Author: lvc-admin

Categories
Dividend Stocks

Fortune Brands has historically generated consistent free cash flow

Business Strategy & Outlook

Since spinning off from its holding company Fortune Brands, Inc., in 2011, Fortune Brands Homes and Security has achieved admirable top-line growth and improved profitability. Its improved financial performance has been the result of a successful operating strategy overlaying a backdrop of strengthening new-home construction and repair and remodel, or R&R, spending. Residential construction was a bright spot during pandemic-affected 2020-21, and housing starts should remain elevated at about 1.6 million units in 2022. However, deteriorating affordability has slowed housing demand, and the project starts to decrease 10% in 2023 to 1.435 million units and decline roughly 10% in 2024 to 1.3 million units, which is about in line with new home production in 2018-19. One can expect affordability will improve over the next two years as mortgage rates subside and home price appreciation returns to its 4% long-term trendline. The project will rebound to 1.55 million units by 2026 and average around 1.45 million units toward the end of the decade.

R&R spending surged during the pandemic, but one cannot expect a dramatic downturn in home improvement projects, although the amount spent per project could moderate over the near term, resulting in flattening growth over the next couple years. Historically, project incidence has been relatively stable, but average project expenditure is more sensitive to macroeconomic conditions. Nevertheless, continue to see a 4%-5% long-term growth trajectory for R&R spending bolstered by several secular tailwinds related to aging housing stock, favorable demographics, and increased acceptance of smart home and energy-efficient products and solutions. Fortune Brands has historically generated consistent free cash flow. Since stand-alone cash flow data has been available, the company has posted 16 straight years of positive free cash flow, and that trend continues, supporting future acquisitions and shareholder distributions.

Financial Strengths

The Fortune Brands has a sound balance sheet, and its consistent free cash flow generation should easily support its debt-service requirements and future capital-allocation decisions. As of first-quarter 2022, Fortune Brands had approximately $3.4 billion of outstanding debt and $378 million of cash, which equates to a net debt/2022 estimated EBITDA ratio of about 2.1. Fortune Brands’ debt balance consists of outstanding debt on its $1.25 billion revolving credit facilities, $600 million of 4% five-year senior notes due in September 2023, $500 million of 4% 10-year senior notes due in June 2025, $700 million of 3.25% 10-year senior notes due in September 2029, $450 million of 4.00% 10-year senior notes due in March 2032, and $450 million of 4.50% 30-year senior notes due in March 2052. Fiscal 2006 is the first-year stand-alone cash flow statement data available for Fortune Brands Home & Security, and 2021 marked the 16th consecutive year the company has generated positive free cash flow. Since 2006, the company has posted an average free cash flow conversion rate of over 100% and a 7% average free cash flow/sales ratio. The company’s ability to generate consistent free cash flow, even in a downturn, demonstrates the durability of Fortune Brands’ business model.

Bulls Say

  • The R&R market is poised for long-term growth, driven by several secular tailwinds, including the aging housing stock and favorable demographics. 
  • Fortune Brands has a robust acquisition pipeline, and future acquisitions could help the company achieve stronger sales growth. 
  • Fortune Brands’ consolidated profitability and ROIC will improve after it spins off its less competitively advantaged cabinets business.

Company Description

Fortune Brands Home & Security is a leading home and security products company that operates three segments. The company’s $2.9 billion (fiscal 2021) cabinets segment, which will be spun off in early 2023, sells cabinets and vanities under the MasterBrand family of brands. The $2.8 billion plumbing segment, led by the Moen brand, sells faucets, showers, and other plumbing fixtures. The $2.0 billion outdoors and security segment sell entry doors under the Therma-Tru brand name, Fiberon-branded patio decking, and locks and other security devices under the Master Lock and SentrySafe brand names.

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Technology Stocks

Align has invested heavily to develop and market its offerings to juveniles and win over parents.

Business Strategy & Outlook

In the 25 years since Align was granted U.S. Food and Drug Administration approval for its clear dental aligners, the Invisalign brand has become synonymous with effective and discreet orthodontic treatment. The serviced addressable market comprises 15 million new orthodontic case starts each year, three fourths of which represent the teen market and the remainder adults. The Invisalign has achieved low-teens market penetration, largely due to its success at appealing to the adult market. Through two decades of research and development and an unrivaled database from roughly 10 million treated patients, Invisalign estimates that the system can treat over 90% of malocclusion cases (misaligned teeth), a substantially wider array of patients than seen with most other clear aligner firms.

Align is focused on disrupting the traditional metal braces market, which represents the lion’s share of the 21 million orthodontic cases today (over 80%), through innovation in customized 3D-printed clear aligners and industry-leading scanners and design software. The dental industry is still in the early stages in the shift to digital technologies, largely stuck to old workflows. Intraoral scanners, such as Align’s iTero device, combined with computer-aided design software (CAD/CAM) are typically seen as the gateway for dental providers to shift new case volumes over to clear aligners (nearly 90% of all Invisalign cases are submitted via digital scan). On the demand side, Align’s largest obstacle has been capturing a more meaningful share of the teen market (currently mid-single-digit penetration). In recent years, Align has invested heavily to develop and market its offerings to juveniles and win over parents, adding solutions for younger patients with mixed dentition, free replacement trays, and physical indicator “dots” that monitor treatment compliance. Additionally, Align has been focused on driving growth through treatments initiated by general practitioner dentists. While traditional metal braces are under the domain of orthodontists, clear aligner treatments offer a separate, incremental stream of revenue to the general dentist.

Financial Strengths

As of fiscal year-end 2021, cash and cash equivalents were $1.2 billion, and the company held no outstanding debt. One cannot have any concerns about Align’s ability to meet minimum purchase agreements with suppliers and do not foresee any liquidity issues facing the company. The free cash flow of $933 billion in 2022 and do not anticipate the firm initiating a dividend in the near term, as Align prefers to return capital to shareholders via share repurchases. The company has $650 million remaining under its existing share-repurchase plan, and recently announced it would use $200 million for accelerated repurchases.

Bulls Say

  • Align’s first-mover advantage has allowed the company to build a dominant market share and a brand synonymous with clear aligners. 
  • Align’s 10 million-plus treated patient data set is unrivaled by competitors and grants the company an edge in developing new indications of treatment. 
  • Invisalign starts saw a tailwind in 2021 as a result of the so-called Zoom effect, with a sharp uptick across cosmetic procedure categories.

Company Description

Align is the leading manufacturer of clear dental aligners globally, having pioneered the technology with the introduction of its Invisalign branded aligners in 1998. Since then, Invisalign has become a household name, having treated over 10 million patients with malocclusion (misaligned teeth) through orthodontist and dentist-guided treatment plans. The company maintains dominant market share of clear aligners, despite the introduction of direct-to-consumer competitors upon the expiration of key patents that began in 2017. Align also manufactures intraoral scanners (iTero), used for orthodontic treatment and restorative dental procedures (digital models for crowns, veneers, and implants).

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Technology Stocks

Tate & Lyle, is focused on the increasing use of alternative ingredients in food and beverage to remove unhealthy components

Business Strategy & Outlook

Tate & Lyle, or T&L, is focused on the increasing use of alternative ingredients in food and beverage to remove unhealthy components (sugar, fat, salt), improve nutritional credentials through added fiber, and increase the shelf life of products. The company has a narrow moat, as the efforts over the last few years to optimize the portfolio, culminating with the sale in 2022 of a controlling stake in the commoditized primary products business unit, have improved the company’s pricing power and competitive position. The company is a market leader in sweeteners, with ingredients that range from high intensity to natural sweeteners, supported by the need to cut calories in food and beverages. The opportunity is substantial as sugar still accounts for 80% of all sweeteners. As the replacement of sugar with more concentrated alternatives comes with significant challenges regarding the product’s mass, stability, and texture, the company’s complementary offering in mouthfeel and fortification is perfectly placed to provide comprehensive solutions for customers. 

T&L plans to continue building its expertise in these somewhat niche and interconnected segments of the specialty ingredients market, since other segments such as flavors are already dominated by large players such as Givaudan and IFF, with T&L unlikely to garner any competitive advantage. The above-average revenue growth as T&L steps up its research and development investment and expands the share of revenue coming from integrated solutions—its service-led platform where the company works closely with customers throughout the product development process, combining multiple ingredients to derive a customized solution that best addresses the customer’s needs. The company’s sucralose segment—with business-to-business sales of the Splenda brand—has seen pricing pressures following the entrance of Chinese players, which has led the company to reduce its capacity. The segment’s top-line growth prospects are likely inferior to the remaining business, but given its brand-related intangible assets, the segment can maintain its operating margin above 30%.

Financial Strengths

Tate & Lyle is in strong financial health. The company has low financial gearing, with net debt to adjusted EBITDA expected to be maintained below 1 time following the disposal of the primary products (commodity ingredients) business unit and a USD 800 million undrawn credit facility. Tate & Lyle will continue to generate healthy free cash flows, similar to other ingredient companies and the consumer staples sector as a whole. Acquisitions form an important part of T&L’s strategy as it looks to expand its portfolio and capabilities within its key areas of expertise of sweetening, mouthfeel, and fortification, with the company aiming to provide an even broader portfolio of solutions to customers as well as gain exposure to fast-growing natural ingredients. These acquisitions are primarily financed from free cash flow, which will enable T&L to maintain its solid financial position. Maintaining a relatively conservative balance sheet is wise as it enables the company to weather potentially volatile earnings and affords capacity for future acquisitions should the right opportunities arise.

Bulls Say

  • Tate & Lyle’s portfolio is well positioned to benefit from secular trends that see consumers demanding healthier, safer, cleaner-label products. 
  • The company has undergone extensive reorganization in order to improve profitability and returns on capital, such as withdrawal from the sugar business and commodity ingredients, allowing management to focus on high-value-added specialty ingredients. 
  • The company’s focus on niche, complementary areas of the food ingredients market could make it the supplier of choice for certain highly specified applications in food reformulation.

Company Description

Tate & Lyle is a global provider of food and beverage ingredients and solutions. Following the sale in 2022 of a controlling stake in its commodity ingredients business, as well as its exit from the sugar business a decade earlier, Tate & Lyle is now focused on specialty ingredients—sweeteners, starches, and soluble fiber. It has 2,700 employees and operates in over 140 countries, with most of its revenue generated in North America.

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Technology Stocks

Kone is increasing investments to connect most of its installed base to the cloud

Business Strategy & Outlook

As the market dynamics in China and Europe shift, the established relationships with developers and end users will protect Kone’s position as a top global elevator player. The company’s success in winning contracts for new elevator and escalator installations stems from a record of delivering tailor-made solutions that can save costs by shortening a building’s construction time, lowering energy use, or improving people traffic flow. In China, now the world’s largest elevator market, Kone has the number-one share in new installations, and in Europe the company is the second-largest competitor for new equipment. 

Winning new installations puts the company at a competitive advantage in securing maintenance contracts, which are more lucrative and important to long-term returns than new installations. In China, where it has now been present for 20-plus years, Kone shares the number-one position for maintenance contracts, and in Europe, the Middle East, and Africa, it is number three. As the original equipment manufacturer, the company is in a good position to win the associated maintenance contract on a new installation because it can offer lower downtime through the quickest access to spare parts, knowledge of its own equipment, and its long record of reliability. This last point is especially important in developing markets, where Kone’s European brand, associated with quality and safety, carries weight. Elevators have become more software-driven, enabling better usage management to lower energy costs or control access for security purposes. As with cars, increasing the sophistication of tools and skills needed to maintain software-enabled elevators has limited some third-party repair providers to servicing older models. Kone is increasing investments to connect most of its installed base to the cloud over the next few years, helping customers dynamically manage elevator and escalator flow as well as providing ongoing online diagnostics to minimize downtime. Once a customer signs on to cloud management, it will be even more unlikely to switch to a new service provider.

Financial Strengths

The company possesses a strong balance sheet, benefiting from a net cash position built by an asset-light business model and only modest acquisitions. Kone’s model of outsourcing most of its components lowers both the capital intensity of its business and the pressure on the balance sheet to finance future revenue with debt. Double-digit EBIT growth, combined with improvements in working capital, has doubled the company’s annual free cash flow generation over the past several years. The free cash flow to remain more than EUR 1 billion per year for the next several years.

Bulls Say

  • Kone’s well-known brand, combined with the market’s sensitivity to safety issues, should put it in a good position to retain a majority of its maintenance contracts in China. 
  • As the revenue mix in China moves away from new installations toward higher-margin maintenance contracts, Kone’s EBIT margin should expand. 
  • Replacement and modernization of aging elevators in Europe and North America should offset slowing revenue growth in the China business.

Company Description

Kone, whose name means “machine” in Finnish, is the world’s fourth-largest supplier of elevators and escalators. Kone began producing elevators in Finland in 1918 and today generates revenue in three ways: selling new elevators and escalators, overhauling or modernizing old equipment, and servicing its installed base. Most of the company’s profit comes from the last activity, where contracts are rolled over annually with built-in price increases. The bulk of the company’s business is in elevators, which are more numerous globally than escalators.

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Global stocks

UCB transformed from a hybrid pharma firm into a pure-play biopharmaceutical company

Business Strategy & Outlook

UCB emerged as a major biopharmaceutical player in the 1990s with the development of blockbuster drugs Zyrtec and Keppra. Throughout the 1990s and early 2000s, UCB transformed from a hybrid pharma/chemical firm into a pure-play biopharmaceutical company by shedding its packaging, film, and chemical businesses. Acquisitions of Celltech (2004) and Schwarz Pharma (2006) strengthened the biopharmaceutical pipeline, bringing in late-stage assets that would eventually be approved as Cimzia (immunology), Vimpat (epilepsy), and Neupro (Parkinson’s disease). These key products helped offset the impact of Zyrtec and Keppra patent losses, and the company has continued to shape its expertise in immunology and central nervous system disorders. 

UCB’s current portfolio faces key patent losses over the next 10 years, but successful pipeline development could help the firm fill the gaps. Among UCB’s central nervous system therapies, the epilepsy drugs Vimpat and Briviact to be strong contributors until key patent expirations in 2022 and 2026, respectively. In immunology, the steady growth for Cimzia until its 2024 patent loss. Through UCB’s acquisition of Zogenix, it gained Fintepla, an oral solution for patients suffering from Dravet Syndrome and Lennox-Gastaut Syndrome, two severe forms of epilepsy. UCB received approval in the EU and Great Britain in August 2021 for Bimzelx, a drug targeting IL-17A and IL-17F for the treatment of moderate to severe plaque psoriasis. It has subsequently received approval in Japan, Canada, and Australia. It could reach the U.S. market by 2024. The immunology landscape is fairly crowded, but Bimzelx could carve out a slice of the market. The potential for label expansions into psoriatic arthritis and other immunology indications. Additionally, UCB has two other later-stage candidates in complement-mediated disorders, with rozanolixizumab and zilucoplan (through the Ra Pharma acquisition announced in 2019). The complement-mediated disorders landscape is also somewhat crowded, with many competitors vying to displace Alexion’s (since acquired by AstraZeneca) dominant position.

Financial Strengths

The UCB is in good financial health, with solid earnings and cash flow generation. UCB has deleveraged over the years, and it ended 2021 with about EUR 860 million in net debt on its balance sheet. Year-end cash and equivalents totaled nearly EUR 1.3 billion. The firm has historically relied on acquisitions to fill gaps left by patent losses and in late 2019 agreed to acquire Ra Pharmaceuticals for about EUR 2 billion, net of cash acquired. The large purchase was mostly financed with new debt, but one cannot have any concerns about the company meeting its financial obligations. In early 2022, UCB acquired Zogenix for EUR 1.7 billion. This acquisition is financed through a combination of cash and a new term loan. The acquisition of Zogenix brought Fintepla into UCB’s portfolio. Fintepla is an FDA-approved oral solution for patients suffering from Dravet Syndrome and Lennox-Gastaut Syndrome, two severe forms of epilepsy. This acquisition will be earnings accretive from 2023 onwards.

Bulls Say

  • The immunology market presents a massive market opportunity for Cimzia and newer drug Bimzelx. 
  • UCB has taken steps to build out the pipeline in attractive therapeutic areas, such as complement mediated disorders. 
  • UCB should be able to leverage its commercial expertise to sell pipeline candidate bimekizumab, approved as Bimzelx outside the U.S. and on track for U.S. approval in 2024.

Company Description

UCB is a Belgium-based biopharma firm focused on the development of novel therapies for the treatment of central nervous system and immunologic diseases. Historically, revenue was derived from allergy medicine Zyrtec and epilepsy drug Keppra, which have both lost patent protection. The firm’s key products are Cimzia (immunology), Vimpat (epilepsy), Neupro (Parkinson’s disease and restless leg syndrome), Briviact (epilepsy), Bimzelx (psoriasis), Evenity (osteoporosis), Nayzilam (cluster seizures), and Fintepla (Dravet Syndrome and Lennox-Gastaut Syndrome).

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Technology Stocks

UCB SATwilio has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform

Young woman trading stock market by touching.

Business Strategy and Outlook 

Twilio is a cloud-based communication-platform-as-a-service, or CPaaS, company offering communication application programming interfaces, or APIs, and prebuilt solution applications aimed at improving customer engagement. Through these APIs, Twilio’s platform allows developers to embed messaging, voice, and video functionality into other applications. Twilio has a long growth runway ahead as it continues to make strategic organic and inorganic investments to expand its platform. In a go-to-market model that focuses on empowering developers to utilize the APIs to rapidly build and deploy solutions, Twilio has been able to expand into use-cases that would be difficult to penetrate otherwise. For common use cases, Twilio has developed applications, like Flex Contact Center, which combine various channel APIs into a unified interface to create use-case-specific solutions.

Twilio’s platform as an incrementally value-additive technology stack, with each layer of the stack building on top of and enhancing the prior. The foundational components of the stack are the Super Network, a global network of connections to carriers that provides efficient communication routing, and the Segment Customer Data Platform, which collects first-party data to assemble customer profiles that inform and optimize customer engagement. The communication channel APIs are deployed through the Programmable Communications Cloud and then are combined and expanded into application platforms in the Engagement Cloud to offer higher level functionality for specific use-cases. It can be viewed this full stack as best-in-breed in the CPaaS space, enabling deeply integrated, sticky communication solutions. Twilio has stellar customer metrics, with churn consistently below 5% and net dollar expansion in excess of 130% in recent years. Twilio’s market opportunity to be significant as the communications industry is still early in its transition to software-based communications. Twilio to lead the charge in the CPaaS space by continuing to gain share from legacy communication vendors and expanding into greenfield markets.

Financial Strength

Twilio’s financial position is sound. Revenue is growing rapidly, and the company is beginning to scale, while the balance sheet is in good shape. As of December 2021, the firm had cash and short-term investments of $5.4 billion and a debt balance of $986 million. In March 2021, Twilio issued $1.0 billion of senior notes, consisting of $500 million of 3.625% notes due 2029, and $500 million of 3.875% notes due 2031. In June 2021, the company redeemed its prior convertible notes, due March 2023, in their entirety. Since raising approximately $150 million in its IPO in 2016, Twilio has completed several secondary offerings, recently announcing a $1.8 billion offering of its Class A common stock in 2021. Twilio has yet to achieve GAAP profitability, as the company remains focused on reinvesting excess returns back into the company, both on an organic and inorganic basis, to build out the platform and enhance future growth prospects. Twilio does not pay a dividend, nor repurchase stock, and for a young company in a relatively nascent industry, it is appropriate that it focuses capital allocation on reinvestments for growth.

Bulls Say’s

  • The addition of SI partnerships and solution APIs should lead to increasing success in winning enterprise customers, which not only offer a greater lifetime value, but also tend to be stickier customers. 
  • Twilio has stellar user retention metrics, with churn consistently below 5% and net dollar retention north of 130% in recent years. 
  • As Twilio focuses on developing more solution APIs and growth shifts from usage-based messaging to SaaS-like priced solutions, there should be a natural uptick in both gross margins and recurring revenue.

Company Profile 

Twilio is a cloud-based communication platform-as-a-service company offering communication application programming interfaces, or APIs, and prebuilt solution applications aimed at improving customer engagement. Through these APIs, Twilio’s platform allows software developers to integrate messaging, voice, and video functionality into new or existing business applications. The company leverages its Super Network, Twilio’s global network of carrier relationships, to facilitate high speed cost-optimized global messaging and voice-based communications.

 (Source: MorningStar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do, business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities. Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and is not liable for any unintentional errors in the document. The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Dividend Stocks

Tesco Is the Best- Positioned Grocer in the Coverage

Business Strategy & Outlook:
Tesco, the largest grocery retailer in the United Kingdom in terms of sales and store network, has successfully completed an ambitious turnaround. It has seen one of the worst times in its history over the past decade, including an accounting controversy in 2014 and a subsequent decline in profits and growth owing to the advent of discounters in the U.K. food retail business. The firm is largely focused on enhancing the in-store experience, providing new own-brand products (entry-level and fresh produce), and re-evaluating supplier connections (smaller base and longer-term partnerships). The turnaround strategy focused on the company’s core strengths: food size and well-documented purchasing power.

Tesco’s ability to better control supplier-related cost inflation, along with its superior cost-saving measures, has enabled it to not only balance competition challenges, but also boost margins and price position (via the Aldi Price Match plan) relative to its competitors. The concerted efforts of management to convert these scale advantages into profitable expansion were fruitful. In the future, the group shall generate more normalized levels of profitability, albeit below historical standards. Tesco outperforms most of its Big Four competitors (Sainsbury’s, Asda, and Morrisons) on key indicators like grocery volume, like-for-like sales growth, and large-store sales growth, proving that its approach is succeeding. Tesco’s Booker is the major food distributor in the U.K., with a presence in both the retail (Symbol and Independent) and catering industries. This is consistent with the company’s long-term strategy to increase scale by consolidating its supplier base and indirectly increase food sales through Booker’s overlap in the food sector.

Financial Strengths:
Tesco is in solid financial condition. At the end of fiscal 2022, net debt/adjusted EBITDA (including operating leases) was 3 times. The operating lease liability is around GBP 7.5 billion, and the net pension shortfall is negligible. The dividend was reintroduced in fiscal 2018 (expected around GBX 11 per share for fiscal 2023) after being suspended when earnings dropped in 2015. Management has also implemented stricter financial discipline, enhanced working capital, and ceased the battle for space. Dividends might expand in parallel with underlying EPS growth at a payout ratio of 50% over the next five years (from slightly less than GBX 10 per share to about GBX 14 by 2027). Given the sector’s low growth prospects and Tesco’s established presence, the grocer to is able to finance its development and store maintenance with capital expenditures below 2.0% of sales. Tesco generates free cash flow at a rate that is significantly higher than the industry average, as a result of the recent improvement in profitability. Free cash flow to the firm is expected to account for close to 3% of sales on average through fiscal 2027. In recent years, Tesco has repositioned its operations, including withdrawing from less lucrative areas, which has helped reduce its debt. It also owns property, worth about GBP 22 billion at the end of fiscal 2022, which could be shed to generate cash if needed, though it has been doing the opposite recently by acquiring more stores to rid itself of inflation.

Bulls Say:
As the largest grocer in the U.K. in both the online and offline channels with almost 100% coverage and a network of more than 3,500 stores, Tesco should be able to use its scale to drive results in ways subscale peers cannot.
An early mover in the online channel, Tesco not only holds a dominant market position (35% online grocery share) but also operates profitably on an EBIT level, thanks to scale.
Management is successfully repositioning the business in terms of pricing, in-store experience, and operating efficiencies.

Company Description:
Tesco is one of the largest food retailers in the world, operating thousands of stores in the United Kingdom, Ireland, and Europe. It recently sold its Asia operation. According to Kantar, Tesco is the market leader in the U.K. with a share around 27%, roughly double that of Asda and Sainsbury’s. Tesco operates a core supermarket business in addition to convenience and neighborhood outlets. With a 35% digital market share in the U.K., the company holds a dominant position online. Tesco gained exposure to the cash-and-carry and out-of-home delivering industries with the landmark GBP 4 billion acquisition of Booker in 2018.

(Source: Morningstar)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.
The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.
The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Global stocks

Raymond James’ bank will also receive a boost from rising interest rates

Global network and financial technology concept.

Business Strategy & Outlook

Raymond James’ revenue and earnings will hold up better over the near to medium term compared with more pure-play investment banks, thanks to a combination of acquisitions, interest rates, and a relatively large wealth-management business. Over 80% of Raymond James’ net revenue comes from relatively more stable wealth management, asset management, and traditional banking, with usually less than 20% coming from capital markets. 2021 capital markets revenue was abnormally high and will likely continue to reset lower over the next year or so. Given Raymond James’ relatively lower proportion of capital markets revenue, its company wide revenue should hold up better than many other firms’. Raymond James’ bank will also receive a boost from rising interest rates. The company as a whole will benefit from multiple acquisitions, such as Charles Stanley, TriState Capital, and SumRidge Partners. The company’s banking segment experienced quite a bit of pressure over the previous two years, but the future looks bright. Net interest margins compressed by more than 100 basis points to less than 2% in 2021, as benchmark interest rates fell and much of the bank’s assets were variable rate. Additionally, the allowance for loan losses has increased to about 1.2% of loans in early 2022 from 1% in 2019. The company’s banking operations in recent years contributed around 40% of operating income, but that has fallen to less than 20% in some recent quarters.

Expectations are that the U.S. Federal Reserve will increase the federal-funds rate to over 3% by the end of 2022, which will boost the yield on Raymond James’ variable-rate loans. Additionally, the acquisition of TriState Capital has increased the company’s banking operations by about 30%. Loan-loss charge-offs may tick up over the next year or two, but the company’s existing allowance for loan losses should be sufficient, so Raymond James’ banking segment will regain its place as a material driver of earnings.

Financial Strengths

Raymond James is in fine financial health. At the end of its fiscal 2021, the company had $2 billion of senior notes payable compared with $8.3 billion of equity. It doesn’t have any senior notes coming due until 2024. The company has total leverage of about 7.5 times, representing a combination of the bank, which is leveraged 14 times, and the brokerage operation. These leverage ratios are reasonable, given the profile of the company. Raymond James also has quite a bit of cash on its balance sheet. Typically around $500 million is housed at the parent company with upward of another $1 billion of parent company cash that is housed in Raymond James’ own bank or lent to its other businesses.

Bulls Say

  • Additional acquisitions can provide some lift to earnings if the macro environment falters. 
  • The company may have a greater opportunity to recruit advisors as it fills holes in its geographic footprint and offers both employee and independent advisor affiliation options. Recent advisor headcount growth and the Alex. Brown brand may portend superior advisor recruitment. 
  • Net interest income and earnings will meaningfully rise with interest rates.

Company Description

Raymond James Financial is a financial holding company whose major operations include wealth management, investment banking, asset management, and commercial banking. The company has more than 14,000 employees and supports more than 5,000 independent contractor financial advisors across the United States, Canada, and the United Kingdom. Approximately 90% of the company’s revenue is from the U.S. and 70% is from the company’s wealth-management segment.

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Global stocks

The strategic rationale for Ipsen’s divestment is to have a greater focus on its faster growing specialty care segment

Business Strategy & Outlook

Ipsen is a global biotechnology company headquartered in France that develops and commercializes medicines across three therapeutic areas: oncology, neuroscience, and rare diseases. Ipsen was founded in 1929 as a consumer healthcare company focused on prescription-based products for digestive disorders and neurological disorders. Ipsen has a global footprint and sells more than 25 drugs in 115 countries, with a direct commercial presence in 34 countries. Over the past nearly 100 years, the company has shifted its focus to its specialty care segment, which comprised 92% of its 2021 revenue. In early 2022, Ipsen announced the divestment of its consumer healthcare segment, which accounted for 8% of 2021 revenue. The strategic rationale for Ipsen’s divestment is to have a greater focus on its faster growing specialty care segment.

Approaching declines in economic profits due to Ipsen’s leading product, Somatuline, facing generic competition in Europe and the United States contributes to the negative moat trend rating. Somatuline accounted for 42% of total sales in 2021, and it will decline to 25% of sales in 2025 due to generic competition impacting sales. Growth from Ipsen’s other marketed products, which have patents that extend until the early to mid-2030s, will somewhat offset the negative impact from generic entry. However, patent expirations for Somatuline and generics gaining market share will likely nevertheless dampen returns by the end of the ten-year explicit forecast period. Thanks to Ipsen’s strong balance sheet, the company is well-positioned to continue funding its internal research and development efforts in addition to external innovation opportunities over the next decade in order to diversify its portfolio. Although the company’s advanced drug candidates are either in the filing stage or Phase 3 with relatively high probabilities of approval due to promising trial data, there is still a degree of uncertainty associated with Ipsen’s clinical and commercial success with these drugs.

Financial Strengths

Ipsen is in decent financial health, and the business continues to continue providing a steady stream of cash. Ipsen made a strategic decision to divest its consumer healthcare segment for EUR 350 million to Mayoly Spindler. This was a strong financial decision since the consumer healthcare segment only accounted for 8% of total revenue in 2021. The management will use the proceeds from the divestment to further expand and diversify its faster-growing specialty care segment. The management team has a history of returning cash to shareholders in the form of dividends. Over the past several years, management has paid a dividend between EUR 0.85 and EUR 1.00 to shareholders. Ipsen announced its 2022 dividend increased by 20% to EUR 1.20. The Ipsen’s shareholder distributions, as mixed as many other biotechnology companies under the coverage, do not pay dividends. The Ipsen’s revenue growth will be constrained by generic competition, so it may better serve long-term investors to reinvest in the company’s pipeline candidates instead of distributing dividends.

Bulls Say

  • Ipsen has a sound financial structure and strong cash generation, which allows it to further develop and expand its pipeline. 
  • Ipsen has a strong and diversified portfolio spanning three key therapeutic areas: oncology, neuroscience, and rare diseases. 
  • The divestment of the consumer healthcare segment allows Ipsen to have an even greater focus on its faster-growing specialty care segment.

Company Description

Ipsen is a global biotechnology company headquartered in France that develops and commercializes medicines across three therapeutic areas: oncology, neuroscience, and rare diseases. Ipsen was founded in 1929 as a consumer healthcare company focused on prescription-based products for digestive disorders and neurological disorders. Over the past nearly 100 years, Ipsen has shifted its focus to specialty care, which comprises the vast majority of its total revenue. In February 2022, Ipsen announced the divestment of its consumer healthcare business, which accounted for 8% of 2021 revenue. Ipsen has a large global footprint and sells more than 25 drugs in 115 countries.

(Source: Morningstar)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Funds Funds

Bennelong ex-20 Australian Equities Fund: Has a track record of adding value by outperforming the market over the long-term

Fund Objective

The Fund’s objective is to grow the value of your investment over the long term via a combination of capital growth and income, by investing in a diversified portfolio of primarily Australian shares, providing a total return that exceeds the S&P/ASX 300 Accumulation Index by 4% per annum after fees (measured on a rolling three-year basis). 

Fund Strategy

The portfolio comprises securities purchased primarily from, but not limited to, the S&P/ASX 300 Index (but excluding those securities in the S&P/ASX 20 Index). The Fund may invest in securities expected to be listed on the ASX except those expected to be included in the S&P/ASX 20 Index upon listing. The Fund may also invest in securities listed, or expected to be listed, on other exchanges where such securities relate to ASX-listed securities. Derivative instruments may be used to replicate underlying positions on a temporary basis and hedge market and company-specific risks. The Fund cannot purchase securities that are in the S&P/ASX 20 Index. However, when a security that is held within the Fund moves into the S&P/ASX 20 Index, that security may continue to be held for so long as deemed appropriate. The investment team will use its discretion in selling down that security, having regard to the best interests of unitholders. In this way, the Fund may hold securities in the S&P/ASX 20 Index from time to time.

Portfolio Performance

Investment Team:

The BAEP investment team consists of eight investment professionals:

  1. Mark East: Chief Investment Officer and Portfolio Manager 
  2. Keith Hwang: Director, Quantitative Research 
  3. Neale Goldstone-Morris: Senior Investment Analyst, Strategy 
  4. Kieran Sisson: Senior Investment Analyst 
  5. Doug Macphillamy: Senior Investment Analyst 
  6. Brad Clibborn: Senior Investment Analyst 
  7. Jack Briggs: Senior Investment Analyst 
  8. Todd Briggs: Investment Analyst 

In the last two years, there has been one hire Doug Macphillamy: Senior Investment Analyst and one departure Julian Beaumont.

BAEP operates under a flat organisational structure with all team members contributing to the investment decision making process. This model has been deliberately adopted to ensure a collaborative effort and avoid a hierarchical structure. Collectively, the investment team has experience in portfolio management; fundamental, macroeconomic, strategy & quantitative research and analysis, and in trading & execution. There is a series of constant checks, balances and back-ups in the business and investment process which support its structure. Mark East (CIO) has the final say on portfolio construction and ultimately accountability/responsibility. The portfolio manager is supported by the extensive resourcing within the broader BAEP investment team. Keith Hwang has primary responsibility for trading and execution, with Kieran Sisson acting as back-up.

About Fund:

Bennelong ex-20 Australian Equities Fund’s objective is to outperform the S&P/ASX 300 Accumulation Index excluding the portion of return attributed to the S&P/ASX 20 Leaders Index, by 4% per annum after fees on a rolling 3-year basis. The Fund invests primarily in Australian shares with high quality business models, strong growth, and underestimated earnings momentum and prospects.

(Source: Banyantree, investmentcentre)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.