Business Strategy & Outlook
New Hope’s strategy seeks to create value for shareholders by remaining a pure-play coal miner and developing thermal coal assets at a time when major miners–including Rio Tinto and BHP–head for the exits. The strategy is entirely reliant on thermal coal demand remaining robust for decades. The purchase of a further 40% interest in the Bengalla coal mine in fiscal 2019 sees New Hope double down on thermal coal. While demand for coal has waned in Europe and North America, Asia will remain the relative bright spot for coal demand over the coming decades, according to the International Energy Agency. The IEA sees the possibility that coal demand in absolute tonnage terms could remain steady out to 2040 in Asia, as economic development supports demand. Nonetheless, the potential for greater action on climate change brings the distinct risk that demand could falter earlier.
On the operational front, the realization of value from New Hope’s assets, given thermal coals has an uncertain future. Bengalla has approval to produce up to 13.4 million run-of-mine, or ROM, metric tons annually, greater than the approximate 12.4 million ROM metric tons mined in fiscal 2020. Capital expenditures required to de-bottleneck the mine and expedite the mining of Bengalla’s reserves are currently being explored. Mining leases were approved in fiscal 2023 for New Acland Stage 3, but water licenses are required before the mine can operate. An approximate 9.2 million metric tons of ROM production is planned in Stage 3. While less successful at New Acland, New Hope’s operational strategies at both assets have sought to expedite value creation. Nonetheless, these actions need to be taken in context. With Bengalla and New Acland reserves supporting multi decade mine lives and with a further 40% stake in Bengalla taken in fiscal 2019, said operational developments work only at the margins to expedite value creation for New Hope’s shareholders. The firm acquired a 15% stake in the Malabar-Maxwell underground mine in fiscal 2022. The mine has probable reserves of 144 million tons and a mine life of greater than 25 years.
Financial Strengths
New Hope’s balance sheet remains well positioned. New Hope’s bias toward a conservative balance sheet as appropriate. The volatile nature of coal prices makes the use of significant debt problematic. The balance sheet currently sits in a net cash position of approximately AUD 182 million at the end of fiscal 2022.
Bulls Say
- Asia’s growth will see demand for coal in the region remain steady for decades to come.
- New Hope’s operating assets enjoy decent positioning on the global thermal coal cost curve.
- The ramp-up of production at Bengalla toward 13.4 million ROM metric tons per year could provide better unit costs.
Company Description
New Hope Corporation is an Australian pure-play thermal coal miner. Its two operating assets–the 100%-owned New Acland coal mine and its 80% interest in the Bengalla coal mine–produce more than 12 million metric tons of saleable thermal coal annually. The vast majority of New Hope’s production is sold into seaborne thermal coal export markets. Reserves at New Acland and Bengalla are sufficient to support multi-decade mine lives. New Hope’s undeveloped coal resources are extensive and include exploration status coal resources in excess of 1 billion metric tons in Queensland’s Surat basin.
(Source: Morningstar)
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.
Business Strategy & Outlook
Unibail-Rodamco-Westfield, was formed in 1968, and it acquired several large malls through to 1995, and offices thereafter. In 2000 it launched a conventions and exhibitions business and is now the European leader in that sector. In 2007 Unibail merged with Rodamco, becoming the largest retail REIT in continental Europe. The group expanded into the U.K. and U.S. via the acquisition of Westfield in 2018. The Westfield acquisition was via a combination of cash and scrip, and management committed to non core asset sales to reduce debt. Progress was good until the COVID-19 crisis crimped its previous earnings certainty, and market sentiment toward Unibail-Rodamco. The group’s assets remain high quality, owning centres that are among the best in Europe and the U.S. Its iconic assets include the Carrousel du Louvre in Paris, Westfield Mall of Scandinavia in Stockholm, Westfield centres at Stratford and Shepherd’s Bush in London, the Westfield World Trade Centre in New York, Westfield Valley Fair in the San Francisco region, and many others.
Unibail’s malls to perform strongly as economic conditions normalise, and as rival low-quality malls in the U.S. close their doors. However, URW’s large debt load has put the balance sheet under pressure. Unibail was able to issue debt during the COVID-19 crisis at cheap prices (albeit slightly higher than 2019 levels), but needs to reduce debt. In November 2020, shareholders rejected a proposed EUR 3.5 billion equity raising. Unibail may instead exit its more than EUR 10 billion of assets in North America, sell approximately EUR 4 billion of assets in Europe, pay no distributions until 2023, and cut development spend. Given the fast-changing landscape, shouldn’t be surprised to see further adjustments to the strategy, with management taking an opportunistic approach, with options including full or partial asset sales, development partnerships.
Financial Strengths
URW is under financial pressure due to its high debt load combined with a hole in its earnings from coronavirus shutdowns, social distancing, and related economic damage. Its loan to valuation ratio of 41.5% (pro forma, as at June 30, 2022) is excessive. A proposed EUR 3.5 billion equity raising was rejected by shareholders in November 2020, URW instead raising cash through European asset sales over 2021 and 2022, and potentially more than EUR 10 billion of sales in North America. The capital proceeds will be used to repay debt, and are confident gearing can be brought under 35%, however, to go much lower than that will require favourable conditions for asset sales, which could take time. If the economy approaches normal conditions and other planned cash collection/retention measures proceed, the company should be on a firmer footing. However, it is possible URW would have to raise equity again if high interest rates persist, or there is a severe and prolonged recession, or virus restrictions return. There remains a remote risk this could completely wipe out current securityholders if all of these negatives occurred, though this would be an extreme scenario. URW’s long-dated debt profile and leases linked to CPI and tenant sales provide some protection from these risks.
Bulls Say
- COVID-19 vaccine rollouts, and the milder omicron virus variant, should help URW’s rents and asset sales in coming years.
- URW tenants have recovered to sales numbers near and even exceeding pre-COVID-19 levels. This suggests that rents should eventually recover and exceed pre-COVID-19 levels once vacancies continue to reduce.
- Although e-commerce competition is intense, a lot of the damage has already been done. URW’s affluent catchments remain desirable for retailers, who require a physical presence to maintain their brand and customer service standards.
Company Description
Unibail-Rodamco-Westfield, or URW, owns a portfolio of quality malls, about two thirds in continental Europe. Since acquiring Westfield in 2018 URW also has about 10% in the U.K. and about 25% in the U.S., but it plans to drastically reduce exposure to the latter. More than 90% of rent comes from shopping centres, the remainder from offices, mostly Paris, as well as some offices attached to mixed-use assets around the world, and a similar amount from a conventions and exhibitions business in France.
(Source: Morningstar)
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.
Business Strategy & Outlook
Geberit’s strategy is aimed at reinforcing its competitive advantage, which supports the group’s exceptional returns on invested capital and high profitability. Geberit’s “push-pull” sales model has successfully created long-term brand loyalty by educating and turning key decision-makers (wholesalers and installers) for sanitary products into business partners. Behind-the-wall products place particular importance on brand reputation and relationships with key decision-makers that are encouraged to sell higher-value products, which makes it extremely difficult for competitors to penetrate Geberit’s existing core markets. Continuous product innovation and product range extension justify price increases, which are ultimately passed on to the end consumer, who lacks understanding on behind-the-wall sanitary matters and relies on support of the intermediary.
Geberit has utilized a combination of extraordinary price increases in addition to its annual price increase to support profitability to combat significant raw material and transportation inflation. Consistent capital investment in the efficiency of production facilities and product innovation helps reduce the reliance of cyclical construction demand to support profitability. With the COVID-19-driven home improvement trend subsiding and a rising-interest rate cycle likely to put the brakes on a strong residential market, greater reliance is placed on product innovation to drive sales. Geberit is consistently investing in product innovation, reflected by 185 new patents having been registered between 2016 and 2021. Novel product innovation justifies the consumer paying premium prices. Slow adoption of new products generally means new product launches enjoy many years of runway. The Sanitec acquisition in 2015 allowed Geberit to accelerate the growth of concealed cisterns in underpenetrated markets. Since 2016 Geberit has returned over 80% of free cash flow to shareholders through dividends and share buybacks, without compromising reinvestment. The firm continues to provide shareholders with a regular source of income, maintaining its target dividend payout ratio of between 50% and 70%.
Financial Strengths
Geberit is in a comfortable financial position, which provides it with financial flexibility and the ability to make long-term investments throughout the cycle. The group has net debt of CHF 273 million on its balance sheet, translating into a net debt/EBITDA ratio of 0.3 times as at the 2021 financial year, a highly conservative level of leverage. Free cash conversion rates have averaged around 100% of net income, allowing Geberit to invest significantly in product innovation to help support price increases and maintaining strong relationships with key decision-makers, as well as generous capital return to shareholders.
Bulls Say
- Geberit enjoys long-lasting relationships with its fragmented customer base of wholesalers and plumbers, the relatively price-agnostic critical decision-makers for behind-the-wall sanitary equipment, which helps protect profitability against rising inflation.
- Regular investment into product innovation and productivity efficiencies reduces the reliance of demand on cyclical construction cycles.
- Shareholder returns are enhanced by Geberit’s generous capital return policy that is supported by strong free cash flow generation.
Company Description
Geberit is a leading manufacturer of sanitary products, which include flushing systems, piping systems and bathroom ceramics. Products are primarily sold through the wholesale channel. Geberit has an extensive history in sanitary products, having filed a patent for its first flushing mechanism in 1912. The company generates sales in 118 countries and operates 29 production plants, the majority of which are in Europe. Geberit shares are listed on the SIX Swiss Exchange. The majority of sales are generated from residential and renovation activities.
(Source: Morningstar)
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.
