Category: Sectors

Categories
Global stocks

SOL reported a statutory net loss of $12.9m after tax

Investment Thesis

  • Trades on fair-value in terms of valuation. 
  • The portfolio is well positioned and diversified, providing access to a range of asset classes across sectors, including equities, private equity, private credit and property. 
  • Solid investment philosophy/approach given investment strategies have delivered above market returns over a significant timeframe. 
  • Strong management/investment team led by Rob Millner, with solid credentials and a strong track record of execution and active stewardship of capital. 
  • Strong track record of paying a consistent and increasing dividend for over 20 years.

Key Risks

  • Deterioration in performance in investments. 
  • Global and Australian economic conditions deteriorate. 
  • The investment Manager/analysts miss-calculate their bottom-up valuation of investments.
  • Reliance on the investment team and their expertise to outperform investment benchmarks. Hence key man risks and departure of key investment personnel, especially Rob Millner.

Key Highlights: Relative to the pcp and on a constant currency basis: 

  • Group regular profit after tax of $834.6m, up +154.4%. 
  • Group loss after tax up -104.7% to -$12.9m. 
  • Net asset value up +71.6% to $9.96 billion. 
  • Pre-tax net asset value per share was up 13.8% for the period (outperformance of 20.2% against market).
  •  After-tax net asset value per share up 28.5% (outperformance of 34.9% against market). 
  • Net cash flows from investments up 93% yoy to $347.9m. Net Cash Flows from investments on a per share basis is up 28%, relative to FY21.
  • The Board declared a final ordinary dividend of 43 cps, which brings total dividends for FY22 to 72 cps, up +16.1% and a 15 cps Special Dividend. Both fully franked.
  • Strategic portfolio (48.6% of total portfolio). The portfolio retains 12.6% of TPG, 39.9% of New Hope, 25.4% of Tuas, 43.3% of Brickworks, 29.8% of Apex Healthcare, 37.0% of Pengana. API stake was sold to Wesfarmers. The portfolio delivered a total return of 25.8% over FY22, driven by gains in New Hope, due to higher coal prices. 
  • Large Caps (31.2% of total portfolio). The portfolio retains positions in companies within the ASX-100 index. The portfolio delivered a total return of -0.6% over FY22 beating the ASX200 Accumulation Index return of -2.2%. 
  • Private Equity (6.6% of total portfolio). The portfolio retains positions in unlisted companies such as Round Oak, Ampcontrol, Ironbark, Agricultural and Water investments, and Aquatic Achievers. Contributions to net cash flow from investments jumped 213% relative to the pcp. The portfolio saw a total return of 19.1%. 
  • Emerging Companies (6.1% of total portfolio). The portfolio retains positions in ex-ASX100 listed equities and unlisted growth companies. The portfolio delivered a total return of -2.3% over 12 months to 31 July 2022, outperforming the ASX Small Ordinaries Accumulation Index by 7.5%.
  • Structured Yield (2.5% of total portfolio). The portfolio retains positions of corporate loans or hybrid instruments. Net cash flow from investments of $19.7m was up +18.7% over the pcp.
  • Property (2.3% of total portfolio). The portfolio comprises positions in actively managed direct property. Industrial development asset was acquired in Kirrawee, NSW and its Retirement lifestyle development (Sage by Moran at Cronulla, NSW) is currently under construction.

Company Description

Washington H. Soul Pattinson and Company Ltd (ASX: SOL) holds a diversified portfolio of uncorrelated investments across listed equities, private equity, property and loans. It has a flexible mandate to generate returns by making long-term investment decisions and adjust the portfolio by changing the mix of investment classes over time. The Company is the second oldest publicly listed company on the ASX and has been successfully managed by the same family from the outset: Lewy Pattinson, Fred Pattinson, Jim Millner and current Chairman, Rob Millner.

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate. Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities. Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Global stocks Shares

MQGs market facing businesses to pick up additional earnings

Shot of elegant smart businesswoman explaining a project to his colleagues with statistics on the computer on coworking place.

Investment Thesis

  • Significant operations across the globe, which provides diversity in business and geographic mix.
  • Changing business mix has seen the company move to a more reliable (annuity style) earnings stream – making it a more quality (less volatile) business. 
  • Solid management team. 
  • Strong infrastructure business, which should benefit further government policies to drive economic growth. 
  • Push into green energy is a positive. 
  • Solid balance sheet, with surplus capital available for deployment (i.e. growth opportunities). 
  • Management unable to quantify FY23 earnings guidance due to the ongoing volatile market conditions. 
  • Potential capital management initiatives in the absence of investment in growth opportunities.

Key Risks

  • Weakness / volatility in financial markets. 
  • Change in regulatory landscape. 
  • Weakness in asset values (e.g. MQG’s co-investments). 
  • Increased competition for advisory work. 
  • Value / EPS destructive acquisitions. 
  • Company fails to achieve its FY20 guidance.

Key Highlights: Relative to the pcp and on a constant currency basis: 

  • Net operating income increased +36% YoY to $17.3bn, primarily driven by higher Fee and commission income (up +33% YoY), Net other operating income (up +74% YoY) and Net interest and trading income (up +21% YoY), which combined with +22% YoY increase in operating expenses to $10.8bn, delivered NPAT of $4.7bn, up +56% YoY. 
  • Net credit and other impairment charges declined -3% YoY, driven by the partial release of Covid-19 overlays in BFS and CGM, partially offset by small number of underperforming equity investments in Macquarie Capital, though credit provisioning levels remained prudent with combined downside macroeconomic scenarios having a higher weighting than the upside scenario. 
  • ROE improved +440 bps YoY to 18.7%.income (up +33% YoY), Net other operating income (up +74% YoY) and Net interest and trading income (up +21% YoY), which combined with +22% YoY increase in operating expenses to $10.8bn, delivered NPAT of $4.7bn, up +56% YoY. 
  • Net credit and other impairment charges declined -3% YoY, driven by the partial release of Covid-19 overlays in BFS and CGM, partially offset by small number of underperforming equity investments in Macquarie Capital, though credit provisioning levels remained prudent with combined downside macroeconomic scenarios having a higher weighting than the upside scenario. 
  • ROE improved +440bps YoY to 18.7%.
  • MAM saw NPAT increase +4% YoY to $2.15bn, driven by income related to the disposition of MIC assets and increased base fees (up +40% YoY) amid acquisition of Waddell & Reed, partially offset by gain on sale of Macquarie European Rail in pcp and lower performance fees (down -40% YoY). AUM increased +38% to $773.1bn (31% private markets + 69% public investments), primarily due to acquisition of Waddell & Reed Financial. 
  • BFS delivered NPAT growth of +30% YoY to $1bn, as strong growth in home loan portfolio (up +33.6% YoY), funds on platform (up +17% YoY) and total BFS deposits (up +21.4% YoY) together with releases in net credit impairments were partially offset by increased technology investment and higher average headcount to support business growth and regulatory requirements. 
  • CGM saw NPAT increase +50% YoY to $3.9bn, driven by increased revenue across Commodities with strong risk management revenue driven by increased client hedging activity and trading activity as a result of elevated volatility and commodity price movements, and partial sale of the UK Meters portfolio, partially offset by the impact of fair value adjustments across the derivatives portfolio.
  • Macquarie Capital delivered NPAT of $2.4bn, up +269% YoY, reflecting +374% YoY growth in net interest and trading income resulting from growth in the private credit portfolio, +131% YoY growth in investment-related income due to material asset realisations in the green energy, technology and business services sectors, and +36% YoY growth in fee and commission income due to M&A and debt capital markets activities, partially offset by lower equity capital markets fee income and brokerage income.

Company Description

Macquarie Group (MQG) is a leading provider of financial, advisory, investment and funds management services. The company has operations around the globe, including world’s major financial centres. The company operates the following key divisions: Macquarie Asset Management; Corporate and Asset Finance; Banking and Financial Services; Commodities and Global Markets; and Macquarie Capital. MQG has over 14,000 employees in over 25 countries across Europe, Middle East & Africa, Asia, Americas and Australia).

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate. Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities. Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Dividend Stocks

WES reported 1H22 results reflecting earnings weaker relative to the pcp, with revenue of $17,758m

Investment Thesis:

  • Ongoing momentum in discretionary spend, driven by strength in housing prices. Diversified asset base with core assets continuing to grow (Bunnings).
  • Expect improved performance from Target and Industrials businesses.
  • On-going focus on shareholder return including attractive yield.
  • Strong management team.
  • Strong balance provides flexibility to take advantage of opportunities as they arise.
  • Potential capital management initiatives.

Key Risks:

  • Margin erosion due to competitive pressures. 
  • Disappointing earnings performance in Bunnings. 
  • Deterioration in the macro picture leading to lower retail sales activity and volumes. 
  • Deterioration in balance sheet metrics. 
  • Adverse movements in AUD/USD.

Key Highlights:

  • WES’s earnings were weaker relative to the pcp, with revenue of $17,758m largely flat relative to the pcp, but EBIT of $1,905, declined -12.3%, and NPAT of $1,213, was -14.2% weaker, with strong results in WesCEF and Industrial and Safety, up +36.3% and +10.8% respectively, more than offset by poor performance in Kmart and Officeworks, down -63.4% and -18.0% respectively.
  • Free cash flows of $949m was -51.7% weaker.
  • Net capex increased to $405m, up +66.7%.
  • WES’s balance sheet position deteriorated from the pcp as a result of a $2.3bn return of capital to shareholders in December, with net financial debt/cash reversing from a net cash position of $871m to $2,615m net financial debt position at the end of the half. Debt to EBITDA (excluding significant items) is now 2.0x versus 1.3x in the pcp.
  • The Board declared an interim dividend of 80cps, fully franked, -9.1% lower than the pcp.
  • Revenue was up +1.7% to $9,209m, whilst earnings dropped -1.2% to $1,259m. On the conference call, management noted “Bunnings remains well positioned for long-term growth, the near-term trading remains uncertain. With Covid continuing to add operational complexity and increased variability in trading patterns. In the second half, the business to benefit from customers continuing to spend more time at home and a sustained pipeline of residential building activity… to expect supply chain constraints and elevated team absenteeism to continue, creating operational complexity as well as cost pressures”.
  • Kmart Group: revenue fell -9.6% to $4,917m as earnings before significant items declined -63.4% to $178m. WES noted “combined Kmart and Target earnings declined 55.8% to $222m for the half, reflecting the significant impact of government-mandated store closures, which led to the loss of almost 25% of store trading days during the half, as well as higher costs and lower stock availability as a result of domestic supply chain disruptions”. On the call with management, WES also highlighted “looking forward to navigating near-term trading environments that remain uncertain volatile across both supply and demand, and with the addition of increasing all material costs”.
  • Officeworks: Revenue was up +3.7% to $1,580m, while earnings fell -18.0% to $82m, with sales growth driven by strong demand in technology and furniture, partially offset by declining sales in higher-margin office supplies and print & copy categories, which continued to be adversely impacted by Covid-related restrictions, including government-mandated temporary store closures.
  • Chemicals, Energy and Fertilisers: Revenue increased +29.8% to $1,077m as earnings increased +36.3% to $218m driven by higher global commodity prices, particularly for LPG, ammonia and ammonia-related products.
  • Industrial and Safety: Revenue was up +5.1% to $944m as earnings increased +10.8% to $41m driven by increased operating efficiencies at Blackwoods, growth in demand from Coregas’ industrial and healthcare customers.

Company Description:

Wesfarmers Limited (WES) has diverse business operations covering convenience stores, home improvement, office supplies, and department stores. The company also has an industrials division which includes businesses in chemicals and fertilizers, industrial and safety products and coal. Wesfarmers employs over 220,000 people.

(Source: Banyantree)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Technology Stocks

Iress Ltd (IRE) reported FY21 Results in line with management’s earnings guidance

Investment Thesis

  • Solid FY22 earnings guidance. 
  • Current share price is trading below the blended valuation and offers a >10% upside. 
  • 50% of the $100m buyback will be purchased in 2022, which should support IRE’s share price. 
  • Growing quantum of superannuation/pension bodes well for IRE’s clients, which bodes well for demand for IRE’s products.
  • IRE’s products are firmly entrenched within Australia, UK and South African financial market players (i.e. IRESS terminals and XPLAN). For instance, in ANZ Wealth Management segment, increasing dynamic of self-licensing by practices, high client retention and increasing demand for integrated solutions, are all key revenue themes. Over 90% of revenue is recurring. 
  • Strong continuing momentum in the core growth markets of ANZ Wealth Management, and South Africa and the UK. 
  • New product roll-out providing growth opportunities. 
  • Solid balance sheet and capable management team.

Key Risks

  • Less subscription due to declining sell-side and buy-side demand as well as financial planners. 
  • Competitive platforms/offering (new disruptive technology); improved features and innovation from competition. 
  • Associated risks in relation to system, technology and software. 
  • Regulatory and structural changes in the finance sector impacting clients and their needs.
  • Deterioration in equity and debt markets which may have a negative impact on terminal demand. 
  • Further deterioration with its Canadian segment.

Key Highlights: Relative to the pcp and on a constant currency basis: 

  • Segment profit: excluding Mortgages, $160-165m, versus $151m in FY21, or including Mortgages $177- 183m, versus $166m in FY21. 
  • Underlying NPAT: excluding Mortgages, $61-67m, versus $47m in FY21, or including Mortgages $74-81m, versus $59m in FY21. 
  • NPAT: excluding Mortgages, $50-58m, versus $62m in FY21, or including Mortgages $63-72m, versus $74m in FY21. 
  • Pro forma revenue $600.2m, was up +3%. 
  • Pro forma segment profit $166.4m, was up +6%.
  • Pro forma EPS of 30.9cps was up +12%. 
  • The final dividend is 30cps, franked to 15% bringing the full year 2021 dividend to 46.0 cents per share, franked at 38% (average weighted). Franking of interim dividend was high in context of EQT bid. 
  • IRE maintains conservative gearing levels and leverage remains below the neutral setting of 2.0x

segment profit (currently at 1.4x).

Company Description

IRESS Ltd (IRE) is an ASX-listed company that specialise in software for the finance industry, with a focus on financial markets, wealth management and superannuation. IRE operates in the Asia-Pacific, UK, South Africa and Canada.

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Global stocks

IEL successfully integrated its acquisition of the British Council’s Indian IELTS operations

Investment Thesis

  • Leveraged to the global reopen / vaccine roll-out trade. 
  • IEL is to benefit from margin expansion as IEL continues to roll out computer-delivered IELTS in preference over the traditional paper-based method of delivery; 
  • Network expansion, with the latest inclusion of IELTS test centres in Ireland, Poland, Chile and Peru and student placement offices in Pakistan and Canada. 
  • IDP’s English Language Testing stream (IELTS) has a strong reputation as the world’s most trusted English language test for study, work and migration. 
  • IEL maintains solid margin and strong earnings/revenue growth/strong cashflow generation.
  • Good management team. 
  • Global growth opportunities in international student population and education industry.
  • Opportunities for stronger growth with introduction and planned roll out of online IELTS delivery. 
  • Strong balance sheet, with ample liquidity. 
  • Potential restructure with British Council which unlocks significant margin opportunity.

Key Risks

  • Sporadic growth is unpredictable with IEL’s business model and unable to forecast periods of slower growth. 
  • Further economic lock-downs to Covid-19. 
  • Currency conversion risk. 
  • High growth expectations need to be met to justify the valuation. 
  • Potential threat from a new or existing competition.

Key Highlights: Relative to the pcp and on a constant currency basis: 

  • Revenue of $397m, up +47% (or +49% in constant currency, CC), driven by strong volume increases in IELTS, up +79%, with growth recorded across the majority of countries where IDP administers the test. IEL also saw a +36% increase in Student Placement revenue to $$106.2m, driven by a +73% increase in multi-destination revenue. Digital Marketing and Events revenue climbed +16% to $23.8m as institutional clients turned to IDP to support their rebound strategies. 
  • EBIT of $77.9m, up +61% (adjusted EBIT of $80.7m, was up +64%. 
  • IEL successfully integrated the British Council’s Indian IELTS operations, following its acquisition.
  • The Board declared interim dividend of 13.5cps. 
  • Performance by Key Segments. 
  • Relative to the pcp, and on a constant currency basis: English Language Testing revenue of $256.m was up +66% driven by strong volume increases rebounding to pre-pandemic levels, up +79%, with growth recorded across the majority of countries where IDP administers the test. IEL saw additional Indian volumes from 1 August following completion of its British Council acquisition. 
  • Student Placement revenue of $106m, was up +33%. Student placement revenue from multi-destination of $79.6m, was up +68%, as volumes were up 33% for the year, with a growing demand for Northern Hemisphere countries driving a 63% increase in multi-destination student placement volumes. Volumes from the UK, Canada and U.S up +37%, +71% and +640%, respectively were the drivers of revenue growth. However, revenue from Australian student placement of $26.6m, was down -18% with volumes remaining subdued, despite early signs of a rebound in interest, which coincided with relaxation of border restrictions, and an extension of post-study work rights. 
  • English Language Teaching revenue of $8.7m, was down -7% as Vietnam schools were down due to Covid, partially offset by higher Cambodian revenue. 
  • Digital Marketing and Events revenue of $23.8m was up +15%.

Company Description

IDP Education Ltd (IEL) offers 1) Student placement: student recruitment/placement in 93 offices across 30 countries into~600 universities, schools and colleges globally in 5 destination countries; and 2) co-owner of IELTS, an English language proficiency test which foreigners must pass in order to obtain certain visas and permanent residency in Australia. IEL is 50% owned by Education Australia Ltd – a business in which 38 Australian universities own a 50.1% stake.

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Global stocks Shares

BEN achieved its third consecutive half of positive jaws and sixth consecutive half of residential lending

Investment Thesis

  • Relative to major banks, BEN trades at fair value, on 12.1x one-year forward price to earnings, 0.8x price to book and dividend yield of 5.3%. 
  • Strong franchise model with funding predominately by way of deposits. 
  • Expected low levels of impairment charges (especially as a low interest rate environment helps customers and arrears). 
  • Continued strong cost discipline, improving efficiency and boosting performance. 
  • Advanced accreditation in progress (which may improve ROE). 
  • Potential pressure on net interest margins as competition intensifies, with major banks in a low interest rate environment. 
  • Leading in terms of customer satisfaction and net promoter metrics, which are increasingly key in a period where trust is paramount.

Key Risks

  • Intense competition for loan growth, combined with further discounting. 
  • Volatility in Home safe earnings. 
  • Increase in bad and doubtful debts or increase in provisioning. 
  • Funding pressure for deposits and wholesale funding.

Key Highlights: Relative to the pcp and on a constant currency basis: 

  • Cost to Income ratio: Despite near term revenue challenges, firmly fixed on a continued improvement in CTI. 
  • Investment spend: FY22 is expected to be $170m –$180m (FY21 $165m) with a similar level of capitalisation to FY21. 
  • Credit expenses: (i) Arrears rates remain benign; (ii) Modest credit expense expected for 2H22.
  • Statutory net profit of $321.3m, up +31.7%. Cash earnings after tax of $260.7m, up 18.7%. Cash earnings per share of 47c, up +13.5%. Total income on a cash basis was $873.4m, up +2.9%. 
  • Net interest margin of 2.09%, down 14bps relative to 2H21
  • Operating expenses were up 1.5% and in line with management expectations. Cost to income ratio declined for the third consecutive half to 59.3% (from 59.8% in 2H21 and 60.9% in 1H21), in line with management’s goal of towards 50% in the medium term. 
  • BEN retained a solid capital position with CET1 of 9.85%, up 49 basis points. The Board approved a new CET1 target range of between 9.5% and 10%. The Board declared a fully Franked Dividend of 26.5 cents per share and Dividend Reinvestment Plan with a 1.5% discount. 
  • BEN saw total lending of $73.8bn increase 2.1% in 2H21. BEN’s residential lending was 1.1x system up +8.4%. Total funding of $81.9bn was up +5.1% on 2H21, with customer deposits up 6.6% on 2H21.

Company Description

Bendigo and Adelaide Bank Ltd (BEN) offers a variety of banking and other financial services including internet banking, housing finance, retail and business banking, commercial finance, funds management, treasury and foreign exchange services, superannuation and trustee services.

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate. Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities. Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Global stocks Shares

AMC’s 1H22 result highlighted the Company’s defensive capabilities and ability to recover higher input costs

Investment Thesis:

  • Leading global market position, with high barriers to entry (very capital intensive).
  • Attractive exposure to both developed markets and emerging markets’ growth.
  • Clearly defined strategy to create shareholder value.
  • Bolt-on acquisitions provide opportunities to supplement organic growth.
  • Solid balance sheet.
  • Leveraged to a falling AUD/USD.
  • Benefits from the recently completed Bemis acquisition to start flowing through.
  • Capital management initiatives – current share buyback of $600m.

Key Risks:

  • Management failed to realize the synergies proposed in the Bemis transaction.
  • Competitive pressures leading to margin erosion and potential balance sheet pressure (e.g. reduced earnings leading to potential debt covenant breaches).
  • Input cost pressures in which the Company is unable to pass on to customers (even though the Company does pass through input costs).
  • Deterioration in global economic growth.
  • Value destructive acquisition.
  • Emerging markets risk.
  • Adverse movements in AUD/USD.

Key Highlights:

  • AMC delivered solid 1H22 results, with revenue up +12% to $6.93bn, operating earnings (EBIT) up +5% to $769m and EPS up +9% to 35.8cps. Top line growth was assisted by approximately $650m driven by price increases highlighting AMC’s ability to pass through higher costs. Excluding pass through, organic sales were up +2% driven by higher volumes and favourable mix. AMC repurchased ~$300m shares in 1H22 and expects to repurchase a total of $600m in FY22. Group leverage (net debt / EBITDA) at the end of the period was 2.9x.
  • Flexibles segment. Segment revenue was up +10% to $5.35bn, consisting of 2% organic growth (focusing on priority segments such as Healthcare, Coffee & Pet Food) and $480m boost from higher raw material costs recovery. Adjusted EBIT of $691m was up +7%, however margin eased -60bps to 12.9% but this was impacted by higher raw materials costs. Excluding this impact margin actually improved on pcp.
  • Rigid Packaging segment. Segment revenue was up +17% to $1.58bn, however this includes +13% uplift from the pass through of higher raw material costs. Excluding pass through, segment revenue was up +4%. In North America, AMC saw solid underlying demand in the beverage business with volumes up +3% (accelerating to +6% in 2Q22). There was also solid volume growth in Isotonics (as well as Iced Tea categories) due to customer demand for 100% recycled PET bottles. Latin America saw double-digit volume growth driven by Argentina, Mexico, and Colombia. Segment adjusted EBIT of $117m was down -13%, with margin down -250bps to 7.4%. Earnings were adversely impacted in North America due to inefficiencies and higher costs from industry-wide supply chain disruptions.
  • M&A quiet whilst Bemis is bedded down and Covid hinders DD process. AMC hasn’t been active with bolt-on acquisitions in recent history, a key part of AMC’s growth strategy. Management noted that they continue to assess opportunities in their space but in recent history have been busy trying to bed down the Bemis acquisition (largest in AMC’s history). Further, management is also finding it challenging to conduct due diligence on opportunities due to Covid-19. Management also noted that asset prices were also elevated at the moment.
  • Outlook – reaffirmed previous guidance. Management expects adjusted EPS to grow by 7-11% in constant currency terms, adjusted free cash flow of $1.1 – 1.2bn, and approximately $600m allocated to share repurchase (increased from $400m previously).

Company Description:

Amcor Limited (AMC) is an international integrated packaging company offering packing and related services. Amcor primarily produces a wide range of packaging products which include corrugated boxes, cartons, aluminum and steel cans, flexible plastic packaging, PET plastic bottles and jars, and multi-wall sacks. The company has operations in Australasia, North America, Latin America, Europe and Asia.

(Source: Banyantree)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Technology Stocks

ANN’s operations in 1H22 were adversely impacted by Covid-19 including manufacturing shutdowns

Finance and Economy Chart for Dollar Gold Euro Currencies Trading View

Investment Thesis:

  • Based on the valuation, ANN’s share price trades at a >10% discount to the DCF valuation.
  • ANN is a quality business with global manufacturing capabilities.
  • In 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.
  • FX translation should be positive for the Company.
  • Raw material cost pressures can be shared with customers and suppliers.
  • ANN has a strong balance sheet position with flexibility to return cash to shareholders or borrowing capacity for acquisitions.

Key Risks:

  • Product recall.
  • Trade wars escalate, leading to higher tariffs.
  • Increase in competitive pressures.
  • Adverse movements in AUD/USD.
  • Emerging or developed market growth disappoints.
  • Any worse or better prices for raw materials.

Key Highlights:

  • Capital management. ANN has ample liquidity of ~$550m in cash and committed undrawn bank facilities, and conservative gearing profile (net debt/EBITDA of 1x vs 0.7x in pcp), despite net debt increasing +61.3% over pcp to $382.1m.
  • The Board declared an interim dividend of US 24.25 cps, down -26.9% YoY, representing ~40% payout ratio.
  • Cashflow. The Company delivered operating cash outflow of $22.1m (vs inflow of $12m in pcp) and cash conversion of 59.7% (after adjusting for short term incentives and insurance paid in half but relating to the full year), impacted by lower net receipts due to reduced profitability, higher working capital given lower payables as a result of timing and lower pricing from outsourced suppliers as well as payment of variable employee costs pertaining to FY21.
  • 1H22 results summary. Sales increased +7.6% over pcp (+7.5% organic growth) to $1,009.2m as Healthcare GBU organic growth of +14.8% was partially offset by Industrial GBU organic sales decline of -2.9%.
  • GPADE margins declined -860bps over pcp to 27.3% due to selling of high-cost Exam/SU inventory from outsourced suppliers at lower prices, Covid-19 related manufacturing disruptions and higher freight costs.
  • EBIT declined -24.3% over pcp (-30.6% in CC) to $111m with margin declining -460bps to 11%, with decline in GPADE partially offset by reduced SG&A driven by continued cost discipline and lower variable employee costs.

Company Description:

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.

(Source: Banyantree)

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Dividend Stocks

NAB also retained strong balance sheet metrics and capital position, with group Common Equity Tier 1 (CET1) ratio of 11.51%

Investment Thesis

  • NAB is trading on an undemanding valuation, with 1.6x Price to Book (P/B) and dividend yield of 5.4%. 
  • All else being equal, NAB is offering an attractive dividend yield on a 2-yr (5.6%) and 3-Yr (5.8%) view. 
  • Strong oligopoly position in Australia (along with three other major banks in CBA, ANZ, WBC).
  • Strong management team and Board. 
  • Macro environment to be both a tailwind and headwind –a rising interest rates environment to be both positive and negative in that while it will enable banks to charge more for loans, it also could result in deterioration in asset quality, slower loan growth, as well as higher inflation and wage growth to be detrimental to costs expense. 
  • Well capitalized after the capital raising. 
  • Though management has been cautioned to expect cost to increase, highlight NAB’s strong franchise model with management capable of improving below a 40% cost to income ratio (however do not factor in management’s long-term target of 35%).
  •  Potential pressure on net interest margins as competition intensifies with other major banks. Though these pressures are to slightly alleviate as it moves into a higher interest rate environment.
  •  Improving return on equity with management proving their abilities in recent times to manage profitability in a low interest rate environment. 
  • Strong provisioning coverage. 
  • A well-diversified loan book.

Key Risks

  • Impacts from Covid-19 are more severe than already provisioned for.
  • Low growth environment impacting earnings. 
  • Potential cuts or reduction to dividends due to low earnings growth. 
  • Intense competition for loan and deposit growth. 
  • Normalizing / increase in bad and doubtful debts or increase in provisioning. 
  • Funding pressure for deposits and wholesale funding (increased funding costs). 
  • Any legal fees, settlements, loss or penalties associated with ASIC or US-based law suits.

Key Highlights: Relative to the pcp and on a constant currency basis: 

  • Cash earnings up +8.3% to $7,104m. Statutory net profit up +8.3% to $6,891m. Net interest margin (NIM) declined 6bps to 1.65%. 
  • Group Common Equity Tier 1 (CET1) ratio of 11.51%, down 149 bps from September 2021 mainly due to the impact of the on-market share buy-back in FY22 totalling $3.9bn (94 bps), and Citi consumer business acquisition (30 bps). Leverage ratio (APRA basis) was 5.1%. Liquidity coverage ratio (LCR) quarterly average of 137%. Net Stable Funding Ratio (NSFR) of 119%. 
  • The Board declared a fully franked final dividend of 78cps, up 5cps from the pcp, and brings full year dividend to 151cps, up +18.9%.
  • Business and Private Banking. Cash earnings of $3,013m, was up an impressive +21.5%, driven by higher revenue (on stronger volume growth and higher margins), and lower credit impairment charges, partly offset by higher operating expenses for additional bankers and resources to support growth, LanternPay acquisition and investment in technology. 
  •  Personal Banking. Cash earnings of $1,591m, declined -3.6%, mainly due to the impact on margins from intense home lending competition, a lower level of credit impairment writebacks, partly offset by lower operating costs. 
  • Corporate and Institutional Banking. Cash earnings of $1,628m improved an impressive +34.9% on higher revenue from strong volume growth and higher margins, and lower credit impairment charges. 
  • New Zealand Banking. Cash earnings of $1,403m was up +14.1% on higher revenue due to growth in volumes and higher margins, partly offset by higher credit impairment charges and operating expenses.

Company Description

National Australia Bank Limited (NAB) is one of Australia’s largest banks, with majority of their financial service businesses operating in Australia and New Zealand. The bank also has a presence in Asia, UK and the US. NAB offers banking services, credit and access card facilities, leasing, housing and general finance, international and investing banking, wealth and funds management, life insurance and custodian, trusts and nominee services.

DISCLAIMER for General Advice: (This document is for general advice only).

This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.

The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require.  The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice.

The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.

Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.

Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents.  Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material.  Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.

The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.

Categories
Global stocks

JHG achieved solid investment performance, with 50%, 60%, 65%, and 76% of assets under management

Investment Thesis:

  • JHG is a truly global asset manager with US$299.7bn in FUM and significant distribution capabilities.
  • Trading on undemanding multiples – 9.1x PE-multiple and 7.2% dividend yield.
  • US$200m share buyback should support share price.
  • Improving flow in the higher margin retail segment.
  • Significant cost selling opportunities and a broader product offering, including new product development.
  • continue to see consolidation at the industry level as an important theme. Trian Partners has taken a 16.7% position in JHG, with the Company appointing two of Trian’s Directors Nelson Peltz and Ed Garden to the JHG Board. From understanding Trian’s partners have been on the record noting the need for industry consolidation. Trian Partners also have a significant shareholding in Invesco Ltd.
  • Current CEO Dick Weil is retiring, and a new CEO could bring a fresh perspective and strategy to the firm.

Key Risks:

  • Funds underperform versus their respective benchmarks.
  • Funds outflow – both retail and institutional (loss of a large mandate).
  • Shift to passive investing accelerates.
  • Loss of key management or investment management personnel.
  • Change in regulatory guidelines plus potential downside from UK’s exit from European Union.
  • Unfavourable currency movements.
  • Change in CEO could result in uncertainty over the strategic direction.

Key Highlights:

  • Adjusted operating income of $328.1 was -30% lower. Adjusted operating margin of 36.2% was weaker than the 42.0% in 1H21. 2Q22 relative to 1Q22 and 2Q21, and in $: JHG achieved solid investment performance, with 50%, 60%, 65%, and 76% of assets under management outperforming relevant benchmarks on a 1yr-, 3yr- , 5yr-, and 10-yr basis, respectively, as at 2Q22-end.
  • AUM declined -17% to $299.7bn, due to tough global markets, FX (US dollar appreciation), and net outflows of $(7.8) bn (due to a significant slowdown in intermediary gross sales and investment underperformance in key strategies).
  • 2Q22 operating income of $143.9m was improved versus $124.6m in 1Q22 but weaker than $225.0m in 2Q21. 2Q22 adjusted operating income (adjusted for one-time, acquisition and transaction related costs) of $149.3m declined from $178.8m in 1Q22 and $269.3m in 2Q21.
  • 2Q22 diluted EPS of $0.56, improved from $0.47 in 1Q22 and $0.79 in the 2Q21. $0.63 on an adjusted basis was lower than the $0.75 in 1Q22 and compared to $1.16 in 1Q21.
  • JHG completed $56m of share buybacks during 2Q22. (6) The Board declared a quarterly dividend of $0.39 per share (which is equivalent to 1Q22).
  • Capital management update. On 27 July 2022, the Board declared a 2Q22 dividend (for the three months ended 30 June 2022) of US$0.39 per share. Further, as part of the US$200m on-market buyback programme approved by the Board in May 2022, JHG purchased ~2.1m of its ordinary shares on the New York Stock Exchange and its CHESS Depositary Interests on the Australian Securities Exchange in 2Q22, for US$56m.

Company Description:

Janus Henderson (JHG) is an independent global asset manager, specializing in active investment. JHG was formed via a merger between Janus Capital Group and Henderson Group. JHG offers expertise across all major asset classes including equities, quantitative equities, fixed interest, multi-asset and alternatives. The group manages approximately $371bn, has over 2,000 employees and is dual listed on the New York Stock Exchange and the Australian Stock Exchange.

(Source: Banyantree)

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