Category: Global stocks

Global Stock refer to share that are traded on multiple exchanges with different currencies. For example, if a publicly-traded company issues shares in dollars on the New York Stock Exchange and in pounds on the London Stock Exchange, it is issuing global registered shares. Global stock to a portfolio offers diversification and may provide higher returns. Global stock markets may experience higher levels of volatility than other domestic markets with bigger swings to both the upside and downside.

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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.

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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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Global stocks Sectors

Perpetual Ltd. Asset under Management increases by 246% over pcp to $98.3 bn

Investment Thesis:

  • PPT is a business having vast diversification, with earnings obtained from trustee services, financial advice and funds management.
  • PPT has a chance to increase FUM (Funds Under Management) through its Global Share Fund, which has a strong performance track record over 1, 3 and 5-years and significant capacity. 
  • PPT maintains FUM in Australian equities, which is of maximum amount. This equates to levelled earnings growth unless PPT can attract FUM into international equities, credit and multi-asset strategies (and other incubated funds).
  • Inflow of funds from retail and institutional investors are expected to be high especially from positive compulsory superannuation trend and Perpetual Private. 
  • Perpetual Private’s high potential to ramp up growth in funds under management and funds under advice.
  • Process of cost improvements in Perpetual Private and Corporate Trust.

Key Risks:

  • Probability of any significant underperformance across funds.
  • Key man risk surrounding key management or investment management personnel.
  • Probability of change in regulation (superannuation) with major interest on retirement income (annuities) than creation of wealth.
  • The average base management fee (bps) annually (excluding performance fee) continues to be stable at ~70bps but there are risks caused due to drawbacks from pressures on fees.
  • The provision of financial advice and Perpetual Private adjoins more regulation and compliance costs.
  • Industry funds, which are building in-house capabilities (~15-20% of total PPT funds under management), have good exposure.

Key Highlights:

  • The operating revenue increased +31% and underlying profit after tax was up +26% post the acquisition of Trillium and Barrow Hanley.
  • Statutory NPAT decreased -9% because of the significant one-off costs.
  • PPT’s assets under management increased by +246% over pcp (previous corresponding period) to $98.3bn, wherein significant amount of funds outperformed their respective benchmarks over the year.
  • Fully franked final ordinary dividend of A$0.96 per share was declared, thereby amounting the total FY21 dividend to A$1.80 per share, which is up +16% over pcp.
  • Perpetual Asset Management Australia delivered total revenue of A$165.7m, which was down -5% over pcp.
  • Perpetual Asset Management International (new international division comprising the Trillium and Barrow Hanley businesses), had total revenue of A$139.2m and underlying profit before tax was A$40.7m.
  • Perpetual Private delivered total revenue of $183.8m, relatively unchanged over pcp and underlying profit before tax of A$35m.
  • Perpetual Corporate Trust delivered total revenue of $134.9m, up +7% over pcp and underlying profit before tax of A$63.8m, which was +9% higher over pcp.

Company Profile:

Perpetual Ltd (PPT) is an ASX-listed independent wealth manager with three core divisions in Perpetual Investments (one of Australia’s largest investment managers); Perpetual Private (one of Australia’s premier high net worth advice business); and Perpetual Corporate Trust (which provides trustee services). PPT looks after ~$98.3 billion in funds under management, ~$17.0 billion in funds under advice and ~$922.8 billion in funds under administration (as on 30 June 2021).

(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.

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Global stocks Shares

Perpetual Ltd. Asset under Management increases by 246% over pcp to $98.3 bn

Investment Thesis:

  • PPT is a business having vast diversification, with earnings obtained from trustee services, financial advice and funds management.
  • PPT has a chance to increase FUM (Funds Under Management) through its Global Share Fund, which has a strong performance track record over 1, 3 and 5-years and significant capacity. 
  • PPT maintains FUM in Australian equities, which is of maximum amount. This equates to levelled earnings growth unless PPT can attract FUM into international equities, credit and multi-asset strategies (and other incubated funds).
  • Inflow of funds from retail and institutional investors are expected to be high especially from positive compulsory superannuation trend and Perpetual Private. 
  • Perpetual Private’s high potential to ramp up growth in funds under management and funds under advice.
  • Process of cost improvements in Perpetual Private and Corporate Trust.

Key Risks:

  • Probability of any significant underperformance across funds.
  • Key man risk surrounding key management or investment management personnel.
  • Probability of change in regulation (superannuation) with major interest on retirement income (annuities) than creation of wealth.
  • The average base management fee (bps) annually (excluding performance fee) continues to be stable at ~70bps but there are risks caused due to drawbacks from pressures on fees.
  • The provision of financial advice and Perpetual Private adjoins more regulation and compliance costs.
  • Industry funds, which are building in-house capabilities (~15-20% of total PPT funds under management), have good exposure.

Key Highlights:

  • The operating revenue increased +31% and underlying profit after tax was up +26% post the acquisition of Trillium and Barrow Hanley.
  • Statutory NPAT decreased -9% because of the significant one-off costs.
  • PPT’s assets under management increased by +246% over pcp (previous corresponding period) to $98.3bn, wherein significant amount of funds outperformed their respective benchmarks over the year.
  • Fully franked final ordinary dividend of A$0.96 per share was declared, thereby amounting the total FY21 dividend to A$1.80 per share, which is up +16% over pcp.
  • Perpetual Asset Management Australia delivered total revenue of A$165.7m, which was down -5% over pcp.
  • Perpetual Asset Management International (new international division comprising the Trillium and Barrow Hanley businesses), had total revenue of A$139.2m and underlying profit before tax was A$40.7m.
  • Perpetual Private delivered total revenue of $183.8m, relatively unchanged over pcp and underlying profit before tax of A$35m.
  • Perpetual Corporate Trust delivered total revenue of $134.9m, up +7% over pcp and underlying profit before tax of A$63.8m, which was +9% higher over pcp.

Company Profile:

Perpetual Ltd (PPT) is an ASX-listed independent wealth manager with three core divisions in Perpetual Investments (one of Australia’s largest investment managers); Perpetual Private (one of Australia’s premier high net worth advice business); and Perpetual Corporate Trust (which provides trustee services). PPT looks after ~$98.3 billion in funds under management, ~$17.0 billion in funds under advice and ~$922.8 billion in funds under administration (as on 30 June 2021).

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

Morgan Stanley: Increasing Capital Allocation to Exemplary and FVE to $85

fintech icon on abstract financial technology background represent Blockchain and Fintech Investment Financial Internet Technology Concept.

James Gorman and Morgan Stanley’s management team have deftly positioned the firm to key financial sector trends through acquisitions. They inked a transformative deal with the acquisition of Citigroup’s Smith Barney that increased Morgan Stanley’s proportion of stable, balance-sheet-light earnings after the enactment of higher regulatory capital requirements. 

Recent acquisitions of E-Trade and Eaton Vance further extend Morgan Stanley’s capabilities and deepen its competitive advantages. E-Trade is a technology firm that offers a leading self-directed brokerage, digital bank, and workplace services business. Eaton Vance is an asset manager that will benefit from Morgan Stanley’s international relationships, while Morgan Stanley’s investment management business can leverage Eaton Vance’s financial intermediary distribution channel and capabilities in environment, social, and governance investing and mass customization of financial products.

Morgan Stanley’s thoughtful acquisitions provide it the scale and scope to effectively compete with the largest financial sector players that are increasingly moving beyond their traditional industry silos. Given synergies and exposure to industry tailwinds, we expect Morgan Stanley’s returns on tangible common equity will increase over time and support the company’s valuation.

Company’s Future outlook

It is estimated that Morgan Stanley’s acquisitions and strategy have led to the increase in its valuation, management’s path to increasing the firm’s valuation to over 2 times tangible book value from 0.5 times in just a decade.” Morgan Stanley plans upgrading capital allocation rating to Exemplary from Standard and increasing fair value estimate to $85 from $70.

Company Profile

Morgan Stanley is a global investment bank whose history, through its legacy firms, can be traced back to 1924. The company has institutional securities, wealth management, and investment management segments. The company had about $4 trillion of client assets as well as nearly 70,000 employees at the end of 2020. Approximately 40% of the company’s net revenue is from its institutional securities business, with the remainder coming from wealth and investment management. The company derives about 30% of its total revenue outside the Americas.

(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

CWY’s FY22 Quantitative earnings guidance are expected to have negative monthly impact

Investment Thesis 

  • CWY trades at fair value based on our infused valuation.
  • Earnings are fairly defensive (as the Company has long term rubbish collection contracts with local government).
  • The solids segment is growing at a slightly higher-than-average GDP rate, with the potential to benefit as CWY’s sales team concentrates more on price increases.
  • Liquids and Industrial Services are expected to recover and benefit from high oil prices.
  • A strong balance sheet that allows for bolt-on acquisitions or capital management initiatives.
  • High entry barriers – difficult to replicate assets & solid margin business

Key Risks

  • Its Solids segment performed worse than expected.
  • There will be no or only minor price increases.
  • Liquids and Industrial Services performed poorly.
  • Oil prices are recovering slowly or not at all.
  • China’s National Sword policy imposes additional cost surcharges.
  • Management fails to meet their key segment margin targets.
  • While earnings are largely defensive, there is some exposure to cyclical economic activity, which may be a drag on earnings.

FY21 Result Highlights

  • Net revenue increased by 7.5% to $1,476.3 million; EBITDA increased by 4.4% to $405.3 million; and EBIT increased by $0.3 million to $213.0 million. “FY22 D&A is expected to be higher reflecting full year contributions from acquisitions and municipal contracts that partially contributed in FY21, new municipal contracts that start in FY22 (Logan, Hornsby), the start of operations at the rebuilt Perth MRF, and higher landfill depreciation,” management stated.
  • The reported EBITDA of $48.0m was +4.6% higher. EBITDA margin was 110 basis points higher than in FY20, owing to the successful implementation of the strategy of exiting low-value workstreams. EBIT increased by $1.2 million to $22.6 million, and the EBIT margin increased by 60 basis points to 7.4 percent.
  • EBITDA increased by 3.5 percent to $110.0 million, while margins increased by 80 basis points to 21.5 percent. EBIT increased by 5.1% to $67.6 million, and EBIT margins increased by 70 basis points to 13.2 percent.
  • Covid-19 lockdowns on lower East coast oil collection volumes had an impact on hydrocarbons. Covid-19-related activity at aged care facilities, hotel quarantine, and mass testing and vaccination centres resulted in higher earnings for Health Services.
  • Despite lower volumes from visitor states, hospitality (grease trap), cruise ships, and automobile industries as a result of Covid-19, liquids and technical services earned more than the pcp.

Company Profile 

Cleanaway Waste Management Ltd (CWY) is Australia’s leading total waste management services company. CWY has a nation-wide footprint in solid, liquid, hydrocarbon and industrial services (with ~200 solid, liquid, hydrocarbon and industrial services depots and processing facilities across the country servicing well over 100,000 customers.

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

Cushman & Wakefield Excellent Recovery in First Half of 2021

20025825 - closeup image of businessman drawing 3d graphics

a boom in the commercial real estate services industry since the nadir of the real estate-driven global financial crisis of 2007. As the third-largest player in the space by market cap, Cushman & Wakefield has benefited disproportionately from various tailwinds that have underpinned an impressive run of growth. Key to this success has been the company’s industry-leading brand reputation and a platform that melds complementary business lines in areas such as property sales, leasing, project management, and outsourcing to serve its corporate and institutional clients.

Although Cushman & Wakefield nominally reports its segments on a regional basis, it also discloses the amount of revenue coming from each business line. Among these, the property, facilities, and project management business is the largest and also the most stable, providing contractual revenue from corporate customers. This business line, which contributes around 54% of companywide revenue, is where Cushman & Wakefield provides many of the services needed by corporations that occupy real estate. 

Finally, the company’s valuation and other business line include several services for corporate and institutional clients, which include appraisals that are used for various purposes. The leasing business line is Cushman & Wakefield’s second largest, contributing around 23% of companywide revenue. In this business line, the company’s brokers work with owners and occupiers of commercial real estate during the leasing process, primarily by executing lease agreements. Similarly, the capital markets business line, which contributes around 14% of companywide revenue, is where brokers facilitate the sale and purchase of commercial real estate property.

Financial Strength

Cushman & Wakefield has somewhat concerning financial health. Commercial real estate is highly cyclical and is subject to significant volatility during downturns, meriting a more cautious approach. Cushman & Wakefield’s higher level of leverage is the result of an aggressive acquisition strategy that has helped cement the firm’s position as a global provider able to compete effectively with CBRE and JLL. In response to the corona virus crisis, Cushman & Wakefield announced it would issue $650 million in senior notes, bringing further attention to its borderline precarious financial situation. 

Bull Says

  • As one of the largest of only a few truly international one-stop shops, Cushman & Wakefield is poised to continue taking share from competitors in a growing industry that increasingly rewards scale.
  • The trend of corporate outsourcing represents a significant opportunity and area of growth for Cushman & Wakefield.
  • Cushman & Wakefield is emerging as an authority on the topic of workplace protocols amid the corona virus era of social distancing, which will allow it to win new outsourcing contracts with major clients.

Company Profile

Cushman & Wakefield is the third largest commercial real estate services firm in the world with a global headquarters in Chicago. The firm provides various real estate-related services to owners, occupiers and investors. These include brokerage services for leasing and capital markets sales, as well as advisory services such valuation, project management, and facilities management.

(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

Auckland Airport Taxis on the Runway with 2% Increase in FVE

with wide-moat Auckland Airport’s annual result offering fiscal 2022 guidance on what the airport will spend (on capital programs), but no guidance on what it will earn (for example revenue from passengers). Fair value estimate increases 2% to AUD 6.70 for the Australian listing due to time value of money. The shares screen as fairly valued at current levels. The New Zealand government has indicated that once vaccination rates increase, the plan is for a phased reopening, so long as that remains supported by the medical science.

The more cautious response to the pandemic in Australia and New Zealand means restrictions are unlikely to be largely removed until midway through fiscal 2022, a further recovery in the economy, consumer confidence in long-haul travel to rebuild, and a reigniting of the logistics needed to support mass travel, including travel agents, tour operators, business conferences, and so on.

The experience elsewhere in the world supports this view, with other highly vaccinated developed markets gradually removing restrictions. The pandemic’s notoriety was elevated in 2020 with the outbreak of corona virus on the Diamond Princess, but even the cruise industry has now restarted services in parts of the world. The company’s base case remains that virus concerns eventually fade, and passengers get back on board boats and airplanes.

Company’s Future outlook

It is believed that the air travel will recover to pre-pandemic levels. Air New Zealand’s fiscal 2021 domestic passenger capacity averaged a respectable 77% of pre-pandemic levels. Across the Tasman, Qantas was slower for the year, due to more frequent restrictions in Australia. However in the fourth quarter, a period which was relatively virus and restriction free nationwide, Qantas achieved domestic passenger traffic at 95% of pre-pandemic levels. Admittedly domestic travel in both nations was likely boosted by the inability to travel abroad. However, this is largely offset by the absence of international travelers taking domestic flights, especially in New Zealand, where nearly all international arrivals enter the country through Auckland Airport.

Company Profile

Auckland Airport is New Zealand’s largest airport, handling 21 million passenger movements in fiscal 2019, approximately 70% of the country’s international visitors. It owns 1,500 hectares of land, and hosts ancillary commercial services, including retail and duty-free, car parking, hotels, warehouses, and offices. Substantial development opportunities could bring its capacity up to nearly 26 million passenger movements per year anticipated by 2026, as well as adding capacity in the ancillary services offered. It also has a minority stake in the small but fast growing Queenstown airport on New Zealand’s south island.

(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

Domino’s Pizza is taking the next step of growth and has released its FY21 results.

Investment thesis

  • Potential for solid growth in Europe and Japan, with significant opportunities that the Company is well positioned to capitalise on.
  • DMP has a strong position in the market in all of its existing geographies.
  • DMP is ahead of the curve in terms of technology and innovative customer offerings.
  • Merger in Europe to increase top-line revenue.
  • A solid management team.
  • Aiming for higher margins (i.e. operating leverage benefits).

Key Risks

The following are the key challenges to the investment thesis:

  • Acquisition integrations are not proceeding as planned.
  • Failure to meet market expectations for sales and earnings growth.
  • Dietary concerns that compel customers to seek out healthier alternatives
  • Input and labour costs have risen.
  • Competition-related market pressures.
  • Key management personnel have left.
  • The corporate office must increase financial assistance to struggling franchisees.
  • Any additional negative media coverage, particularly regarding underpayment of wages at the franchisee level.
  • Any new concerns about store rollout (such as cannibalisation or demographics not supportive of new stores).
  • Commodity prices have risen as a result of Australia’s ongoing drought.

Highlights of key FY21 results

  • FY22 has begun on a strong footing, with 2,974 stores (including 26 opened this fiscal year) delivering +7.7 percent network sales growth (+2.7 percent on a Same Store basis)… With a two-year cumulative Same Store Sales growth of 13.7 percent, Domino’s is trying to demonstrate sustainable growth by retaining customers from the pandemic’s initial peaks.
  • The 3-5 Year Outlook for New Store Openings has increased to +9-12 percent (up from +7-9 percent),” with management stating that “a review of our modelling has increased our expectations for Benelux (+200 stores) and Japan (+500 stores), and now expects to operate 6,650 stores by 2033.
  • DMP reaffirms its 3-5 year Same Store Sales forecast of +3-6 percent.
  • The 3-5 year net capex outlook has been raised to $100-150 million (up from $60-100 million) as DMP assists franchisees with store expansions.
  • The Board has determined that it will increase its payout ratio from 70% to 80% in recognition of this new phase in Domino’s growth and the expected free cash flow.

Company Description  

Domino’s Pizza Enterprises Limited (DMP) operates retail food outlets. The Company offers franchises to the public and holds the franchise rights for the Domino’s brand and network in Australia, New Zealand, Europe and Japan. 

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

Panasonic’s Faster Than Expected Recovery Led by Auto and Data Center Demand

Panasonic has implemented a huge restructuring several times, approximately for every 15 years, and recovered its profitability each time. On the other hand, we doubt Panasonic’s capability on strategic investment, as the company failed to address the changing environment in the global consumer electronics industry and consequently did not generate sufficient return from past investments. In fact, Panasonic’s revenue has been unchanged at around JPY 7 trillion-JPY 8 trillion, and its operating margin has ranged between 1% and 5% for more than two decades. 

Financial Strength 

Panasonic has a very strong financial position, with net cash of JPY 288 billion (USD 2.7 billion) at the end of March 2016, having improved its balance sheet from a net debt position of JPY 1 trillion (USD 9.5 billion) at the end of 2012. This improvement has been achieved through a combination of improved operating cash flow performance (the company produced an operating cash flow loss in 2012 but generated a combined JPY 1.80 trillion in operating cash flow over 2013-15), as well as sales of investments and property, plant, and equipment.

Panasonic’s June-quarter revenue was 29% up from the previous year exceeding our expectations. The automotive segment’s sales were 1.8 times as large as the previous year driving the revenue growth because of the lower base due to the pandemic. The appliance segment’s sales were 22% up from the previous year as demand for flat-panel TVs and digital cameras recovered. Revenue for the industrial solutions segment was 24% up from the previous year as a result of robust investment for semiconductors and data centers. Panasonic’s revenue and operating income forecast for fiscal 2021 to JPY 7.3 trillion and JPY 390 billion from JPY 7.15 trillion and JPY 360 billion, respectively. Our new operating income forecast is 51% up from the previous year, driven by automotive, connected solutions, and industrial solutions segments. 

Bulls Say’s 

  • Panasonic has plenty of “one-off” earnings and cash flow upside available through exiting unprofitable products.
  • If Panasonic can hit its fiscal 2019 corporate plan targets, it will generate earnings and cash flow growth that should support a higher valuation.
  • Panasonic’s leading position in electric vehicle batteries puts it in a very strong position in a potentially revolutionary technology.

Company Profile 

Panasonic is a conglomerate that has diversified from its consumer electronics roots. It has five main business units: appliances (air conditioners, refrigerators, laundry machines, and TVs); life solutions (LED lighting, housing systems, and solar panels; connected solutions (PCs, factory automations, and in-flight entertainment systems); automotive (infotainment systems and rechargeable batteries); and industrial solutions (electronic devices). After the crisis in 2012, former president Kazuhiro Tsuga has focused on shifting the business portfolio to increase the proportion of B2B businesses to mitigate the tough competition in consumer electronics products.

(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.