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Global stocks Shares

Despite pandemic disruptions, NIB Holdings produce strong FY21 results

85215903 - attractive businessman using mobile phone while having lunch

Investment Thesis:

  • Increased demand for health care services due to ageing population of Australia, thereby contributing increased dependence on private health care insurers. NHF offers exposure to the business model of providing a funding mechanism for the high-growth health care sector.
  • Healthcare expenditure is expected to rise by 5-10% per annum, so government cannot offer healthcare services to people without increase in tax.
  • The average premium rates increased at the rate of 5 – 6% per annum. 
  • Policyholder growth and exposure to speed up the investments, NHF is expected to offer double-digit growth in medium term.
  • Strong members in management.
  • Chalking out budget plan, which improves the company’s expense ratio. 
  • PHI (Protected Health Information) is promoted by giving incentives and benefits. 
  • Joining with Tasly Holdings (Chinese Pharmaceutical Company) in Joint Venture and making international presence through the same.

Key Risks:

  • Increase in competition among top 6 players
  • Putting policy growth targets at risk 
  • Marketing expenses are anticipated to go high, thereby straining earnings growth.
  • Unexpected decline in policyholders in spite of providing incentives 
  • Rapid increase in healthcare spending and health services demand from people have left Australian Government struggling.
  • Registered health insurance firms are unable to increase premium rates without prior approval from the Government/Minister for Health/PHIAC/APRA. Because of this, NHF’s ROE and margins would be exposed to political process and pressures if the company makes large profits.
  • Regulatory changes including tax incentives and benefits which encourage take up of PHI. 
  • Due to poor insurance policy design, aging population, and costs of new medical equipment, procedures and treatments; lapse rates and claims inflation would be higher than expected.
  • Negotiations not done rightly with healthcare providers (private hospital operators) which may result into unfavorable contractual terms;
  • Investment returns might be lower than expected.

Key Highlights:

  • nib holdings Ltd. (NHF) reported strong FY21 results in spite of Covid-19, however it was in line with management expectations
  • Revenue grew by +2.9% to $2.6bn and Group operating profit (UOP) of $204.9m, which is up by 39.5%
  • NPAT of $160.5m was mainly driven by net investment income of $51.8m.
  • Statutory EPS of 35.2 cents, which was +82.4% higher.
  • ROIC of 19.1% which was similar to pre-pandemic levels.
  • Final dividend of 14cps fully franked (up from 4 cents), which brings the full year dividend to 24cps.

Company Profile:

nib Holdings Limited (NHF) is the Australian private health insurer. NHF operates in four divisions which are private health insurance, life insurance, travel insurance and related health care activities.

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

Nanosonics achieved a strong FY21 performance

Investment Thesis

  • Ultrasound disinfection is required. To avoid cross-infection, ultrasound transducers must be disinfected between patients. Trophon EPR outperforms traditional methods (soak, spray, wipe, or other manual reprocessing/disinfection methods). Traditional soaking, for example, takes 25 minutes, whereas Trophon disinfects ultrasound probes in 7-8 minutes.
  • Potential addressable installed base of 120,000 Trophon EPR units worldwide (40,000 each in the US, Europe, and the Rest of the World).
  • Higher level disinfection required to reinforce the drive path for new guidelines and regulations. New Guidelines in Australia and New Zealand for example, establish Trophon as the gold standard in high-level disinfection.
  • Trophon become standard of care and direct sales team driven for strong adoption as its continuous growing in North America.
  • With the demand for safety inventory, GE Healthcare has retained a large and credible distribution partner.
  • In the United Kingdom, the Managed Equipment Service (MES) business model is overcoming client capital budget constraints.
  • Progress is being made in terms of geographic expansion.
  • A strong balance sheet will help to support the growth strategy.

Key Risks

  • Increased competition as new entrance entered the market. 
  • Non-receptive markets where NAN’s product is regarded as excessive when compared to traditional disinfection methods such as using sterile wipes.
  • Key customer risk, as one of NAN’s largest customers
  • Product flaws or incidents that necessitate recalls.
  • Unfavorable foreign currency movements in the AUD/USD.
  • Poor R&D execution with no progress.
  • Because of the nature of the business, it is prone to quickly reaching a natural penetration rate, where growth becomes subdued.

FY21 results highlights

  • Revenue of $103.1m, up +3.0 percent (or +12 percent in constant currency), driven by recovery in 2H21 with revenue of $60.0m, up +39 percent (or +50 percent in CC) compared to 1H21.
  • NAN’s global installed base of 26,750 units increased by +13 percent or 3,030 units (with 2H new installed base increasing by +20 percent compared to 1H21 with 1,650 units installed).
  • Revenue of $76.4m, up +9% from 1H21 revenue of $42.7m, up +27% from 1H21, driven by a recovery in ultrasound procedure volume to pre-Covid-19 levels.
  • Operating profit before tax of $11.0m was -11 percent lower than the $12.4 m pcp, driven by 2H21 profit before tax $10.8m which grew as total revenue increase +39% in 2H21 versus 1H21.
  • NAN retained a strong balance sheet position to fund growth initiative with net cash position improving $4.2 to $96.0m.
  • Revenue of $26.7 million was down -11 percent, but 2H revenue of $17.3 million was up +84 percent compared to 1H21, with installed base growth recovering and GE Healthcare capital purchases increasing.
  • EBIT of $10.8 million fell -7 percent. Operating expenses increased by 12% to $70.8 million, primarily due to $20.3 million in 4Q expenses as NAN returned to its intended investment run rate.
  • The $5.9 million in free cash flow was driven by $8.3 million in 2H free cash flow, which offset a $2.4 million net cash outflow in 2H21.

Company Profile 

Nanosonics Ltd (NAN) is an ASX-listed company which focuses on developing and commercialising infection control devices. NAN’s first device, the trophon® EPR is a proprietary automated device for low temperature, high level disinfection of ultrasound probes. The device is approved for sale across major markets including, Australia and New Zealand, US, Europe, Japan, Hong Kong, and South Korea. The trophon® EPR is sold through distributors including GE Healthcare, Philips, Samsung, Siemens Toshiba and Miele Professional.

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
Property

The share price of BWP has dropped following the release of the FY2021 results.

Property investment or saving money for buy home. A businessman hand holding coin over glass jar and resident house model on wooden table.

Investment Thesis 

  • Stable and sustainable distribution yield.
  • Trades on a ~20.7% premium to NTA.
  • Strong and experienced management team.
  • WES stake in BWP (24.75%) provides security against risk of non-renewal of leases by Bunnings. 
  • High quality property portfolio with long weighted average lease expiry, strong lease covenants, and high occupancy.
  • Low interest rate environment is encouraging for the housing industry and hardware sales however any sudden increase in interest rates provides risk to both revenue and debt financing costs. 
  • Solid balance sheet with low gearing levels. 
  • Risk of poor execution in redevelopment of assets vacated by Bunnings to other uses.

Key Risks

We see the following key risks to our investment thesis:

  • Any slowdown in demand and net absorption for hardware space.
  • Persistent lower inflation (and deflation) affecting retailers.
  • Economic conditions affect property fundamentals such as values (cap rates and rental growth), vacancies, retail activity (and hence demand for space at big-box retail sites). 
  • Risk of non-renewal of leases by Bunnings Group. 

BWP Portfolio key Highlights

 (1) Occupancy and Rent Reviews: the portfolio was 97.8% leased. According to management, “the rent payable for each leased property is increased annually, either by a fixed percentage or by the CPI, except when a property is due for a market review… During the year, 86 leases in the portfolio had annual fixed or CPI increases, resulting in an average increase of 1.6% in the annual rent for these properties. Sixteen market rent reviews (including 13 Bunnings Warehouse properties) were finalised during the year, with rents broadly in line with the market. The market rent reviews that were due for two Bunnings Warehouses during the year ended 30 June 2020 and 11 during the year ended 30 June 2021 are still being negotiated or are being determined by an independent valuer and remain unresolved”. 

(2) Property portfolio revaluations: BWP’s portfolio value increased $151.9m to $2,636.1m in FY21, driven by capex of $16.8m and revaluation gains of $149.2m, less net proceeds from divestments of $15.8m. Net revaluation gain was driven by growth in rental income and an average decrease in capitalisation rates across the portfolio in FY21. BWP’s weighted average capitalisation rate for the portfolio was 5.65% (versus 5.84% in December 2020 and 6.08% in June 2020). 

(3) Acquisitions and divestments: BWP made no acquisitions in FY21 but made several offers, with management highlighting “the Trust actively continues to look for value creating opportunities”. BWP also divested its Underwood property in Queensland for $16.0m to an unrelated third party in May 2021. BWP has also entered into an agreement to divest its Mindarie property in Western Australia for $14.5m to an unrelated third party with settlement expected on 30 July 2021. 

(4) Developments: in FY21, BWP completed the expansion of the Croydon Bunnings Warehouse, Victoria for $4.0m, which drove an annual rental increase of ~$0.2m. BWP also expanded the Port Melbourne Bunnings Warehouse, Victoria, for $6.6m, driving an annual rental increase of ~$0.4m.

Company Description  

BWP Trust (BWP) is a real estate investment trust focused on operating, owning, and divestments and acquisitions of large format retailing properties, in particular, Bunnings Warehouses, leased to Bunnings Group Ltd (‘Bunnings’). Bunnings is the leading retailer of home improvement products in Australia and New Zealand and is a major supplier to builders and trades people in the housing industry. BWP is managed by an external responsible entity, BWP Management Ltd who is paid an annual fee based on the gross assets of BWP. Both Bunnings and BWP Management Ltd are wholly-owned subsidiaries of Wesfarmers (WES), one of Australia’s largest listed companies. WES owns ~24.75% of BWP. Currently, BWP is the largest owner of Bunnings Warehouse sites, with a portfolio of ~80 stores. Eight properties have adjacent retail showrooms leases to other retailers.  BWP also owns one stand-alone showroom property. The assets have a current value of ~$2.49bnmillion, WALE of ~4 to 5 years, 97.5% occupancy rate.

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

Ramsay Health Care reported solid earnings in fiscal year 2021

Investment Thesis :

  • Holds a leading positions in Australia, France and Scandinavia.
  •  Earnings will begin to rise in FY22-24 as a result of pent-up demand on waiting lists.
  •   Has a well-diversified portfolio with a large scale.
  • Australia’s largest private hospital operator, with strong industry fundamentals  
  • Favourable macro-industry trends include an ageing and growing population, the spread of chronic disease, and more innovation, treatment, and technology, all of which are driving demand to private hospital.
  • Supportive government policy (tax incentive for people to get private health insurance). 
  • Ongoing brownfield program driving earnings and offshore earnings growth
  • Significant international operation paves way for the firm to grow internationally in near future.
  •  Attractive industry dynamics with high entry barriers for new firms.

Key Risks:

  • Competitive risk (new hospitals, new beds), from listed and unlisted hospital operators
  • Brownfield projects fail to deliver the earnings uplift.
  • Cost pressures (negotiating price increases with private health insurance companies).
  • Government policy on private health insurance is changing.
  • Execution risk (able to get the uplift in earnings from brownfield projects).
  • Snap economic lockdowns due to Covid-19
  • Currency risk

Key financial highlights of year2021:

In relative to the previous corresponding period i.e pcp (herein pcp is year 2020)

  • During the year 2021, RHC revenue increased by 3.9% to $12.4bn.
  • The increase in revenue was driven by strong earning growth across all of its geographical segments-i.e from Asia Pacific, UK and Europe.
  • In Asia Pacific, revenue from patients increased by 7.8% to $5.4bn reflecting strong growth in surgical admission (2) In U.K, revenue increased by 10.2% to $1,024.1m and included payments from the NHSE of $417.6m representing net cost recovery for services provided by Ramsay to the NHSE during the year (3) Europe revenue increased by 6.9% to $6,839.9m and included government grants of $428.3m and was impacted by 80m euros from the sale of a portfolio of nine German hospitals in 1H21
  • EBIT increased by 29.1% to $1.1bn and statutory profit increased by 58.1% to $449m, reflecting a strong increase in admissions.
  • The Board declared a fully franked final dividend of 103cps, bringing the FY21 dividend to 151.5cps (up by 142.4 %) and representing a payout ratio of 79 percent of statutory profit.
  • During the underlying period ROCE improved by 60bps to 9.3% and ROIC gained by 260bps to 7%.
  • Operating cash flow fell by 11.9 % to $1.5 billion, owing to changes in working capital as a result of cash loans from the French government while FCF fell by 14.8 percent to $85,
  • Financial metrics improved, with net debt (excluding lease liabilities) fallen by 15 % to $2.4 billion, lowering leverage to 3.7 times from 4.4 times. 

Company Profile:

Ramsay Health Care Ltd (RHC) is a company that provides medical services. RHC has hospitals, day surgery centres, treatment facilities, rehabilitation centres, and psychiatric units all around the world. It has about 500 sites throughout Australia, the United Kingdom, France, Sweden, Norway, Denmark, Germany, Indonesia, Malaysia, Hong Kong, Italy, and the Nordic countries.

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

Nitro software operating expenses rise as their top line expands

20025825 - closeup image of businessman drawing 3d graphics

Investment Thesis

  • Total Addressable Market (TAM) for sizeable market opportunity is US$28bn (company estimates which is based on ground up model taking into account customer values). 
  • Created a solid foundation on which to build – the company has penetrated 68 percent of the Fortune 500 companies, and while the initial involvement with these companies may be small, it provides the opportunity to scale up with these customers (approx. 10 percent of the Fortunes 500 customers have 100 or more licenced users).
  • Structural tailwinds – businesses looking to digitise manual, paper-based processes are continuing to migrate online.
  • Looking to become a platform.
  • Subscription provides an appealing recurring revenue base.
  • The company’s competitive position continuously developing in R&D investment and enhance value proposition with customer.

Key Risks

  • Rising Competitive pressure especially when larger player like adobe inc and document sign.
  • Company trade on high valuation multiples like growth in subscriptions, new customers and Penetration of existing clients which disappoints the market growth.
  • Product Innovation stall and fails to resonate with customers.
  • Emergence of new competitors and technology.

Nitro software’s 1H CY21 result

  • Group revenue increased by +27 percent to $24.1 million, with subscription revenue increasing by +66 percent to $15.1 million as a result of new customer acquisition and growth among existing customers.  ARR (annual recurring revenue) of $33.8 million was up +56 percent Year on year.
  • Gross Profit was up 28 percent to US$22.1m, with Gross Profit margin of 92%.
  • R&D expenses of US$5.8m were up by 46% and represented 24% of revenue. Key Operating expenses saw significant increase as the company continuous to invest in the business to drive a top line growth.
  • Operating earnings (EBITDA excluding share-based and M&A expenses) were a loss of $3 million, compared to a gain of $0.2 million in the pcp.
  • At the end of the period, there was no debt and a cash balance of $38.6 million.

Company Profile 

Nitro Software Ltd (NTO), founded in 2005 & listed in 2019, is a global document productivity software company. NTO offers integrated PDF productivity, eSignature and business intelligence (BI) tools through a horizontal SaaS and desktop-based software suite. The Company helps customers move to 100% digital document workflows, eliminating paper and accelerating business processes.NTO serves customers around the world and counts 68% of the Fortune 500 companies among its customers. In total, NTO has over 12,000 business customers (who are defined as having at least 10 licensed users) and across 155 countries.

(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
Shares Technology Stocks

Whispir’s strong FY21 results seems positive for the stock

Investment Thesis

  • Sizeable market opportunity – in the U.S. alone WSP TAM is US$4.7bn (WSP North American target markets) vs total U.S. CPaaS TAM of US$98bn.
  • Established a solid foundation to build from – the Company has over 800 customers worldwide with leading brand names.  
  • Structural tailwinds – ongoing automation and digitization. 
  • Increasing direct sales penetration.
  • Attractive recurring revenue base via subscriptions. 
  • Investment in R&D to continue developing the Company’s competitive position and enhance value proposition with customers.   

Key Risks

We see the following key risks to our investment thesis:

  • Rising competitive pressures.
  • Growth disappoints the market, given the company trades on high valuation multiples – growth in subscriptions, new customers and penetration of existing clients. 
  • Product innovation stalls and fails to resonate with customers. 
  • Emergence of new competitors and technology.
  • Key channel partnerships breakdown.

FY21 key trading metrics 

  • FY21 ARR (annualized recurring revenue) was up +28.5% to $53.6m, driven by increased spending by installed customer base and addition of new customers. Recurring revenue is now at 96.7%.
  • Customer revenue retention was 115.9%, with management noting that whilst customers may initially engage for single communication solutions, once implemented with operational processes, management find that new applications / use cases across client’s organization. 
  • Over the year, WSP added 171 net new customers (up +27% YoY), bringing total customer numbers to 801. An attractive component of WSP’s solution is the Company’s “low code-no code” platform, which easily integrates with existing inhouse client IT systems and can be deployed within hours. This is one of our key competitive advantages.
  • New customer acquisition costs were down more than 50% due to higher sales efficiency and a growing proportion of digital direct sales (self-discovering the platform). 
  • LTV / CAC (ratio of lifetime value to customer acquisition costs) improved to 26.1x (from 23.7x). 
  • Gross revenue churn (3 month average) at Jun-21 was 2.4%.

Company Description  

Whispir Ltd (WSP), founded in 2001, is a global enterprise software-as-a-service (SasS) company. WSP provides a communications workflow platform that automates interactions between businesses and people. The Company has over 800 customers, operates in 60 countries and more than 200 staff globally. WSP operates in an emerging subset of the enterprise communications SaaS market known as Workflow Communications-as-a-Service (WCaaS). WSP currently solves two communication problems: (1) Operational Messaging – engaging with employees; and (2) External Messaging – engaging with customers. WSP operates in 3 key markets – Operational messaging (size $8bn), API messaging (size $32bn) and Marketing messages (size $66bn).

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

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.