With divestitures of Stubhub, eBay Classifieds, and Gmart largely in the rearview mirror, eBay’s business looks remarkably similar to its genesis: a customer-to-customer e-commerce platform connecting hundreds of millions of buyers and sellers worldwide, with an emphasis on non-new, seasoned goods. The core eBay Marketplace business should have plenty of room to run, considering management’s estimated $500 billion total addressable market for non-new, seasoned goods, and could benefit from swelling interest in resale markets and a strong pull-forward in e-commerce demand in 2020 and 2021.
eBay’s Marketplace generated the sixth-highest gross merchandise volume, or GMV, among global players in 2021, and renewed attention by management in core verticals like collectibles, used and refurbished goods, liquidation inventory, premium shoes, and luxury jewelry–often products without a benchmark average sales price, or ASP, index (limiting price comparison pressure and leaning into the marketplace’s edge in price discovery)-appears clever. The eBay’s, 147 million active buyer base, and recent platform improvements (including managed payments, promoted listings, and inventory management services) should prove sufficient to solidify advantages in many targeted verticals.
Financial Strength:
eBay’s financial health is sound. The company has access to a $1.5 billion commercial paper facility and a $2 billion line of credit represent attractive backstops, particularly when considering that the firm maintained only $4.2 billion in net debt at the end of 2021, with a further $5.8 billion available in short-term investments. eBay’s highly free-cash-flow generative business model, comfortable coverage of interest payments (7.8 times over the same period), and investment-grade credit rating suggest that the firm should have no trouble meeting its fixed obligations.
Management again raised its buyback facility again in the fourth quarter of 2021, to $6 billion from $2 billion prior. With $1.6 billion in cash and equivalents on the balance sheet at the end of 2021, eBay maintains a bulletproof balance sheet, with substantial flexibility to meet fixed interest and principal payments, invest in attractive internal investment opportunities, and return a generous amount of capital to shareholders through share repurchases and dividends.
Bulls Say:
The firm’s managed payments rollout executed seamlessly, and offers optionality for auxiliary financial services down the line.
Recent successes in higher-touch luxury resale and collectibles categories offer a blueprint for sustained growth in the C2C marketplace.
The addition of auction-based items and offsite advertising could catalyze better sell-through rates and monetization in the promoted listings business.
Company Profile:
eBay operates one of the largest e-commerce marketplaces in the world, with $87 billion in 2021 gross merchandise volume, or GMV, rendering the firm the sixth-largest global e-commerce company. eBay generates revenue from listing fees, advertising, revenue-sharing arrangements with service providers, and managed payments, with its platform connecting more than 147 million buyers and roughly 20 million sellers across almost 190 global markets. eBay generates just north of 50% of its GMV in international markets, with a large presence in the U.K., Germany, and Australia.
(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.
The philosophy of the team is to identify mispricing within sectors and securities, allocating active risk in areas in which it has conviction while ensuring the portfolio remains diversified to avoid singular themes being pervasive through the portfolio. The team takes account of global macro insight from the global investment strategy committee and overlays its domestic market knowledge to come up with a base-case expectation looking forward six to nine months depending upon its conviction. In addition to this, the team develops multiple upside and downside scenarios as a risk-management framework. Based on the base case, the team engages in quantitative and qualitative analysis to determine sector allocation. The quant component is where the team will look at historical and relative spread comparison within and across sectors. The outcomes of this analysis are then overlaid by qualitative insight considering technical demand, credit, and liquidity dynamics. The culmination of this analysis in conjunction with the base-case expectation guides the actual portfolio positions. The fund looks to invest across government, semi government, supranational, credit, inflation-linked bonds, securitised assets, and cash. The team is clear about allocating only active positions where it has a high degree of conviction and an expected positive reward profile. Holdings are disclosed daily. BNDS runs as a separate vehicle to the flagship unlisted fund and has some additional restrictions on the amount of residential mortgage-backed securities it can hold owing to requirements on holdings being issued by a listed entity.
Portfolio:
The portfolio can invest across government, semi government, supranational, credit, securitised assets, inflation-linked bonds, and cash. As of November 2021, more than 40% of the portfolio was invested in investment-grade corporate bonds, around 25% in semi government issues, 20% in government, 10% in supranational, with a small amount of mortgage-backed and asset-backed securities. This allocation has been relatively consistent over time, and cash levels have been low, generally a few percentage points, even in times of stress like the early-2020 market plummet. Relative to the Bloomberg AusBond Composite Index, the fund has been long underweight in government bonds, choosing instead to invest more broadly across spread assets. Given the fund’s constraints, the overall portfolio remains high-quality, with 35% of assets in AAA rated issues, no allocation below investment-grade, and a weighted average credit rating of AA-. Portfolio manager Anthony Kirkham and the Western team have historically been opportunistic within their mandate, though duration is kept within plus or minus 1.0 year relative to the benchmark. Active duration moved short relative to the benchmark around mid-2021 but came back in line with the index around yearend. Like most Australian bond managers, they entered 2021 overweight in credit, indicative of their opportunistic profile. Susquehanna Financial Group is the primary market maker, and bid-ask spreads have remained respectable over its relatively short life, moderately higher than passive Australian bond ETFs, which is to be expected. This vehicle contained about AUD 190 million in February 2022 and can be used as a core defensive allocation.
People:
The fund is managed by a seasoned team of investors who remain dedicated to this strategy. The team is led by Anthony Kirkham, who has had more than 30 years of wider experience, including nearly two decades at Western Asset Management, and leading this strategy since 2002. Kirkham has credit analyst, dealer, and portfolio manager experience working for Commonwealth Bank, Metway Bank, RACV Investments, and Citigroup. He is supported by Damon Shinnick, who is a portfolio manager with a focus on credit portfolios. Shinnick has 22 years of experience within the industry including 11 years at the firm. Shinnick has also held an array of portfolio manager roles previously at Challenger Financial, Lehman Brothers, Pension Corporation LLP, and HSBC. Craig Jendra is also a key member of the team, joining Western in 1996 and being promoted to portfolio manager in 2000. Jendra has 25 years of industry experience with previous roles at Citigroup and JPMorgan. The three portfolio managers are supported by analyst Sean Rogan, who joined in 2002 and has 32 years’ industry experience; dedicated investment dealer Anthony Francis; and portfolio analyst Lawrence Daly, who ensures risk characteristics are maintained and adhered to. Together, the group boasts more than 25 years’ industry experience and is among the most impressive in its peer group.
Performance:
BNDS began in November 2018. It has closely tracked its equivalent unlisted fund strategy, Western Asset Australian Bond, over that span. The long-running unlisted fund has done well over the long term, especially compared with peers. It has delivered returns above the Bloomberg AusBond Composite Index, net of fees, over the past decade. That is ahead of its target return of 75 basis points (gross of fees) over the benchmark and market cycle. A tracking error of 100 basis points is targeted. Perhaps more impressive, though, is that these results put the strategy’s flagship A share class in the first quartile of its Morningstar Category over the trailing three, five, and 10 years to December 2021. Sector allocations and credit exposure continue to drive performance. Most of the outperformance has stemmed from the fund’s allocation to higher-spread assets in lieu of government bonds, especially credit. To put this into context, the portfolio has had around 40%-50%exposure within credit since 2002. Adding the strategy’s allocation to supranationals to the mix, this exposure goes up to almost 60%. While this increases the strategy’s exposure to wider credit spreads, it remains high quality, and the majority of it is shorter-dated to control for spread risk. Owing to the mandate restrictions, the fund can’t and doesn’t take large-duration bets. Duration was the second largest contributor to the portfolio in 2021, but has been a small negative attributor over the long term, largely a result of the fund’s short-duration bias in an environment of shrinking bond yields.
(Source: Morningstar)
Price:
It’s critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category’s middle quintile. That’s not great, but based on our assessment of the fund’s People, Process and Parent pillars in the context of these fees, we think this share class will still be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Silver.
(Source : Morningstar)
About Funds:
BetaShares Western Asset Aus Bd ETF BNDS is a compelling choice for domestic fixed-interest exposure owing to its best-in-class team and straightforward approach. BNDS provides daily holdings to the market and has grown steadily since it began in November 2018 with active external market makers. Anthony Kirkham, head of investment/portfolio manager, is the leader of this strategy, and we have high regard for his investment knowledge and skills. Kirkham is supported by an experienced investment team, consisting of Craig Jendra and Damon Shinnick, co-portfolio managers, and Sean Rogan, research analyst. The stability of this group and quality of the research are impressive. There’s appeal to the strategy’s simplistic and relatively conservative investment process, which seeks mispriced domestic fixed-interest securities within various sectors. Sector and issuer limits are applied to help damp volatility in different environments. Still, sector allocation and issuer selection has been strong over the past decade, emphasising the team’s rigourous analysis in these areas. However, this can be a hindrance if yields rise unexpectedly. That said, the portfolio’s active duration was moved around judiciously and contributed strongly in 2021, a testament to the team’s ability to interpret and capitalise on shifting economic conditions. The track record here has also been consistent and solid over multiple time frames, and the annual 0.42% fee is competitive relative to peer
(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.
Lead manager Joe Higgins continues the thoughtful relative value approach that has been in place both here and on his other charge, TIAA-CREF Core Bond TIBDX. This strategy earns an Above Average Process Pillar rating. Higgins has the ultimate authority in ensuring what holdings go into the portfolio but draws heavily on the strength and expertise offered by the sector managers, analysts, and macroeconomic strategists in identifying relative value opportunities across the fixed-income universe. The strategy can invest in everything from corporate bonds and mortgages to municipal bonds and emerging-markets debt, with the higher-risk sectors like high-yield bonds, bank loans, and emerging-markets debt ranging between 10% and 30% depending on the team’s outlook and risk appetite. The strategy has avoided taking extreme positions in any of those areas and has generated its alpha from a variety of sources instead of relying on any one area. This approach has benefited investors through steady-as-it-goes performance rather than wild swings based on drastic portfolio shifts, and it has worked through a variety of market environments.
Portfolio:
As of December 2021, the portfolio’s largest exposures were to investment-grade corporate bonds (24.2% of assets), agency mortgage-backed securities (18.6%), and emerging-markets debt (10.2%). The emerging markets exposure rarely if ever broke double-digit threshold, but its allocation has been on the upswing since March 2020 given the portfolio managers’ belief in its ability to outperform over the long term. The emerging markets’ relative lack of direct correlation to domestic corporate moves, as well as premium on offer from new issuance, make them attractive. This overweighting also makes sense to the managers in context of a rising rate environment, as they seek refuge in assets that are not hypersensitive to rate increases. That 10.2% stake in emerging-markets debt is almost 4 times the category peer median, though, and about half of it is rated below-investment-grade. Coupled with 5.6% in high-yield corporates, 4.3% in nonagency mortgages, and 2.7% in senior loans, the “plus” sector exposure of this portfolio amounted to 22.7% at the end of December 2021. This edges toward the higher half of the 10%-30% “plus” budget and represents increased credit risk, but the strategy’s yield (a proxy for risk) has hugged quite closely to the peer median in the past couple of years, indicating a reasonable level of risk-taking.
People:
Joe Higgins, who replaced long time lead manager Bill Martin at the end of 2020, is a seasoned and capable manager supported by three experienced comanagers and a robust analyst team. The strategy earns an Above Average People Pillar rating. Higgins had been leading the Core strategy since 2011, has been with the firm since 1995, and was previously sector lead on asset-backed securities and commercial mortgage-backed securities. He is supported by the same trio of comanagers that backed Bill Martin: government specialist John Cerra, high-yield leader Kevin Lorenz, and emerging-markets expert Anupam Damani. They are backed by a robust investment team that continues to expand following the legacy Nuveen and Symphony merger. The organization now boasts considerable firepower, with 43 portfolio managers and 60 analysts spread across the fixed-income platform. Even though Higgins has the ultimate decision-making power for this strategy, he draws on the strength and expertise of the sector managers in allocating capital to portfolios per mandate requirements. As such, the whole team provides input to help with portfolio construction, and often the managers’ portfolios will rhyme with each other. Additionally, the introduction of an investment committee and strategy groups provided more formalized structures for manager discussions and viewpoint sharing.
Performance:
The strategy under Joe Higgins’ tenure has bested almost 70% of distinct peers in the intermediate core-plus bond category, keeping up with the record his predecessor Bill Martin set during his tenure from September 2011 to December 2020. Over that period, the Institutional share class returned 4.5% annualized and outpaced roughly two thirds of peers. While lagging performance punctuated this record at various points, most notably in March 2020, by and large “measured consistency” was the characteristic on display for this strategy’s performance. Following the rough showing in early 2020 when the strategy lost 8%, almost 200 basis points more than the peer group median, the strategy experienced more bumps all throughout 2021 as rate volatility had a negative impact on mortgage holdings. On the plus side, the strategy had an underweighting in agency mortgages relative to the benchmark (18.6% versus 27.4% at year-end) so the hit was less severe, and an overweighting in high-yield corporates relative to the bogy (5.6% versus 0%) proved rewarding given robust economic conditions.
(Source: Morningstar)
Price:
It’s critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category’s cheapest quintile. Based on our assessment of the fund’s People, Process and Parent pillars in the context of these fees, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Bronze.
(Source : Morningstar)
About Funds:
TIAA-CREF Core Plus Bond has an experienced lead manager and the solid process remains intact, while the expansive supporting cast has only broadened. The strategy’s Institutional and Advisor share classes earn a Morningstar Analyst Rating of Silver, while the more-expensive share classes are rated Bronze. The W share class, which does not charge a fee, is unrated. Veteran manager Joe Higgins, who has led the sibling strategy TIAA-CREF Core Bond TIBDX since 2011, took over this strategy at the end of 2020 when long time lead manager Bill Martin retired. Higgins was a natural replacement given that he had been running a similar, more-conservative mandate. He is supported by the same trio of comanagers that backed Martin: government specialist John Cerra, high-yield leader Kevin Lorenz, and emerging-markets expert Anupam Damani. All told, Nuveen’s robust taxable fixed-income group boasts more than 100 portfolio managers, analysts, and traders that help Higgins fulfil his mandate. The strategy’s solid process remains unchanged and peppered with measured risk-taking. Higgins and team execute a relative value process that incorporates a broad opportunity set, with the bulk of assets in investment-grade securities and a smaller subset in higher-risk “plus” sectors like high-yield bonds, bank loans, and emerging-markets debt that will typically amount to 10%-30% of assets depending on Higgins’ outlook and allocation decisions.
(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.
Finance and Economy Chart for Dollar Gold Euro Currencies Trading View
Business Strategy and Outlook
Qube’s strategy is to consolidate the fragmented logistics chain surrounding the export and import of containers, bulk products, automobiles, and general cargo, to create a more efficient and cost-effective supply chain. The business has enjoyed some successes to date, though significant scope for industry consolidation remains.
It is alleged Qube to generate robust earnings growth over the long term on acquisitions, developments and organic growth. The domestic port logistics industry has traditionally been very fragmented, highly competitive, and inefficient. Currently, there are more than 250 operators providing port logistics services in one segment of the market. These are typically small operators with limited geographic scope offering limited point-to-point services. Qube’s strategy is to provide a broad range of services nationwide, touching multiple segments of the import/export supply chain. Analysts are supportive of this strategy and believe there is significant scope for further industry rationalisation.
Consolidating the fragmented logistics chain should significantly improve Qube’s competitive position. Qube has already established a dominant market share in some specific port logistics offerings, particularly with regards to rail haulage services to and from Port Botany. Successfully developing its strategic land holdings into inland intermodal terminals should add materially to Qube’s future earnings and support cost advantages to less efficient peers. Qube aims to develop inland rail terminals as an alternative to moving container volumes from port via road. When fully developed, Moorebank will be Australia’s largest inland intermodal terminal. The bulk and general segments are highly fragmented and competitive but Qube is one of the largest players, with operations at 28 city and regional ports. The automotive stevedoring business operates in a duopoly market structure, holding long-term off-ship transportation, processing and storage contracts with major foreign vehicle manufacturers.
Financial Strength
Following the sale of Moorebank warehouses, Qube is in strong financial health. Gearing (net debt/net debt plus equity) was 10% in December 2021, well below Qube’s 30%-40% long-term target range. It has less than AUD 400 million in debt after receiving the upfront component of Moorebank sale proceeds, providing ample headroom to fund developments and bolt-on acquisitions. A special dividend or share buyback is likely in 2022. It is projected net debt/EBITDA to fall from 3.8 at June 2021 to below 2 times in 2022 and for the medium term. Qube’s businesses have delivered steadily increasing operating cash flow in recent years, though operations remain cyclical. Recent growth initiatives should generate strong future cash flow, though a large-scale acquisition or development project may require new equity funding. Qube has significant capital expenditure requirements including Moorebank development. Qube is committed to paying 50%-60% of earnings per share before amortisation as dividends.
Bulls Say’s
There is significant potential to increase efficiency through vertical integration of port logistics services. Qube will attempt to deliver on this strategy through consolidation and integration.
The Moorebank Intermodal Terminal should become a key piece of Sydney’s transport infrastructure, driving strong returns for Qube.
Senior management has a proven track record in the port logistics segment and has demonstrated an ability to generate strong returns for shareholders
Company Profile
Qube has three main divisions: operating; property; and Patrick. Operating undertakes road/rail transportation of containers to and from port, operation of container parks, customs/quarantine services, warehousing, intermodal terminals, international freight forwarding, domestic stevedoring, and bulk transport. Patrick is the container terminals business acquired from Asciano, and the property division includes tactical land holdings in Sydney.
(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.
Shot of elegant smart businesswoman explaining a project to his colleagues with statistics on the computer on coworking place.
Investment Thesis
Operates in a large addressable market – B2C furniture and homewares category is approx. $16bn.
Structural tailwinds – ongoing migration to online in Australia in the homewares and furniture segment. At the moment less than 10% of TPW’s core market is sold online versus the U.S. market where the penetration rate is around 25%.
Strong revenue growth suggests TPW can continue to win market share and become the leader in its core markets.
Active customer growth remains strong, with revenue per customer also increasing at a solid rate.
Successful execution in new growth pillars – Trade & Commercial (B2B) and Home Improvement.
Management is very focused on reinvesting in the business to grow top line growth and capture as much market share as possible. Whilst this comes at the expense of margins in the short term, the scale benefits mean rapid margin expansion could be easily achieved.
Strong balance sheet to take advantage of any in-organic (M&A) growth opportunities, however management is likely to be very disciplined.
Ongoing focus on using technology to improve the customer experience – TPW has invested in merging the online with the offline experience through augmented reality (AR).
Key Risks
Rising competitive pressures.
Any issues with the supply chain, especially because of the impact of Covid-19 on logistics, which affects earnings / expenses.
Rising cost pressures eroding margins (e.g., more brand or marketing investment required due to competitive pressures).
Disappointing earnings updates or failing to achieve growth rates expected by the market could see the stock price significantly re-rate lower.
Trading on high PE-multiples / valuations means the Company is more prone to share price volatility.
1H22 Result Highlights
TPW delivered strong top line growth of +46% YoY for 1H22, despite experiencing some supply chain and product availability issues (which also impacted customer satisfaction metrics). Hence the growth rate would have likely been stronger in our view. The Company also saw some inflationary pressures on product and freight, which saw 1H22 delivered margin decline to 30.5% (from 33.0% in pcp) and was in line with management’s previous guidance.
Advertising & Marketing costs were up +55% YoY and increased as a percentage of revenue to 13.6% (from 12.8% in pcp), driven by a step up in both performance and brand marketing. TPW’s brand awareness continues to increase, now above 60%. Management also spoke about pushing the brand awareness strategy nationally.
TPW’s ongoing investment in the business (people and technology, new growth horizons in B2B and home improvement) saw fixed cost increase YoY and hence saw EBITDA decline -19% YoY to $12.0m.
TPW posted the sixth straight quarter of revenue per active customer growth, which was up +10% YoY. This was driven by higher average order value and the repeat rate.
Company Profile
Temple & Webster Group (TPW) is a leading online retailer in Australia, which offers consumers access to furniture, homewares, home décor, arts, gifts, and lifestyle products.
(Source: BanayanTree)
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.
While COVID-19 is still materially impacting near-term travel demand in many regions of the world, we expect Marriott to expand room and revenue share in the hotel industry over the next decade, driven by a favorable next-generation traveler position supported by renovated and newer brands, as well as its industry-leading loyalty program. Additionally, we believe the acquisition of Starwood (closed in September 2016) has strengthened Marriott’s long-term brand advantage, as Starwood’s global luxury portfolio complemented Marriott’s dominant upper-scale position in North America.
Marriott’s intangible brand asset and switching cost advantages are set to strengthen. Marriott has added several new brands since 2007, renovated a meaningful percentage of core Marriott and Courtyard hotels in the past few years, and expanded technology integration and loyalty-member presence; these actions have led to share gains and a strong positioning with millennial travelers. Starwood’s loyalty member presence and iconic brands should further strengthen Marriott’s advantages. With 97% of the combined rooms managed or franchised, Marriott has an attractive recurring-fee business model with high returns on invested capital and significant switching costs for property owners. Managed and franchised hotels have low fixed costs and capital requirements, along with contracts lasting 20 years that have meaningful cancelation costs for owners.
Financial Strength:
Marriott’s financial health remains in good shape, despite COVID-19 challenges. Marriott entered 2020 with debt/adjusted EBITDA of 3.1 times, as its asset-light business model allows the company to operate with low fixed costs and stable unit growth, but reduced demand due to COVID-19 caused the ratio to end the year at 9.1 times. During 2020, Marriott did not sit still; rather, it took action to increase its liquidity profile, including suspending dividends and share repurchases, deferring discretionary capital expenditures, raising debt, and receiving credit card fees from partners up front. As travel demand recovered in 2021, so too did Marriott’s debt leverage, with debt/adjusted EBITDA ending the year at 4.5 times. If demand once again plummeted, we think Marriott has enough liquidity to operate at zero revenue into 2023.
Bulls Say:
Marriott is positioned to benefit from the increasing presence of the next-generation traveler through emerging lifestyle brands Autograph, Tribute, Moxy, Aloft, and Element.
Marriott stands to benefit from worker flexibility driving higher long-term travel demand. Our constructive stance is formed by higher income occupations being the most likely industries to continue to work from remote locations.
Marriott has a high exposure to recurring managed and franchised fees (97% of total 2019 units), which have high switching costs and generate strong ROICs.
Company Profile:
Marriott operates nearly 1.5 million rooms across roughly 30 brands. Luxury represents 10% of total rooms, while full service, limited service, and time-shares are 43%, 46%, and 2% of all units, respectively. Marriott, Courtyard, and Sheraton are the largest brands, while Autograph, Tribute, Moxy, Aloft, and Element are newer lifestyle brands. Managed and franchised represent 97% of total rooms. North America makes up two thirds of total rooms. Managed, franchise, and incentive fees represent the vast majority of revenue and profitability for the company.
(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.
Several secular trends are affecting Tyson’s long-term growth prospects. While U.S. consumers (81% of fiscal 2021 sales) are limiting their consumption of red and processed meat (71% of Tyson’s sales), they are consuming more chicken (29%). International demand for meat has been strong, and although Tyson’s overseas sales mix is just 12%, it is likely to increase over time, as this is an area of acquisition focus. Also, in order to feed the world sustainably, alternative proteins should play a key role. Tyson is actively investing in lab-grown and plant-based meats and should participate in this growth (albeit to a small degree). The beef segment has been a bright spot in Tyson’s portfolio in recent years, as strong international demand, coupled with a drought-induced beef shortage in Australia, has increased the segment’s operating margins to 10% over the past five years from 2% prior to 2017. Conversely, the chicken segment has suffered from executional missteps that have resulted in structurally higher costs relative to competitors.
About 80% of Tyson’s products are undifferentiated (commoditized), so it is difficult for them to command price premiums and higher returns. Although Tyson is the largest U.S. producer of beef and chicken, we do not believe this affords it a scale-based cost advantage, as its segment margins tend to be in line with or even below those of its smaller peers. The absence of a competitive edge, in the form of either a brand intangible asset or a cost advantage, leads us to our no-moat rating.
Financial Strength:
Tyson’s financial health is viewed as solid and there aren’t any issues to suggest that it will be unable to meet its financial obligations. While Tyson generates healthy cash flow and is committed to retaining its investment-grade credit rating, the business is inherently cyclical, with many factors outside of its control. But management has made changes to improve the predictability of earnings. Chicken pricing contracts, which now link costs and prices, and a greater mix of prepared foods (from 10% in 2014 to the current 19%) both serve as stabilizers. In terms of leverage, net debt/adjusted EBITDA stood at a rather low 1.2 times at the end of fiscal 2021, below Tyson’s typical range of 2-3 times. At the end of December, Tyson held $3.0 billion cash and had full availability of its $2.25 billion revolving credit agreement. Together, this should be sufficient to meet the firm’s needs over the next year, namely about $2 billion in capital expenditures, nearly $700 million in dividends, and $1.1 billion in debt maturities.
Bulls Say:
China’s significant protein shortage resulting from African swine fever should boost near-term protein demand, while the country’s continued moderate increase in per capita consumption of proteins should drive long-term growth.
While investor angst over chicken price-fixing litigation has weighed on shares, Tyson’s recently announced settlements materially reduce this overhang.
In the current inflationary environment, Tyson’s cost pass-through model limits potential profit margin pressure.
Company Profile:
Tyson Foods is the largest U.S. producer of processed chicken and beef. It’s also a large producer of processed pork and protein-based products under the brands Jimmy Dean, Hillshire Farm, Ball Park, Sara Lee, Aidells, State Fair, and Raised & Rooted, to name a few. Tyson sells 81% of its products through various U.S. channels, including retailers (47% in fiscal 2021), food service (32%), and other packaged food and industrial companies (10%). In addition, 11% of the company’s revenue comes from exports to Canada, Mexico, Brazil, Europe, China, and Japan.
(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.
Security and technology risks (including cyber-attacks).
Increased competition, potentially from new forms of payment systems.
Value destructive acquisition(s).
Macroeconomic conditions globally deteriorate, impacting consumer spending and business activity, especially given the coronavirus outbreak.
Significant change at the senior management level.
Company fails to meet market/investor expectations leading to analysts’ earnings downgrade – the stock is likely to come under selling pressure.
Outstanding litigation risk.
Key highlights:
MA’s FY21 results came in above consensus estimates with revenue of $18.9bn (up +23%) vs estimate of $18.8bn and EPS of $8.76 (up +38%) vs estimate of $8.43 amid a spending rebound, with management forecasting YoY growth in FY22 as cross-border travel continues to improve.
MA’s fundamentals remain strong with highly defensible and recurring revenue streams, high incremental margins and superior Free Cash Flow (FCF) generation, and remains well positioned to capture management’s targeted $255 trillion in new payment flows. The impact of potential sanctions on Russia and broader valuation declines of tech stocks amid monetary policy tightening weigh on investor sentiment.
Secular growth should remain strong from ongoing global shifts toward card-based and electronic payments with MA’s innovations and acquisitions to strengthen Buy Now Pay Later (BNPL), crypto currency and account-to-account payments providing further boost.
Management sees significant opportunity by expanding in payments and has upgraded its total addressable market size estimate to $255 trillion, up +8.5% over prior estimate driven by driving growth in person to merchant payments through new wins across the globe, capturing new payment flows, including commercial, B2B accounts payable, bill pay and cross-border remittances, and leaning into payment innovation in areas like instalments, contactless acceptance and crypto currencies.
Company Description:
Mastercard Inc is a technology company in the global payments industry that connects consumers, financial institutions, merchants, governments, digital partners and businesses, enabling them to use electronic forms of payment instead of cash and cheques. The Company provides payment solutions and services through brands such as Mastercard, Maestro and Cirrus.
(Source: Banyantree)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Las Vegas demand remains robust, with fourth-quarter sales reaching 134% of 2019 levels, up from 119% last quarter, driven by strong gaming, food and beverage, and room revenue. Wynn plans to sell and leaseback its Boston assets for $1.7 billion, which will be used to pay down debt and invest back into its existing properties and new opportunities, like the property in the United Arab Emirates (scheduled to open in 2026). Wynn will receive management fees for this property and we see this as a good allocation of capital, supporting our Standard capital allocation rating. Macao benefits from a large addressable market (China’s 1.4 billion population), which is captive (only gambling location in China) and underpenetrated (2% of Chinese visited Macao in 2019), with a propensity to gamble (average Macao visitor produced $925 in gaming sales versus $244 in Las Vegas in 2019). Also, supply is limited, with just 41 casinos versus around 1,000 in the United States, supporting operator regulatory advantages, the source of narrow moats in the industry.
Financial Strength:
Wynn’s 2021 sales and EBITDA (pre-corporate expense) of $3.8 billion and $837 million, respectively, surpassed our $3.4 billion and $808 million forecast, driven by better-than-expected Macao sales results. Wynn shares are viewed as undervalued, but prefer shares of narrow-moat Las Vegas Sands, which also trades at a discount to our $53 valuation, while offering stronger assets, along with a stout balance sheet. Macao (76% of 2019 EBITDA) 2021 revenue of $1.5 billion was ahead of our $1.3 billion estimate, while EBITDA of $96 million trailed our $129 forecast. Encouragingly, Wynn saw strong VIP direct play during the recent Chinese New Year, with turnover per day up 175% from 2021 and at 88% of 2019 levels.
Company Profile:
Wynn Resorts operates luxury casinos and resorts. The company was founded in 2002 by Steve Wynn, the former CEO. The company operates four megaresorts: Wynn Macau and Encore in Macao and Wynn Las Vegas and Encore in Las Vegas. Cotai Palace opened in August 2016 in Macao, Encore Boston Harbor in Massachusetts opened June 2019. Additionally, we expect the company to begin construction on a new building next to its existing Macao Palace resort in 2022, which we forecast to open in 2025. The company also operates Wynn Interactive, a digital sports betting and iGaming platform. The company received 76% and 24% of its 2019 prepandemic EBITDA from Macao and Las Vegas, respectively.
(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.
Strong FY22 earnings guidance momentum as CSL continues to see strong demand.
Seqirus flu business which recorded its first year of positive earnings (EBIT) in FY18 and continues to perform well.
Strong demand for their portfolio of products.
High barriers to entry in establishing expertise + global channels + operations/facilities/assets.
Strong management team and operational capabilities.
Leveraged to a falling dollar.
Key Risks:
Competitive pressures.
Product recall / core Behring business disappoints.
Growth disappoints (underperform company guidance).
Turnaround in Seqirus flu business stalls or deteriorates.
Adverse currency movements (AUD, EUR, USD)
Key highlights:
CSL Ltd (CSL) 1H22 results came in ahead of expectations. Net earnings (NPAT) of $1.76bn, down -3%, or -5% on a constant currency (CC) basis.
Revenue of $6,041m was up +4%. EBIT of $2,215m, was -8% weaker.
Margins of 36.7% was down from 41.1% in the pcp.
NPAT of $1.76bn, down -5% (Constant Currency, CC) and likewise, earnings per share $3.77, down -5%, despite revenue up +4% (CC) driven by strong growth CSL’s market leading haemophilia B product IDELVION and specialty products KCENTRA and HAEGARDA.
CSL Behring: Total sales of $4,356 was flat, whilst EBIT of $1,331, was -22% weaker
Immunoglobulins: sales of $1,977m was down -9% with management pointing to supply tightness temporarily impacting growth.
Albumin: sales of $571m was up +1% due to competitive pressures in the EU as local manufacturers compete for volume and as CSL saw a decline in US as supply constraints stem from plasma collections.
Haemophilia: sales of $587m was up +5% with sales in recombinants of $372m, up +12% offset by plasma sales, $215m, down -6%.
Specialty: sales of $914m was up +2% despite sales in peri-operative bleeding of $465m, up +8%.
Seqirus: revenue of $1,685m was up +17% as seasonal influenza vaccine sales were up +20% and CSL achieved a record volume ~110m doses in the northern hemisphere
Company Description:
CSL Limited (CSL) develops, manufactures and markets human pharmaceutical and diagnostic products from human plasma. The company’s products include pediatric and adult vaccines, infection, pain medicine, skin disorder remedies, anti-venoms, anticoagulants and immunoglobulins. These products are non-discretionary life-saving products.
(Source: Banyantree)
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Laverne Securities Pty Ltd, ACN 629 216 477, T/As Investor Desk, is a Corporate Authorised Representative of Laverne Capital Pty Ltd (AFSL 482937). This service is administered by OpenInvest Limited ACN 614 587 183 via the OpenInvest Portfolio Service ARSN 628 156 052. This website provides factual information about the service, and any general advice contained does not take into account your objectives, financial situation or needs. Before making any investment decision, please review the PDS and Target Market Determination available at https://www.investordesk.com.au/key-documents/. Should you require assistance in determining whether an investment in the service is right for you, you may wish to seek personal advice from an appropriately licensed financial adviser.
