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Global stocks Shares

Capri’s Faces COVID-19 Disruptions and Intense Competition While Working on its brands

Powered by store openings and retail expansion in the 2010-15 period, Michael Kors became one of the largest American handbag producers in sales and units. However, over the past five years, growth has stalled due to markdowns of bags at third-party retail and declining sales at company-owned stores. While Capri has reduced distribution to limit discounting of Michael Kors bags, competition in the American handbag market is fierce and growth is limited. Moreover, the company is in the process of closing more than 100 Michael Kors stores.

Capri spent a steep $3.4 billion to purchase Jimmy Choo and Versace to boost its status as a luxury house and reduce its dependence on Michael Kors. However, we do not think these deals have changed Capri’s no-moat status as the acquired brands have more fashion risk, less profitability, and narrower appeal than Michael Kors. Capri is investing in store remodels, store openings, and expanding the set of accessories for both Jimmy Choo and Versace, but we don’t think these efforts will yield the intended gains, particularly given the severe interruption we expect from COVID-19. 

We believe Michael Kors lacks the brand strength (and ultimately pricing power) to provide an economic moat for Capri, rating poorly on the criteria that Morningstar uses to evaluate luxury brands, in contrast to others such as narrow-moat Tapestry’s Coach.

Financial Strength

Capri has debt, but it is very manageable. At the end of June 2021, it had total shortand long-term debt of $1.3 billion, but it also had more than $350 million in cash. Capri, though, has $1.3 billion in available borrowing capacity it amended its revolving and term loan credit agreement.Thus, Capri has no significant debt maturities prior to 2023. Capri has also recently modified its debt covenants, allowing a maximum leverage ratio of 3.75 times. Its debt/adjusted EBITDA was 2.3 times at the end of fiscal 2021, and we forecast this will decline to 1.2 times at the end of fiscal 2022. The firm averaged more than $500 million in annual buybacks in fiscal 2015-20. We now forecast its share repurchases at an annual average of about $630 million over the next decade. However, Capri does not pay dividends. We forecast its fiscal 2021 capital expenditures will rise to $205 million (3.9% of sales) from just $111 million (2.7% of sales) last year. Long term, we forecast Capri’s annual capital expenditures as a percentage of sales at 4.3% as management works to improve the performance at Jimmy Choo and Versace.

Bulls Say

  • Michael Kors is one of the largest brands in terms of units and sales in the high-margin handbag market, and we think this positioning should aid its prospects as it looks to grow in complementary categories like footwear.
  • Michael Kors has reduced its dependence on wholesale customers, which we view favorably as increased direct-to-consumer sales allow for better pricing and control over marketing.
  • The acquisitions of Jimmy Choo and Versace afford diversification opportunities by bringing two luxury brands that maintain products with high price points into the fold.

Company Profile

Michael Kors, Versace, and Jimmy Choo are the brands that comprise Capri Holdings. Capri markets, distributes, and retails upscale accessories and apparel. Michael Kors, Capri’s largest and original brand, offers handbags, footwear, and apparel through more than 800 company-owned stores, third-party retailers, and e-commerce. Milan-based Versace (acquired in 2018) is known for its ready-to-wear luxury fashion. Jimmy Choo (acquired in 2017) is best known for women’s luxury footwear. John Idol has served as CEO since he was part of a group that acquired Michael Kors in 2003.

 (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
IPO Watch

Paras Defence launched its IPO; hitting 185% from its issue price and got locked in upper circuit

The Paras Defence and Space Technologies IPO market lot size was 85 shares with a price brand of Rs. 165-175 per share. A retail-individual investor can apply for up to 13 lots (1105 shares or ₹193,375).The face value for each share is Rs. 10 per share and is listed on both BSE and NSE.

Paras Defence IPO Shares offer:

CategoryShare offersAmount (Rs.)
Fresh Issue80,34,286140.60 Cr.
Offer for sale1,724,49030.18 Cr.
Total97,58,776170.78 Cr.

Paras Defence IPO Reservation:

CategoryReservationShare Amount
QIB50%48,79,38885.39 Cr.
NII15%14,63,81625.62 Cr.
RII35%34,15,57259.77 Cr.
Total100%97,58,776170.78 Cr.

Objects of the Issue:

  • Fund capital expenditure requirements.
  • Funding incremental working capital requirements.
  • Repayment or prepayment of all or a portion of certain borrowings/outstanding loan facilities availed by the company.
  • General Corporate purposes.

Summary of Financial Statement (Restated Consolidated)

ParticularsFor the year/period ended (₹ in millions)
31-Mar-2131-Mar-2031-Mar-19
Total Assets3,627.583,423.863,297.48
Total Revenue1,446.071,490.511,571.69
Profit After Tax157.86196.57189.70

Paras Defence and Space Technologies IPO Subscription Status (Bidding Detail)

The Paras Defence and Space Technologies IPO was subscribed 304.26 times on Sep 23, 2021. The quota reserved for qualified institutional buyers category was subscribed about 170 times, the non-institutional investors’ quota 927.70 times and retail individual investors’ (RIIs) portion 113 times.

Paras Defence and Space Technologies shares had a blockbuster debut on the bourses on October 1, rising 185 percent to Rs 498.75 from its issue price of Rs 175 on the BSE.  Since it was a 5 percent rise from the opening price of Rs 475, the share got locked in upper circuit.

Company Profile

Paras Defence and Space Technologies are primarily engaged in the designing, developing, manufacturing, and testing of a variety of defense and space engineering products and solutions. The company has five major product category offerings – Defence & Space Optics, Defence Electronics, Heavy Engineering, Electromagnetic Pulse Protection Solutions, and Niche Technologies. Paras Defence and Space Technologies is the only Indian company with the design capability for space-optics and opto-mechanical assemblies and is one of the leading providers of optics for various Indian defense and space programs. The company also delivers customized turnkey projects in the defense segment. The company has partnered with some of the leading technology companies around the world to indigenize advanced technologies in the defense and space sectors for the Indian market.

The company has 2 manufacturing plants in Maharashtra and is in the process of expanding its current manufacturing facility at Nerul in Navi Mumbai.

(Source: https://parasdefence.com/,)

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
LICs LICs

Argo Global provides capital growth, dividend income and diversified portfolio to investors

Smiling young social worker sitting at table with senior lady and explaining document content to her

Being an LIC, it is a close-ended fund with liquidity as it is traded in the secondary market. The total market capitalization is $328.3m and dividend yield is 3.7%.

The Company provides access to a portfolio which is managed by Cohen & Steers; it is a well-regarded asset management firm with a stable, experienced and well-resourced investment team.

The downside of the LIC is that the company has traded primarily at a discount to pre-tax NTA since listing in July 2015. Their management fees are at the higher end in comparison to the listed peer group.

The opportunities offered by this LIC is that it helps investors to diversify their existing portfolio with an infrastructure as an asset class as the returns generated by it are less volatile than the equities market. Investments in infrastructure generally acts as an inflation-hedged income stream.

The portfolio is actively managed and typically hold 50-100 securities. At least 80% of the portfolio will be invested in global listed infrastructure securities, up to 20% can be invested in global infrastructure fixed income securities and up to 5% of the portfolio can be held in cash.

ALI seeks to provide investors a total return, consisting of capital growth and dividend income, from a diversified long-only portfolio of global listed infrastructure securities that outperforms the Benchmark (FTSE Global Core Infrastructure 50/50 Index, net total return, AUD) over the long-term.

About the company:

Argo Global Listed Infrastructure Limited is a Listed Investment Company (LIC) that listed on the ASX in July 2015. Argo Service Company Pty Ltd (ASCO), a wholly-owned subsidiary of Argo Investments Limited (ARG), is the Manager of the Company and has appointed Cohen & Steers as the Portfolio Manager. Cohen & Steers is a global investment manager in long-life assets, including infrastructure, real estate securities, natural resource companies, commodity futures and fixed-income securities.

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
ETFs ETFs

VanEck MSCI: A great quality-factor-focussed passive solution for world developed-markets equity

The benchmark is based on its parent index, the MSCI World ex Australia Index, which includes large and mid cap stocks across 22 developed countries. The top 300 ranked securities are chosen to constitute the quality index and cover around 30% to 40% total market capital as the portfolio tilts towards the large companies. No country or a sector constrains are implemented in the quality index, although a 5% limit is imposed for individual holdings.

Portfolio 

The ETF fully mirrors the composition of the MSCI World ex Australia Quality Hedged Index its large holding is Microsoft account for 5.4% of assets, which is effectively diversifies firm-specific risk. Information technology has been the largest sector exposure 38.9%, reflecting the dominance of tech stocks over the developed markets quality growth spectrum. Financial Exposure 4.7% is discernibly underweight compared with the MSCI World ex Australia Index. 

People

Chesler is an industry veteran with more than 25 years of experience across Sunstone partners, perpetual limited and liberty. Hannah joined VanEck investment in 2014 source ETF, where he was part of the investment management team. 

Performance 

QHAL has delivered superlative performance since its launch till August 2021. Its lack to exposure to small and mid-caps, paired with the quality growth orientation of the portfolio stemming from overweighting in information technology and healthcare, have been the drivers of outperformance since inception. However, currency hedging has been the prime contributor to robust performance as the AUD appreciated against the USD over the trailing two years till August 2021. Launched in early 2019, the ETF has outperformed the category index and category average rival by 4.8% and 6.6% till 31 July 2021, ranking in the in the first quintile of its category.

QHAL Performance History.png

About the Fund

QHAL gives investors exposure to a diversified portfolio of quality international companies from developed markets (ex Australia) with returns hedged into Australian dollars. QHAL aims to provide investment returns before fees and other costs which track the performance of the Index.

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
ipo IPO Watch

First Watch Restaurant Group Inc announced pricing of Initial Public Offering

The shares are expected to being traded on NASDAQ Global Select Market on 1st October 2021, under the ticker symbol “FWRG” and it is expected to close on 5th October 2021. 

First Watch Restaurant Group Inc. announced the price of its Initial Public offering of 9,459,000 shares of its common stock at a price to the public of $18.00 per share.  

In addition, the company has granted the underwriters a 30 days option price to purchase up to an additional 1,418,850 shares of common stock at the Initial Public Offering price less underwriting discounts and commissions.

At the time of Initial Public Offering their Total Offering Expense is $5,000,000.00 while their total share outstanding is 57,629,596. 

Market capitalization of First Watch Restaurant Group Inc is 1.239 billion. First Watch intends to use the proceeds from the proposed offering to repay borrowings outstanding under its credit facilities.

Company Profile 

First Watch is an award-winning Daytime Dining restaurant concept serving made-to-order breakfast, brunch and lunch using fresh ingredients. First Watch offers traditional favorites, such as pancakes, omelets, sandwiches and salads, alongside specialty items like the Quinoa Power Bowl®, Avocado Toast and the Chickichanga. There are more than 420 First Watch restaurants in 28 states, and the restaurant concept is majority owned by Advent International, one of the world’s largest private-equity firms.

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

Zoom and Five9 Terminate Merger Agreement; FVE Remains unchanged

LONDON, UNITED KINGDOM: Analysts work on the trading floor at Goldman Sachs in London, 22 March 2004. AFP PHOTO / ODD ANDERSEN (Photo credit should read ODD ANDERSEN/AFP via Getty Images)

It provides video telephony and online chat services through a cloud-based peer-to-peer software-platform and is used for teleconferencing, telecommunication, distance education and social relations. Zoom is a recognized market leader in meeting software and is disrupting and expanding the $43 billion video conferencing market with its ease of use and superior user experience. 

Zoom relies mainly on a low-touch e-commerce model that lends itself to viral adoption, but it has also established a direct salesforce to gather and serve larger, more strategic customers. The company has been adept at adding users, especially during COVID-19-induced lockdowns, and it also has several related products to upsell. Even as the lockdowns are loosening, customer retention has been better than expected.

With the 2019 introduction of Zoom Phone, which it does not plan to sell to customers who do not already have Zoom Meetings, Zoom Apps and OnZoom, the portfolio is expanding meaningfully. The company’s focus is squarely on adding as many users as possible. This starts with generating buzz and familiarity with free users, while the direct salesforce sells to enterprise accounts. Customers are growing rapidly, with larger customers numbering more than 1,999, while smaller customers total approximately 497,000.

Zoom and Five9 Terminate Merger Agreement; $252 FVE unchanged

Our $252 fair value estimate is unchanged after no-moat Zoom announced that it was terminating its $14.7 billion merger agreement for Five9. This is not entirely surprising after the Sept. 17 news that Institutional Shareholder Services recommended to Five9 shareholders that they vote against the merger coupled with the announcement several days later that the Department of Justice was investigating the acquisition. We view this as unfortunate, as the acquisition would have expanded the portfolio while deepening switching costs and creating cross-selling opportunities. We suspect that the company will continue to pursue smaller deals but believe national security issues will creep up again in larger transactions.

At the time of the announcement, we viewed the deal as strategically sharp, so we similarly view the cancellation as less than ideal. Fortunately, at its investor day on Sept. 13, Zoom announced the Zoom Video Engagement Center for customer engagement would launch in early 2022, with initial use cases targeting wealth management, doctor visits, and retail shopping. Two weeks ago, we wondered how the company would integrate this solution with Five9 when that acquisition closes. In short, we now think Zoom has the makings of an organic contact center solution, and still has a long-standing partnership with Five9 to leverage in the near term. With the rapid success of Zoom Phone as a test case, swollen coffers and strong margins, we expect the company to develop VEC relatively quickly.

Bulls Say

  • Both the Zoom user base and the company’s revenue have grown rapidly and are expected to continue to do so over the next several years. 
  • Zoom offers a disruptive technology that is designed from the ground up as a video-first collaboration platform. Customer satisfaction is well above video conferencing peers.
  •  Zoom’s low-touch, low-friction model should eventually drive strong margins. The company has already produced a full year of positive GAAP profitability, which is well ahead of other high-growth software.

Company Profile

Zoom Video Communications provides a communications platform that connects people through video, voice, chat, and content sharing. The company’s cloud-native platform enables face-to-face video and connects users across various devices and locations in a single meeting. Zoom, which was founded in 2011 and is headquartered in San Jose, California, serves companies of all sizes from all industries around the world.

 (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
Global stocks Shares

BioNTech’s COVID-19 Vaccine Success Could Help It Build a Moat on mRNA Technology

The emerging biotech’s first commercial vaccine, for COVID-19, received its first authorization in December 2020, and its early-stage pipeline and mRNA technology platforms have caught the eye of several large pharmaceutical companies, resulting in collaborations and partnerships.

Further, the company has a burgeoning vaccine pipeline for infectious diseases. In partnership with the Bill & Melinda Gates Foundation, BioNTech is developing vaccines for HIV and tuberculosis, and the company’s COVID-19 program in partnership with Pfizer and Fosun Pharma was built off an existing partnership with Pfizer for an influenza vaccine. The COVID-19 vaccine, Comirnaty (BNT162b2), quickly progressed through human trials, culminating in authorization in the United States and Europe in December 2020. 

Company’s Future Outlook

We think the vaccine’s excellent efficacy, strong supply, and early leadership on the market all support $35 billion in Comirnaty sales in 2021 and $43 billion in 2022 (BioNTech books half of Pfizer’s gross profits, profit share from other smaller partners, and direct sales in Germany and Turkey). However, the long-term market for coronavirus vaccines is uncertain, and even if there is demand for continued vaccination in the long run, we expect the market to be competitive.

BioNTech’s COVID-19 Vaccine Success Could Help It Build a Moat on mRNA Technology

We believe BioNTech has a positive moat trend due to strengthening intangible assets in its pipeline. Over the next five years, we expect several data readouts, assets progressing through trials, and even the company’s first potential approval. Further, testing new combinations of treatments, which tends to improve efficacy in cancer treatment, will also strengthen the competitive position of BioNTech’s platforms. 

The positive results and subsequent authorization of BNT162b2, BioNTech’s vaccine against SARS-CoV-2, support our positive moat trend rating. While the long-term profit outlook for BNT162b2 remains uncertain, we believe its success demonstrates the potential of the company’s mRNA vaccine platform.

Financial Strength 

BioNTech has historically burned through cash to fund research and development of its pipeline. The company has minimal debt on its balance sheet, as it has funded discovery and development with equity issues,collaboration payments from partnerships with large pharmaceutical firms as well as a large inflow of cash from Comirnaty gross profits in 2021 and 2022 and believe this will continue for long term basis.Outside of BioNTech’s COVID-19 vaccine candidates, we think the earliest approval could arrive in 2023, which would put the company on a path toward steady profitability. Management has taken advantage of a couple of opportunities to acquire early-stage assets and expand its geographic footprint to establish a U.S. research hub at low prices. We expect the near-term focus for capital allocation to remain on its pipeline of vaccines and other therapies.

Bull Says

  • BioNTech’s pipeline, which relies on expertise in mRNA and bioinformatics, will be difficult to replicate by competitors. 
  • BioNTech will be able to command a premium price with its personalized cancer therapies, if successful. 
  • The rapid development of COVID-19 vaccine Comirnaty bodes well for the rest of BioNTech’s pipeline and the future of its mRNA research platform.

Company Profile

BioNTech is a Germany-based biotechnology company that focuses on developing cancer therapeutics, including individualized immunotherapy, as well as vaccines for infectious diseases, including COVID-19. The company’s oncology pipeline contains several classes of drugs, including mRNA-based drugs to encode antigens, neoantigens, cytokines, and antibodies; cell therapies; bispecific antibodies; and small-molecule immunomodulators. BioNTech is partnered with several large pharmaceutical companies, including Roche, Eli Lilly, Pfizer, Sanofi, and Genmab. Comirnaty (COVID-19 vaccine) is its first commercialized product.

 (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
Commodities Trading Ideas & Charts

Whitehaven Coal is cheap in spite of soaring thermal coal futures

The portfolio of export-orientated mines is based in New South Wales, Australia. Salable coal production expanded from 10 million tonnes in fiscal 2014 to about 15 million tonnes in fiscal 2021, largely due to the ramp-up of Maules Creek and the expansion of the Narrabri mine. Equity output is expected to grow to approach 19 million tonnes by fiscal 2023. 

Whitehaven focused on increasing resources, reserves, and production through the boom. Maules Creek was developed despite a challenging external environment, and the subsequent ramp-up and improved coal prices from 2016 saw the weak balance sheet quickly repaired. Favourable coal prices are critical to generating excess long-term returns, but on this front we are circumspect. However, from near-break even profit levels in fiscal 2020, we see material longer-term earnings upside as coal prices recover.

Financial Strength:

The last traded price of the Whitehaven Coal is AUD 3.30 and the fair value as per the analysts is AUD 4.30, which shows that the share is undervalued.

Whitehaven’s financial position is relatively weak. The balance sheet deteriorated with the rapid decline in the coal price in fiscal 2020 and the payment of about AUD 300 million of dividends declared with the final result from fiscal 2019. The speed of the decline in the coal price, the production issues at Maules Creek and Narrabri, and the impact on unit cost drove a spike in net debt to about AUD 820 million at end 2020. At this level, Whitehaven is carrying more debt and leverage than most of its peers. The company had liquidity of about AUD 410 million at end 2020 with about AUD 100 million cash and AUD 310 million remaining undrawn on the company’s AUD 1 billion debt facility, which matures in July 2023.

Bulls Say:

  • It is increasingly difficult for new coal mines to gain approval. This could dampen future supply to the benefit of existing coal producers with long life. 
  • Whitehaven’s Maules Creek and Narrabri mines will likely provide a core of low-cost production, while Maules Creek brings a meaningful proportion of metallurgical coal. 
  • The company is development rich with projects including the Vickery and Winchester South deposits. This underpins a strong pipeline of production growth, including some coking coal, for Whitehaven for years to come.

Company Profile:

Whitehaven Coal is a large Australian independent thermal and semisoft metallurgical coal miner with several mines in the Gunnedah Basin, New South Wales. It also owns the large undeveloped Vickery and Winchester South deposits in New South Wales and Queensland respectively. Coal is railed to the port of Newcastle for export to Asian customers. Equity salable coal production expanded from 10 million tonnes in fiscal 2014 to about 15 million tonnes in fiscal 2021, largely due to Maules Creek. The Maules Creek and Narrabri mines should be the key driver of an expansion in equity coal production to approach 19 million tonnes from fiscal 2023. Development of the Vickery deposit could see approximately 8 million tonnes of additional equity production from around 2025.

(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
Global stocks

BMW Attractively Valued Despite Chip Shortage, Coronavirus, and Higher Spending on Electrification

especially in powertrains. BMW continues to outperform the overall car market despite global economic uncertainties from the coronavirus and is one of only a handful of automakers to which we assign an economic moat. As emerging-market consumers become wealthier, many will purchase luxury items for the first time.

BMW has consistently produced vehicles that command superior pricing and generated revenue increases above global vehicle growth rates. From 2004 to 2019, worldwide light-vehicle sales grew at a 2.7% average annualized rate. During the same 15-year period, BMW consolidated revenue and automobile unit volume grew at annual averages of 6.0% and 5.3%, respectively. BMW also has long-term goals to generate automotive segment return on capital employed of equal to or greater than 40% and an automotive segment EBIT margin of 8%-10%.

Financial Strength

BMW enjoys solid financial health with flexible balance sheet. The company has averaged 14.8% industrial EBITDA margins (including China JV equity income and excluding financial services) for the past 15 years, generating solid cash flow and enabling moderate dividend payments to shareholders. With the financial services group accounted for on an equity basis, balance sheet leverage has been overly conservative with an average total debt/total capital ratio of 6.2% during the past 10 years.Also excluding financial services, manufacturing operations’ total adjusted debt/EBITDAR averages a very low 0.6 times.

BMW’s liquidity position as extremely robust, with the manufacturing operations’ cash and marketable securities balance of EUR 9.5 billion and syndicated credit line availability of EUR 8 billion at the end of March 2020. BMW’s credit line expires in July 2024. BMW’s consolidated total debt/total capital ratio, including financial services has averaged 63.2% over the past 10 years.

Bulls Say’s

  • BMW possesses sustainable competitive advantages, given the strength and global recognition of the brands, technological leadership in powertrains, and ability to command premium pricing from consumers that regularly rate its vehicles as some of the best toown, resulting in excess returns.
  • BMW’s presence in global markets reduces reliance on any one regional economy and improves growth prospects as developing markets offset mature regions.
  • The BMW, Mini, and Rolls-Royce brand images command a premium among consumers in all parts of the world.

Company Profile 

In addition to being one of the world’s leading premium light-vehicle manufacturers, BMW Group produces BMW motorcycles and provides financial services. Premium light-vehicle brands include BMW, Mini, and ultraluxury brand Rolls-Royce. Operations include 31 production facilities in 15 countries, with a sales network reaching over 140 countries. In 2020, worldwide sales volume exceeded 2.3 million automobiles and more than 179,000 motorcycles.

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
Commodities Trading Ideas & Charts

Schlumberger Will Benefit From the Oil Market’s Recovery From COVID-19

the company has earned solid economic profits for decades. It reached the front of the pack in wireline evaluation in the 1920s, and it hasn’t relinquished its position since. Since then, Schlumberger has used its unrivaled expertise in understanding oil and gas reservoirs to not only drive a continuous stream of profits in its legacy business lines (embedded in the reservoir characterization segment), but also develop other oilfield-services business lines with nearly unwavering success. As one of many examples, the company pioneered directional drilling in the mid-1980s, a technology that today is recognized as an indispensable ingredient in the shale revolution.

Schlumberger is now applying its expertise to a somewhat different strategic focus: lowering the cost per barrel of oil and gas development via the provisioning of performance-linked services. Also, the company is prioritizing its digital capabilities, which will further support its capacity to boost efficiencies for Schlumberger and its customers.

Financial Strength

Despite COVID-19’s disruption of oil markets, Schlumberger remains in excellent financial health, with net debt/EBITDA of about 2 times in 2019. The company has $3 billion in cash and $3.5 billion in credit facility availability, and only about $3.5 billion in debt is coming due through 2023. The company to remain substantially free cash flow positive in the near term even as oil markets are still in the recovery phase.

Bulls Say’s

  • Schlumberger has long spent more on R&D than all its service company peers combined and more than all the oil majors.
  • The company has a multide cade record of innovation and a proven ability to generate shareholder value in even dismal oil market conditions.
  • Asset Performance Solutions is a hidden gem within the company, likely to generate growth with high returns on capital in years to come.

Company Profile 

Schlumberger is the world’s largest supplier of products and services to the oil and gas industry. The company operates its business via multiple groups: reservoir characterization, drilling, production, and Cameron. It is investing more than any other services firm to make its offerings more bundled, which it believes is likely to be one of the key industry trends during the next 10years. Efforts on this front are most visible via the Schlumberger Production Management business, which now accounts for 10% of its revenue.

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.