Author: Aayushi Swami
Investment Thesis
- Currents earnings headwinds are seasonal rather than structural.
- Recent acquisitions of European products provide growth options.
- Ongoing focus on operational efficiency to support earnings.
- Undemanding valuation relative to domestic chemicals’ peer group and international players.
- Launch of Omega-3 canola business.
- Sale of its South American crop protection and seed treatment businesses to simplify business model and reduce working capital volatility.
- Sector consolidation could see NUF potentially engaged in corporate activity.
Key Risks
- Integration risk associated with recent acquisitions.
- Adverse movements in commodities prices.
- Unfavorable seasonal impacts.
- Competitive pressures.
- Adverse currency movements.
- Regulatory / litigation risks.
- South America transaction fails to proceed.
FY21 Results Key Highlights
- Revenues of $3.2bn, was up +10%.
- Underlying EBITDA of $370m, was up +51%, driven by improved seasonal conditions, soft commodity prices and tight supply. NUF saw growth in all business segments and especially strong demand for NUF’s crop protection and seeds products. Segment earnings breakdown are as follows: APAC AU$112m, up +47%; North America US$79m, up +25%; Europe EUR€108m, up +80%, and Seed Technologies AU$46m, up 57%.
- Underlying NPAT was $61m versus pro-forma loss of -$73m in FY20.
- Management highlighted NUF’s performance improvement program achieved $20m in FY21, and $25m since inception.
- FY21 saw NUF see significantly improve net working capital and cash generation, with $257m in free cash flow at 30 September 2021 (versus -$151m in FY20).
- NUF’s balance sheet is now in a much stronger position, with leverage(net debt/EBITDA) to 0.9x from 2.5x in FY20.
- The Board Declared an Unfranked dividend of 4cps (versus zero payment in FY20.)
Company Profile
Nufarm Ltd (NUF) is one of the world’s leading crop protection and specialist seeds companies. The Company produces products to assist farmers in protecting their crops against damage caused by weeds, pests and disease. The Company has manufacturing and marketing operations in Australia, New Zealand, Asia, Europe and the Americas.
(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:
- Fasting growing Digital business, with strong execution by management
- Expectations of new product releases will gain significant traction with customers
- Increasing skew towards recurring revenue
- Global gaming exposure
- Growing market share in underpenetrated markets
- Leveraged to a falling AUD
- Strong balance sheet with ample liquidity provides management with significant flexibility to take advantage of value accretive acquisitions or pursue organic growth opportunities
Key Risks:
- Any further downside to the Japanese market
- Low replacement/uptake in the US market
- Competition risk
- Loss in market share
- Lack of product development
- Adverse currency movements
- Adverse outcome from any potential court case
Key highlights:
- The proposed acquisition of Playtech is strategically and financially compelling. It will accelerate Aristocrat strategy and provide material scale in the already large and growing $70bn online RMG segment.
- ALL’s share price has performed strongly and is up 34.9% over a one-year period
- Enhanced market leading positions in gaming operations, measured by the number of machines and fee per day
- Sustainable growth before share across key gaming outright sales markets globally
- Further growth in Pixel United bookings with UA spend and expected to be within the recent range of 26% and 29% of overall Pixel United revenues, pending priming and success of new game launches during the year
- Continued D%D investment to drive sustained long-term growth with investment likely to be modestly above the historical range of 11% to 12% of revenue
- operating revenue of $4,736.1m was up +14.4% on a reported basis, or +24.8% in CC, whilst EBITDA of $1,542.9m was up +43% on a reported basis and +58% higher on a CC basis
- ALL’s normalised profit after tax and before amortisation of acquired intangibles (NPATA) of $864.7m, was up +81% in reported terms, and +102% in constant currency (CC) relative to the prior corresponding period (pcp), driven by strong product and portfolio performance, and profitable growth across both Aristocrat Gaming and the Pixel United businesses
Company Description:
Aristocrat Leisure Ltd (ASX: ALL) manufactures and sells gaming machines in Australia and globally, to casinos, clubs and hotels. In addition, ALL provides complementary products and services such as gaming systems and software, table gaming equipment and other related products.
(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.
