Author: Aayushi Swami
Investment Objective:
The Fund aims to provide investors with the performance of an index, before fees and expenses, composed of the 200 largest Australian securities listed on the ASX.
Portfolio Objective:
Can be used as a core Australian equities exposure.
Low cost access (relative to fund managers managing domestic portfolios) to the 200 largest companies on the ASX in a single fund.
Positives:
• Low cost exposure to broader market, without having to pick individual stocks.
• Given the concentration in the Australian market, investors can use this ETF as a core holding whilst selecting lesser known stocks to drive portfolio alpha.
Negatives:
• Deterioration in Australian economy.
• Aggressive increase in global bonds yields, leading to equity risk repricing.
• Parent company experiences financial stress or negative corporate governance event.
ETF Performance:
ETF Positioning:
About the Company:
BlackRock is a global asset manager listed on the New York Stock Exchange. BlackRock has a comprehensive range of products and services across asset classes, geographies and investment strategies with 135.
(Source: Banyantree)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Investment Thesis :
- Leading market share positions in on-premise enterprise resources planning (ERP) and on-premise customer relationship management (CRM) markets with customers in over 180 countries and strong brand awareness.
- The market is undervaluing SAP’s CRM business (relative to its peer group such as Salesforce.com).
- Support revenues and Cloud subscriptions provide recurring revenue, which gives SAP a defensive profile.
- Competent management team.
- Strong operating and free cash flow generation with attractive dividend policy (payout ratio of at least 40%)
Key Risks
- The Slower take-up for HANA and S/4HANA.
- Deteriorating sentiment if the economy and IT spending weakens.
- Market share loss in software revenue driven by cloud migration.
- Aggressive M&A with risk of overpaying.
- Additional opex spending dampening margin expansion.
- Key-man risk due to management changes.
- Competition from other established players like Microsoft, Salesforce.com and Oracle
Key highlights of FY 2021
Ongoing momentum in the business saw management slightly raised the bottom end of their previous guidance, which may have disappointed the market (i.e. investors may have been expecting a bigger bump up). Management’s 2021 outlook (non-IFRS @ CC): Cloud Revenue €9.3 – 9.5bn (prev. €9.2 – 9.5bn), up +15-18%; Cloud and Software Revenue €23.6 – 24.0bn (prev. €23.4 – 23.8bn), up +2-3%; and Operating Profit €7.95 – 8.25bn (prev. €7.8 – 8.2bn), flat to -4%. Management reiterated their operating cash flow guidance of approx. €6.0bn and FCF above €4.5bn.
2Q21 results highlights : Relative to the pcp:
- Total group revenue of €6.7bn was up +3% (in CC terms), driven by Cloud up +17%, Software licenses and support down -2% (Software Licenses down -13%, Software Support up +1%), Cloud and Software up +5% and Services down -7%. SaaS/PaaS cloud revenue (excluding Intelligent Spend) was up+25% (CC). Software Licenses were down -13% (CC) as expected and were ahead of expectations. Current Cloud Backlog (CCB) was up +20% (CC terms) to €7.8bn, with SAP S/4HANA CCB up +48% to €1.1bn.
- From a region perspective, Asia Pacific & Japan revenue was solid (Cloud up +23% in CC; Cloud & Software up +6% in CC) while Americas (Cloud up +12% in CC; Cloud & Software up +5% in CC) and EMEA (Cloud up +23% in CC; Cloud & Software up +5% in CC) also saw good growth. Operating profit of €1.9bn was down -2% on pcp, but up +3% in CC terms. Operating margins were down -30bps to 28.8%
Company Profile:
SAP SE (SAP) is a global software and service provider headquartered in Walldorf, Germany, operating through two segments: Applications, Technology & Services segment, and the SAP Business Network segment. The Applications, Technology & Services segment is engaged in the sale of software licenses, subscriptions to its cloud applications, and related services and the SAP Business Network segment includes its cloud-based collaborative business networks and services relating to the SAP Business Network (including cloud applications, professional services and education services). SAP is the market leader in enterprise application software and also the leading analytics and business intelligence company, with the Company reporting that more than 77% of all transaction revenue globally touches an SAP system.
(Source: Banyantree)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Investment Thesis
- The Company trades on 2-yr PE-multiple of 19.5x and dividend yield of 2.1%, which is attractive in our view.
- The Company should come out of COVID-19 in a solid position, with significant balance sheet liquidity increasing flexibility to undertake strategic M&A and invest in the business.
- Market leadership position in medical equipment and supplies industry.
- Global footprint with continuing strong growth in EM.
- Successful track record of developing breakthrough technologies. The Micra AV transcatheter pacing system is expected to be a blockbuster.
- Opportunities in growing diabetes market.
- Successful M&A to gain strategic advantage
Key Risks
- Aggressive competition by other established players putting pressure on margins.
- Strict government regulations and scrutiny.
- IP theft by countries like China.
- Challenging political environments with U.S.-China trade war and Brexit.
- Downturn in U.S. economy given the fact that the company still derives 51% of its revenue from the local market.
- Currency headwinds
Key financial highlights of year2021
- Revenue of $30.117bn increased +4% over pcp (+2% on an organic basis, which adjusts for the $331m benefit of foreign currency translation, the $15m inorganic benefit of the company’s acquisition of Titan Spine in the Cranial & Spinal Technologies division in the Neuroscience Portfolio, and the $360-390m benefit the company received from an extra week in 1Q21 compared to 1Q20).
- Net earnings were $3.606bn or $2.66 per diluted share (non-GAAP earnings and diluted EPS were $6.005bn and $4.44, respectively, both decreasing -3%, however, adjusting for the negative 22 cent impact from FX, non-GAAP diluted EPS increased +2%).
- Cash flow from operations was $6.240bn, down -13.7% over pcp and FCF was $4.885bn, down – 18.9% over pcp and representing FCF conversion from non-GAAP net earnings of 81%.
- The Company ended the year with a cash position ~$10.8bn.
Management’s FY22 outlook
- Organic revenue growth acceleration to +9% with FX having a positive impact of $400-500m (1Q22 organic growth of 17-18%, and a currency tailwind of $200-250m at recent rates).
- Cardiovascular and Neuroscience to grow 10-11%, Medical Surgical to grow 6-7%, and Diabetes to grow 3-4%, all on an organic basis (1Q21 Cardiovascular to grow 14-15%, Medical Surgical to grow 18-19%, Neuroscience to grow 25-26%, and Diabetes to be flat).
- Non-GAAP diluted EPS in the range of $5.60-5.75, including a benefit of 10-15 cents from currency at recent rates (1Q21 EPS of $1.31-1.34, including a currency tailwind of 3 cents at recent rates).
Company Profile:
Medtronic Plc (MDT) is a medical technology, services and solutions company operating in four segments: Cardiac and Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group and Diabetes Group. The Cardiac and Vascular Group segment includes cardiac rhythm and heart failure, coronary and structural heart, and aortic and peripheral vascular; Minimally Invasive Therapies Group segment includes surgical solutions, and patient monitoring and recovery; Restorative Therapies Group segment includes spine, neuromodulation, surgical technologies and neurovascular and the Diabetes Group segment includes intensive insulin management, non-intensive diabetes therapies, and diabetes services and solutions.
(Source: Banyantree)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
