And finally, you have to feel for Citi analysts who slapped a "buy" on Vocus stock on Tuesday night, not long after the drama had unfolded. Timing is everything when it comes to such calls and this time it looks like they may have been at least one day early.

Citi shaved its target price to $7.45, from $8, and cut underlying earnings expectations 3 per cent to 4 per cent. However, it said the recent share price fall was excessive.

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