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Categories
ETFs ETFs

SPDR S&P/ASX200 Fund : A well diversified fund providing exposure to Australian market at low cost

Investment Objective:

The State Street SPDR S&P/ASX200 is the first ASX-listed ETF, launched in the year 2001.The SPDR S&P/ASX 200 Fund aims to closely match with the results of the S&P/ASX 200 Index before fees and expenses.

Investment strategy:

The fund aims to give exposure to core Australian stocks. The portfolio is well-diversified, covering approximately 90% of the Australian market in terms of capitalisation. The fund aims to provide both capital growth and income by investing in ASX-listed firms that are liquid. Herein, an investor can get diversified exposure to Australian share market at a low cost and yield performance of the 200 largest and most liquid publicly listed entities in Australia.

The entity responsible for the fund is State Street Global Advisors, Australia Services Limit.

Portfolio Objective:

  • Diversified exposure to Australian share.
  • Provides capital appreciation and growth if funds are invested over long term basis.
  • Provides adequate diversification to investors by investing in a single fund.

Fundamentals:

  • The size of the fund is $4.9bn and no. of holdings  in 203 shares of Australia.
  • The total market capitalization of the fund is AUD $2,196,388.80M as on 31/8/2021.
  •   Minimum subscription or redemption of 25,000 units is available to investor.
  • The fund provide an earnings growth of 10.66% and return on equity is 11.63%.
  • The equity (dividend) yield of the fund is 3.37% and its P/E ratio is 19.34.
  • Generally, the fund make distributions to investors on  quarterly basis.
  • The  management fee of the fund is 0.13%  p.a. of NAV.

Positives:

  • Diversification with low cost
  • Fast, flexible trading
  • Transparency

Negatives:

  • Failure to meet investment objective.
  • Exposure to various risk such as regulatory, credit, market, company,industry, derivative etc.
  • During the holding period the portfolio value may go up and down due to market volatility.

Company Profile:

State Street is a global asset manager and credited for creating the world’s first ETF and being an index pioneer.  Over the past forty years the company has built a universe of active and index strategies across asset classes to help investors achieve their goals.The company has $3.59 trillion asset under management, 23 million clients across 62 countries.

ETF Performance…

Figure 1: Fund performance as at 31 July 2021

(%)FundBenchmark
1-month+1.09%+1.10%
3-months+5.78%+5.80%
1-year+28.52%+28.56%
3-year (p.a.)+9.37%+9.48%
5-year (p.a.)+9.90%+10.05%
Since Inception (p.a.)+8.23%+8.54%

Source:State Street. 

ETF Positioning…

Figure 2: Top ten holdings

Source: State Street

   Figure3: Sector Allocation                       

     Source: State Street

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

WiseTech declared strong FY21 results and uplift in dividends

Investment Thesis:

  • WiseTech is ahead of its nearest competitors, which clearly makes it a market leader
  • Increased globalization results in growing global trade, thereby accelerating selling of products 
  • Annual customer turnover rate is low and revenue visibility is high
  • Enhancement of WTC products evident from the amount spent on R&D 
  • WTC’s long term goal is to be the operating system for world-wide logistics 
  • After acquiring 39 companies since it got listed on stock exchange in 2016, WTC has built up substantial resources and development capabilities to drive its CargoWise technology pipeline.
  • The scalability of WiseTech business model  
  • Due to higher consolidation of the logistics software industry, geopolitical tensions are considered as tailwinds by management 

Key Risks:

  • Another earnings downgrade is announced by the company
  • Organic growth could narrow down further, which might not result in such high valuation. Although, organic growth was improved during FY19.
  • Management has observed that the revenues from recent acquisitions have declined indeed and rendered very less margin. This means that the return obtained from these acquisitions could take longer than management’s expectations
  • Threats from competition like new product/technological advancements
  • Disruption caused due to technology (data breach)
  • Currency moving adversely

Key Highlights:

  • Share price of WiseTech Global Ltd (WTC) rose by 28.5% after its announcement of FY21 results which is higher than market estimates and the Company’s own expectation. 
  • Strong uplift in dividend payments has also been declared
  • Total Revenue for FY21 is $507.5m, which is up by +18% (or +24% ex FX)
  • EBITDA of $206.7m, is up by +63% in comparison to FY20
  • FY21 NPAT is $105.8m, which was up by +101% with reference to FY20
  • Investment of $167.1m by WTC in Research and Development (up from $159.1m in FY20), which is about 33% of total revenue, ensures that WTC stay ahead of its competitors
  • Management announced a strong FY22 outlook, expecting revenue growth of 18% – 25% and EBITDA growth of 26% – 38% 

Company Profile:

WiseTech Global (WTC) which was founded in October 1994, is a leading provider of software to the logistics services industry globally. WTC develops, sells and implements software solutions that enable logistics service providers to facilitate the movement and storage of goods, domestically and internationally. WTC’s software assists their customers to better address and adapt to the complexities of the logistics industry while increasing their productivity, reducing costs and mitigating risks. WTC services over 6,000 customers across more than 115 countries with offices in Australia, New Zealand, China, Singapore, South Africa, United Kingdom and the United States. 

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

Entergy’s Service Area Significantly Affected by Hurricane Ida

narrow moat ratings after Category 4 Hurricane Ida impacted significant portions of Entergy’s service area, including the New Orleans area. On Aug. 29, Entergy disclosed that Hurricane Ida caused all eight transmission lines that provide power to New Orleans to fail. This subsequently caused a load imbalance causing all generation to cease operations. 

While it is too early to estimate any financial impact from Hurricane Ida, the storm has drawn comparisons to Hurricane Katrina, the last Category 4 hurricane to impact the area. The combination of damage from Hurricane Katrina and Hurricane Rita, which struck the region shortly after Katrina, led to $1.5 billion total restoration costs for the repair of Entergy’s electric and gas facilities. This excluded lost revenue due to customer outages and Entergy’s inability to recover fixed costs through base rates.

Near-term liquidity constraints following Katrina and Rita led Entergy’s subsidiary, Entergy New Orleans, to file voluntary Chapter 11 bankruptcy. The subsidiary exited bankruptcy in May 2007 and eventually recovered most of the restoration costs through insurance proceeds and regulatory approval of storm restoration cost securitization, which was authorized by state law.

Company’s Future outlook

Entergy’s last traded price was 111.69 USD, whereas its fair value estimate is 110.00 USD, which makes it an overvalued stock. Entergy New Orleans contributed $49 million of Entergy’s $1.1 billion consolidated net income in 2020.  It is estimated that every $250 million of disallowed restoration costs reduces fair value estimate $1 per share. Entergy New Orleans had roughly $1 billion in total rate base at year-end 2020, representing approximately 3.5% of Entergy’s $28 billion rate base. Hurricane Ida increases Entergy’s regulatory risk as regulators likely will scrutinize the company’s storm response and restoration costs. 

Company Profile

Entergy is an integrated utility with approximately 22 gig watts of regulated utility-owned power generation capacity. It has shrunk its merchant generation business and plans to retire its remaining operating merchant nuclear unit in Michigan in 2022. Its five regulated integrated utilities generate and distribute electricity to about 3 million customers in Arkansas, Louisiana, Mississippi, and Texas.

(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
Shares Technology Stocks

Another Strong Quarter for Zoom with Steeper Q4 Deceleration in Guidance

However, third-quarter guidance was mixed but largely in line and implied fourth-quarter guidance shows a steeper deceleration in top line growth than anticipated as a result of increasing churn and lower customer’s additions in the online channel that focuses on smaller customers. 

Zoom has been guiding to deceleration as the year progresses, even as it has been beating expectations and raising full year expectations over the last three quarters. There is a long runway for growth as the company gains traction with Zoom Phone and evolves its main application to a communication platform. Along these lines, management will focus on expanding its platform to feature a wider array of revenue generating products as hyper growth normalizes.

Current remaining performance obligations, or cRPO, grew 58% year over year in the quarter, compared with 54% revenue growth. While this is generally a positive indicator for revenue over the next year, management was careful to point out that billings cycles are growing increasingly concentrated in the April quarter and that therefore both cRPO and deferred revenue are to decrease sequentially in the third quarter.

Company’s Future outlook

Zoom Vedio Communication’s last traded price was 347.50 USD, whereas its fair value estimate is 252.00 USD, which makes it a highly overvalued stock.  Revenue grew 54% year over year to $1.021 billion, which topped the high end of guidance of $990 million. Direct and channel business was strong, with enterprise customers doing larger deals but taking more time to evaluate the solution and being more strategic in their approach. Up sells of Zoom Phone and a pickup in Zoom Rooms helped drive larger deals. New customers accounted for 74% of revenue, which is unusually high for a software company of Zoom’s size. Zoom Phone momentum continued during the quarter, with the company reaching 2 million seats. Net dollar expansion remains strong at 130%,

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
Shares Small Cap

InvoCare Headwinds with the Return of Funeral Restrictions Immaterial to FVE

The company boasts well-known, highly respected brands and cost advantages over the long tail of smaller players in the highly fragmented death care industry, underpinning our wide economic moat rating. Death is one of few certainties in life, supporting steady demand for InvoCare’s services. Death rates can fluctuate from year to year. For instance, social distancing and increased hygiene focus in the wake of the COVID-19 pandemic led to a virtually non-existent flu season and significantly lower mortality rates in calendar 2020. However, death rates are very consistent over the long run.

While the program created some near-term disruption as venues closed or were otherwise impaired while undergoing refurbishments, InvoCare to capture an increasingly large portion of market share, given its dominant position, brand strength, and refreshed service offering following the venue refurbishments. Customers, typically the family of the deceased, are relatively price-insensitive, given the highly emotional context surrounding death care. 

Financial Strength 

InvoCare’s balance sheet is in a strong position following the AUD 274 million equity raising in calendar 2020. Leverage, measured as net debt/adjusted EBITDA, improved to 1.3 at fiscal year-end 2020, from 2.4 in fiscal 2019, comfortably below covenant levels of around 3.5. As earnings improve, net debt to fall below 1.0 times EBITDA by fiscal 2022. Underlying operating income lifted 46% on the coronavirus-ravaged prior corresponding period, or PCP, to AUD 39 million, still around 10% below the first half of fiscal 2019. Pricing bounced back during the period as restrictions on funeral attendances eased and pricing recovered—a demonstration of the strength of the underlying business.

Australia’s hardline approach to minimising COVID-19 cases with social distancing, lockdowns, and an increased focus on hygiene is leading to the second consecutive year of virtually no flu. InvoCare’s Australian funeral volumes in the first half were flat on the prior corresponding period and down approximately 3% on the prepandemic first half of fiscal 2019. The number of deaths to grow at an average CAGR of around 3% per year for the next decade, accelerating beyond 2030 due to demographics. The last traded price of Invocare Ltd was 12.15 AUD while it’s Fair Value Estimate 15.30 AUD which shows that InvoCare has potential to Grow.

Bulls Say’s

  • InvoCare consistently generates return on invested capital above its weighted average cost of capital, reflective of its pricing power due to its market position, reputation, and strong brand equity.
  • Industry volumes are immune to economic factors and will steadily grow as the population increases.
  • Prepaid funerals effectively lock in future sales and provide InvoCare with a low-cost source of funding.

Company Profile 

InvoCare is the largest funeral, cemetery, and crematorium operator in Australia and New Zealand. We estimate InvoCare enjoys over a third of revenue share in Australia, and around a fifth in New Zealand, and is the number one player in both countries. Australia contributes the vast majority of consolidated earnings. InvoCare owns a portfolio of over 60 brands, including three flagship national Australian brands: White Lady, Simplicity Funerals, and Value Cremations, and owns and operates 290 funeral homes, along with 16 cemeteries and crematoria. 

(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
Fixed Income Fixed Income

Westpac Banking Corp to issue Convertible perpetual notes

Investment Thesis:

  • For WBCPK, the final distribution margin has been decided at 2.9%, which is more than BBSW (Bank Bill Swap Rate) in comparison to pre-book build range of 2.9- 3.1%.
  • The WBCPK securities are similar to the value declared by the recently offered MBLPD (Macquarie Bank Ltd.) securities but offer a healthy premium margin to other major banks’ AT1 securities.
  • WBCPK offers a gross running yield of 2.0% and yield-to-first call maturity of 4.1%.
  • Westpac Bank has a powerful business and is a regular issuer of debt- instrument in the market.
  • Westpac is also offering an opportunity to reinvest (“Reinvestment Offer”) into the new WBCPK securities to all current WBCPG (Westpac Capital Notes 4) holders since the first call date (20 Dec-21) of WBCPG is approaching. 
  • WBCPG investors have been given the option of reinvesting some or all of their holdings into WBCPK. If WBCPG investors hold it until 20 Dec-21, Westpac has disclosed that the Company plans to redeem any outstanding notes for face value of $100 per security.

Key Risks:

  • The current market price of WBCPK would be volatile on account of different factors that may impact the financial and economic conditions. Interest Rate is likely to fluctuate along with the change in the market rate.
  • Economic distress to the Australian economy, including an extended declining phase in the Australian economy. 
  • Risk of dividends not being paid, given that they are discretionary.
  • WBCPK are anticipated to be converted into ordinary shares on the Scheduled Conversion Date, unless mentioned otherwise on or before that date. 
  • Risk of non-occurrence of conversion on the scheduled conversion date because of the inability of fulfilment of the scheduled conversion conditions due to a large fall in the Ordinary Share price relative to the Issue Date VWAP (Volume Weighted Average Price), or if ordinary shares stop from being quoted on ASX or have been limited from trading for a specific period.
  • The price of the Ordinary Shares may be impacted by transactions affecting the Westpac Bank share capital, such as rights issues.
  • Westpac Bank’s financial performance and position may affect the market price of WBCPK (and the ordinary shares into which they are expected to be converted).

Security Description:

WBCPK securities are fully paid, non-cumulative, convertible, redeemable, perpetual, and unsecured, which is subject to a capital trigger event and non-viability trigger event, subordinated, listed securities. Its current price is $100 and the coupon rate that it would be offering would be 2.90%. Its issue date is 15th September, 2021. The securities have been scheduled to be converted into ordinary shares on 21 June 2032 (only on account of conversion conditions being fulfilled). 

Company Profile:

Westpac is one of Australia and New Zealand’s leading financial services provider, operating under multiple brands, with a low presence in Europe, North America and Asia.  As on 31st March 2021, Westpac and its controlled entities had total assets of approximately $889 billion. 

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

Vanguard Australian Shares Index ETF offers potential long-term capital growth with dividend income

Investment Objective

Vanguard Australian Shares Index ETF seeks to track the return of the S&P/ASX 300 Index before taking into account fees, expenses and tax.

Investment Strategy

The fund provides low cost and efficient exposure to the broad Australian share market.  The fund offers diversification by being exposed to all market sectors including the AREITs. The fund seeks to generate capital growth over the long term while producing dividend income along the way attached with franking credits.  

Portfolio Objective

  • Competitive long-term returns while less exposed to volatility in the price of any one security.
  • Deliver long term returns at low cost. 
  • The fund seeks long term capital growth, tax effective income while being tolerant to share market volatility.  

Positives

  • Diversification.
  • Low cost exposure to a broad and diverse range of listed securities. 
  • Quarterly distributions. 

Negatives 

  • Share market volatility could cause the portfolio value to go up and down during the holding period.  
  • The index tracking capability of the fund may fail to meet the objectives of the fund.
  • The fees and costs of the fund may change.

Company Description 

The Vanguard Group has been in Australia since 1996 and currently has $140 billion of assets under management. The Group manages some 82 funds with head office in Melbourne, Australia. The Vanguard Group, globally, has been operating since 1975 with $1.6 trillion of asset under management. The global group manages 400 funds with 30 million investors worldwide.

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

Vanguard focus on increasing dividends while also delivering some capital growth

Investment Objective 

Vanguard Australian Shares High Dividend Yield seeks to replicate the performance of the FTSE Australia high Dividend yield index before taking into account fees, expenses and taxes.

Investment Strategies

  • The Funds seeks low cost exposure to ASX Listed Companies that are expected to deliver higher Dividend as compared to other ASX Listed Companies.
  • Funds Achieves diversification by limiting the amount of securities holds of maximum 10% of portfolio.
  • Fund does not invest more than 40% of its assets in single industry. AREIT Investing does not excludes particular funds.  

Portfolio Objective 

  • Long term returns are competitive in nature.
  • Provides long term returns at low cost. 
  • The fund seeks long-term capital growth and tax-efficient income while being risk-averse in the stock market.

Positives 

  • Diversification 
  • Low Cost exposure to dividend paying ASX Listed Securities
  • Distributions are made on quarterly basis

Negatives 

  • Dividend-paying stocks underperform the market as a whole.
  • Share market volatility may cause the portfolio value to fluctuate.
  • The fund’s index tracking capability may fail to meet the fund’s objectives.
  • The fund’s fees and costs are subject to change.

Company Profile 

The Vanguard Group has been in Australia since 1996 and currently has $140billion of assets under management. The Group manages some 82 funds with head office in Melbourne, Australia. The Vanguard Group, globally, has been operating since 1975 with $1.6 trillion of asset under management. The global group manages 400 funds with 30 million investors worldwide.

ETF Performance…

Figure 1: Fund performance as at30June 2021

(%)FundBenchmark
1-month+1.39%+0.1.39%
3-months+6.03%+6.03%
6- months+16.33%+16.34%
1-year +34.89%+34.86%
3-year (p.a.)+10.46%+10.38%
Since Inception (p.a.)+9.50%+9.45%

Source: Vanguard. Inception date: 26 May2011.

ETF Positioning…

Figure 2: Top ten holdings

Source: Vanguard

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

BETASHARES AUSTRALIAN SUSTAINABILITY LEADERS ETF is true-to-label and cost effective

Investment Objective:
The main goal of Betashares Australian Sustainability Leaders ETF is to track the index (before fees and expenses) that involves Australian companies, which have passed through screens so as to eliminate companies with direct or sufficient exposure to fossil fuels or those that are involved in activities which are supposed to be inconsistent when compared to responsible investment requirement.

Investment Strategy:
This fund offers a chance to investors to align their investments with their ethical standards. FAIR’s investment methodology includes strict screening criteria, which provide investors a true to label ethical investment option. FAIR does not consider investing in any of the big 4 banks or large Australian mining companies.

Portfolio Objective:
Diversified exposure is provided to ethical Australian shares
High preference towards companies that are classified as “Sustainability Leaders”
Ethical investment methodology that are true to label

Positives:
Shares diversification
Australian shares options that are available at low cost
Distributions made semi-annually

Negatives:
Fluctuations in Share market can make the portfolio value go up and down during the holding period.
Concentrated market in relation to others
Exclusion of major market sectors experiencing strong returns
Change in fees and costs of the fund might be possible

Company Profile:
BetaShares is a renowned manager of ETFs and other funds that are traded on the ASX. The inception of the company was in 2009 and it now consists of over 60 products in its portfolio, all of which can be bought and sold on the ASX. The company aims to offer investors simple, liquid, and cost-effective solution to Australian and global shares, cash and fixed income, currencies, commodities, and active and alternative strategies.

ETF Performance:

(%)FundBenchmark
1-month+0.29%+0.34%
3-months+5.53%+5.66%
6-months+11.28%+11.46%
1-year+19.30%+19.76%
5-year (p.a.)–+9.80%
Since Inception (p.a.)+10.54%+11.07%

(Source: BetaShares)

Fig. 1: Fund performance as at 31 July 2021

ETF Positioning:

(Source: BetaShares)

Fig. 2: Top 10 Exposures

(Source: BetaShares)

Fig. 3: Sector Allocation

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

BetaShares ETF to allow investors to invest in Companies identified as Climate Leaders

Investment Objective

ETHI aims to track index performance (before fees and expenses), which includes a range of large global stocks that have also passed screens to exclude firms with direct or significant exposure to fossil fuels or which have been engaged in activities that are considered inconsistent with responsible investment considerations. ETHI is responsible for the monitoring of the index.

Investment Strategy

  • The fund offers investors the chance to link their ethical values with their interests. 
  • ETHI integrates a wide range of ESG criteria with positive climate leadership screens, providing an authentic ethical investment approach.
  • ETHI holds a diversified portfolio from a range of worldwide locations of major, sustainable, ethical enterprises.

Portfolio Objective

  • Provide diversified exposure to globally listed ethical shares.
  • Prefer companies classified as “climate leaders”.
  • True to designate the methodology of ethical investment.

Positives 

  • Shares, currencies, and markets are all used to diversify.
  • Exposure to international ethical shares at a low cost
  • Distributions are made on a semi-annual basis.

Negatives 

  • Share market volatility may cause the portfolio value to fluctuate during the holding period. 
  • It is more concentrated in comparison and it excludes major market sector that may experience strong returns. 
  • Fund may changes their cost and fees. 

Company Profile 

BetaShares is a well-known manager of ETFs and other funds traded on the ASX.  The company was founded in 2009 and now has over 60 products available, all of which can be bought and sold on the ASX.  The company seeks to offer investors simple, liquid, and cost-effective access to Australian and global shares, cash and fixed income, currencies, commodities, and active and alternative strategies. 

ETF Performance…

Figure 1: Fund performance as at 31 July 2021

(%)FundBenchmark
1-month+3.74 %+3.79%
3-months+11.26%+11.44%
6-months+21.98%+22.25%
1-year +35.34%+35.89%
3-year (p.a.)+25.60%+26.21%
Since Inception (p.a.)+23.43%+23.92%

Source:BetaShares

ETF Positioning…

Figure 2: Top ten holdings

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.