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LICs LICs

WAM Strategic Value Limited Commences Trading

Young businesswoman sitting at the table with touchpad and communicating with senior woman

There Pre – Net Tax Tangible Assets is $1.27 till June 2021. IPO price is $1.25 on 28th June 2021.

Till now, there is no Dividend history for WAM Strategic Value.

WAM Strategic Value Limited ((WAR)) date of listing on ASX on June 28, 2021, at a price of $1.25 per share with 180 million shares on issue.

Following the merger proposal with WAM Global Limited ((WGB)), the portfolio increased following the IPO, with Templeton Global Growth Fund Limited ((TGG)) being a positive contributor. 

TGG shareholders can choose between receiving WGB stock consideration with an attaching option or cash consideration equal to the NTA after tax and transaction charges under the terms of the offer.

The announcement of MHH’s reorganisation from a LIT to an ETMF would have given the portfolio a lift as well, with the MHH unit price reacting positively to the news.

Company Profile 

WAM Strategic Value Ltd is an investment company. Its investment objectives are to provide capital growth over the medium-to-long term, deliver a stream of dividends and preserve capital while providing shareholders with exposure to a diversified equities portfolio.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

NortonLifeLock Merging With Avast to Expand Reach within Consumer Security Market; Maintain $21 FVE

Our $21 fair value estimate for no-moat NortonLifeLock after announcing its intention to merge with fellow consume cybersecurity firm Avast. The news follows NortonLifeLock recently acknowledging rumors of Avast combination talks, and we believe this merger is in line with NortonLifeLock’s plan to use mergers as a growth accelerator with a focus on extracting overlapping costs. The deal puts Avast’s enterprise value between $8.6 billion and $9.2 billion, depending on how Avast shareholders elect to receive a majority stock or cash option. We updated our model with the assumption that the merger occurs in the middle of 2022 as expected, helping the company rapidly expand its revenue growth rate and achieve its reiterated adjusted earnings target of $3 per share in the coming years.

NortonLifeLock gains international reach, especially within the important German market, and helps bolster its opportunity with the small business segment through this merger. The combined company will be renamed at a later point and together have about 40 million direct customers and over 500 million total users, as well as about $3.5 billion in combined revenue with a blended adjusted operating margin of 52% (presynergies). 

NortonLifeLock expects to achieve $280 million of annual gross cost synergies, fully realized by the second year post-merger. We believe the merged company will be shareholder centric, with a plan to return 100% of free cash flow through the existing $0.125 quarterly dividend and future share buybacks.

Financial Deals Post – Merger

NortonLifeLock will finance the deal with cash and $5.35 billion of new debt facilities, which the company expects to rapidly pay down post-merger. Avast shareholders are expected to own between 14% and 26% of the combined company, depending on their election, post-merger. In the majority stock option, Avast shareholders receive $2.37 in cash and 0.1937 shares of NortonLifeLock whereas in the majority cash option, Avast shareholders receive $7.61 in cash and 0.0302 shares of NortonLifeLock. In the majority stock option, NortonLifeLock plans to increase its buyback program by $3 billion.

Current NortonLifeLock CEO Vincent Pilette will be the CEO, Avast’s current CEO will become President, and NortonLifeLock’s CFO will retain her role for the combined company. The merged company will have dual headquarters, with Avast in Prague, Czech Republic and NortonLifeLock in Tempe, Arizona. While we appreciate the combined company expanding its geographical footprint, we expect a concerted focus on reducing costs to reel in operating and fixed costs.

Company Profile 

NortonLifeLock sells cybersecurity and identity protection for individual consumers through its Norton antivirus and LifeLock brands. The company divested the Symantec enterprise security business to Broadcom in 2019. The Arizona-based company was founded in 1982, went public in 1989, and sells its solutions worldwide.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Technology Stocks

Syneos Reports Strong Q2 Results; Raising FVE to $64 on Improved 2021 Outlook

the new entity, into the upper echelon of large, global, late-stage contract research organizations, but at the price of a significant debt load. Most of Syneos’ CRO business comes from the most lucrative area of the CRO market: long, complex trials that typically require thousands of patients across the globe and thus have ample room for missteps. Trial sponsors need a CRO not only with strong technical know-how in specific disease areas, but also with the expertise in local country cultures and government relations.

Legacy INC Research was a leader in late-stage clinical research from small- and mid-cap biopharma, while inVentiv Health had better exposure to large pharma. The combined company has a diversified client base and provides a full portfolio of offerings, including staffing solutions and commercialization. While we don’t see significant competitive advantages in the staffing and selling business, both complete Syneos’ portfolio of services and offer flexibility to clients. The lower-margin commercial solutions business has had mixed success, but management’s cross-selling strategy to offer hybrid contracts with both clinical and commercial components should be a boon to the segment.

Financial Strength 

Narrow-moat Syneos reported second-quarter revenue of $1.3 billion, representing nearly a 27% increase year over year. Adjusted EBITDA was $175 million for the quarter, up 47% from the prior-year period. Syneos is recovering well from pandemic-related challenges, as evidenced by its strong year-over-year figures. Due to strong demand across Syneos’ clinical and commercial segments, management has updated its 2021 guidance. Syneos reported solid net new business wins in Clinical and Commercial Solutions, totaling $1.7 billion for the quarter, representing a book-to-bill ratio of 1.33 times. The new business wins contributed to an ending backlog of $11.7 billion for the quarter, up 21% from the prior-year period. 

Syneos ended the quarter with about $261 million of unrestricted cash and total debt outstanding of about $2.9 billion, resulting in a net leverage ratio of 3.8 times. We continue to think Syneos’ positive momentum indicates the operating environment remains strong. Syneos is in middling financial health after the 2017 merger, with about $2.9 billion in total debt weighing down the balance sheet. The deal pushed the company to the top tier of large, global late-stage players, which positions the company to secure deals with large biopharma companies and propel cash generation, but we expect the deal to limit near-term financial flexibility. Syneos’ major debt maturities are pushed out to 2024 and beyond, which provides the company ample opportunity to grow and unearth synergies from the merger.

Bulls Say’s 

  • Syneos’ late-stage contract research business is poised to benefit from stable research and development spending and increased outsourcing in the biopharma industry.
  • High levels of new drug approvals should boost growth in the company’s contract commercialization business.
  • Robust net new business wins should translate to accelerated growth in the contract research segment in the near term.

Company Profile 

Syneos is a global contract research and outsourced commercialization organization that provides services to pharmaceutical and biotechnology firms. Its clinical solutions segment offers early- to late-stage clinical trial support that ranges from specialized staffing models to strategic partnerships that oversee nearly all aspects of a drug program, while the company’s commercialization solutions includes outsourced sales, consulting, public relations, and advertising services.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Commodities Trading Ideas & Charts

Boosting Our Oneok Fair Value Estimate to $49 Following Second-Quarter Results

our fair value estimate to $49 per share. Oneok’s second quarter clearly shows the firm benefiting from a recovery in volumes across its footprint after the COVID-19- driven decline last year as well as numerous new assets placed in service.

Given the strong results, Oneok boosted its 2021 EBITDA guidance to above its earlier midpoint of $3.2 billion, and toward our current forecast of $3.3 billion. Second-quarter EBITDA was $802 million, a 50% increase from last year’s levels. The largest contributor to its earnings improvement is a recovery in Rockies volumes, as well as higher realized commodity pricing on its gathering contracts with a percentage of proceeds component. Rockies volumes across its footprint have recovered over 85% since the second quarter of 2020 to nearly 300,000 barrels per day, or bpd, and Oneok still has 440,000 bpd of capacity, expandable to 540,000 bpd with minimal capital spending.

Every 25,000 bpd of Rockies volumes is worth another $100 million in Oneok EBITDA. Oneok remains well positioned to capture new opportunities in the Williston basin. The gas/oil ratio has improved 80% over the last year in the Williston basin, leading to a substantial recovery in gas production. Oneok’s second-quarter gas processing volumes were about 1.25 billion cubic feet per day, and the firm expects to connect more than 300 wells to its footprint this year.

The increased connections point to incremental upside of about 150 million cubic feet per day of processing volumes. Reducing flaring to zero across Oneok’s footprint adds another 100 million cubic feet per day. Beyond that, simply holding the current oil rig count flat in the Williston basin suggests another 1 billion cubic feet per day of upside in overall gas volumes over the next decade per Oneok estimates.

Company Profile 

ONEOK, Inc. is an energy midstream service provider in the United States. The Company owns and operates natural gas liquids (NGL) systems, and is engaged in the gathering, processing, storage and transportation of natural gas. THe Company’s operations include a 38,000-mile integrated network of NGL and natural gas pipelines, processing plants, fractionators and storage facilities in the Mid-Continent, Williston, Permian and Rocky Mountain regions. The Company operates through three business segments. The Natural Gas Gathering and Processing segment provides midstream services to contracted producers in North Dakota, Montana, Wyoming, Kansas and Oklahoma.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Commodities Trading Ideas & Charts

Consolidated Edison Reports Weak Q2 Due to Adverse Weather Events but Reaffirms Earnings Guidance

Adjusted EPS in the recently ended quarter were $0.53 versus $0.60 in the same period last year. Earnings in the second quarter were negatively impacted by several heat waves in June. Con Ed mobilizes crews in anticipation of weather events, resulting in significant extra costs even when the weather events end up not being as serious as anticipated.

Our 2021 adjusted EPS estimate of $4.25 is unchanged and at the midpoint of management’s $4.15-$4.35 EPS guidance range. Management increased its 2023 rate base guidance by $135 million due to the approval of a new transmission line. The increase in projected rate base would result in about a $0.01 increase in our 2023 EPS estimate but would not have a material impact on our fair value estimate.

Con Ed’s regulatory allowed returns are lower than industry average, but the overall regulatory rate structures in New York remain constructive. Multi-year rate cases provide forward-looking estimates of capital expenditures and rate base, swallowing Consolidated Edison Company of New York, Con Ed’s largest subsidiary, to consistently earn near or above its 8.8% allowed return on equity.

Company Profile 

Con Ed is a holding company for Consolidated Edison Company of New York, or CECONY, and Orange & Rockland, or O&R. These utilities provide steam, natural gas, and electricity to customers in southeastern New York–including New York City–and small parts of New Jersey. The two utilities generate roughly 90% of Con Ed’s earnings. The other 10% of earnings comes from investments in renewable energy projects and gas and electric transmission. These investments have resulted in Con Ed becoming the second-largest owner of utility-scale PV solar capacity in the U.S.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Currencies Trading Ideas & Charts

Coinbase Global Benefits from more Interest and Adoption of Cryptocurrency, but the Future Remains Unknown

Golden bitcoins. Cryptocurrency on computer motherboard.

The company’s reputation, regulatory compliance, and track record as a custodian have allowed it to maintain transaction fees above many of its peers despite operating in a crowded field with hundreds of competing firms trying to grab market share in the rapidly growing space. Coinbase has continued to branch off into adjacent businesses offering cryptocurrency collateralized loans, a crypto debit card, blockchain infrastructure support, and data analytics services.

While these new businesses expand the company’s presence in the cryptocurrency space and add new revenue streams, the company still earns the majority of its income through the transaction fees traders pay when they trade on Coinbase’s platform. These fees are charged as a percentage of trade’s total value. Due to its breadth of its service offerings and the connection between cryptocurrency prices and trading revenue, Coinbase’s short- and long-term results are deeply tied to the health and growth of cryptocurrencies as an asset class. 

Cryptocurrency adoption continues to rise but questions regarding the long-term viability of cryptocurrency, the role of speculation in current market prices, and the potential for a more hostile regulatory environment remain unanswered.

Financial Strength 

Coinbase is in an excellent financial position, particularly after receiving an influx of capital from private-investment- in-public-equity investors coinciding with its direct listing on the Nasdaq exchange. Coinbase saw a spike in trading volume in the first quarter of 2021, leading the company to generate more net income in the first quarter of the year than in the entirety of 2020. As a result, the company ended March 2021 with nearly $2 billion in cash against only $500 million in borrowed crypto assets. Since March, Coinbase has issued $1.25 in convertible debt due in 2026, adding to both its liquidity reserves and its debt load. The decision to keep Coinbase largely free of debt makes sense given how volatile the company’s revenue generation can be. Coinbase needs to keep sufficient financial reserves to sustain itself in the event of a major market collapse.

No-moat Coinbase reported strong second-quarter results with earnings of $6.42 per share and net revenue of $2.23 billion coming in above our expectations. Earnings benefited from a tax benefit of $737 million as a result of tax deductions associated with the company’s direct listing. Strong cryptocurrency prices during the quarter drove total trading volume to a new all-time high of $462 billion, 38% more than last quarter. Coinbase added 29 new cryptocurrencies to be traded on its platform and now lists 83 different offerings. Coinbase continues to increase spending with operating expenses increasing 66% from last quarter and 838% year over year. As a result of the sharp sequential increase in operating expenses the company’s operating margin fell from roughly 55% in the first quarter to 39% in the current quarter.

The two largest drivers of this decline were technology and development spending, which increased 58%, sequentially and marketing spending, which increased 66%. Historically, Coinbase has kept marketing spending at 10% or less of sales, as it relied more heavily on word of mouth than on advertising to grow. The company is now guiding marketing expenses to be around 12%-15% of sales during 2021. Average retail trading fees increased from 1.21% in the first quarter to 1.26% in the second quarter, due to a mix shift away from the company’s less expensive Coinbase Pro platform. 

Bulls Say’s

  • Coinbase has established itself as the leading U.S.cryptocurrency exchange and established a strong reputation for security in an industry filled with risk for traders.
  • Coinbase has been able to accelerate the rate at which it lists new cryptocurrencies, giving the company more exposure to the growth of the asset class.
  • There is a global market for cryptocurrency. Regulatory approval from international regulators will allow Coinbase to expand its operations and increase its footprint globally.

Company Profile 

Founded in 2012, Coinbase is the leading cryptocurrency exchange platform in the United States. The company intends to be the safe and regulation-compliant point of entry for retail investors and institutions into the cryptocurrency economy. Users can establish an account directly with the firm, instead of using an intermediary, and many choose to allow Coinbase to act as a custodian for their cryptocurrency, giving the company breadth beyond that of a traditional financial exchange. While the company still generates the majority of its revenue from transaction fees charged to its retail customers, Coinbase uses internal investment and acquisitions to expand into adjacent businesses, such as prime brokerage, data analytics, and collateralized lending.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

Rapid Deployment of Ships Set Buoying Royal Caribbean Outlook for Positive Profitability in Early 2022

Portrait of Vietnamese young stock broker talking on the phone with coworker

 while COVID-19 remains pervasive. With a return to sail underway, cruise operators are now utilzing updated health protocols to ensure the safety of cruising as paying customers return onboard. As virus mitigation tactics prove successful, we expect Royal to see modest pricing gains as it digests bookings paid for with future cruise credits, limiting near-term yield gains. On the cost side, stringent health protocols and cruise resumption costs should inflate spending, factors that will aggravate profitability through 2022.

Royal took quick action to reduce operating expenses and capital expenditures as a result of the coronavirus (we forecast capital expenditures of $2.2 billion in 2021, down from $3 billion in prepandemic 2019). Also, since the beginning of the pandemic, the firm accessed around $13 billion to enhance its liquidity cushion. Further, as of June 30, $2.4 billion in customer deposits were still available for use. Although we believe Royal’s cash burn should remain between $300 million-$350 million a month (as it restaff the fleet), it should be able to navigate a graduated return to sailing over the next six months. While Royal is set to return to positive profitability over the next year, the prior 20>25 by 2025 target (EPS to $20 by 2025) is virtually impossible to reach as a result of secular changes in demand due to COVID-19.

Financial Strength 

Royal has taken numerous steps to ensure it remains a going concern after COVID-19. In March 2020, Royal noted it was taking actions to reduce operating expenses and capital expenditures by the tune of $1.7 billion to improve liquidity. Additionally, since the beginning of the pandemic, the firm secured around $13 billion in liquidity through various debt and equity issuances (resulting in our estimate for $1.1 billion in debt service costs in 2021, up from around $400 million in 2019). 

Furthermore, as of June 30, $2.4 billion in customer deposits were still available for use, although industry commentary suggests about half of canceled bookings have been refunded in cash rather than future cruise credits during the pandemic. And in April 2020, Royal announced it was laying off or furloughing more than 25% of its 5,000 shoreside employees. The cash burn for Royal every month while restaffing and redeployng its ships should be between $300 million-$350 million.

Bulls Say’s 

  • If COVID-19’s delta variant recedes quickly, yields could recover faster than we currently anticipate.
  • Lower fuel prices could help benefit the cost structure to a greater degree than initially expected, thanks to Royal’s floating energy prices (with only about 50% of fuel costs historically hedged).
  • The nascent Asia-Pacific market should remain promising post-COVID-19, as the four largest operators previously had capacity for nearly 4 million passengers at the beginning of 2020, which provides an opportunity for long-term growth with a new consumer when cruising fully resumes.

Company Profile 

Royal Caribbean is the world’s second-largest cruise company, operating 60 ships across five global and partner brands in the cruise vacation industry. Brands the company operates include Royal Caribbean International, Celebrity Cruises, and Silversea. The company also has a 50% investment in a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises, allowing it to compete on the basis of innovation, quality of ships and service, variety of itineraries, choice of destinations, and price. The company is completed the divestiture of its Azamara brand in the first quarter of 2021.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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ipo IPO Watch

Home cooking helps Cobram Estate Olives (ASX: CBO) build a $700m

Cobram Estate debuted on the ASX on Wednesday in a compliance listing in which it did not raise new capital but transformed from an unlisted public company with 705 shareholders to a publicly traded company in full view of the public. In its first hour on the ASX, the firm traded between $1.82 and $1.89 a share, giving it a market capitalisation of $706 million at the low end.

The organization’s chairman and co-founder, Rob McGavin, said it was satisfying to have established a corporation worth more than $700 million, but the group is now focused on long-term strategic decisions.

With a market capitalization of $700 million, it is almost twice as valuable as department store chain Myer, a household name that has struggled to keep up with online shopping and the epidemic. Cobram Estate, Australia’s No. 1 extra virgin olive oil and a huge seller at Woolworths and Coles, and Red Island, a more value-oriented brand, are the two prominent brands.

Cobram Estate’s Total Production 

Mr McGavin said that during the epidemic, sales were boosted by frequent capital city lockdowns, which drove many households to look more thoroughly at the sources of items used in recipes. Cobram Estate employs 172 employees, each of whom received 500 free shares as part of the company’s ASX IPO. Cobram Estate grows 2.4 million olive trees on 6854 hectares of farmland in central Victoria, accounting for 71% of Australia’s total olive oil production.

A few weeks ago, stockbrokers tested the appetite of potential investors with a $2 issue price, but found little institutional interest at that level. The board of directors opted to forego any capital offering and instead pursue a compliance listing.

According to the prospectus, Cobram Estate’s revenue for the year ended June 30 is estimated to be $211 million, with a net profit of $33.6 million. Because of the unique characteristics of the olive producing sector, where trees only produce one large crop every two years, the company will need to conduct a substantial education drive for new shareholders.

The harvest in 2021, which lasted from late April to June, was one of the large crop years, implying that next year’s crop will be “light”. The harvest in 2021 was 16.05 million litres, which was 7% higher than expected.

Company Profile 

COBRAM ESTATE PTY LTD is located in DOCKLANDS, VICTORIA, Australia and is part of the Fruit and Tree Nut Farming Industry. COBRAM ESTATE PTY LTD has 120 employees at this location and generates $4.80 million in sales (USD). (Employees figure is estimated, Sales figure is modelled). There are 10 companies in the COBRAM ESTATE PTY LTD corporate family.

(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
Technology Stocks

Marvell Technology Inc. (NASDAQ: MRVL) Maintains FVE $40 & Aiming to take the Cloud and 5G Markets

The concept of 5G network with magnifying glass on modern circuit board, high-speed mobile internet and new generation networks technology background

Marvell is the leader in DPUs and PAM-4 optics, and the clear second in the enterprise and cloud Ethernet markets. Marvell’s recent financial history has been choppy, as result of CEO Matt Murphy’s aggressive overhaul of the business’ focus. Marvell has emerged as a strong competitor in the networking chip market, following a multiyear business pivot to acquisitions, divestitures, and organic development to focus on high-growth cloud, 5G, and automotive markets.

Between data processing units, or DPUs, optical interconnect, and Ethernet solutions, Marvell has one of the broadest networking silicon portfolios in the world, and we think it is primed to steal market share from incumbent Broadcom with bleeding-edge technology. Marvell has the right portfolio to invest aggressively in organic growth going forward, but don’t rule out further acquisitions to bolster its competitiveness and enter adjacent markets.

Company’s Future outlook
Marvell’s 2021 acquisitions of In phi and Innovium will give it a path to robust and sustained top-line growth in the cloud market and expect significant margin expansion over our 10-year forecast even as it invests to compete with larger rivals. Nevertheless, the market is assuming nearly immediate operating synergies from these two acquisitions, which take some time and the shares are significantly overvalued at this point and caution investors to await a greater margin of safety. The reorganization is squarely in the firm’s rearview mirror now, and forecast mid-teens sales growth and immense margin expansion over the next 10 years. The combination of 2021 acquisitions In phi and Innovium under Marvell’s umbrella will create a dangerous combination to Broadcom in the high-performance switching arena and enable share gains.

Company Profile
Marvell Technology Inc. (NASDAQ: MRVL) is a leading fables chipmaker focused on networking and storage applications. Marvell serves the data center, carrier, enterprise, automotive, and consumer end markets with processors, optical interconnections, application-specific integrated circuits (ASICs), and merchant silicon for Ethernet applications. The firm is an active acquirer, with five large acquisitions since 2017 helping it pivot out of legacy consumer applications to focus on the cloud and 5G markets.

(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

Monster Beverage Glass Is Half-Full as Its Tremendous Commercial Success Is Offset by Inflation Headwinds

Stock exchange market concept, stock broker looking at graph working and analyzing with display screen, pointing on the data presented and deal on a exchange, Businessman trading stocks online.

 Monster continues to extract outsize growth and stella profitability from this market. Crucial to Monster’s positioning in the market is its partnership with Coca-Cola. Being able to rely on the widest moat in beverages for distribution, merchandising, and retailer negotiation reinforces and perpetuates the benefits of its resonant brand, in our view. With its entire U.S. footprint and most international territories fully incorporated into the Coke system, strategic and logistic planning should become more seamless, allowing products to be scaled more quickly, particularly in international markets (over 35% of sales). Despite the inevitable complexity of appealing to distinct local palates, we believe Monster’s continued geographic diversification should augment its positioning.

Given the importance of the Coke relationship, the launch of Coke Energy products following arbitration between the two parties was a significant development. Still, it has proved to be far from an existential threat, garnering trivial share in the markets where it launched (and recently discontinued in the U.S.). In addition to a seemingly more tenuous Coke relationship, Monster must contend with an intense competitive environment. While Red Bull remains the most formidable rival, Monster is also beleaguered by a number of both established and upstart firms looking to carve out niches in the energy space. Nevertheless, structural advantages and an experienced management team should allow the firm to navigate an evolving competitive landscape.

Financial Strength 

Moreover, the business churns out healthy free cash flow, with over $1.1 billion generated on average over the past three years (high-20s as a percentage of sales). The company’s free cash flow has historically supported persistent share repurchases, and the company’s ability to continue buying back shares amid market disruptions like the coronavirus pandemic is a poignant illustration of its financial health, in our view. As of June 2021, Monster had over $1.5 billion in cash and short-term investments on its balance sheet, with no long-term debt to speak of. 

Still, general liquidity is not a concern. In addition to its healthy cash balance and an untapped revolver, Monster has implemented certain nontraditional means of financing, such as a working capital line of credit that is similar to an interest-bearing liability but not treated as leverage for accounting purposes. 

Bulls Say’s

  • Monster is a leading pure-play incumbent in a secularly advantaged beverage category that is growing in the high single digits, meaningfully above the broader industry average (low single digits).
  • Monster’s strategic partnership with Coca-Cola aligns its fortunes with the widest moat in nonalcoholic beverages, affording it top-tier store positioning and merchandising.
  • International expansion through Coke’s bottlingsystem offers material runway for growth.

Company Profile

Monster Beverage is a leader in the energy drink subsegment of the beverage industry. The Monster trademark anchors its portfolio, and notable offerings include Monster Energy and Monster Ultra. The firm has also started to incubate new trademarks for emerging enclaves of the energy space, like Reign in performance energy. It is primarily a brand owner, outsourcing most of its manufacturing processes to third-party copackers. It primarily uses the Coca-Cola bottling system for distribution after a strategic agreement in which Coke became Monster’s largest shareholder (roughly 19%) and that also included the exchange of certain businesses between the two firms. Most of Monster’s revenue is generated in the United States, though international geographies are increasing in the mix.

(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.