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Dividend Stocks Philosophy Technical Picks

Despite wobbles at the top, Bapcor’s core is expected to be positive

Business Strategy and Outlook:

Bapcor’s narrow economic moat is contingent not on the CEO, but rather its scale. Bapcor’s scale allows not only additional buying power, but also the ability to source an extensive range of inventory (over 500,000 SKUs, many of these slow-moving, for over 20,000 different vehicle types) and the flexibility to efficiently allocate inventory between stores. Smaller players, lacking this scale, will be unable to replicate Bapcor’s low cost position. 

Bapcor’s trade network’s extensive reach also means Bapcor is able to provide parts to more customers in a timelier manner than smaller competitors, often within the hour, even for slow-moving SKUs. Bapcor’s trade customers consist of principally chain and independent mechanic workshops. These businesses are relatively price inelastic, as costs are passed through to the end consumer, and these businesses instead value parts availability and convenience, allowing service bays to turn over quickly. The number of registered vehicles in Australia will grow at low single digits over the next decade, marginally outpacing population growth. There are currently more than 19 million passenger vehicles in Australia, with an average age of over 10 years, and more than 14 million older than five years– squarely in Bapcor’s target market.

Financial Strength:

While it is expected that the near-term earnings momentum may slow down, analysts anchor on the firm’s long-term fundamentals and defensive earnings. The dividend yield generated by the firm is also substantial.

The financial outlook for the firm remains unchanged. Bapcor has benefitted from elevated government stimulus and pent-up demand, boosting fiscal 2021 sales as consumers opt to maintain and improve their existing cars rather than upgrade to newer vehicles. Australian retail sales were the standout in fiscal 2021, with sales from the Autobarn and Autopro network up 26% compared with fiscal 2020. It is expected that much of the growth was discretionary, rather than maintenance expenditure–retail sales outperformed 16% sales growth in Bapcor’s maintenance focussed trade business.

Company Profile:

Bapcor is one of the largest automotive spare parts and accessories businesses in Australia and New Zealand. The firm principally distributes automotive spare parts and accessories to independent and chain mechanic workshops in Australia and New Zealand through Burson-branded stores. Bapcor also operates a retail automotive spare parts and accessories business in Australia, catering to the DIY customer, under the AutoPro and Autobarn brands. The specialist wholesale business is a brand owner and wholesaler of specialised parts.

(Source: Morningstar)

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.

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Dividend Stocks Expert Insights

Paychex Is Well Placed to Benefit From the Economic Recovery and a Complex Regulatory Landscape

Business Strategy and Outlook

Paychex’s offering appeals to businesses wishing to outsource mission-critical functions, manage and attract employees, and remain compliant with increasingly complex and evolving regulations. Paychex’s solutions span from do-it-yourself payroll with add-on human capital management modules to full-service HR outsourcing via an administrative services organization or professional employer organization model. The ASO and PEO solutions allow a business to outsource critical HR functions to Paychex, including payroll, compliance, and benefits administration, and access support from onsite HR professionals. The main difference between the two models is that under a PEO, Paychex enters a co-employment arrangement and acts as the employer of record for tax and insurance purposes. 

Financial Strength

Paychex is in a strong financial position. At the end of fiscal 2021, Paychex had a net cash position of over $300 million including restricted cash and total corporate investments. In fiscal 2019, the company issued $800 million of fixed-rate long-term debt to fund the $1.2 billion acquisition of PEO business Oasis. Paychex has returned nearly $7 billion of capital to shareholders during the eight years to fiscal 2021 primarily through dividends and to a lesser extent share repurchases. It is expected that  Paychex’s strong free cash flow generation will support an 80% dividend payout ratio over our forecast period. 

Paychex’s medium-term outlook due to resilient revenue retention and stronger demand for complementary HCM solutions than previously anticipated, underpinning our 4% fair value estimate increase to $110 per share. At current prices, Paychex’s shares screen as overvalued trading at a 21% premium to our updated fair value estimate. Management now expects fiscal 2022 adjusted EPS growth to be about 19%, from about 13% previously.

Bull Say’s

  • Paychex is well placed to benefit from increased regulatory complexity under a U.S. Democratic administration. 
  • Paychex benefits from high customer switching costs, a scale-based cost advantage, and strong brand assets and a referral network built over many decades. 
  • Paychex dominates the small-business outsourced payroll market with strong prospects of further market penetration.

Company Profile 

Paychex is a leading provider of payroll, human capital management, and insurance solutions servicing small and midsize clients primarily in the United States. The company, established in 1979, services over 710,000 clients and pays over 1 in 12 U.S. private-sector workers. Alongside its traditional payroll services, Paychex offers HCM solutions such as benefits administration and time and attendance software, as well as human resources outsourcing and insurance brokering.

(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.

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LICs LICs

Metrics Master Income Trust Seeking to Raise $440m through Unit Purchase Plan

On 28 October 2021, MXT announced a Unit Purchase Plan (UPP) proposing to issue 220.8m new units at a price of $2.00 per unit. The Trust is targeting to raise ~$441.6m. While the Trust maintains the flexibility to accept applications in excess of the target raise amount, applications in excess of this amount may also be scaled back.

The Offer closed on 30 November 2021 with an Issue Date of 3 December 2021. New units are expected to commence trading on 6 December 2021.

Capital raised will be invested in accordance with the investment mandate and target return of the Trust.

MXT targets a return of the RBA cash rate plus 3.25% p.a. (currently 3.35% p.a. net of fees) through the economic cycle, with income distributions intended to be paid monthly. Since listing on the ASX in October 2017, MXT has delivered a net return of 5.15% pa.

Net Asset Value of metrics Master Income Trust is $1,573,565,708. Current Unit Price is $2.07. 

Performance 

Performance.png

Company Profile

The Investment Objective of the Metrics Master Income Trust is to provide monthly cash income, low risk of capital loss and portfolio diversification by actively managing diversified loan portfolios and participating in Australia’s bank‐dominated corporate loan market. The Manager seeks to implement active strategies designed to balance delivery of the Target Return, while seeking to preserve investor.

(Source: FN Arena, Bloomberg, MXT)

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.

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Funds Funds

UBS Property Securities Fund: The fund which aims to outperform the S&P/ASX 300 Property Accumulation Index

Investment strategy 

The Fund uses a multi-step investment process for constructing the Fund’s investment portfolio that combines top-down sector allocation with bottom-up individual stock selection. Top-down sector allocation is determined through a systematic evaluation of listed and direct property market trends and conditions. Bottom-up stock selection is driven by proprietary analytical techniques to conduct fundamental company analysis, which provides a framework for security selection through an analysis of individual securities independently and relative to each other. Investment return objective The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling three year periods.

Investment return objective 

The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling three year periods.

 Downside Risks

  • Deterioration in the Australian economy especially the property market (fundamentals deteriorate). Rising bond yields negatively impacting pricing. 
  • The Portfolio Manager/analysts miss-calculate their bottom-up valuation 
  • Key person risks in Mr. Pica (however, the CBRE investment team is relatively large and capable of succession planning). 

Fund Performance (as at 31 May 2021)

C:\Users\Akhila\Downloads\Screenshot 2021-12-23 163325.png

(Source: UBS)

Fund Positioning: Top 5 Holdings – Overweights & Underweights (as at 31 May 2021)

C:\Users\Akhila\Downloads\Screenshot 2021-12-23 164000.png

(Source: UBS)

Investment Process

The Fund uses an investment process that combines in-depth top-down and bottom- up fundamental market research with a disciplined and systematic approach to portfolio construction and risk management. The Portfolio Manager’s bottom-up approach integrates both quantitative and qualitative research to identify individual securities where the real estate is undervalued and represents the most compelling investment opportunities. The securities research process incorporates several factors including: 

  • Property visits – the Portfolio Manager utilises its local presence to gauge the quality and location of the real estate, assessing properties and capital expenditure needs at the property level. 
  • Management meetings – the Portfolio Manager assesses the management team’s alignment with shareholders; determines the depth and experience of the team; and judges their ability to articulate and execute their strategy. 
  •  Modelling – the Portfolio Manager generates cash flow earnings projections; performs net asset value analysis; and analyses the capital structure. 

About the fund

The UBS Property Securities Fund (portfolio managed by CBRE while Distributed by UBS) is a portfolio of mainly Australian Real Estate Investment Trusts that the investment team believes are being undervalued by the market, based on the in-house assessment of the company’s future cashflows. The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling five-year periods 

(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.

Categories
Funds Funds

Pendal Horizon Fund: An actively managed portfolio of Australian shares

 The Fund is led by Crispin Murray, who has over 27 years’ industry experience and is currently the Head of Equity Strategies at Pendal. Mr. Murray is supported by a research team of nineteen, including Mr. Rajinder Singh who has over 17 years’ experience in Australian equities and manages a range of sustainability and ethical funds for Pendal.

The benchmark index is S&P/ ASX300 Accumulation Index.

Downside Risks: 

  • Market & security specific risk including Australian economic conditions deteriorate. 
  • The Portfolio Manager/analysts miss-calculate their bottom-up valuation. 
  • Stock selection fails to yield alpha against the benchmark – Companies which are screened out, such as in materials, energy, gambling, outperform. 
  • Key man risks with Crispin Murray, Andrew Waddington and Jim Taylor.

Investment Team:

Pendal’s nineteen-member Equity team is one of the largest in the industry. The Fund is managed by Crispin Murray, who is also the Head of Equity and is assisted by Rajinder Singh, who has a combined 44 year’s industry experience.

Fund Performance:

Fund Positioning:

Sector Allocation:

Investment Philosophy & Process:

Investment Philosophy: The Fund’s investment philosophy is based on the belief that good corporate governance and sustainability is a central factor to a company’s longterm success. 

Investment Process: The investment process is driven by bottom-up, fundamental research of stocks listed on the Australian Stock Exchange (both large and small cap). The key features of the process are best described in the diagram below. The Manager also utilises a proprietary system as part of its investment process, which includes Analyst Analyser which is a database that captures analyst financial models, valuations and recommendations

About the Fund:

The Pendal Ethical Share Fund is an actively managed portfolio of Australian shares which seeks to ensure that funds are invested in an ethical and socially responsible manner. The Fund invests in companies whose practices and impacts are aligned with an investor’s own social, environmental and ethical preferences and aims to provide a return (before fees, costs and taxes) that exceeds the S&P/ASX 300 Accumulation Index over a 5-year period.

(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.

Categories
Dividend Stocks

General Mills’ Strong Brands Provide the Pricing Power Needed to Combat Inflationary Pressures

Business Strategy and Outlook

As at-home food consumption remains elevated during the pandemic, consumers are finding favor with General Mills’ offerings, as shown by increases in household penetration and repeat purchase rates in most categories. It is expected that this lift will largely be temporary, with consumers gradually returning to activities outside of the home, returning away-from-home food expenditures to half, as it was prior to the pandemic. But it is also expected that a lasting benefit for General Mills’ pet food business exist, given the high-single-digit increase in pet adoptions during the crisis.

General Mills has earned a narrow moat rating for its preferred status with retailers, strong brand equities, and cost edge. Due to evolving nutritional preferences, consumers have been shifting from processed fare to fresh, natural options, causing General Mills’ categories to slow. In response, the firm laid out its Accelerate strategy in 2021, which calls for the company to overhaul its marketing and innovation processes. Specifically, the firm will shift media investments to digital formats to better align with consumer media consumption, it will launch bolder innovations with a faster speed to market, it will be a force for good-with purpose-driven brands–and it will invest in data analytics (leveraging proprietary data from its Box Tops program and brand websites) to drive growth. Further, the firm will reshape its portfolio by divesting 5% of sales that dilute growth and will acquire growing businesses that strengthen its five global platforms (cereal, pet, ice cream, snack bars, Mexican) or its positioning in its eight core markets (U.S., Canada, France, U.K., Australia, China, Brazil, and India).

Financial Strength 

General Mills has generally maintained a net debt/adjusted EBITDA ratio of under 3 times, although the fiscal 2018 acquisition of Blue Buffalo increased the metric to 4.8 times. But in fiscal 2021, the firm reduced leverage to below 3 times, returning the firm to its pre-acquisition capital allocation priorities of 1) capital expenditures, 2) dividend growth, 3) strategic acquisitions, and 4) share repurchases. In September 2020, General Mills implemented its first dividend hike since the tie-up, in the spring of 2021 it resumed share repurchases, and in July it closed on its $1.2 billion acquisition of no-moat Tyson’s pet snacks business. General Mills generates a significant amount of free cash flow (cash flow from operations less capital expense), averaging 15% of sales over the past three years, generally in line with our 14% annual average over the next five years. 

Bulls Say 

  • General Mills’ pet food business should benefit from the high-single-digit increase in pet adoptions during the pandemic. Its BLUE brand has been growing rapidly, as on-trend innovations are resonating with consumers.
  • The firm is modernizing its brand-building capabilities, with shortened lead times for new product launches and advertising budgets that are shifting to digital formats where consumers are spending more time. 
  • General Mills’ well-developed Strategic Revenue Management and Holistic Margin Management programs should help the firm offset steep cost inflation.

Company Profile

General Mills is a leading global packaged food company that produces snacks, cereal, convenient meals, yogurt, dough, baking mixes and ingredients, pet food, and superpremium ice cream. Its largest brands are Nature Valley, Cheerios, Old El Paso, Yoplait, Pillsbury, Betty Crocker, BLUE, and Haagen-Dazs. In fiscal 2021, 75% of its revenue was derived from the United States, although the company also operates in Canada, Europe, Australia, Asia, and Latin America. While most of General Mills’ products are sold through retail stores to consumers, the company also sells products into the food-service channel and the commercial banking industry

 (Source: Morningstar)

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.

Categories
Dividend Stocks

Coca – Cola cash flow generation improved with ongoing FCF of $661m and cash realisation of 124.7%

Coal is excavated at the Jim Bridger Mine, owned by energy firm PacifiCorp and the Idaho Power Company, outside Point of the Rocks, Wyoming March 14, 2014. West Virginia mined 120 million tons (109 metric tons) of coal in 2012, second to Wyoming, or about 12 percent of total U.S. production. Kentucky was third with about 9 percent of output, according to the National Mining Association. REUTERS/Jim Urquhart (UNITED STATES - Tags: ENERGY BUSINESS) - RTR3H5NY

Investment Thesis 

  • Currently under a takeover target. 
  • Structural challenges – consumers moving away from carbonated soft drinks (CSD). 
  • Increased competitive pressures from other beverage companies or margin pressure/erosion from supermarket chains.
  • Cost pressure eroding margins, including the NSW container deposit scheme. 
  • CCL not being able to push through price increases to clients. 
  • CCL has a strong global brand portfolio with diversified product offering.
  • Strong growth in NZ, Indonesia and PNG. 
  • Management is focused on cost out and reinvestment, growing efficiency and margins as a result.

Key Risks

  • CCL unable to sustain the turnaround especially in International segments. 
  • Company meets or exceeds its full year guidance. 
  • Increased competitive pressures. 
  • Cost pressure eroding margins, including the NSW container deposit scheme. 
  • CCL not being able to push through price increases to clients.
  • International segment unable to deliver growth.

Key Financial Results 

  • Volumes for the year were down -4.2% over pcp and revenue declined -3.5% to $2.94bn with a more pronounced decline in ongoing EBIT (down -14.7% to $362.6m with margin down -170bps to 12.3%) due to changes in channel and pack mix (multi-serve PET and multipack cans increasing and demand for immediate consumption offerings decreasing) as consumer behaviour responded to Covid-19 lockdown measures. Management have seen a recovery in volumes starting 2H20, with strong momentum carried into January 2021 trading. 
  • The Company was able to achieve market share gains in the non-alcohol ready to drink (NARTD) market which grew during the year, delivering NARTD volume share gains of +0.7% with Coca-Cola Trademark increasing its volume share by +0.4%. 

Company Profile 

Coca-Cola Amatil (CCL) manufactures, distributes and sells carbonated soft drinks along with still and mineral waters, fruit drinks, ready-to-drink coffee and tea and flavoured milk drinks. CCL also rents and services commercial refrigeration equipment to food/beverage manufacturers.

(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.

Categories
Global stocks

Johnson Matthey PLC diversified global stock with good financial health

Business Strategy and Outlook

Johnson Matthey is a U.K.-based specialty chemical company with unique expertise in catalysts, chemicals, and manufactured products derived from platinum group metals, or PGMs. Sales are fairly concentrated in developed markets, particularly Europe and North America. China, growing fast, now accounts for 15% of sales. Roughly 60% of sales are targeted at the automobile sector. 

The clean air segment is the company’s largest (51% of EBIT) and is the foundation of narrow moat rating. The segment, a global leader in a highly concentrated market, manufactures auto catalysts for cars and heavy-duty trucks that reduce emissions and improve air quality. Success is primarily dependent on increasingly stringent environmental legislation, which allows the company to develop novel solutions that can be sold at premium prices. While the advent of electric vehicles will ultimately cause auto catalysts to move into secular decline, it is still seen to have more than a decade of high returns for the business.

Other core segments include efficient natural resources and health, which contribute 44% and 5% of EBIT, respectively. Efficient natural resources manufacture industrial catalysts for the chemical and oil and gas sectors, licenses technology for chemical processing, and includes the precious metals refining and manufacturing business. EBIT should fall in the next few years as high PGM prices normalize, but the overall outlook for the segment remains solid. The health segment is a global leader in manufacturing active pharmaceutical ingredients, or APIs, for controlled substances like opiates and amphetamines. Growth will depend on success of the pipeline of new APIs, which is still a few years away. 

The company also offers fuel cells, technology for blue hydrogen production, and components for green hydrogen plants

Financial Strength

Johnson Matthey is in good financial health. The model-driven credit risk assessment is moderate. The company targets a net debt (including post-tax pension deficits) to EBITDA ratio of 1.5-2 times. As of September 2020, the ratio stood at 1.6 times. The company’s debt maturity profile is balanced, with a good portion of borrowings having maturity dates more than five years and no major refinancing due in 2020 or 2021.

Bulls Say’s

  • The pipeline of increasing global environmental legislation targeting vehicle emissions remains full for the foreseeable future. 
  • Johnson Matthey’s expertise in hydrogen and fuel cells should enable the company to be a meaningful player when these markets develop. 
  • Johnson Matthey is positioned to benefit from current megatrends such as increasing environmental concerns and rising wealth in emerging markets.

Company Profile 

Based in the U.K., Johnson Matthey is a global leader in production of emissions catalysts for automobiles and trucks. The company also manufactures industrial catalysts for the chemicals and oil and gas sectors, and a variety of other industrial products derived from platinum-group metals.

(Source: MorningStar)

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.

Categories
Dividend Stocks

Magellan Financial Group Ltd Loses Largest Mandate; FVE reduced to AUD 38

Business Strategy and Outlook

Magellan is an active manager of listed equities and infrastructure. The firm has had considerable success in growing funds under management, or FUM, owing to its superior track record of outperformance, product expansion initiatives, and strong distribution capabilities.

The firm has a fundamental, high-conviction investment approach. Its flagship Global strategy has historically tilted toward IT, e-commerce platforms, and consumer franchises; preferring large, developed market multinationals. FUM have been attracted by consistently achieving excess returns with lower volatility and drawdowns relative to peers.Magellan’s products are well-distributed. Its funds are featured across platforms, included in model portfolios, and are well-rated. 

There is a focus on targeting retail investors, with product expansion an increasingly common driver of growth. As per Morningstar analyst, Magellan has built the foundations for ongoing earnings growth, supported by its economic moat, product variety, and historically strong track record. Regardless, the potential earnings upside from these positive traits will take time to manifest.

Magellan Loses Largest Mandate, but Sell-Off Way Overdone

Morningstar analyst reduced its fair value estimate for Magellan Financial Group by 25% to AUD 38 per share, following client the termination of its mandate with its largest client, St James’s Place, or SJP. As per the viewpoint of Morningstar analyst, most of Magellan’s institutional clients hired the group to deliver returns of about 10% per year and focus on downside protection. It is an investment undertaking Magellan has always communicated to the market, and a hurdle it consistently surpassed, with institutional returns averaging 18% per year over the last five years. As Magellan’s recent underperformance has only begun since November 2020, it was believed that institutional clients would negotiate for lower fees rather than terminate Magellan. Regretfully, this has not transpired in SJP’s case.

Financial Strength

Magellan is in sound financial health.The firm has a conservative balance sheet with no debt, with its financial position also boosted by solid operating cash flows. As of June 30, 2021, Magellan had cash and equivalents of about AUD 212 million and financial investments with a net fair value of around AUD 453 million mainly invested in its own unlisted funds and listed shares. This should provide it with enough liquidity to cope with most market conditions. Its high dividend payout ratio of: (1) 90%-95% of the net profit after tax of its core funds management business before performance fees; and (2) annual performance fee dividend in the range of 90%-95% of net crystallised performance fees aftertax reflects the capital-light nature of asset management.

Bull Says

  • The majority of Magellan’s earnings come from a few large funds, meaning it has a high reliance on key investment personnel and the performance of its main funds. Should key people leave, or its main funds underperform for a sustained period, outflows could be material. 
  • There is increasing competition from other active international equity managers and new international equity funds from incumbents. 
  • The firm faces fee pressure from the increasing popularity of lower-cost alternatives, such as indextype products and ETFs.

Company Profile

Magellan Financial Group is an Australia-based niche funds manager. Established in 2006, the firm specialises in the management of equity and infrastructure funds for domestic retail and institutional investors. Magellan has been particularly successful in winning mandates from global institutional investors. Current FUM is split across global equities, infrastructure and Australian equities

(Source: Morning Star)

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.

Categories
Technology Stocks

Omicron Buoys Sonic Healthcare Coronavirus Testing but Our Long-Term View Stands

Business Strategy and Outlook

Sonic’s “medical leadership” model recognises the importance of the referring doctor as the company seeks to differentiate itself on service levels. Success in the model is evidenced by organic growth consistently tracking ahead of the market, suggesting market share gains. Sonic’s organic volume growth in its core laboratories segment has typically ranged between 3% and 4% and we forecast a similar rate over our 10-year forecast period. The volume growth is underpinned by population growth, aging demographics in developed markets, higher incidence of diseases and wider adoption of preventative diagnostics to manage healthcare costs.

Laboratory medicine, or pathology, has a high fixed cost of operation and thus benefits from volume growth to drive lower cost per test outcomes. Sonic benefits from cost efficiencies by maximising throughput through its network of labs and collection centres. Higher testing volumes result in a lower cost per test as labour, equipment, leases, transportation and overhead costs are all leveraged.

Financial Strength

Sonic is in a strong financial position. Free cash flow conversion of earnings prior to acquisition spend has averaged 98% over the last 10 years and has allowed Sonic to quickly repay the debt funding its acquisitions. At the end of fiscal 2021, Sonic reported AUD 921 million in net debt representing net debt/EBITDA of only 0.4 times, below the 2.0 to 2.7 times range targeted by management, and well below the 3.5 times covenant. Sonic also has a progressive dividend policy which is communicated as a minimum of an equal dividend per share to the prior year.

Our AUD 33 fair value estimate factors in 4% group revenue growth in a typical year and a midcycle operating margin of 14%. It is estimated that the deliver EPS growth of roughly 5% in a typical year. Partly offsetting this was the Australian government cutting the reimbursement rate for private providers to AUD 72.25 per test from AUD 85 prior, which is in place until June 30, 2022. The deal broadens Sonic’s existing U.S. footprint by instantly adding annualised revenue of roughly USD 110 million, or 7% of Sonic’s fiscal 2021 U.S. laboratory revenue.

Bulls Say’s 

  • Sonic boasts leading market positions in most of its geographies and benefits from cost advantage derived from scale. 
  • Pathology and diagnostic imaging are highly defensive industries that influence the majority of treatment decisions. 
  • Free cash flow conversion prior to acquisition spend has averaged 98% of earnings over the preceding 10 years and forecast to remain high, allowing Sonic ample flexibility to reinvest in the business.

Company Profile 

Sonic Healthcare is a global pathology provider. It is the largest private operator in Australia, Germany, Switzerland and the U.K., the second largest in Belgium and New Zealand and the third largest in the U.S. In addition to pathology, which contributes roughly 85% of group revenue, Sonic is the second largest player in diagnostic imaging in Australia and the largest operator of medical centres in Australia. The company typically earns about 40% of group revenue in Australia and New Zealand, 25% in the U.S. and 35% in Europe

(Source: Morningstar)

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.