Tim Boreham: Chalmed ones enjoying budget boost

Not everyone is buoyed by the federal budget, but it works like a Chalm for folks in these sectors, says Tim Boreham.

‘Here’s something for you and you and you’ Australian Treasurer Jim Chalmers has given some ASX sectors a budget boost. Picture: AAP

When it comes to their night-of-nights, federal treasurers are either splashing cash like an inebriated mariner, or else clasping the purse shut like a miserly wealthy great aunt who wants everyone to think she is down to her last cent.

In the case of Jim Chalmers, it was a case of the latter, although the last unborrowed cent had drained from the coffers some time ago.

His maiden budget manifesto predictably was short of evident largesse, but for investors it was well short of a Halloween horror act.

Some share market sectors are firmly on the “winners” side of the ledger, even if the key measures were well flagged.

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In the case of remuneration packaging, the government confirmed its intent to forego $345 million of revenue to exempt electric and plug-in hybrid vehicles from fringe benefits tax.

The purpose of the policy is to make the cost of an EV equivalent, in after-tax terms, to a conventional car.

The $1.06 billion market cap McMillan Shakespeare (ASX:MMS), the biggest novated leasing provider, asserts that it is “well positioned to assist customers transition into EVs under this policy.”

We bet it is.

Even without this likely surge in customer activity, the company has fared well from the post-pandemic surge in employment activity and car leasing.

Also a fleet manager, the company has benefited from buoyant used car resale values.

Also in the salary packaging and vehicle leasing and management sector, listed cousins Smartgroup (ASX:SIQ), Eclipx Group (ASX:ECX) and SG Fleet (ASX:SGF) are similarly well placed. Having said that, ratcheting interest rates could temper refinancing activity.

Amid the fiscal rectitude, the childcare sector is another rare winner, with the government affirming its election pledge to widen the childcare subsidy to 1.26 million families, at a cost of $4.6 billion.

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This means the sandpit becomes more fun for the largest listed childcare provider G8 Education (ASX:GEM) and the smaller, Victorian-based Mayfield Childcare (ASX:MFD) which have been suffering headwinds including increased labour costs.

As with inflation-affected industries, a key factor is whether the centres can push through compensatory price increases and the answer appears to be “yes”.

After all, working parents tend to have little choice but to pay up, especially in areas with long waiting lists.

At the other end of the demographic scale, the $3.9 billion package of aged care reforms included increased funding to increase the number of “care minutes” residents receive.

More contented residents at no extra costs bodes well for the retirement/nursing home operators Estia Health (ASX:EHE), Regis Healthcare (ASX:REG) and Japara Healthcare (ASX:JHC).

In healthcare, the government has moved to staunch waste and inefficiencies and outright fraud now embedded in the National Disability Insurance Scheme (NDIS).

Still, the scheme will cost $35 billion this year and at the projected rate of growth will cost more than $100 billion by 2033.

There are already thousands of NDIS service intermediaries and last week health insurer NIB Holdings (ASX:NHF) announced a $150 million capital raising to fund NDIS acquisitions.

As a beachhead the company has already acquired the private Maple Plan, one of 1200 operators to manage the funding plans for NDIS clients, for an undisclosed amount (broker Ord Minnett estimates $40 million).

At the very least, the gambit diversifies from the vagaries (and risks) of private health insurance funding.

Other likely budget winners are Telstra (ASX:TLS), TPG Telecom (ASX:TPG) and Aussie Broadband (ASX:ABB), because the government will spend $2.4 billion to extend fibre access to 1.5 million households.

Defence spending is expected to increase 8 per cent this year, to the benefit of ship builder Austal (ASX:ASB).

All in all, the maiden Chalmers offensive doesn’t exactly forge the path to fiscal reform and both the lifters and leaners in our midst have little to fear.

Find more Tim Boreham wisdom at stockhead.com.au

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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