Category: Research

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IPO Watch

Supriya Lifescience displays healthy listing with 55% premium

Money bag with the word IPO (Initial public offering; stock market launch) and a calculator. The first public sale of shares of a joint stock company. Business and finance concept

The Rs 700 crore- IPO by the API manufacturer, Supriya Lifescience was issued from December 16 to 20, 2021. The issue price was in the range of INR 265-274 per equity share. The Book Running Lead Managers were Axis Capital Limited and ICICI Securities Limited.

Overall, the issue received bids for 1,03,89,57,138 shares against 1,45,28,299 shares on offer, according to NSE data. The IPO comprised a fresh issue of up to Rs 200 crore and an offer for sale of up to Rs 500 crore.

The subscription by QIBs was 31.83 times, NII category was subscribed 161.22 times, Retail investors subscribed 56.01 times, thereby making the entire subscription 71.51 times.

The pre-issue holding of promoters was 99.98%, which after issue is 68.24%.  The scrip was listed on secondary market at INR 425 on BSE with premium of 55.11% and on NSE it was listed at INR 421.

Proceeds of the issue would be utilized for funding capital expenditure requirements of the company, repayment and/ or pre-payment, in full or part, of certain borrowings availed by the company and general corporate purposes.

Supriya Lifescience looks forward to achieve continuous growth in coming years on account of strong fundamentals. Since past three to four years it has bee growing at the CAGR of 18%. The company has managed to maintain 40% EBITDA margin, which is due to their focus on penetrating into more regulated markets where we are able to get a much better average selling price for the existing products. They look forward to add more APIs into existing therapeutic categories apart from adding new therapeutic categories in their basket, like decongestants, anti-gout, xanthine derivatives and more vitamin derivatives. They wish to focus more on anti-anxiety therapies.

Supriya Lifescience envisages to expand across newer geographies and focus more on regulated markets like North America, Japan and China. Currently, twelve of the existing products are backward integrated and contribute about 65% of the total revenue and it continues to be their strategy for further capacity expansion and product developments as well. About Rs 92 crore of the amount that will be raised would be utilised for capacity enhancements by adding a new production block which would add further capacity.

About the company:

Supriya Lifescience is a manufacturer and supplier of active pharmaceutical ingredients (APIs) with a focus on research and development. As of October 31, it had niche product offerings of 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and antiallergic. The API maker has consistently been the largest exporter of Chlorpheniramine Maleate and Ketamine Hydrochloride from India, contributing to 45-50 per cent and 60-65 per cent, respectively, of the API exports from India, between fiscal 2017 and 2021.

(Source: economictimes.com)

General Advice Warning

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

Categories
Fixed Income Fixed Income

PIMCO ESG Global Bond Fund: A Fund providing exposure to core bond holding with ESG bias

The Fund provides exposure to investment grade securities from around the globe while incorporating PIMCO’s ESG screening framework. The strategy can be used as a core bond holding in client portfolios who have an ESG bias. The PIMCO Global Bond Fund is in attraction due to the well-resourced / experienced investment team and PIMCO’s well established investment process. PIMCO’s ESG framework involves three stages: (1) Exclude (restrictions on certain sectors). (2) Evaluate (best in class ESG issuers + prime engagement candidates). (3) Engage (engage issuers to improve ESG related business practices).

Downside Risk

  • Interest rate risk (bond prices and yields are inversely related). 
  • Credit risk (the risk of downgrades or even default) & inflation risk. 
  •  Personnel risk – significant turnover among the 3 lead PMs.

Fund Performance (As at Aug, 2021)

C:\Users\Akhila\Downloads\Screenshot 2021-12-29 144804.png

Investment Process

PIMCO applies a wide range of strategies including Duration analysis, Credit analysis, Relative Value analysis, Sector Allocation and Rotation and individual security selection. The Manger looks to make active decisions with a long-term focus and avoid extreme swings in duration or maturity with a view to creating a steady stream of returns. The Manager has designed and structured a global investment process that includes both top-down and bottom-up decision-making. The first and most important step in the firm’s process is to get the long-term view correct. The figure below provides a summary of the key elements in the investment process.

C:\Users\Akhila\Downloads\Screenshot 2021-12-29 145011.png

Secular analysis: The Manager considers its secular analysis as critical to the investment process, with the firm devoting three days every year to a “Secular Forum”. At this forum, the firm formulates PIMCO’s outlook for global bond markets over the next three to five years. Selected members of the investment staff are assigned secular topics to monitor, including monetary and fiscal policy, inflation, demographics, technology, productivity trends, and global trade. Secular researchers tackle their subjects on a global basis and approach them over a multi-year horizon. At the forum the researchers present their findings to all of the firm’s investment professionals. 

Decision making: Post Secular and Economic Forums, the Investment Committee (senior portfolio managers) develop major strategies that serve as a model for all portfolios using a consensus-based approach. The IC utilises top-down analysis provided by the forums as well as bottom-up input from specialists who focus on various fixed income sectors and the regional portfolio committees. The Investment Committee sets targets for portfolio characteristics such as duration, yield curve exposure, convexity, sector concentration and credit quality and ensures themes are consistently applied across all portfolios. The portfolio management group including the PIMCO Global Strategy team, through the incorporation of the Investment Committee’s model portfolio characteristics, will then construct the Fund.

About the fund

 The ESG Global Bond Fund is an actively managed portfolio of global fixed interest investment which incorporates PIMCO’s ESG screening. The portfolio predominantly invests in governments, corporate, mortgage and other global fixed interest securities.

(Source: Banyantree)

General Advice Warning

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

Categories
Shares Small Cap

Bega Cheese economic moat required to sustainably generate economic profits

Business Strategy and Outlook

Bega has transformed from a dairy processor with a focus on business to business operations to a branded consumer food company with a more diversified earnings base and less exposure to volatile milk prices. While dairy will remain a key category for Bega Cheese, the focus will be on high value products such as cream cheese and infant formula. In January 2021, Bega finalised the acquisition of Lion Dairy and Drinks from Kirin Group for AUD 534 million. As part of the acquisition, Bega acquired leading brands in milk-based beverages and yoghurt, white milk, and plant-based beverages, in addition to 13 manufacturing sites and Australia’s largest national cold chain distribution network. 

Revenue from the branded segment, which includes spreads, grocery products and Lion’s Dairy and Drinks portfolio, to expand at a CAGR of 18% to fiscal 2026, underpinned by new product innovation and bolt-on acquisitions. Bega Cheese has made limited investment in its brands, particularly in Australia where Fonterra is the licensee of the Bega brand, however since acquiring the spreads and grocery business in 2018, marketing spend as proportion of revenue has increased to 3% from 1% and it is anticipated to remain the higher level.

Financial Strength

Our fair value estimate is AUD 5.20 per share. Bega’s balance sheet is sound. Leverage, measured as net debt/EBITDA improved to 2.3 at June 30, 2021, from 2.4 at the prior period and comfortably below covenants. This is a pleasing position post the major acquisition of Lion Dairy and Drinks in fiscal 2021 which was funded through AUD 267 million of new and extended debt facilities and a AUD 401 million equity raising. It is expected that further deleveraging in coming years as acquisition synergies are achieved, earnings improve and noncore assets are divested, with net debt/EBITDA falling below 2.0 by 2023. Bega has the capacity to pursue smaller acquisitions while maintaining a dividend payout ratio of 50% normalised EPS. The group’s fiscal 2022 EBITDA guidance of AUD 195 million to AUD 215 million has necessitated an 11% downgrade to our fiscal 2022 EBITDA forecast to AUD 215 million.

Bulls Say’s 

  • Bega is shifting investment to the spreads and grocery business, which we view as less commoditised and higher margin than dairy, with strong niche positions in Vegemite and peanut butter 
  • External factors outside of Bega’s control, such as the weather, can adversely impact supply and demand dynamics. This can impact commodity prices, inputs costs and the firm’s supply chain and lead to volatile earnings 
  • Changing consumer trends toward dairy-free and vegan diets could lead to declines in per-capita dairy and cheese consumption, weighing on the majority of Bega’s earnings

Company Profile 

Bega Cheese is an Australian based dairy processor and food manufacturer of well-known brands including Bega Cheese and Vegemite. Bega Cheese operates two segments: the branded segment which produces consumer packaged goods primarily sold through the supermarket and foodservice channels and the bulk segment which produces commodity dairy ingredients primarily sold through the business-to-business channel.

(Source: Morningstar)

General Advice Warning

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

Categories
ipo IPO Watch

CMS Info Systems Limited IPO subscribed 1.95 times

The company is engaged in installing, maintaining, and managing assets and technology solutions on an end-to-end outsourced basis for banks, financial institutions, organized retail and e-commerce companies in India.

The IPO comprises of offer for sale of equity share amounting to Rs. 1,100 crore. The CMS Info Systems IPO open date is Dec 21, 2021, and the close date is Dec 23, 2021. The issue may list on Dec 31, 2021. The mininimum lot size comprises of 69 shares at a price band of Rs.205-216 per equity share.  A retail-individual investor can apply for up to 13 lots (897 shares or ₹193,752).The IPO will be listed both on NSE as well as BSE .

The IPO aims to raise funds for the following objectives;

  • To carry out an offer for sale of equity shares by promotors aggregating upto Rs. 11,000 million.
  • To achieve the benefits of listing the equity shares on the stock exchanges.

CMS Info System Limited  IPO has got 50 per cent reserved for qualified institutional buyers (QIBs), 35% reserved for retail investor and 15 per cent reserved for non-institutional investors (NIIs). 

CMS Info Systems IPO Subscription Status (Bidding Detail)

The offering received 7,32,71,721 applications versus 3,75,60,975 shares on offer, resulting in a 1.95-to-1 subscription ratio. The part earmarked for retail bidders was subscribed 2.15 times, according to BSE data, while the institutional quota garnered 1.45 times offers. So far, the HNI section has been subscribed to 1.98 times.

Company Profile

As of March 31, 2021, CMS Info Systems Limited was India’s largest cash management firm in terms of ATM and retail pick-up points. The company instals, maintains, and manages assets and technological solutions for banks, financial institutions, organised retail, and e-commerce companies in India on an end-to-end outsourced basis.

The company is divided into three segments: 1. cash management services, 2. managed services (such as banking automation product sales, common control systems, and software solutions, and so on), and 3. others (such as financial card issuance for banks and card personalisation services). It has a network of 3,965 cash vans and 238 branches and offices covering all of India’s states and union territories as of August 31, 2021.

(Source: CMS Info Systems IPO DRHP)

General Advice Warning

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

Categories
Funds Funds Research Sectors

UBS Property Securities Fund: The fund which aims to outperform the S&P/ASX 300 Property Accumulation Index

Investment strategy 

The Fund uses a multi-step investment process for constructing the Fund’s investment portfolio that combines top-down sector allocation with bottom-up individual stock selection. Top-down sector allocation is determined through a systematic evaluation of listed and direct property market trends and conditions. Bottom-up stock selection is driven by proprietary analytical techniques to conduct fundamental company analysis, which provides a framework for security selection through an analysis of individual securities independently and relative to each other. Investment return objective The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling three year periods.

Investment return objective 

The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling three year periods.

 Downside Risks

  • Deterioration in the Australian economy especially the property market (fundamentals deteriorate). Rising bond yields negatively impacting pricing. 
  • The Portfolio Manager/analysts miss-calculate their bottom-up valuation 
  • Key person risks in Mr. Pica (however, the CBRE investment team is relatively large and capable of succession planning). 

Fund Performance (as at 31 May 2021)

C:\Users\Akhila\Downloads\Screenshot 2021-12-23 163325.png

(Source: UBS)

Fund Positioning: Top 5 Holdings – Overweights & Underweights (as at 31 May 2021)

C:\Users\Akhila\Downloads\Screenshot 2021-12-23 164000.png

(Source: UBS)

Investment Process

The Fund uses an investment process that combines in-depth top-down and bottom- up fundamental market research with a disciplined and systematic approach to portfolio construction and risk management. The Portfolio Manager’s bottom-up approach integrates both quantitative and qualitative research to identify individual securities where the real estate is undervalued and represents the most compelling investment opportunities. The securities research process incorporates several factors including: 

  • Property visits – the Portfolio Manager utilises its local presence to gauge the quality and location of the real estate, assessing properties and capital expenditure needs at the property level. 
  • Management meetings – the Portfolio Manager assesses the management team’s alignment with shareholders; determines the depth and experience of the team; and judges their ability to articulate and execute their strategy. 
  •  Modelling – the Portfolio Manager generates cash flow earnings projections; performs net asset value analysis; and analyses the capital structure. 

About the fund

The UBS Property Securities Fund (portfolio managed by CBRE while Distributed by UBS) is a portfolio of mainly Australian Real Estate Investment Trusts that the investment team believes are being undervalued by the market, based on the in-house assessment of the company’s future cashflows. The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling five-year periods 

(Source: Banyantree)

General Advice Warning

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

Categories
LICs LICs

Metrics Master Income Trust Seeking to Raise $440m through Unit Purchase Plan

On 28 October 2021, MXT announced a Unit Purchase Plan (UPP) proposing to issue 220.8m new units at a price of $2.00 per unit. The Trust is targeting to raise ~$441.6m. While the Trust maintains the flexibility to accept applications in excess of the target raise amount, applications in excess of this amount may also be scaled back.

The Offer closed on 30 November 2021 with an Issue Date of 3 December 2021. New units are expected to commence trading on 6 December 2021.

Capital raised will be invested in accordance with the investment mandate and target return of the Trust.

MXT targets a return of the RBA cash rate plus 3.25% p.a. (currently 3.35% p.a. net of fees) through the economic cycle, with income distributions intended to be paid monthly. Since listing on the ASX in October 2017, MXT has delivered a net return of 5.15% pa.

Net Asset Value of metrics Master Income Trust is $1,573,565,708. Current Unit Price is $2.07. 

Performance 

Performance.png

Company Profile

The Investment Objective of the Metrics Master Income Trust is to provide monthly cash income, low risk of capital loss and portfolio diversification by actively managing diversified loan portfolios and participating in Australia’s bank‐dominated corporate loan market. The Manager seeks to implement active strategies designed to balance delivery of the Target Return, while seeking to preserve investor.

(Source: FN Arena, Bloomberg, MXT)

General Advice Warning

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

Categories
Funds Funds

UBS Property Securities Fund: The fund which aims to outperform the S&P/ASX 300 Property Accumulation Index

Investment strategy 

The Fund uses a multi-step investment process for constructing the Fund’s investment portfolio that combines top-down sector allocation with bottom-up individual stock selection. Top-down sector allocation is determined through a systematic evaluation of listed and direct property market trends and conditions. Bottom-up stock selection is driven by proprietary analytical techniques to conduct fundamental company analysis, which provides a framework for security selection through an analysis of individual securities independently and relative to each other. Investment return objective The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling three year periods.

Investment return objective 

The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling three year periods.

 Downside Risks

  • Deterioration in the Australian economy especially the property market (fundamentals deteriorate). Rising bond yields negatively impacting pricing. 
  • The Portfolio Manager/analysts miss-calculate their bottom-up valuation 
  • Key person risks in Mr. Pica (however, the CBRE investment team is relatively large and capable of succession planning). 

Fund Performance (as at 31 May 2021)

C:\Users\Akhila\Downloads\Screenshot 2021-12-23 163325.png

(Source: UBS)

Fund Positioning: Top 5 Holdings – Overweights & Underweights (as at 31 May 2021)

C:\Users\Akhila\Downloads\Screenshot 2021-12-23 164000.png

(Source: UBS)

Investment Process

The Fund uses an investment process that combines in-depth top-down and bottom- up fundamental market research with a disciplined and systematic approach to portfolio construction and risk management. The Portfolio Manager’s bottom-up approach integrates both quantitative and qualitative research to identify individual securities where the real estate is undervalued and represents the most compelling investment opportunities. The securities research process incorporates several factors including: 

  • Property visits – the Portfolio Manager utilises its local presence to gauge the quality and location of the real estate, assessing properties and capital expenditure needs at the property level. 
  • Management meetings – the Portfolio Manager assesses the management team’s alignment with shareholders; determines the depth and experience of the team; and judges their ability to articulate and execute their strategy. 
  •  Modelling – the Portfolio Manager generates cash flow earnings projections; performs net asset value analysis; and analyses the capital structure. 

About the fund

The UBS Property Securities Fund (portfolio managed by CBRE while Distributed by UBS) is a portfolio of mainly Australian Real Estate Investment Trusts that the investment team believes are being undervalued by the market, based on the in-house assessment of the company’s future cashflows. The Fund aims to outperform (after management costs) the S&P/ASX 300 Property Accumulation Index over rolling five-year periods 

(Source: Banyantree)

General Advice Warning

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

Categories
Funds Funds

Pendal Horizon Fund: An actively managed portfolio of Australian shares

 The Fund is led by Crispin Murray, who has over 27 years’ industry experience and is currently the Head of Equity Strategies at Pendal. Mr. Murray is supported by a research team of nineteen, including Mr. Rajinder Singh who has over 17 years’ experience in Australian equities and manages a range of sustainability and ethical funds for Pendal.

The benchmark index is S&P/ ASX300 Accumulation Index.

Downside Risks: 

  • Market & security specific risk including Australian economic conditions deteriorate. 
  • The Portfolio Manager/analysts miss-calculate their bottom-up valuation. 
  • Stock selection fails to yield alpha against the benchmark – Companies which are screened out, such as in materials, energy, gambling, outperform. 
  • Key man risks with Crispin Murray, Andrew Waddington and Jim Taylor.

Investment Team:

Pendal’s nineteen-member Equity team is one of the largest in the industry. The Fund is managed by Crispin Murray, who is also the Head of Equity and is assisted by Rajinder Singh, who has a combined 44 year’s industry experience.

Fund Performance:

Fund Positioning:

Sector Allocation:

Investment Philosophy & Process:

Investment Philosophy: The Fund’s investment philosophy is based on the belief that good corporate governance and sustainability is a central factor to a company’s longterm success. 

Investment Process: The investment process is driven by bottom-up, fundamental research of stocks listed on the Australian Stock Exchange (both large and small cap). The key features of the process are best described in the diagram below. The Manager also utilises a proprietary system as part of its investment process, which includes Analyst Analyser which is a database that captures analyst financial models, valuations and recommendations

About the Fund:

The Pendal Ethical Share Fund is an actively managed portfolio of Australian shares which seeks to ensure that funds are invested in an ethical and socially responsible manner. The Fund invests in companies whose practices and impacts are aligned with an investor’s own social, environmental and ethical preferences and aims to provide a return (before fees, costs and taxes) that exceeds the S&P/ASX 300 Accumulation Index over a 5-year period.

(Source: Banyantree)

General Advice Warning

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

Categories
ETFs ETFs Research Sectors

iShares S&P-ASX200- an attractive cost effective exposure to the top 200 Australian companies of ASX

Investment Objective: 

The Fund aims to provide investors with the performance of an index, before fees and expenses, composed of the 200 largest Australian securities listed on the ASX.

Portfolio Objective: 

Can be used as a core Australian equities exposure. 

Low cost access (relative to fund managers managing domestic portfolios) to the 200 largest companies on the ASX in a single fund.

Positives:

• Low cost exposure to broader market, without having to pick individual stocks. 

• Given the concentration in the Australian market, investors can use this ETF as a core holding whilst selecting lesser known stocks to drive portfolio alpha. 

Negatives: 

• Deterioration in Australian economy. 

• Aggressive increase in global bonds yields, leading to equity risk repricing. 

• Parent company experiences financial stress or negative corporate governance event.

ETF Performance:

ETF Positioning:

About the Company:

BlackRock is a global asset manager listed on the New York Stock Exchange. BlackRock has a comprehensive range of products and services across asset classes, geographies and investment strategies with 135.

(Source: Banyantree)

General Advice Warning

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

Categories
Funds Funds

CFS Index Australian Bond: Simple and reasonably priced choice for diversified Australian bond exposure

Approach

FSI matches the risk factors of the benchmark, including duration, sector exposures, and credit quality by employing a full replication method. The strategy can hold securities that have been or are expected to be included in the index, and it can exclude those likely to drop in or out. On average, the cash holding would be in the vicinity of 0.5% because of the impact of daily flows and liquidity needs. The larger asset base gives the firm the benefit of scale and helps to keep a lid on overall transaction costs. FSI uses the BlackRock Aladdin portfolio management tool to manage the index-tracking process end to end, including trading and risk assessment and monitoring.

Portfolio

CFS Index Australian Bond replicates the Bloomberg AusBond Composite 0+ Year Index fully. As of 30 September 2021, the fund is composed mainly of Treasury (56.6%) and government-related (semigovernment and supranational) debt (36.4%). Corporate credit constitutes most of the remaining portion of the fund. A major portion of the credits in the index are issued by banks, followed by diversified financials and real estate trusts. . The concentrated credit exposure to banks and financials means Australian property fundamentals play a role in the portfolio’s performance in the long run.

People

FSI has a long history of managing passive strategies. FSI’s institutional passive funds under management is substantial. As of August 2021, FSI had around $5.1 billion in active funds and $12.2 billion in passive strategies. The Australian fixed-income team headed by Stephen Cooper within FSI is responsible for the CFS Index Australia Bond Fund. Cooper is an industry veteran. He is supported by four portfolio managers in the team, with Darja Milosevic and Alex Nikolovski dedicated to passive vehicles.

Performance 

As a core bond holding, CFS Index Australia Bond has served investors well over time by bringing broader portfolio volatility down and protecting capital when equity market slides. On the other hand, it has lagged when yields rose and when credit markets have been strong. This was evident in 2013 when the fund’s 1.7% gain trailed over half of its category peers or when yields rose toward the second half of 2020 through the end of the first quarter of 2021 (November 2020–March 2021). Encouragingly, the fund had done well when equity markets were weak. Its relatively long duration and high-quality exposure have been a boon during such occasions. 

CFS Performance.png

About the Fund

CFS Wholesale Indexed Australian Bond Fund is a unit trust incorporated in Australia. The objective of the Fund is to closely track the UBS Warburg Australian Composite Bond Index, All Maturities. The Fund invests in securities issued or guaranteed by governments, statutory authorities, banks, and corporations of a high credit standing, with some cash for liquidity.

(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.