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Global stocks Shares

OOh!media is strongly-positioned but shares are overvalued relative to our intrinsic assessment

In the nine years to 2019, advertising dollars flowing to the Australian outdoor medium increased at a CAGR of 9%.

Our view is based on three structurally related tailwinds:

 First, unlike other traditional media, the outdoor audience is increasing. 

Second, a key Achilles heel for the outdoor advertising industry was the lack of reliable audience measurement. However, with the 2010 launch of measurement of Outdoor Visibility and Exposure, or MOVE, the medium now has greater legitimacy and offers a more robust way for marketers to assess the return on money allocated to outdoor advertising. 

Third, in contrast to its debilitating impact on other traditional media, digital technology is a growth facilitator for the outdoor industry. We estimate converting a static site to a digital site can lift advertising revenue three- to four-fold, potentially doubling the margin and vastly lifting the return on capital. 

We view these drivers as long-dated, and will continue to be exploited by oOh!media. Management is investing in further technological, data, and analytics capability. While adding to near-term costs, these investments are designed to more effectively convince marketers of the benefits of outdoor advertising, in terms of greater sophistication in audience targeting, resulting in longer-term sustainability.

Our fair value estimate for oOh!media is AUD 1.40 per share, which implies fiscal 2021 enterprise/EBITDA of 11.9 times but Shares in oOh!media are trading 30% above our AUD 1.40 fair value estimate. We are not ignorant of the stock’s appeal to investors lusting after high-beta, COVID-19 recovery trades ahead of imminent reopening of the New South Wales and Victorian economies.

Bulls Say 

  • Outdoor advertising is a growth medium benefiting from structural tailwinds such as increasing audience, more reliable measurement, and conversion of inventory to digital.
  • Australian outdoor’s 5% share of the total advertising pie still lags Canada (8%), the U.K. (7%), and the global average of 6%-plus. 
  • OOOh!media may have failed in its attempt to merge with APN Outdoor in 2017, but it completed the acquisition of Adshel in September 2018 and there is an opportunity to extract sizable synergies from the combination.

Financial Strength

 At the end of June 2021, net debt/EBITDA was 1.1 times, pre AASB 16. We forecast this to fall to 0.7 by the end of 2021, within the renegotiated 3.25-3.50 covenant limit for 2021. The current dividend payout policy is reasonably conservative at between 40% and 60% of net profits after tax but before amortisation acquired intangibles, allowing further investment in inventory digitisation. However, due to the uncertain impact of the coronavirus outbreak, there were no dividends in 2020 and we forecast resumption of just AUD 0.04 in 2022.

Company Profile

OOh!media operates a network of outdoor advertising sites with a sizable share of the Australian market of around 30%, and has a presence in New Zealand. It boasts a diverse portfolio of locations to service the needs of outdoor advertisers, and is particularly strong in the roadside billboard and retail (such as shopping malls) segments. OOh!media offers these services by entering into lease arrangements with owners of outdoor sites–effectively an intermediary allowing site owners to monetise their visible space in high-traffic areas. In late September 2018, the group completed the acquisition of Adshel from HT&E for AUD 570 million, a deal that cements its competitive position in the face of industry consolidation.

 (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

Digital Realty Continues Deepening its Global Footprint and Transitioning Away From Wholesale Only

power, and connection needs. Along with Equinix, we think this makes Digital Realty one of only two data center providers that can offer this breadth and set itself apart from the pack.

Before its acquisition of Telx in 2015, Digital Realty garnered almost 95% of its total revenue from wholesale data centers and had virtually no interconnection revenue. At the end of 2020, a year in which Digital Realty also acquired Interxion, a firm with almost exclusively co-location and interconnection revenue, we estimate that annualized rent from the largest customers–those taking greater than 1 megawatt of power–made up only about half of total annualized revenue, and interconnection revenue was about 9% of the total.

In Digital Realty’s data centers, tenants can directly connect to their cloud providers or other partners, resulting in reduced latency and superior security. Even when in different Digital Realty locations, customers can bypass the public Internet to connect with other Digital Realty data centers via direct fiber connections within cities or through a software-defined network between cities. 

Steady Performance in Q3 for Digital Realty as It Continues Pursuing New Opportunities 

Digital Realty’s third-quarter results were consistent with recent performance, with a solid level of new bookings and re-leasing spreads that remain sluggish. 

The firm’s 11% year-over-year revenue growth was significantly boosted by higher utilities revenue, which simply reflects higher energy costs that Digital passes on to its customers.Rental revenue, which excludes pass-through revenue, was up 6%. Renewal spreads remain under pressure as the firm continues working off below-market contracts with its larger deployments, but this quarter’s negative 6% cash re-leasing spread was misleading, as it was the result of a 30- megawatt renewal combined with a very large new lease.

New bookings totaled $113 million in annualized revenue, with space and power bookings just over $100 million for the third straight quarter, and interconnection bookings in the $12 million-$13 million range for the fifth straight quarter-every quarter since Digital acquired Interxion. While this level of bookings is solid, it is believed that the moves the firm is making will lead them to pick up in the future. Key moves Digital made during or after the third quarter include entries into both India and Nigeria, both through joint ventures. The firm also made an investment in AtlasEdge data centers in Europe to propel its edge ambitions.

Bulls Say 

  • Digital Realty’s shift toward connection and colocation exposes it to the most attractive parts of the data center business and the growth tailwinds of cloud providers and data connectivity. 
  • Digital Realty’s global offering and high exposure to cloud providers gives it an advantage over competitors that operate in more narrow geographies or can only offer retail colocation space.
  • Internet of Things, artificial intelligence, and other innovations that increase the public’s demand for data and connectivity require more hardware and connections in data centers.

Company Profile

Digital Realty owns and operates nearly 300 data centers worldwide. It has more than 35 million rentable square feet across five continents. Digital’s offerings range from retail colocation, where an enterprise may rent a single cabinet and rely on Digital to provide all the accommodations, to “cold shells,” where hyperscale cloud service providers can simply rent much, or all, of a barren, power-connected building. In recent years, Digital Realty has de-emphasized cold shells and now primarily provides higher-level service to tenants, which outsource their related IT needs to Digital. Digital Realty has also moved more into the co-location business, increasingly serving enterprises and facilitating network connections. Digital Realty operates as a real estate investment trust.

 (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

Megaport retained strong balance sheet position, with a cash balance of $136.3m at year-end

Graphic of investment stock market data analysis business

Investment Thesis

  • MP1 is a global Software Defined Network provider, focusing on cloud connectivity. As such, the Company is leveraged to the rapidly growth of global cloud and data centres and is in a strong position to benefit from the rollout to new cloud and data centre regions. Key macro tailwinds behind MP1’s sector: (1)  adoption of cloud by new enterprises; (2) increased level of investment and expenditure by existing customers; and (3) more and more enterprises looking to use multiple cloud  products/providers, which works well with MP1’s business model.
  • MP1 has a scale advantage over competitors. MP1 is over 600 locations around the globe. MP1 has significant scale advantage over competitors and whilst replicating this scale is not necessarily the difficult task, it will take a number of years to do so during which time MP1 will continue to add locations and customers using the scale advantage.
  • Strong R&D program ensuring MP1 remains ahead of competitors. 
  • Strong cash balance of $136.3m at year end and a reducing cash burn profile puts the Company in a strong position.
  • Strong relationship with data centres (DC). MP1 has equipment installed in 400 data centres, so MP1 is a customer of data centres. MP1 also drives DCs interconnection revenue. Whilst several data centres like NEXTDC, Equinix provide SDN (Software Defined Network) services, it is unlikely data centres will look to change their relationship with (or restrict) MP1 given they are designed to be neutral providers to network operators. Further, given MP1’s existing customer base and connections with cloud service providers, it would be very difficult for data centres (without significant disruption to customers/cloud service providers) to change the rules for MP1.

Key Risks

  • High level of execution risk (especially with respect to development). 
  • Revenue, cost and product synergies fail to eventuate from the InnovoEdge acquisition. 
  • Heavy reliance on third party partners (especially data centre providers and cloud service providers) 
  • Data centres like NEXTDC, Equinix provide SDN services and decide to restrict MP1 in providing their services. 
  • Disappointing growth (in terms of expanding data centre footprint, customers, ports, Megaport Cloud Router).

Company Profile 

Megaport Ltd (MP1) is a software-based elastic connectivity provider – that is, it is a global Network as a Service (NaaS) provider. MP1 develops an elastic connectivity platform providing customers interconnectivity and flexibility between other networks and cloud providers connected to the platform.

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

ANN delivered solid FY21 performance with strong financial position

Investment Thesis

  • ANN is a reputable company with international production capability.
  • The 5-yr forward earnings estimates are on the conservative side and capture the moderating growth likely to be seen from the elevated levels experienced in FY21.
  • ANN’s share price trades at a >10% discount in comparison to DCF valuation
  • FX translation should be positive for the Company. 
  •  Raw material cost pressures can be shared with customers and suppliers.
  • ANN has a healthy financial sheet, allowing it to repay cash to shareholders or borrow money to fund acquisitions.

Key Risk

  • Recall of a product.
  • Trade wars escalate, leading to higher tariffs.
  • Increase in competitive pressures.
  • Adverse movements in AUD/USD.
  • The expansion of emerging and developed markets both disappoints.
  • Any worse or better prices for raw materials.

Key highlights of FY21

  •  Sales of $2,027m, up by 25.6% (+22.5% in CC) with Healthcare organic growth of 34.8% and Industrial organic growth of 7.1%. 
  •  EBIT of $338m, up by 56.0% (+51.4% in CC) with margin improving 330bps to 16.7%, driven by higher production volumes, pricing/mix benefit and SG&A operating leverage, partly offset by elevated labour and freight costs combined with increase in inventory provision.
  •  Profit Attributable to ANN shareholders of $246.7m, up by 57.5% (+48.5% in CC) and EPS of 192.2cps (EPS would have been 193.9cps, without Cloud Computing accounting policy change), up by 59.9% (+50.8% I CC). 
  •  Operating Cash Flow of $49.2m (down by 74.3% over pcp) representing cash conversion of 60.9%, negatively impacted due to greater investment in working capital to support top line growth along with pricing impact as well as higher capex to increase capacity in a number of higher demanded products.
  • ROCE saw significant improvement (up +590bps to 19.8% pre-tax and up +550bps to 16.8% post tax), predominantly due to strong EBIT growth.
  • Final dividend of US43.6cps (up +54.3% over pcp), taking full year dividend to US76.8cps, up +53.6% over pcp and representing payout of 40%.
  • Strong financial position with ample liquidity of $464m (cash and committed undrawn bank facilities), conservative gearing profile (net debt/EBITDA of 0.7x vs 0.6x in pcp), well managed debt profile with net debt position below target leverage and no significant upcoming maturities in the next 12-months and investment grade rating of Baa2 by Moody’s.

FY 22 Outlook

Assuming net interest expense in the range of $20-21m, effective tax rate in the range of 22-23% and increased software investments where a portion will now be expensed rather than capitalised and amortised pursuant to the new cloud computing accounting policy resulting in 5-6cps adverse EPS impact, management anticipates EPS to be in the range of 175-195cps. Management further noted on the analyst conference call, “we expect continued demand for Mechanical, Surgical, Life Sciences and internally manufactured Single Use gloves, however, lower demand is expected in areas which benefited most during the onset of COVID-19 .

Company Profile

Ansell Ltd (ANN) operates two global business units: (1) Ansell’s Industrial segment manufactures and markets multi-use protection solutions specific for hand, foot, and body protection, for a wide-range of industries such as automotive, chemical, metal fabrication; (2) Ansell’s Healthcare segment (Medical + Single Use) offers a full range of surgical and examination gloves covering all applications, as well as healthcare safety devices and active infection protection products. The segment also manufactures and markets single use hand protection. Ansell recently sold its  Sexual Wellness Global Business Unit group.

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

HT&E delivered strong results led by higher consumer confidence

Investment Thesis:

  • Improvement in radio advertising markets over the medium term and solid demand for radio as a medium for advertising agencies is expected
  • Further cost outs, specifically significantly lower corporate overheads costs
  • ATO (Australian Taxation Office) and HT&E settlement in due course is expected
  • Potential corporate activity due to amendment made in media ownership rules
  • Increase in the valuation of Soprano (25% interest)  
  • Ongoing capital management initiatives
  • Strong balance sheet

Key Risks:

  • Decline in advertising dollars (radio and outdoor), especially if the retail sector in Australia comes under pressure 
  • Radio experiences structural disruption
  • Increased competition from major player(s) on tenders
  • Execution risk which might arise due to international expansion
  • ATO tax liability materializes at a level above market expectation
  • Hong Kong could become a drag on group performance (Coronavirus or protests escalate)
  • New and extensive Covid-19 related lockdowns are reintroduced nationwide

Key highlights:

  • Core group revenue was up by 18.2% to $109.9m (a like basis revenue was up by 21%) 
  • Underlying EBITDA of $30.4m was up by 55.9%, and NPAT of $16.3m was up by 352.8%
  • The Board reinstated the dividend and declared a fully franked interim dividend of 3.5cps
  • Soprano (HT&E holds a 25% interest) which is to be sold to Link Mobility Group Holdings, a global CPaaS (Communications Platform as a Service) provider listed on the Oslo stock exchange, for a total consideration of approx. $560m. This values HT1’s share at approx. $139m.
  • 1H21 Radio revenue was up by 19% YoY, which was in-line with the market at 20.2%. This was a solid performance given ARN has reported significant market share gains over the past two financial years.
  • Cody Outdoor – HK. The segment saw a significant improvement in earnings (EBIT of $0.7m vs a loss of $2.7m in the pcp), driven by fewer lockdowns and a well progressed vaccination program, which has driven renewed advertiser confidence, with revenue up 28% on a local currency basis.
  • The commercial benefits will be fetched by building up the audience for the digital platform.

Company Description: 

HT&E Limited (HT1) is a media and entertainment company with operations in Australia, New Zealand and Hong Kong. The Company operates the following key segments: (1) Australian Radio Network (ARN) – metropolitan radio networks including KIIS Network, The Edge96.One and Mix106.3 Canberra; (2) Hong Kong Outdoor (Cody) – Billboard, transit and other outdoor advertising in Hong Kong, with over 300 outdoor advertising panels and in-bus multimedia advertising across 1,200 buses; and (3) Digital Investments – digital assets including iHeartRadio, Emotive and Conversant Media.

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

SUN reported strong FY21 result with plans to deliver a growing business through strategic initiatives

Investment Thesis

  • Management believes it will be difficult to achieve a ROE target of 10% in FY21 due to factors affecting both the underlying ITR and cost to income targets, as well as the historically low interest rate environment, but it hopes to maintain an ordinary dividend payout ratio of 60-80 percent of cash earnings.
  • SUN has a 2-year forward PE-multiple of 15.0x and a fully franked yield of 5.3 percent, which is excellent.
  • A $250 million share repurchase programme should help the company’s stock price.
  • SUN’s Bank has been granted advanced accreditation by APRA, resulting in capital relief.
  •  Banking and general insurance margins outperformed expectations (GI).
  •  The Royal Commission’s recommendations have resulted in positive changes in the sector.
  •  Maintaining net interest margins while maintaining good credit quality in its Bank and Wealth sector.
  •  Management has the ability to continuously maintain an underlying insurance trading ratio of 12 percent and a sustainable ROE of at least 10% in the future.

Key Risk

  • Competition in insurance lines is greater than predicted, affecting pricing, unit growth, and risk management.
  • Continuing high-intensity natural disasters, like the NSW bushfires, which will deplete reinsurance and have an impact on SUN’s profitability.
  • Key milestones for FY21, such as the rollout of the Company’s technology and digital platforms, have not been met.
  • Investment returns are lower than projected.
  • Net interest margins are lower or provisions are larger than projected.
  • An increase in the number of claims.

Key highlights of FY21

  • SUN reported strong FY21 results reflecting cash earnings of $1,064m, up by 42.1% and Group NPAT, up by 13.1% to $1,033m.
  • By segments: Relative to the pcp: (1) Insurance (Australia): PAT of $547m, was up by 42.4%.(2) Banking & Wealth: PAT of $419m was up +69% on net interest margins of 2.07%, up 13bps. (3)NZ: PAT of $200m declined by 18.4% driven lower by General Insurance PAT of NZ$177m, declining 19.2% (mainly due to higher natural hazard costs and lower investment income).
  • SUN reported better top-line growth, with Gross Written Premium (GWP) growth of 5.5 percent in Australia and 9.2 percent in New Zealand, respectively (best insurance top-line performance in almost a decade).
  • Suncorp Bank  home lending grew by 0.8 percent in the second half of 2021, and has grown home loans for six months in a row as of July 31, 2021.
  • The Board declared a fully franked final ordinary dividend of 40cps which brings FY21 total fully franked ordinary dividends to 66cps (on a 79.3% payout ratio, and up from 36cps in FY20, on 60.7% payout ratio), a fully franked 8 cent special dividend, and an on-market share buyback of up to $250m (which should support its share price).

Guidance commentary: (1) FY23 Plan: “The plan intends to deliver a growing business with a sustainable return on equity above the cost of equity throughout the cycle.” The Group is investing in 12 major projects to achieve this, with the program’s advantages beginning to be realised in 2H22. (2) Natural hazard and reinsurance: SUN has increased its natural hazard allowance for FY22 to $980 million. (3) Releases of prior-year reserves: SUN continues to allow for prior-year reserve releases if inflation continues low, releases should be at least 1.5 percent of Group NEP. (4) Operating expenses: The Group’s operating expense base is estimated to be $2.8 billion, including project spending and restructuring charges in fiscal year 22. (6) Capital: SUN remains committed to a 60-80% dividend distribution ratio”.

Company Profile

Suncorp Group Ltd (SUN) provides general insurance, banking, life insurance, and superannuation products and related services to the retail, corporate, and commercial sectors in Australia and New Zealand. The company operates through Personal Insurance, Commercial Insurance, General Insurance New Zealand, and Banking segments.

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

Bapcor delivered record results driven by increased revenue and earnings across all business segments

Investment Thesis:

  • Trading below analysts’ valuation 
  • Fundamentals for the vehicle aftermarket continue to remain strong (with increase in second hand vehicle sales; travellers seeking social distancing and hence moving away from public transport; with Covid lockdown measures in forced, more people are spending their holidays domestically utilising their vehicles)
  • Significant opportunities within BAP to drive growth (expanding network; increase market share by leveraging BAP’s Victorian DC; enhance supply chain efficiencies; driven own brand growth). 
  • Strong earnings growth profile
  • Further opportunity to grow gross profit margins from better buying terms with tier one and two suppliers
  • Significant distribution network across Australia to leverage from
  • Ongoing bolt on acquisitions and associated synergies
  • Growing BAP’s own brand strategy, which should be positive for margins
  • BAP is on track to reach their 5-year targets to supplement market leading brands with BAP’s own brand products
  • Weak macro story of leveraged Australian consumer and lower growth environment persisting
  • Thailand represents a meaningful opportunity 

Key Risks:

  • Rising competitive pressures 
  • Value destructive acquisition
  • Rising cost pressures eroding margins (e.g. more brand or marketing investment required due to competitive pressures)
  • Given the high trading multiples the stock trades at, a disappointing earnings update could see the stock price significantly re-rate lower
  • Integration (and therefore synergies) of recent acquisitions underperform market expectations 
  • Execution risk around Thailand

Key highlights:

  • BAP delivered a record result with FY21 revenue up +20.4% over the pcp, driven by increased revenue and earnings across all business segments
  • Pro forma EBITDA and NPAT, were up +28.8%, and +46.5% respectively, over the pcp.
  • The revenue and EBITDA generated by segments are:
  1. Trade: Delivered record revenue of $649m, up by 15.5% and EBITDA of $115m, which is up by 19%
  2. New Zealand: Revenue of $170m, was up 8.8% and EBITDA of $33m, was up 21.2%
  3. Specialist Wholesale (‘SWG’): Revenue of $660m, and EBITDA of $90m was up +26.8% and +42.2% respectively
  4. Retail: Revenue of $369m increased +26.1% and EBITDA of $65m increased +20.1%
  5. Asia: On BAP’s 25% investment in Tye Soon and Thailand, management highlighted revenue up by 26% and profit after tax of $2.2m

Company Description: 

Bapcor Ltd (BAP) is Australasia’s leading provider of aftermarket parts, accessories and services. The core businesses of BAP are: (1) Trade – Burson Auto Parts is a trade focused parts professional supplying workshops with all their parts and accessories. (2) Retail – Autobarn is the premium retailer of auto accessories and Opposite Lock specializes in 4WD accessory specialists. (3) Independents – supporting the independent parts stores via the group’s extensive supply chain capabilities and through brand support. (4) Specialist Wholesaler – the number 1 or 2 industry category specialists in parts supply programs. (5) Services – experts at car servicing through Midas and ABS.

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

Facebook’s Network Effect Moat Source Remains Intact

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along with the valuable data that they generate, makes Facebook attractive to advertisers in the short and long term. The combination of these valuable assets and expected continuing growth in online advertising bodes well for Facebook, as the firm generates strong top-line growth and remains cash flow positive and profitable. Facebook has increased users and user engagement by providing additional features and apps to keep them engaged within the Facebook ecosystem. With more Facebook user interaction among friends and family members, sharing of videos and pictures, and the continuing expansion of the social graph, we believe the firm compiles more data, which Facebook and its advertising clients then use to launch online advertising campaigns targeting specific users. While utilization of the data is under scrutiny in different markets, we think Facebook’s large audience size will still attract the ad dollars. Growth in Facebook’s average ad revenue per user indicates advertisers’ willingness to pay more for Facebook-placed ads, as they expect high return on investment from the targeted ads.

We believe Facebook will continue to benefit from an increased allocation of marketing and advertising dollars toward online advertising, more specifically social network and video ads where Facebook is especially well positioned. The firm’s Facebook app, along with Instagram, Messenger, and WhatsApp, is among the world’s most widely used apps on both Android and iPhone smartphones. Facebook is taking steps to further monetize its various apps, such as providing interactive video ads. It is also applying artificial intelligence and virtual and augmented reality technologies to various products, which may increase Facebook user engagement even further, helping to further generate attractive revenue growth from advertisers in the future.

We assign Facebook a wide moat rating based on network effects around its massive user base and intangible assets consisting of a vast collection of data that users have shared on its various sites and apps. Given its ability to profitably monetize its network via advertising, we think Facebook will more likely than not generate excess returns on capital over the next 20 years.

Financial Strength

 In an industry where continuing investments are required to remain competitive and maintain market leadership, we believe Facebook is well positioned in terms of access to capital. The firm has a very strong balance sheet with $62 billion in cash, cash equivalents, and marketable securities and no debt.The firm generated $39 billion cash from operations in 2020, 7% higher than the prior year. We expect faster growth in cash flow during the next five years owing to operating leverage after 2022. Facebook’s strong operational and financial health is demonstrated by the 28% average free cash flow to equity/revenue during the past three years. We project average annual FCFE/sales to be in the 35%-40% range through 2025, as a result of strong top-line growth and slight operating margin expansion beginning in 2022. We do not expect Facebook to issue a dividend as it remains in a rapid-growth phase. The firm may use some portion of its cash, as it remains active on the merger and acquisition front.

Bull Says

  • With more users and usage time than any other social network, Facebook provides the largest audience and the most valuable data for social network online advertising. 
  • Facebook’s ad revenue per user is growing, demonstrating the value that advertisers see in working with the firm. 
  • The application of AI technology to Facebook’s various offerings, along with the launch of VR products, will increase user engagement, driving further growth in advertising revenue.

Company Profile

Facebook is the world’s largest online social network, with 2.5 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktops. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada and 25% from Europe. With gross margins above 80%, Facebook operates at a 30%-plus margin.

 (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
Dividend Stocks

Blackstone Has Built Itself a Solid Reputation as a Go-To Firm in the Alternative Assets Segment

Business Strategy and Outlook

Blackstone has built a solid position in the alternative asset-management industry, utilizing its reputation, broad product portfolio, investment performance track record and cadre of dedicated professionals to not only raise massive amounts of capital but sustain the reputation it has built for itself as a “go-to firm” for institutional and high-net-worth investors looking for exposure to alternative assets. Unlike the more traditional asset managers, who have had to rely on investor inaction (driven by either good fund performance or investor inertia/uncertainty) to keep annual redemption rates low, the products offered by alternative asset managers can have lockup periods attached to them, which prevent investors from redeeming part or all of their investment for a prolonged period of time.

Financial Strength

Blackstone’s business model depends heavily on having fully functioning credit and equity markets that will allow its investment funds to not only arrange financing for leveraged buyouts and/or additional debt issuances for the companies it operates but cash out of them once they’ve run their course. The company entered 2021 with $5.7 billion in longer-term debt (on a principal basis) on its books, with 56% of that total coming due during 2030-50. The company also has a $2.25 billion revolving credit facility (which expires in November 2025) but had no outstanding balances at the end of June 2021.

Blackstone should enter 2022 with a debt/total capital ratio of 44%, debt/EBITDA (by our calculations) at 1.3 times, and interest coverage of more than 25 times. On the distribution front, share repurchases have been rare over the past decade, with the company repurchasing (net of issuances) less than $2 billion of stock (most of which was bought back in the past three calendar years). During the first half of 2021, Blackstone repurchased 3.2 million shares of common stock for $289 million. Dividend payments, meanwhile, exceeded $21 billion during 2011-20 and are expected to account for 85% of distributable earnings annually going forward.

Bulls Say’s

  • Blackstone, with $499 billion in fee-earning AUM at the end of June 2021, is a “go-to firm” for institutional and high-net-worth investors looking for exposure to alternative assets.
  • The company’s ever-increasing scale, diversified product offerings, long track record of investment performance and strong client relationships position the firm to perform well in a variety of market conditions.
  • Customer demand for alternatives has been increasing, with institutional investors in the category limiting the number of providers they use—both positives for Blackstone’s business model.

Company Profile 

Blackstone is one of the world’s largest alternative asset managers with $684 billion in total asset under management, including $499 billion in fee-earning asset under management, at the end of June 2021. The company has four core business segments: private equity (27% of fee-earning AUM, and 31% of base management fees, during 2020); real estate (32% and 39%); credit & insurance (25% and 15%); and hedge fund solutions (16% and 15%). While the firm primarily serves institutional investors (87% of AUM) it does serve clients in the high-net-worth channel (13%). Blackstone operates through 25 offices located in the Americas (8), Europe and the Middle East (9), and the Asia-Pacific region (8).

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

PGF Dividend Uplift Offers Attractive Yield

Young female explaining new idea to her colleague in creative office.

Last trade price of PM Capital is A$ 1.49. Their Outstanding shares is 390.11 Million. PGF’s provides Public Float which is 279.25 Million. PM Capital Global Earnings Per Share (EPS) is $0.415 while the Price Earning ratio is 3.59 percent. 

Currently, PM Capital’s Annual Yield is 5.03 percent while their Annual revenue TTM is $218.56 Million.

On 24th September 2021, Net Tangible Asset backing per ordinary share before tax accruals is $1.63 while NTA after tax is $1.47. Gross Dividend yield per annum is 9.6 percent.  

The Company also announced that due to its strong profits reserve position, it intends to maintain a minimum dividend of 5.0cps for both the interim and final dividend for FY22, representing a full year FY22 dividend of at least 10cps. As at 30 June 2021, the Company has 5 years dividend coverage at 10cps.

On 12 August 2021, PM Capital Global Opportunities Fund ((PGF)) announced a final dividend for FY21 of 5.0cps, fully franked, a 100% increase on the FY20 final dividend.

The increased dividend announcement represents a significant uplift in yield. Based on the share price at the close of 19 August 2021, the full year dividend declared for FY21 represented a dividend yield of 4.8%. The forecast FY22 dividend would represent a yield of 6.4%, fully franked, which is strong for a global equity focused LIC.

Company Profile 

PM Capital Global Opportunities Fund Ltd. engages in investing in a portfolio of listed securities across global securities markets. Its investment objective is to increase the value of its portfolio by providing long term capital growth. The company was founded on October 1, 2013 and is headquartered in Sydney, Australia.

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