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InMobi eyes $100m local piece of puzzle

Continued from Page 17

Slowing China could cut rates


company Softbank, which invested $US200m last year, and Silicon Valley venture capital firms Kleiner Perkins Caufield & Byers and Sherpalo Ventures, which put in $US15m in 2010. It has used the funds to go on a global spending spree, although last year it had to curtail its expansion in Kenya, South Africa and Russia, where devicebased advertising failed to reach the heights anticipated. Mobile advertising in Australia is still to take off, with total spend of less than $90m in 2012, according to IAB data. But Mr Satija said this was changing. I think we started to see a good hockey stick trend in the Australian mobile market last year around Q3 and Q4. Id like to think we played our part in that in some small way. The market is growing faster than even the forecasts we have from third parties in Australia. All the numbers that we planned for this year we are running ahead of those numbers, he said. Australia is going to grow 400 per cent plus this year compared to last year. Last year our base was small . . . for Australia, the next big milestone is to touch $100m in revenue. I want to cross that run rate in less than 11/2 years . . . Seventy-nine per cent of Australians will have purchased something using their mobile phone in the next 12 months. In May last year InMobi struck a deal to provide advertising sales for Mi9s Ninemsn, giving Mi9 access to InMobis rich media inventory, which includes animated ads. Many use HTML5 technology developed by the companys subsidiary Sprout. InMobi bought the Sprout platform, recognised as one of the leading platforms for creating mobile ads, in August 2011. Then earlier this year the group struck a deal with News

Limited, publisher of The Australian, to partner on its HTML5 visual authoring platform, InMobi Studio. InMobi will build mobile and tablet ads for clients across the newspaper publishers digital brands. InMobi has also partnered with Fairfax Media to deliver richer and more effective mobile advertising solutions in New Zealand. In recent years, both Apple and Google have made major acquisitions for their mobile ad networks, iAd and Admob, aimed at ensuring dominance of the mobile ad space. Facebook has also grown to become a key player. Together, Google and Facebook command about 70 per cent of the mobile ad market. Before joining InMobi in December 2010, Mr Satija was the head of wireless business for Japan and Asia-Pacific at Google. He also worked for Google in India. Google has this amazing focus upon very good product and technology, as well as very good people and culture. At InMobi we have taken it to the next level, he says. As Google has grown much larger, the base of mobile can move much faster than the base of PC. So it is much harder for a company of $50bn to adjust to that base naturally. We are a mobile-first company and I think the speed to execution for us is much, much faster. On the future of mobile advertising, Mr Satija said the advent of new services on mobile phones would create growth opportunities in the segment that would see advertising surpass any other form of advertising in terms of its effectiveness. You will see location services on mobile and we will be able to track and share location data because that allows mobile services providers to target them and give them information. So location will make the advertising richer, he said.

China PMI
61 59

Real economic activity


GDP y/y (RHS)

16 14 12 10

Sharp rise in real estate prices

CHINAS average house prices rose sharply in June from a year earlier but an increase in supply and a cash crunch in the nations banking system may have restrained some of markets momentum. Prices of homes in 100 Chinese cities were up a solid 7.4 per cent from a year earlier, after a 6.9 per cent rise in May, according to data provider China Real Estate Index System. But month-over-month price rises slowed to 0.77 per cent from Mays 0.81 per cent gain. Since June, interbank liquidity has tightened with the Shanghai interbank offered rate hitting historical highs, said CREIS. Mortgage applications were the Asian financial crisis that a target was not achieved, prompting economists to speculate the Peo-

THE prospect of an interest rate cut in China is growing amid renewed signs that the powerful manufacturing sector is weakening, which will have negative consequences for the broader economy. Economists believe there is an increased chance that China will grow by less than 7 per cent over the final two quarters of 2013, which would be the worst performance for the economy in more than a decade. Two key barometers of manufacturing output published yesterday showed the sector has been struggling for the two months. The official Purchasing Managers Index, compiled by the National Bureau of Statistics, recorded a sharp drop from 50.8 in May to 50.1 in June. The HSBC index also fell significantly from 49.2 to 48.2 in June. A result below 50 shows the

57 55 53 51 49 47 45

New orders Headline PMI

120 115 110 105 100

New export orders

2010 11 12 13

95 90

ANZ China real activity index (LHS)

2005 07 09 11 13

6 4
Source: ANZ

manufacturing output is contracting rather than expanding. Senior economists believe the HSBC survey provides a more reliable reading of the sector because it charts the output of Chinas private manufacturers, whereas the official index measures the nations state-owned enterprises. The weaker results compounded negative sentiment in the Australian equities market, which recorded its worst start to a

new financial year since the first trading day in 2009-10. The S&P/ASX200 lost 92.3 (1.9 per cent) points to close at 4710.3 while the All Ordinaries was off 85.7 (1.72 per cent) points to 4689.7. The Australian dollar was trading at US91.98c last night. Some economists now believe the weakness emerging across the economy could mean that China misses the official economic growth target of 7.5 per cent. It would be the first time since

tightened as credit availability was insufficient, resulting in smaller discounts on mortgage rates and longer approval processes for mortgages. Lending on the interbank market was squeezed in June by a combination of seasonal reporting factors, slower foreign-capital inflows and stepped-up demand for funds from banks. While interbank rates have since fallen slightly, the tight liquidity was apparent throughout most of June. The data provider said an increase in the number of housing units coming to market also contributed to the slower month-over-month price increase. Prices were up despite government efforts to keep them from spiraling higher.

ples Bank of China could soon cut official interest rates. JPMorgans chief China economist, Zhu

Haibin, said the future direction of Chinas economy would be dictated by the manufacturing sector. The biggest challenge faced by the China economy remains the weakness in manufacturing, Mr Zhu said. It is related to the overcapacity in a number of sectors and the declining rate of return on investment. BOC International investment manager Xiang Jian said financiers were becoming cautious about investing in Chinas manufacturing sector because of the declining returns. The PMI has been weak for the past three months because of the international economy and Chinas economy adjusting from growth of 8 per cent down to around 7.5 per cent, Mr Xiang told The Australian yesterday. To our investors that means the sector has become a cautious area to invest in. We havent seen any signs that say to us that it is going to pick up in the next few months or even out until the end of this year.

Commercial property sales rising

Insurance brokers plan $469m listing


State risks 29,000 mining jobs

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southwest of Singleton, has been a casualty of the NSW planning system despite receiving ministerial approval in February. In April the NSW Land and Environment Court put a stop to the plans. It was the first time a NSW court had overturned a major project approval to extend an existing open-cut mine. Employees at our Mount Thorley Warkworth mine are now victims of the uncertainty that the poorly designed NSW planning system has created, Mr Kenyon-Slaney said. Mr Galilee added that to avoid an economic body blow of the magnitude identified in the PwC report, the NSW government needed to replace the present broken planning system with a more efficient system that provided certainty and consistency for mining projects. A spokesman from the Department of Planning and Infrastructure said its initial

assessment of the councils submission, including the PwC research, indicated that it overstated alleged mining project delays by failing to take into account the time proponents took to prepare their applications and respond to submissions. Additionally, several of the mining projects mentioned in the submission involved complex issues where the proponents had failed to adequately address potential impacts, the spokesman said. In these cases, it was necessary for the department to subject the projects to further examination. Mr Galilee said the council and many of its members had been in and out of ministers offices over recent months to highlight the concerns directly. It is also fair to say that there are still some sections of the government who dont seem to understand that mining is a strategic industry for NSW and is fundamentally important to the strength of the economy.

AUSTRALIAN insurance broking network Steadfast is seeking to raise up to $469 million through an initial public offering. The company is chaired by Frank OHalloran, former chief executive of QBE Insurance. The indicative price range for the IPO is between $1 and $1.20 a share, its filing showed, noting that the listing would proceed if a minimum $160m was raised. At the top end of the range, Steadfast will have a price to fiscal 2014 earnings ratio of 16.5 times, giving it a market value of $622m. Its estimated dividend yield range is between 3.1 per cent and 4.7 per cent. A bookbuild will be conducted on July 30, with the company scheduled to begin trading on the Australian Securities Exchange on a normal settlement basis by August 14. JPMorgan and Macquarie Capital are joint lead managers on the IPO. Established in 1996, and with 280 brokers under its umbrella, Steadfast claims to be the largest general insurance broking network in Australia, measured by annual premiums and the num-

ber of licensed brokers in its network. The groups gross written premiums totalled about $3.7 billion for the year ended June 30, 2012, giving it market share of 22 per cent, according to management estimates. Directors and management believe that the IPO will position Steadfast to take advantage of significant growth opportunities given the potential for further consolidation of insurance brokers and the ability to enhance cross-selling of products distributed through the Steadfast network, Mr OHalloran said in the prospectus. The IPO will fund already agreed-on acquisitions, including equity stakes of between 25 per cent and 100 per cent in 58 insurance broking businesses and two underwriting agencies. Key management and employees within the Steadfast network are expected to own between 43 per cent and 47 per cent of the companys shares after the listing. For the half-year ended June 30, $US850m was raised from 14 Australian IPOs, according to Dealogic. That is a 262 per cent lift on the $US235m raised in the same period last year.

Sales of commercial property to local buyers increased 30 per cent over the previous financial year, according to CBRE

Boart slashes earnings

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Boart Longyear. We are very comfortable with our gearing ratios and our coverage ratios and we are not concerned with our debt position, he said. In addition, Ausdrills business was heavily focused on work at mine sites, rather than exploration projections. Im not denying that theres pain and there will be pain for a while, we share that view but having said that, production just doesnt stop. Most of it will carry on. Shares in Ausdrill, which were at $3.61 a year ago, closed down

7c to 79c yesterday. Emeco, which peaked at 96c last August, shed 1c to close at 27c. Boart Longyear closed down 5c at 62.5c, down from $3.12 a year ago. The plunge in valuations across the mining services sector has given rise to speculation that private equity groups could look to snap up the struggling companies in the space. Mr Oberg said Boart Longyear could be an obvious target for private equity. The thing I can see potentially is Boart going to private equity. Realistically, it should be private, because its so volatile, he said.

LOCAL investors underpinned the $16 billion of commercial property sold last financial year, a 12 per cent increase on 2011-12, according to real estate agent CBRE. Sales jumped 24 per cent in the June quarter compared with the same three months last year, despite concerns about the economy. CBREs head of research for Australia, Stephen McNabb, said buyers had concentrated on a small number of low-risk but high-quality investments with a lower number of higher-value deals during the year. The result had driven up the value of prime buildings while

secondary investments had lagged, he said. Sales to local buyers increased 30 per cent over the previous financial year while foreign investment slumped 43 per cent during the year. However, CBRE national director of capital markets, Josh Cullen, noted foreign investors had bought $11bn worth of Australian property since 2007. CBRE said sales of office property increased 28 per cent to $9.7bn for the year, retail property sales were flat at $4.4bn, while sales of industrial property fell 16 per cent to $1.9bn. In a separate report released yesterday, economic forecaster BIS Shrapnel said the retail property sector was set to face its greatest challenges since the global financial crisis thanks to falling consumer savings, a slow

Commercial property sales

Year to June 30 2013

$4.4bn $1.9bn $9.7bn

OFFICE (up 28% on 2012) INDUSTRIAL (down 16%) RETAIL (steady)

Source: CBRE

economy, growth in online retailing and the depreciation of the Australian dollar. BIS Shrapnel predicted the market share of internet retailing could increase from 6 per cent to 11 per cent within the next five years. What this means is that

more than $3 out of every $10 of additional expenditure will go online, BIS Shrapnel senior project manager Maria Lee said. The forecaster expects shopping centre incomes to grow at an average pace of 2 per cent per annum over the next five years, failing to keep pace with inflation. On the office property market, real estate agent Knight Frank put the number of office property sales at $9.09bn, noting demand was driven by unlisted wholesale funds, syndicates and Australian real estate investment trusts. National research director Matt Whitby said $2.3bn worth of office property was in due diligence or final negotiations. There has been a consistent upward trend in CBD office sales volumes over the past four financial years, he said.

Taxation office poised for cultural overhaul

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AMP buys half-share of Mirvacs office site


AUSTRALIAN property giants have launched into the new financial year with the announcement of $441.9 million worth of real estate acquisitions. AMP Capital Wholesale Office Fund (AWOF) confirmed yesterday the highly anticipated purchase of a half-share in the Mirvac Groups Sydney office development at 200 George Street for $317m.

Investa Office Fund also said it had bought a building at 99 Walker Street in North Sydney for $124.9m. Financial firm Ernst & Young has agreed to lease at least 70 per cent of Mirvacs new 37-storey office building in the heart of Sydney for 10 years when it is finished in 2016. Mirvac will provide AMP Capital a secured rent guarantee over any remaining unleased space at completion for a term of four years. AMP, which previously owned the site, had negotiated the first

right to acquire a half-interest in any development on the property. This transaction presents a rare development opportunity and an excellent investment outcome for our clients, said Chris Judd, AMP Capital head of property funds management. The acquisition is consistent with our strategy to remain focused on core, well-located office towers and bringing some newer assets into the fund to increase the quality of the portfolio and deliver our investors strong risk

adjusted returns over the long term. AWOF is an open-ended unlisted fund with $2.8 billion of high-quality office buildings in Australia and New Zealand. Meanwhile, Investa said the 21-storey A-grade office building it purchased in North Sydney would generate a 7.9 per cent yield on cost and would be accretive to 2014 financial year earnings. The building is leased to seven office tenants, including GE Capital and AAMI.

up some good people who might be interested in a bit of a career change, and take on a challenging new role, Mr Jordan said. What they know how to do is marshal resources. They know how to manage projects, to get things done on time and to hopefully be a screen, as to, Well why are we asking for that information, what is our purpose here, to have a better focus on information requests because that is what auditors in a commercial sense do. The pilot program will begin with about 10 new recruits. Another significant change is that the tax office will speak out publicly on controversial issues where in the past it has kept quiet although Mr Jordan does not go so far to say that laws regarding taxpayer privacy should be changed. I think if someone else puts information into the public domain it is useful for the tax office to be a participator in the debate. Historically, the tax office has never really made comment about things. Scrutiny of offshore banking practices will increase with greater co-operation with overseas authorities, and a recent

breakthrough in dealings with the notoriously private Swiss will be a major boost to future probes. Changes to the information to be exchanged with the Swiss recently came into force, with Mr Jordan describing it as a huge advantage. With more information being given to tax authorities around the world, and a renewed focus on advisers, Mr Jordan said wealthy Australians using offshore structures needed to realise they cant hide any more. Who can they trust when you have employees of major banks or contractors to trust companies taking their information and providing it to authorities, the games over, that is the story here, the game is over. Despite the changes and cultural overhaul, Mr Jordan says he has been surprised with the willingness of employees to embrace the changes he is making. I had friends say, You are mad taking on this role . . . you will never be one of them, they will shut you out. But this has not been the case, he said. People know that someone like me coming from the outside has this opportunity to do things that might have happened because things would have rolled along as they had previously.

Watpacs $146m Defence deal

CONTRACTS: Builder Watpac


has secured a $146 million contract to upgrade army bases for the Defence Department. The firm will embark on building and infrastructure upgrades at 16 bases in Queensland, NSW, the ACT and Victoria. Watpac chief executive Martin Monro said the program of works would be extensive and include facility upgrades, civil works and enhancements to security and visitor management. Work would start this month and was expected to be finished by the end of next year, he said. Watpac will deploy specialist

teams totalling about 400 workers to deliver the construction program, with the upgrades to be delivered across as many as eight bases at any one time, he said. Already, Watpac is delivering more than 3000 new accommodation units across 14 Australian Defence Force bases through the Plenary Living consortium. Some of Watpacs major projects include the $600m One Central Park, Park Lane and The Mark development in Sydney and the $206m commercial tower development at 180 Ann Street in the Brisbane CBD.

Garry Trudeau is on leave