Category: Sectors

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Technology Stocks

Nanosonics Ltd. reflecting a strong rebound in growth compared to 1H21

Investment Thesis

  • Requirement for ultrasound disinfection. Ultrasound transducers must be disinfected between patients to prevent cross-infection. Trophon EPR is a significant improvement above traditional methods (soak, spray, wipe or other manual reprocessing/disinfection method). For instance, traditional soaking takes ~25 minutes versus Trophon which takes ~7-8 minutes to disinfect ultrasound probes.
  • Potential addressable installed base of ~120,000 Trophon EPR units globally (~40,000 in the US, Europe and Rest of World each).
  • New guidelines and regulation drive pathways to reinforce requirements for high level disinfection. For instance, new guidelines in Australia and New Zealand setting Trophon as the standard in high level disinfection.
  • Continued growth in North America to be driven by its direct sales team with adoption remaining strong and Trophon becoming the standard of care.
  • Large and credible distribution partner is retained in GE Healthcare with demand for safety inventory.
  • Managed Equipment Service business model (MES) in the UK overcoming capital budget constraints by clients.
  • Progress with geographic expansion. 
  • Strong balance sheet to support growth strategy.

Key Risks 

  • Competitive pressures as potential entrants enter the market. 
  • Non-receptive markets where NAN’s product is considered overkill compared to traditional disinfection methods such as using sterilised wipes.
  • Key customer risk as one customer is NAN’s largest customer 
  • Product faults or incidents where recalls are required.
  • Adverse foreign currency movements in AUD/USD.
  • Poor execution of R&D with no progress.
  • Nature of business makes it prone to easily reaching a natural penetration rate, where growth becomes subdued.  

1H22 Results Highlight

  • Revenue of $60.6m, up +41%, driven by strong growth with capital revenue of $19.0m, up +102%, and consumables and service revenue of $41.6m, up +23%.
  • Global installed base up +12%.
  • Continued investment in the strategic growth agenda resulted in operating expenses of $42.7m, up +29%.
  • Operating profit before tax of $3.3m, significantly improved from the $0.2m in the pcp.
  • NAN has no debt and its cash position continues to provide a strong foundation to support its growth plans – 1H22 free cash flow reflects net outflow of $3.8m with Cash and cash equivalents of $92.0m at 31 December 2021.
  • R&D investment of $10.7m, up +41%, with a focus on NAN’s new endoscope reprocessing product platform, Nanosonics Coris.

Company Profile 

Nanosonics Ltd (NAN) is an ASX-listed company which focuses on developing and commercialising infection control devices. NAN’s first device, the trophon® EPR is a proprietary automated device for low temperature, high level disinfection of ultrasound probes. The device is approved for sale across major markets including, Australia and New Zealand, US, Europe, Japan, Hong Kong, and South Korea. The trophon® EPR is sold through distributors including GE Healthcare, Philips, Samsung, Siemens Toshiba and Miele Professional.

(Source: BanyanTree)

General Advice Warning

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

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Global stocks Shares

CGC reported solid FY 21 results driven by International segment to grow its revenue by 30%

Investment Thesis 

  • Improving momentum at the operational level and the stock is trading well below our valuation.
  • Positive thematic play on food supply for a growing global and domestic population.
  • Leading market positions in five core categories (Berries, Mushrooms, Citrus, Tomato and Avocado via the recent acquisition).
  • Near-term challenges could persist a little while longer (e.g. extreme weather and drought)
  • Execution of domestic berry growth program continues, while China berry expansion is gaining momentum. 
  • Balance sheet risk has been removed with the recent capital raising.
  • Given the number of downgrades, management will likely need to rebuild trust with its guidance and execution.

Key Risks

  • Further deterioration in weather conditions leading to pressure on earnings.
  • Further deterioration in earnings could put the balance risk at risk again.  
  • Weather affecting crops or any significant increase in insurance expense. This risk is mitigated as CGC has crop insurance (hail, wind, fire) and structure insurance.
  • Any power outage causing crops to be destroyed per incident.
  • Any significant increase in costs of power, affecting earnings.
  • Any disruption to operations from health and safety issues.
  • Any disruptions or issues associated with water, irrigation and water recycling.
  • Negotiations with supermarket giants Coles (Wesfarmers), Woolworths and independent grocers result in erosion of margins.
  • Pricing pressures arising from either competitors, or insufficient demand.
  • Increased costs due to lower water allocations. 

1H22 Results Highlights                

Relative to the pcp:   

  • Revenue increased +4.8% to $1220.6m, driven by International up +30% (+40% in CC) with both regions performing strongly with production and pricing improvements. 
  •  EBITDA-S increased +10.6% (+14% in CC) to $218.2m, with International up +33.9% (+49.2% in CC) underpinned by strong China pricing and additional production from increased footprint and yield, partially offset by -1.3% decline in Farms & Logistics segment amid Covid-19 lockdowns impacting foodservice/market industry. 
  •  NPAT-S increased +16% (+25% in CC) to $64m with higher D&A amid major capex programs going-live and impact of acquisitions was more than offset by reduced tax expense amid increased contribution from China. Statutory NPAT declined -32% (-28% in CC) to $41.4m. 
  •  Operating cashflow of $114.6m declined -16.8%, amid increased working capital in 2H21 (consistent with normal cycle) and $23.1m tax payments. 
  •  Operating capex increased +51% to $43.2m (expect CY22 to be $55-60m) and growth capex of $84.4m increased +68% amid continuation of international expansion. 
  •  Net debt increased +108% to $299.2m leading to leverage increasing +0.86x to 1.85x, still within target range of 1.5-2x. 
  •  The Board declared a fully franked final dividend of 5cps bringing FY21 payout to 9.0cps (flat over pcp). 

Company Profile

Costa Group Holdings Ltd (CGC) grows and markets fruit and vegetables and supplies them to supermarket chains and independent grocers globally. CGC has leading market positions in five core categories of Berries (Blueberries, strawberries and raspberries), Mushrooms, Citrus, Tomato and Avocado via the recent acquisition.

(Source: Banyantree)

General Advice Warning

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

Categories
Technology Stocks

CrowdStrike in the early stages of becoming a market mainstay

Business Strategy and Outlook

CrowdStrike is a leader in endpoint security, a necessity that aids in protecting devices and networks, and its threat hunting and breach remediation services are topnotch. While nefarious threat actors are continually upping their attack methodology to create zero-day attacks and are using the rise in entities using cloud-based resources to their advantage, CrowdStrike developed a methodology to turn any entities’ weak-point into better protection for all of its clients. CrowdStrike’s cloud-delivered endpoint protection platform continuously ingests data from all of its installed agents to enhance its protection solutions while keeping all users up to date against the latest threats. It is anticipated that CrowdStrike’s customer base, revenue, and margins will experience profound growth throughout the 2020s as customers update their endpoint and workload security requirements in a hybrid-cloud world. 

CrowdStrike’s endpoint protection platform melded the needs of next-generation antivirus, threat intelligence, endpoint detection and response, and other features like managed threat hunting into a consolidated management plane. The lightweight agents, installed on physical devices like servers and laptops, or in virtual machines and cloud environments, are continually improving through its cloud database algorithms, becoming more capable as more data is received. In analysts view, CrowdStrike’s solutions establish customer switching costs and its network effect makes changing vendors a challenge as clients rely on having the latest threat protection. 

Alongside a persistent talent shortage in cybersecurity and firms attempting to manage disparate toolsets for various parts of endpoint security, entities are challenged to stay secure in networking environments without distinct security perimeters. CrowdStrike’s experts supplement these overwhelmed or short-staffed teams, and the firm also offers breach remediation and proactive testing services. It is likely that CrowdStrike is in the early stages of becoming a market mainstay as businesses and governments rapidly adopt cloud-based endpoint protection platforms.

Financial Strength

It is seen CrowdStrike as a financially sound company that will be able to generate solid free cash flow and expand its margin profile throughout the 2020s. CrowdStrike had its initial public offering in June 2019 and has historically operated at a loss on a GAAP basis. It is viewed CrowdStrike’s capital deployment efforts true to a land-and-expand strategy, whereby CrowdStrike initially has elevated sales and marketing expenses to gain a customer cohort before expanding its revenue per customer while lowering its operating costs per customer (on a revenue percentage basis). In analysts view, CrowdStrike can benefit from cross-selling and up-selling tangential products to its existing base and new clients, while also converting breach remediation service clients to be product customers. As of the end of fiscal 2022, CrowdStrike had $2.0 billion of cash, cash equivalents, and marketable securities and $740 million of debt. With a strong balance sheet and free cash flow generation, it is anticipated CrowdStrike to pay its obligations on time.

Bulls Say’s

  • CrowdStrike’s innovative endpoint security solutions, delivered as a platform, are quickly attracting customers as clients want to consolidate their myriad legacy security tools. Its threat remediation services are a powerful tool in landing new subscription clients. 
  • After landing a client, CrowdStrike can gain significant margin leverage via the cross-selling and up-selling of additional security modules. 
  • CrowdStrike’s products become more capable as new clients are added, and its threat intelligence and hunting can become a core part of customer’s cybercrime defense.

Company Profile 

CrowdStrike Holdings provides cybersecurity products and services aimed at protecting organizations from cyberthreats. It offers cloud-delivered protection across endpoints, cloud workloads, identity and data, and threat intelligence, managed security services, IT operations management, threat hunting, identity protection, and log management. CrowdStrike went public in 2019 and serves customers worldwide 

(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
Shares Small Cap

Myer remains highly uncertain as it grapples with cyclical and structural industry headwinds

Business Strategy and Outlook

Myer targets the middle to upper market, selling exclusive brands in competition with department store David Jones. The five largest Australian department stores share virtually the whole of the department store sector between them. While Myer, with a market share of around 15%, and key competitor David Jones (around 10%) operate at the upper end of the market, they also compete to an extent with the discount department stores operated by Wesfarmers (around 50%) and Woolworths (around 25%).

With entry into the Australian market of brands like Zara and H&M, and online competition from players such as Amazon, it is anticipated domestic department stores will increasingly find it difficult to compete with the international disrupters because of limited comparable sales volume growth. It is seen online sales to become an even more meaningful percentage of sales during the next decade as consumers increasingly perceive online retailers as offering value and convenience. Myer’s strategy is to strengthen its online presence and is rapidly growing its e-commerce business, while rationalising its physical footprint to maintain productivity levels, owing to relatively weak sales growth in the brick-and-mortar channel. But it is likely competition from e-commerce to intensify.

While it is likely the online channel to grow faster than the brick-and-mortar channel to fiscal 2030, and Myer to partially capture its share of this e-commerce growth, Amazon Australia will pursue its piece of the pie, leading to a decline in the size of the sector’s addressable market. The outlook for Myer remains highly uncertain as it grapples with cyclical and structural industry headwinds. To account for this uncertainty, analysts require a large discount to perceived value before investing in Myer. In tough economic times, it is the discount department stores benefit from more frugal customer behaviour. It is expected earnings to improve gradually from fiscal 2022, with the removal of virus-related restrictions when a treatment and vaccine for COVID-19 become widely available.

Financial Strength

The balance sheet continued to improve, and Myer finished January 2022 with a net cash position of around AUD 217 million. This compares with net cash of AUD 206 million as of January 2021. A new four-year funding package secured in November 2021, eliminated near-term refinancing risk. Myer’s board reinstated the dividend, which had been suspended since fiscal 2018. The reinstatement of the dividend signals the board’s confidence in the underlying strength of the business and could improve market sentiment.As are many other retailers, Myer is committed to paying rent to landlords for its store portfolio. These operating leases are now on balance sheet with new accounting standards from January 2019.

Bulls Say’s

  • Myer is an iconic Australian department store brand resonates with Australians. Myer is hanging onto this perception by improving its stores and online offerings to meet customer demand.
  • Myer is well placed to rebound strongly if it can successfully navigate the current economic slowdown.
  • Strategic initiatives–aimed at vertically integrating retail from design, manufacture, and sales–ensure that Myer is capturing a higher share of gross margin and control of its exclusive bands.

Company Profile

Myer is Australia’s largest department store operator, with some 60 stores that are mostly spread across eastern states. Stores are generally located in areas of high foot traffic in major metropolitan shopping centres. Competitive advantages include a well-established brand and scale benefits from a relatively large revenue base. The brand is somewhat iconic among Australian domestic consumers. The group’s loyalty programme has more than 5 million members.

(Source: MorningStar)

General Advice Warning

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

Categories
Global stocks

Coles Group reported 1H22 results reflecting modest sales growth despite cycling elevated sales

Investment Thesis

  • Strong market position in supermarkets, with significant scale and penetration providing a competitive advantage.
  • Increasing private labels penetration – COL recently reiterated its target of 40% penetration.
  • Relatively defensive earnings (food tends to be largely non-discretionary).
  • Undemanding valuation relative to main domestic competitor Woolworths. 
  • Improved focus and capital allocation now that the Company is demerged. 
  • Supply chain automation and upgrades should lead to efficiency gains.
  • In our view, the deal with Ocado puts Coles in a leadership position for online delivery. 
  • Flybuys is a highly attractive asset which could be monetized. 

Key Risks

  • Significant competitive pressures (including the emergence of new players) could erode margins. 
  • Management resets earnings base at the upcoming Strategy update in June 2019.
  • Online disruption (full online offering).
  • Automation and supply chain upgrades will require significant capital expenditure, cost of which has not been fully identified. 
  • Balance sheet could be stretched once adjusted for leases. 
  • Cost inflation runs ahead of top line growth. 

1H22 Results Highlights 

  • Sales revenue growth of +1.0% to $20.6bn and +9.2% on a two-year basis despite cycling elevated Covid-related sales in the pcp.
  • EBITDA of $1,762m was down -2.2%, and EBIT of $975m, was down -4.4% and impacted by higher Covid-19 disruption costs, related travel restrictions on Express’ earnings and transformation project costs. EBIT margin of 4.7%, was down -27bps.
  • NPAT of $549m, was down -2.0%.
  • Smarter Selling benefits in excess of $100m in 1H22; On track to deliver over $200m of benefits in FY22.
  • Cash realisation of 117% and a strong balance sheet (leverage ratio of 2.7x) with a net cash position of $54m (excluding lease liabilities). COL retained solid investment grade credit ratings with S&P and Moody’s.
  • The Board declared a fully franked interim dividend of 33.0cps and retained an annual target dividend payout ratio of 80% to 90%.
  • In February 2020, Coles conducted a review into the pay arrangements for all team members who received a salary and were covered by the General Retail Industry Award 2010 (GRIA). To date COL has incurred $13m of remediation costs.

Company Profile 

Coles Group Ltd (COL) is an Australian retailer (supermarket and liquor), demerged from Wesfarmers (WES) which acquired the business in 2007. As at 30 June 2018, Coles processed more than 21 million customer transactions on average each week, employed over 112,000 team members and operated 2,507 retail outlets nationally. The Company has three main operating segments: Supermarkets, Liquor and Convenience. The Company will also retain a 50% ownership stake in flybuys loyalty programs. 

(Source: BanyanTree)

General Advice Warning

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

Categories
Shares Small Cap

Ardent Leisure Buys Family Entertainment Venues in Colorado

Business Strategy and Outlook

Ardent Leisure’s underlying fundamentals is moderated by the wider macroeconomic factors that influence its operations and the current restructuring efforts to restore earnings after the recent upheavals. Of greater concern is the near-term impact of the coronavirus on Ardent’s operations and its financial position, especially theme parks. But cost-cutting and government assistance measures have provided relief. RedBird’s USD 80 million investment in June 2020 for an initial 24.2% preferred equity interest in Main Event secures the U.S. family entertainment chain’s funding position. Furthermore, RedBird has the option to acquire an additional 26.8% interest at a future date, with the valuation to be based upon 9.0 times EBITDA at the time of exercising the option, subject to a minimum equity floor price.

Beyond the current coronavirus crisis, Ardent Leisure possesses solid leisure and entertainment assets that all operate in intensely competitive markets. These assets compete for the leisure dollars of consumers who are spoilt with alternatives, especially in this online digital world, where most traditional entertainment activities can now be enjoyed in a virtual setting. Furthermore, most of the group’s businesses are relatively capital-intensive, particularly as Main Event expands its venue footprint and as Ardent strives to keep up with competing leisure options and stay fresh in consumers’ minds. The situation is exacerbated by cyclical factors, with consumer discretionary spending highly leveraged to swings in general economic conditions.

Financial Strength

Ardent has AUD 119 million of net debt on the balance sheet, as at the end of December 2021. This comfortable position with AUD 93 million in available liquidity for Main Event is mainly thanks to Redbird’s USD 80 million (AUD 100 million) capital injection into the U.S. business, in return for a 24.2% preferred equity stake. The Queensland government’s recent tourism-friendly three-year AUD 64 million loan package (plus AUD 3 million grant) also means the Australian theme parks unit now has AUD 18 million of available liquidity.

Bulls Say’s

  • COVID-19 has inflicted significant damage on Ardent Leisure’s businesses and the first and foremost question is how long it will take for businesses to return to pre-pandemic levels. 
  • Ardent Leisure’s businesses provide consumers with affordable leisure and entertainment destinations, although demand dynamics are highly leveraged to discretionary spending patterns. 
  • Competition is fierce for the group’s operations, with proliferating alternatives competing for consumers’ leisure dollars.

Company Profile 

Ardent Leisure is an owner and operator of leisure assets. Its theme park operations are situated in Australia, including Dreamworld and WhiteWater World on the Gold Coast. The group also runs Main Event, a growing portfolio of family entertainment operations in the United States, offering bowling, arcade and various other leisure activities.

(Source: Morningstar)

General Advice Warning

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

Categories
Global stocks Shares

G8 Education Ltd Long term Outlook remains positive with growing population; Announced share buyback

Two young women talking together with a tablet in the living room. They sit spaced apart to prevent the virus.

Investment Thesis

  • Trading below our valuation. 
  • Long-term outlook for childcare demand remains positive with growing population (organic and net immigration). 
  • Greater focus on organic growth as well as acquired growth. 
  • National footprint allows the Company to scale better than competitors and mum and dad operators.
  • Potential takeover target by a global operator. 
  • Leverage to improving occupancy levels – (rough estimates) a 1.0% improvement in occupancy equates to $10-11m revenue and approx. $3m EBIT benefit.

Key Risk

  • Execution risk with achieving its operating leverage and occupancy targets.
  • Increased competition leading to pricing pressure. 
  • Increased supply in places leading to reduced occupancy rates. 
  • Value destructive acquisition(s). 
  • Adverse regulatory changes or funding cuts to childcare.
  • Recession in Australia.
  • Dividend cut   

CY21 Results Highlights Given the disruption to CY20 results, comparing the CY21 results to pre-Covid CY19 results. 

  • Group core revenue of $828m was down -6.9% (or down ~$62m) vs CY19 due to lower occupancy (down 2.1% vs CY19) impacting revenue by ~$50m and a $48m impact from the centers divested since CY19. Partly offsetting these were higher average net fees of $16m and $20m of temporary government support relating to Covid-19. 
  •  Core centre NPBT of $137.8m was down -7.7% on CY19, however core centre NPBT margin of 16.6% was mostly flat on CY19 (16.8%) driven by cost management (effective booking and attendance levels; roster optimization) and removal of negative or low margin centers through lease surrender or divestment. 
  •  Group’s cash conversion of 107% was higher vs CY19 101% despite lower overall operating cash flows (driven by lower EBITDA), in part driven by the benefits of lower interest payments (refinance and lower net debt levels). 
  •  GEM finished the year with a strong balance sheet, with a net debt position of $26m and leverage (net debt / EBITDA) of 0.2x. 
  • The Board declared a fully franked dividend of 3cps, representing a payout ratio of 56% and within the target payout ratio range of 50-70% of NPAT. The Company also announced an on-market buyback “to be determined by appropriately balancing between shareholder returns and leverage levels, the uncertain earnings recovery outlook driven by Covid-19, the funding of strategic priorities including the improvement program and the property investment program and other funding needs included for wage remediation and network optimization.”

Company Profile

G8 Education Limited (GEM) owns and operates care and education services in Australia and Singapore through a range of brands. The Company initially listed on the ASX in December 2007 under the name of Early Learning Services, but later merged with Payce Child Care to become G8 Education.

(Source: Banyantree)

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

Nine Entertainment Co reported a solid 1H22 result; Strong growth in Company’s digital assets and its FTA TV asset

Investment Thesis

  • Upside potential to NEC’s share price from investors ascribing a higher value for Stan, NEC’s subscription video of demand (SVOD). Stan is now cash flow positive and profitable, with margins having the potential to surprise on the upside. 
  • Relatively attractive dividend yield of ~4%. 
  • NEC is now a much more diversified business, with revenue not dominated by traditional FTA TV but also attractive digital platforms and assets. 
  • Cost out strategy – looking to remove $230m in structural costs.  
  • Corporate activity given NEC’s strategic assets.
  • Trading below our valuation. 

Key Risks

  • Competitive pressure in Free to Air (FTA) TV and SVOD. 
  • Stan growth (subscriber numbers or breakeven point) disappoints market expectations. 
  • Structural decline in TV audiences continues to impact sentiment towards the stock. 
  • Deterioration in advertising markets.
  • Cost blowouts in obtaining new programming/content.
  • Increased competition from Netflix and Disney.

1H22 result highlights. 

  • Group revenues of $1.33bn was up +15% on pcp and group operating earnings (EBITDA) of $406.3m was also up +15% on pcp, driven by ongoing momentum in advertising and subscription businesses. Group NPAT of $212.9m was up + 20% on pcp. 
  •  EPS of 12.5cps was up +20% and the Company declared a fully franked dividend of 7cps (up +40% YoY), which equates to 56% of NPAT. 
  •  NEC retains a very strong balance sheet with net leverage (wholly owned) of 0.1x and net debt of $63m. 
  • Management noted that CY22 has started strongly across all platforms and advertisers, across all major categories. NEC retains a strong balance sheet, with a (wholly owned) leverage ratio of 0.1x, which in as per analyst view at some point will provide management with the option to undertake value accretive inorganic growth initiatives or additional capital management.
  •  Positive on the medium-term earnings outlook for NEC and are attracted to a diverse asset base (including Stan / Domain). With the stock trading on a reasonable dividend yield of ~5% (fully franked) and below our valuation, and thus maintain Buy recommendation by banyantree analysts.

Company Profile

Nine Entertainment Co (NEC), through its subsidiaries, broadcast news and current affairs, sporting events, comedy, entertainment and lifestyle programs. Nine Entertainment serves customers throughout Australia. NEC has repositioned itself from a linear free-to-air broadcaster, to a creator and distributor of cross-platform, premium content. While the channel Nine Network remains core, it is now complemented by subscription video on demand (SVOD) provider Stan, a live streaming and catch-up service 9Now, digital network nine.com.au and array of digital content.

(Source: Banyantree)

General Advice Warning

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

Categories
Technology Stocks

MongoDB is well set to grow at a robust pace

Business Strategy and Outlook

Since 2007, MongoDB has amassed millions of users of its document-based database, as workload shifts to the cloud has accelerated data collection growth as a whole and thus the need for architectures to store such data (particularly NoSQL variants like document-based databases). MongoDB appears to be doing anything but losing steam, as its database technology has remained the most desirable database (both SQL and NoSQL included) for professional developers to learn globally over the last four years, according to Stack Overflow. It is seen such interest will persist as MongoDB’s more recent cloud database-as-a-service and data lake offerings help ensure MongoDB’s rich features transform to meet new technological needs. 

The database market is booming–growing exponentially as a result of migrations to the cloud. Once enterprise workloads are on the cloud, scaling, collecting, and analyzing data becomes easier because of how effortless it is to scale data storage in the cloud. As a result, it is likely that the amount of data collected and analytical computations on such data in the cloud will continue to dramatically increase, in turn, benefiting many database providers, particularly MongoDB. It is anticipated MongoDB is considered the premier document-based DB, with extremely rich features–from in-database data transformation to instant interoperability on multiple cloud platforms. It is alleged the majority of this net new data to be stored is largely for hefty analysis, thus requiring a NoSQL database, like MongoDB, due to its ability to store unindexed or “unknown categories” of data. 

With significantly more opportunity to go in converting customers to its cloud database-as-a-service product, Atlas, which represents 50% of all revenue and brand new opportunity for the company’s just-released data lake offering, it is likely MongoDB is well set to grow at a robust pace and profit from such scale. It is held also believe that MongoDB has a sticky customer base and could eventually merit a moat down the road.

Financial Strength

It is alleged MongoDB is financially stable given the early stages of the company, as analysts are confident the company will generate positive free cash flow in the long term. MongoDB had cash and cash equivalents of $1.83 billion at the end of fiscal 2022 with $1.14 billion in convertible debt on its balance sheet–due in both 2024 and 2026. It is foresee that MongoDB will become free cash flow positive in fiscal 2026 after which is believed MongoDB will continue to invest heavily back into its business rather than distributing dividends or completing major repurchases of its stock. Analysts model minor acquisitions in analysts explicit 10-year forecast, though it is held MongoDB will continue to focus primarily on in-house R&D.

Bulls Say’s

  • MDB’s document-based database is best equipped to remove fear of vendor lock-in and is poised for a strong future. 
  • MongoDB’s new data lake could gain significant traction, making MongoDB even stickier, as it is alleged data lakes have even greater switching costs than databases. In turn, this could further boost returns on invested capital. 
  • MongoDB could eventually launch its own data warehouse offering, which would further increase customer switching costs.

Company Profile 

Founded in 2007, MongoDB is a document-oriented database with nearly 33,000 paying customers and well past 1.5 million free users. MongoDB provides both licenses as well as subscriptions as a service for its NoSQL database. MongoDB’s database is compatible with all major programming languages and is capable of being deployed for a variety of use cases. 

(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

HT&E Ltd : Delivered Strong FY21 Result In spite Of Lockdowns

Investment Thesis:

  • It is anticipated an improvement in radio advertising markets over the medium term and expect solid demand for radio as a medium for advertising agencies. 
  • Further cost outs, specifically significantly lower corporate overheads costs. 
  • Potential corporate activity given changes to media ownership rules. 
  • Upside to the valuation of Soprano (25% interest) 
  • Ongoing capital management initiatives.  
  • Solid 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 with international expansion.
  • 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:

HT&E (HT1) delivered a strong FY21 result on the back of a solid performance by radio in the back half of CY21 despite lockdowns. Group revenue of $225m was up +16% YoY and EBITDA of $59.8m up +21% on the back of solid top line growth and good cost management. The Company also closed the acquisition of 46 radio stations focused on regional markets from Grant Broadcasters, with management calling out $6-8m of revenue opportunities in CY22. The resolution to the ATO matter over the year was also a positive.

  • Driven by a resilient radio market, group revenue of $225m was up +15% YoY (or up +16% on a like-for-like basis). The Company saw improved ad spend in the second half of CY21 despite extended government-enforced lockdowns.  On the back of strong top line growth and good cost management, HT1 delivered EBITDA of $59.8m up +21% and EBIT of $45.9m up +41%. Group NPAT of $28.8m was up +87% YoY. 
  • The Company declared a final dividend of 3.9cps, taking the full year dividend to 7.4cps fully franked. Management is committed to a dividend payout ratio of 60-80%, subject to market conditions.
  • Balance sheet is in a strong position with net cash position of $189.1m. Debt of $67.2m and cash reserves were utilized to fund the acquisition of 46 radio stations from Grant Broadcasters in early January 2022. Subject to market conditions, management expects leverage to be below 1.0x by the end of CY22.
  • Total segment revenue was up +12% to $195.6m, with Radio revenues were up +13% (maintaining its momentum) and Digital audio revenues up +48% (excluding disposed businesses) with podcasting the main driver. Segment costs were up +14% on a like basis driven by higher cost of sales on improved revenues, while people and operating expense came in at the low end of the guidance provided at the half year result. 

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.    

(Source: Banyantree)

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