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Global stocks Shares

Ramsay Health Care reported solid earnings in fiscal year 2021

Investment Thesis :

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

Key Risks:

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

Key financial highlights of year2021:

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

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

Company Profile:

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

General Advice Warning

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

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Shares Technology Stocks

Whispir’s strong FY21 results seems positive for the stock

Investment Thesis

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

Key Risks

We see the following key risks to our investment thesis:

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

FY21 key trading metrics 

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

Company Description  

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

General Advice Warning

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

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Shares Technology Stocks

Another Strong Quarter for Zoom with Steeper Q4 Deceleration in Guidance

However, third-quarter guidance was mixed but largely in line and implied fourth-quarter guidance shows a steeper deceleration in top line growth than anticipated as a result of increasing churn and lower customer’s additions in the online channel that focuses on smaller customers. 

Zoom has been guiding to deceleration as the year progresses, even as it has been beating expectations and raising full year expectations over the last three quarters. There is a long runway for growth as the company gains traction with Zoom Phone and evolves its main application to a communication platform. Along these lines, management will focus on expanding its platform to feature a wider array of revenue generating products as hyper growth normalizes.

Current remaining performance obligations, or cRPO, grew 58% year over year in the quarter, compared with 54% revenue growth. While this is generally a positive indicator for revenue over the next year, management was careful to point out that billings cycles are growing increasingly concentrated in the April quarter and that therefore both cRPO and deferred revenue are to decrease sequentially in the third quarter.

Company’s Future outlook

Zoom Vedio Communication’s last traded price was 347.50 USD, whereas its fair value estimate is 252.00 USD, which makes it a highly overvalued stock.  Revenue grew 54% year over year to $1.021 billion, which topped the high end of guidance of $990 million. Direct and channel business was strong, with enterprise customers doing larger deals but taking more time to evaluate the solution and being more strategic in their approach. Up sells of Zoom Phone and a pickup in Zoom Rooms helped drive larger deals. New customers accounted for 74% of revenue, which is unusually high for a software company of Zoom’s size. Zoom Phone momentum continued during the quarter, with the company reaching 2 million seats. Net dollar expansion remains strong at 130%,

Company Profile

Zoom Video Communications provides a communications platform that connects people through video, voice, chat, and content sharing. The company’s cloud-native platform enables face-to-face video and connects users across various devices and locations in a single meeting. Zoom, which was founded in 2011 and is headquartered in San Jose, California, serves companies of all sizes from all industries around the world.

(Source: Morningstar)

General Advice Warning

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

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Shares Small Cap

InvoCare Headwinds with the Return of Funeral Restrictions Immaterial to FVE

The company boasts well-known, highly respected brands and cost advantages over the long tail of smaller players in the highly fragmented death care industry, underpinning our wide economic moat rating. Death is one of few certainties in life, supporting steady demand for InvoCare’s services. Death rates can fluctuate from year to year. For instance, social distancing and increased hygiene focus in the wake of the COVID-19 pandemic led to a virtually non-existent flu season and significantly lower mortality rates in calendar 2020. However, death rates are very consistent over the long run.

While the program created some near-term disruption as venues closed or were otherwise impaired while undergoing refurbishments, InvoCare to capture an increasingly large portion of market share, given its dominant position, brand strength, and refreshed service offering following the venue refurbishments. Customers, typically the family of the deceased, are relatively price-insensitive, given the highly emotional context surrounding death care. 

Financial Strength 

InvoCare’s balance sheet is in a strong position following the AUD 274 million equity raising in calendar 2020. Leverage, measured as net debt/adjusted EBITDA, improved to 1.3 at fiscal year-end 2020, from 2.4 in fiscal 2019, comfortably below covenant levels of around 3.5. As earnings improve, net debt to fall below 1.0 times EBITDA by fiscal 2022. Underlying operating income lifted 46% on the coronavirus-ravaged prior corresponding period, or PCP, to AUD 39 million, still around 10% below the first half of fiscal 2019. Pricing bounced back during the period as restrictions on funeral attendances eased and pricing recovered—a demonstration of the strength of the underlying business.

Australia’s hardline approach to minimising COVID-19 cases with social distancing, lockdowns, and an increased focus on hygiene is leading to the second consecutive year of virtually no flu. InvoCare’s Australian funeral volumes in the first half were flat on the prior corresponding period and down approximately 3% on the prepandemic first half of fiscal 2019. The number of deaths to grow at an average CAGR of around 3% per year for the next decade, accelerating beyond 2030 due to demographics. The last traded price of Invocare Ltd was 12.15 AUD while it’s Fair Value Estimate 15.30 AUD which shows that InvoCare has potential to Grow.

Bulls Say’s

  • InvoCare consistently generates return on invested capital above its weighted average cost of capital, reflective of its pricing power due to its market position, reputation, and strong brand equity.
  • Industry volumes are immune to economic factors and will steadily grow as the population increases.
  • Prepaid funerals effectively lock in future sales and provide InvoCare with a low-cost source of funding.

Company Profile 

InvoCare is the largest funeral, cemetery, and crematorium operator in Australia and New Zealand. We estimate InvoCare enjoys over a third of revenue share in Australia, and around a fifth in New Zealand, and is the number one player in both countries. Australia contributes the vast majority of consolidated earnings. InvoCare owns a portfolio of over 60 brands, including three flagship national Australian brands: White Lady, Simplicity Funerals, and Value Cremations, and owns and operates 290 funeral homes, along with 16 cemeteries and crematoria. 

(Source: Morningstar)

General Advice Warning

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

Categories
Global stocks Shares

oOh! Media Ltd reported solid first half year results in 2021

Investment Thesis:

  • Out of Home advertising has a strong market share .(47 % in Australia and New Zealand) 
  •  Due to the current uncertainty around lockdown restrictions, the share price are traded at a meaningful discount in comparison to its valuation in terms of DCF / PE-multiple; EV/EBITDA multiple.
  • Dividends have been temporarily suspended, with the Board expecting to reconsider when market conditions improve and the Company’s lenders agree.
  • OML operates in a highly concentrated market which makes it difficult for new players to enter in.
  • The top line of the company is still well-diversified, with no single contract having a large impact on revenue.
  • Management did not disclose an earnings guidance for FY22, but did say that “revenue for Q3 is now pacing 38 percent higher than the corresponding period in 2020,” and also stated that audiences and associated revenues will see a strong recovery when the current lockdowns end.
  • Unproven Cathy O’Connor having vast media experience and a track record of leading profitable media firms joined as OML CEO in January 2021.

Key Risk:

  • Threats from competitors lead to loss in market share.
  • Unsatisfactory growth (company and industry specific).
  • The pandemic has lasted longer than anticipated.
  • Market cyclicity in advertising.
  • Updates on contract renewals have been disappointing.

 Highlights of key FY21 results:

  • OML reported solid 1H21(first half of year 2021) results, reflecting improvement in earnings. During the underlying period OML reported revenue of $251.6m which is 23% up  compared to 1H20(first half of year2020).
  • The increase in revenue was driven by revenue recovery across its key products namely commute, road ,retail , fly , locate and other junkee media and Cactus Imaging .
  • During the underlying period, the gross margin was 42.5% which is 8.8 points up in comparisons to 1H20, indicating a return to pre covid levels.
  • EBIDTA for the underlying period was $33.3 million, which is 209% above from 1H20, ton account of margin improvement leveraging revenue growth.
  • With the help of its property partners, OML was able to secure $19 million in net rent abatements.
  • Underlying NPATA was $2.4m versus a loss of $16.9m in 1H20.
  • The balance sheet of OML improved, with the gearing ratio (Net Debt / Underlying EBITDA) falling to 1.1x (from 1.8x) and net debt falling to $94 million, down by 16 percent from the previous first half year result.
  • The total capital investment for the year will be about $25 million, with the focus remaining on revenue growth and concession renewals.
  • The Board has put a stop to dividends for the time being, with the purpose of reviewing the decision if market conditions improve and the Company’s lenders agree.

Company Profile:

oOh!media Ltd (OML) is one of Australia’s largest operators of out-of-home advertising products, including all major advertising formats such as billboards, shops, street furniture, airports, and office towers (largest scale with footprint in all major regions in Australia and New Zealand). The company employs 800 individuals, with 150 working in sales, 250 in operations (cleaning, maintaining street furniture, and so on), and the remainder in shared services, technology, and so on.

General Advice Warning

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

Categories
Shares Technology Stocks

oOh!Media Ltd a buy given the Company’s leverage to ad spend pick up once restrictions ease.

Investment thesis

  • Strong market share (~47% in Australia / New Zealand) in a growing advertising medium Out Of Home (OOH).
  • The share price trades below our blended valuation (DCF / PE-multiple / EV/EBITDA multiple).
  • Dividend temporarily suspended, with the Board intending to revisit this decision when prevailing market conditions improve and with consent of the Company’s lenders.
  • Management did not provide quantitative FY22 earnings guidance but did provide “revenue for Q3 is currently pacing 38% higher than the corresponding period in 2020 and 74% of Q3 2019”. Further, management noted, “forward visibility remains uncertain given the ongoing effects of Covid-19 lockdowns and associated movement restrictions, however we expect that when the current lockdowns end there will be a strong recovery in audiences and associated revenues as has been the case previously”. 
  • The market that OML competes in is concentrated (majority share with three very well financed competitors), which poses a challenge for international players wanting to come in (need to have a network established to be an out-of-home player). 
  • Unproven CEO Cathy O’Connor became CEO of OML in January 2021, however she brings extensive experience in media and history of running profitable media companies. 
  • OML utilises audience analytics to stay ahead of the curve, with its association with Quantium (Quantium is 50% held by Woolworths and the other 50% is private equity, with its data set currently covering all the Woolworths loyalty data, NAB credit card data, real estate core logic etc to capture more than 75% of Australians spend). OML believes Quantium gives it an edge over its competitors, especially given it has exclusive rights and the contract was only recently renewed.

Key Risks

  • The following are the key challenges to the investment thesis:
  • Competitive threats leading to market share loss.
  • Disappointing growth (company and industry specific).
  • Pandemic is prolonged longer than expected.
  • Cyclicality in advertising markets 
  • Disappointing updates on contract renewals.

Highlights of key FY21 results

Relative to the pcp: (1) Revenue of $251.6m was up +23% driven by revenue recovery across key formats in Australia (Road, Retail and Street Furniture) and NZ. OML maintained the number one market position in both the Australian and New Zealand markets. (2) Gross margin of 42.5% was up 8.8 points reflecting recovery towards pre-Covid levels. (3) Underlying EBITDA of $33.3m was up +209% driven by margin expansion leveraging revenue uplift. (4) OML was able to negotiate with property partners for net rent abatements of $19m. (5) Underlying NPATA was $2.4m versus a loss of $16.9m in 1H20. Reported Net Loss after tax of $9.3m (post AASB16) was an improvement from a -$28.0m loss in 1H20. (6) OML’s balance sheet strengthened with gearing ratio (Net Debt / Underlying EBITDA) down to 1.1x (from 1.8x) and net debt declined to $94m, down -16% relative to the pcp. (7) The Board has temporarily suspended dividends (as per OML’s announcement during its March 2020 equity raising) with the Board intending to revisit this decision when prevailing market conditions improve and with consent of the Company’s lenders.

Company Description 

oOh!media Ltd (OML) is one of Australia’s largest operators of out of home advertising products (largest scale with footprint in all major regions in Australia & New Zealand) covering all the major advertising formats including – billboards, retail, street furniture, airports and office towers (~95% market share in office tower marketing). The Company has a workforce of 800 people, with ~150 people sales facing, ~250 people on operations (cleaning maintaining street furniture etc) and rest in shared services, technology, etc.

General Advice Warning

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

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Dividend Stocks Expert Insights Shares

Woolworths Screens as Overvalued

operating supermarkets and discount department stores. Market capitalization is around AUD 50 billion, with annual sales of over AUD 50 billion. The fair value estimate for narrow-moat Woolworths is AUD 24. The board declared a fully franked dividend of AUD 1.08 for the full fiscal year 2021, equating to a payout ratio of 69%.

Woolworths has a narrow economic moat, characterized by an extensive supermarket store network, serviced by an efficient supply chain operation coupled with significant buying power. It operates in the very competitive supermarket and discount department store segments of the retail sector. Intense competition has taken its toll on margins. Management has reset prices lower to drive foot traffic and increase basket sizes. Volume growth is vital for maximizing supply chain efficiencies.

Australian food sales of over AUD 40 billion represented about 15% of total Australian retail sales in fiscal 2021. The percentage increases substantially if sales are strictly comparable. 

Financial Strength

Woolworths is in a strong financial position with solid gearing metrics. At the end of fiscal 2021, the balance sheet was conservatively geared and EBITDA covered interest expenses 7 times. After the AUD 2 billion share buyback, Woolworth’s investment-grade credit rating is expected to be the same. Woolworths generates large cash flow with significant negative working capital. Cash flow comfortably finances capital expenditure. The balance sheet is robust, and acquisitions are generally bolt-on and funded with cash or existing debt facilities.

Woolworths is well positioned to withstand cyclically weak consumer spending. Woolworths is a defensive stock, with food retailing generating most of group revenue and profit, a solid balance sheet, and a narrow moat surrounding its economic profits. Woolworths last traded price was 40.99 AUD, whereas its fair value is 24 AUD, which makes it an overvalued stock. As per the analysts, the group’s operating earnings will shrink by about a quarter in fiscal 2022 with the demerger of Endeavour.

Bull Says

  • Woolworths’ dominant position in the supermarket sector is entrenched and, coupled with first-class management, suggests that it can maintain leadership in the sector.
  • Woolworths’ operating leverage could lead to a rebound in operating margins, driving cash generation that funds expansion and acquisitions while allowing capital-management initiatives.
  • The refurbishing of the existing supermarket fleet and rollout of revised store formats, with significantly improved service, convenience and product offerings could increase store productivity and lead to higher sales growth.

Company Profile

Woolworths is Australia’s largest retailer. Operations include supermarkets in Australia and New Zealand, and the Big W discount department stores. The Australian food division constitutes the majority of group EBIT, followed by New Zealand supermarkets, while Big W is a minor contributor.

(Source: Morningstar)

General Advice Warning

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

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Global stocks Shares

Coty’s Turnaround Is Progressing Faster than Expected

besting $1.0 billion estimate, as sales in the long-troubled mass beauty segment rebounded from the pandemic faster than expected. The strength was driven by Cover Girl, the cornerstone of the segment, which experienced its first full quarter of market share gains in five years, on the heels of the brand’s relaunch, supported by a new lineup of clean ingredient products and a robust marketing campaign. 

While Coty’s net debt/adjusted EBITDA remains quite high at 5.3 times at the end of June, the firm closed its fiscal year with $2.3 billion in liquidity, which should be sufficient to meet its needs over the next year ($240 million in capital expenditures, $100 million in preferred dividends, and $25 million in debt maturities).

CEO Sue Nabi laid out her turnaround strategy last year, which calls for Coty to increase its exposure to high growth markets where it had been historically underexposed. But the firm has been able to improve quickly the trends, in the face of a global pandemic, nonetheless. 

Company’s Future Outlook

For fiscal 2021, Coty’s adjusted operating margin was 8.8% compared with 6.9% in fiscal 2019, given positive mix shifts to more profitable channels (e-commerce and prestige) and categories (skincare), lower obsolescence charges, temporarily reduced marketing expenses, and over $330 million in permanent fixed cost reductions. Coty’s fiscal 2022 guidance also exceeds forecast, calling for low-teen organic sales growth, and $900 million in adjusted EBITDA, compared with estimates of 9% growth and $800 million in adjusted EBITDA. Although material increase in Coty’s intrinsic value is anticipated, its fair value is still under review, in order to revisit the long term forecast and the implications of its planned IPO of a stake in its Brazilian beauty business.

Company Profile

Coty is a global beauty company that sells fragrances (56% of fiscal 2020 revenue), color cosmetics (31%), and skin/body care (13%). The firm licenses brands such as Calvin Klein, Hugo Boss, Gucci, Burberry, and Davidoff for its prestige portfolio. Coty’s most popular color cosmetic brands are Cover Girl, Max Factor, Rimmel, Sally Hansen, and Kylie. Coty also holds a 40% stake in a salon and retail hair care business, including brands Wella, Clairol, OPI, and ghd. Francois Coty founded the firm in 1904 and it remained private until its 2013 IPO. It had focused on prestige fragrances and nail salon brands until the 2016 acquisition of Procter & Gamble’s beauty care business. This nearly doubled the firm’s revenue base, and launched it into mass channel cosmetics and professional hair care.

(Source: Morningstar)

General Advice Warning

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

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Shares Small Cap

SkyCity’s Business to Sit on the Sidelines Amid Travel Restrictions

buoyed by the recovery from current coronavirus-induced lows and solid performance from its core assets in Auckland and Adelaide. SkyCity’s Auckland and Adelaide properties underpin the firm’s narrow economic moat. SkyCity is the monopoly operator in both jurisdictions, with long-dated licences (exclusive licence for Auckland expires in 2048, and Adelaide licence expires in 2085 with exclusivity guaranteed until 2035). The quality of these assets, particularly SkyCity Auckland, has helped build the firm’s VIP gaming business.

SkyCity’s exposure to the volatile VIP gaming market is smaller than that of Australian rivals Crown Resorts and Star Entertainment. VIP revenue typically represents over 20% of Crown’s and Star’s sales, compared with SkyCity’s typical 10%-15%. While high rollers have no alternatives when in Auckland or Adelaide, SkyCity effectively competes as a destination casino on a global scale against locations such as The Star in Sydney and Crown Melbourne. This includes a NZD 750 million upgrade to SkyCity Auckland to be completed by the end of calendar 2024 and a AUD 330 million expansion for SkyCity Adelaide, a transformational project completed in fiscal 2021.

Financial Strength 

Despite near-term earnings weakness, SkyCity’s balance sheet remains robust, bolstered by a NZD 230 million capital raise completed at the end of fiscal 2020 and extensions to new and existing debt facilities. As expected, SkyCity declared a final dividend in the second half of fiscal 2021, following the June 30, 2021 covenant testing date. We expect SkyCity’s balance sheet to continue to improve over coming years as earnings recover, with net debt/EBITDA dropping below 1.0 in fiscal 2024 as expansionary projects roll off and earnings recover. 

Our fair value for SkyCity to NZD 3.80, from NZD 3.50, following the release of fiscal 2021 results. The raise on our fair value estimate is principally due to a more positive outlook on capital expenditure as SkyCity’s major expansion projects roll off and insurance payments are set to cover the majority of growth expenditure earmarked for the next three years. Despite New Zealand recently shifting back into stage 4 lockdown, SkyCity’s longdated and exclusive licences in Auckland and Adelaide create a regulatory barrier to entry, underpinning the firm’s narrow moat, and position the business well to participate in the recovery as restrictions ease. 

The payout ratio is well-supported by SkyCity’s balance sheet. The completion of the NZD 330 million Adelaide expansion in fiscal 2021 takes some pressure off cash flows, and of the further NZD 500 million in capital expenditure flagged for the NZICC project, around NZD 380 million will be funded by insurance payments to be received following the NZICC fire. The NZD 750 million NZICC/Horizon Hotel project (which helped secure licensed exclusivity at the core Auckland casino) has been delayed by a fire, with completion now expected in late calendar 2024.

Bulls Say’s 

  • Long-dated exclusive licences to operate the only casino in Auckland and Adelaide allow SkyCity to enjoy economic returns in a regulated environment.
  • We expect transformative capital expenditure at SkyCity’s Auckland and Adelaide casinos will lead to a sizable step-up in earnings.
  • SkyCity is well positioned to benefit from the emerging middle and upper class in China.

Company Profile 

SkyCity Entertainment operates a number of casino-hotel complexes across Australia and New Zealand. The flagship property is SkyCity Auckland, the holder and operator of an exclusive casino licence (expiring in 2048) in New Zealand’s most populous city. The company also owns smaller casinos in Hamilton and Queenstown. In Australia, the company operates SkyCity Adelaide (exclusive licence expiring in 2035).

(Source: Morningstar)

General Advice Warning

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

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Shares Technology Stocks

Salesforce Margin Performance Bodes Well Long-Term; FVE up to $292

Online stock exchange team

Even as revenue growth is likely to dip below 20% for the first time at some point in the next several years, ongoing margin expansion should continue to compound earnings growth of more than 20% annually for much longer. Sales force’s fair value estimate increased to $292.

Sales Cloud represents the original sales force automation product, which streamlined process management for sales leads and opportunities, contact and account data, process tracking, approvals, and territory tracking. Service Cloud brought in customer service applications, and Marketing Cloud delivers marketing automation solutions.  Sales force Platform also offers customers a platform-as-a-service solution, complete with the App Exchange, as a way to rapidly create and distribute apps. 

Sales force is widely considered a leader in each of its served markets, which is attractive on its own, but the tight integration among the solutions and the natural fit they have with one another makes for a powerful value proposition. To that end, more than half of enterprise customers use multiple clouds. Further, customer retention has gradually improved over time and is better than 90.

Financial strength

Salesforce.com is a financially sound company. The last traded price of Salesforce was 260.85 USD while its FVE (Fair value Estimate) is 292.00 USD, which shows that Salesforce has potential to grow.

Revenue is growing rapidly, while margins are expanding. As of Jan. 31, Salesforce.com had $12.0 billion in cash and investments, offset by $2.7 billion in debt, resulting in a net cash position of $9.3 billion.  Further, Salesforce generated free cash flow margins in excess of 17% in each of the last four years, including 18% in fiscal 2021, which was negatively impacted by COVID-19. In terms of capital deployment, Salesforce makes acquisitions rather than pay a dividend or repurchase shares. 

Bull Says

  • Salesforce.com dominates the SFA space but still only controls 30% in a highly fragmented market that continues to grow double digits each year, suggesting there is still room to run.
  • The company has added legs to the overall growth story, including customer service, marketing automation, e-commerce, analytics, and artificial intelligence.
  • Salesforce.com’s margins are subscale, with a runway to more than 100 basis points of operating expansion annually for the next decade. Indeed, management has put more emphasis on expanding margins in recent quarters.

Company Profile

Salesforce.com provides enterprise cloud computing solutions, including Sales Cloud, the company’s main customer relationship management software-as-a-service product. Salesforce.com also offers Service Cloud for customer support, Marketing Cloud for digital marketing campaigns, Commerce Cloud as an e-commerce engine, the Sales force Platform, which allows enterprises to build applications, and other solutions, such as Mule Soft for data integration.

(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.