Categories
Dividend Stocks

Tesco Is the Best- Positioned Grocer in the Coverage

Business Strategy & Outlook:
Tesco, the largest grocery retailer in the United Kingdom in terms of sales and store network, has successfully completed an ambitious turnaround. It has seen one of the worst times in its history over the past decade, including an accounting controversy in 2014 and a subsequent decline in profits and growth owing to the advent of discounters in the U.K. food retail business. The firm is largely focused on enhancing the in-store experience, providing new own-brand products (entry-level and fresh produce), and re-evaluating supplier connections (smaller base and longer-term partnerships). The turnaround strategy focused on the company’s core strengths: food size and well-documented purchasing power.

Tesco’s ability to better control supplier-related cost inflation, along with its superior cost-saving measures, has enabled it to not only balance competition challenges, but also boost margins and price position (via the Aldi Price Match plan) relative to its competitors. The concerted efforts of management to convert these scale advantages into profitable expansion were fruitful. In the future, the group shall generate more normalized levels of profitability, albeit below historical standards. Tesco outperforms most of its Big Four competitors (Sainsbury’s, Asda, and Morrisons) on key indicators like grocery volume, like-for-like sales growth, and large-store sales growth, proving that its approach is succeeding. Tesco’s Booker is the major food distributor in the U.K., with a presence in both the retail (Symbol and Independent) and catering industries. This is consistent with the company’s long-term strategy to increase scale by consolidating its supplier base and indirectly increase food sales through Booker’s overlap in the food sector.

Financial Strengths:
Tesco is in solid financial condition. At the end of fiscal 2022, net debt/adjusted EBITDA (including operating leases) was 3 times. The operating lease liability is around GBP 7.5 billion, and the net pension shortfall is negligible. The dividend was reintroduced in fiscal 2018 (expected around GBX 11 per share for fiscal 2023) after being suspended when earnings dropped in 2015. Management has also implemented stricter financial discipline, enhanced working capital, and ceased the battle for space. Dividends might expand in parallel with underlying EPS growth at a payout ratio of 50% over the next five years (from slightly less than GBX 10 per share to about GBX 14 by 2027). Given the sector’s low growth prospects and Tesco’s established presence, the grocer to is able to finance its development and store maintenance with capital expenditures below 2.0% of sales. Tesco generates free cash flow at a rate that is significantly higher than the industry average, as a result of the recent improvement in profitability. Free cash flow to the firm is expected to account for close to 3% of sales on average through fiscal 2027. In recent years, Tesco has repositioned its operations, including withdrawing from less lucrative areas, which has helped reduce its debt. It also owns property, worth about GBP 22 billion at the end of fiscal 2022, which could be shed to generate cash if needed, though it has been doing the opposite recently by acquiring more stores to rid itself of inflation.

Bulls Say:
As the largest grocer in the U.K. in both the online and offline channels with almost 100% coverage and a network of more than 3,500 stores, Tesco should be able to use its scale to drive results in ways subscale peers cannot.
An early mover in the online channel, Tesco not only holds a dominant market position (35% online grocery share) but also operates profitably on an EBIT level, thanks to scale.
Management is successfully repositioning the business in terms of pricing, in-store experience, and operating efficiencies.

Company Description:
Tesco is one of the largest food retailers in the world, operating thousands of stores in the United Kingdom, Ireland, and Europe. It recently sold its Asia operation. According to Kantar, Tesco is the market leader in the U.K. with a share around 27%, roughly double that of Asda and Sainsbury’s. Tesco operates a core supermarket business in addition to convenience and neighborhood outlets. With a 35% digital market share in the U.K., the company holds a dominant position online. Tesco gained exposure to the cash-and-carry and out-of-home delivering industries with the landmark GBP 4 billion acquisition of Booker in 2018.

(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.

Categories
Daily Report Financial Markets

Shanghai Market Outlook – 14 July 2022

Shanghai-Market-Outlook-14-July-2022Download

Categories
Daily Report Financial Markets

USA Market Outlook – 14 July 2022

USA-Market-Outlook-14-July-2022Download

Categories
Daily Report Financial Markets

Japan Market Outlook – 14 July 2022

Japan-Market-Outlook-14-July-2022Download

Categories
Daily Report

Morning Report Global Markets Update – 14 July 2022

Global-Markets-Update-14-July-2022Download

Categories
Daily Report Financial Markets

European Market Outlook – 13 July 2022

European-Market-Outlook-13-July-2022Download

Categories
Daily Report Financial Markets

Australian Market Outlook – 13 July 2022

Australian-Market-Outlook-13-July-2022Download

Categories
Global stocks

Raymond James’ bank will also receive a boost from rising interest rates

Global network and financial technology concept.

Business Strategy & Outlook

Raymond James’ revenue and earnings will hold up better over the near to medium term compared with more pure-play investment banks, thanks to a combination of acquisitions, interest rates, and a relatively large wealth-management business. Over 80% of Raymond James’ net revenue comes from relatively more stable wealth management, asset management, and traditional banking, with usually less than 20% coming from capital markets. 2021 capital markets revenue was abnormally high and will likely continue to reset lower over the next year or so. Given Raymond James’ relatively lower proportion of capital markets revenue, its company wide revenue should hold up better than many other firms’. Raymond James’ bank will also receive a boost from rising interest rates. The company as a whole will benefit from multiple acquisitions, such as Charles Stanley, TriState Capital, and SumRidge Partners. The company’s banking segment experienced quite a bit of pressure over the previous two years, but the future looks bright. Net interest margins compressed by more than 100 basis points to less than 2% in 2021, as benchmark interest rates fell and much of the bank’s assets were variable rate. Additionally, the allowance for loan losses has increased to about 1.2% of loans in early 2022 from 1% in 2019. The company’s banking operations in recent years contributed around 40% of operating income, but that has fallen to less than 20% in some recent quarters.

Expectations are that the U.S. Federal Reserve will increase the federal-funds rate to over 3% by the end of 2022, which will boost the yield on Raymond James’ variable-rate loans. Additionally, the acquisition of TriState Capital has increased the company’s banking operations by about 30%. Loan-loss charge-offs may tick up over the next year or two, but the company’s existing allowance for loan losses should be sufficient, so Raymond James’ banking segment will regain its place as a material driver of earnings.

Financial Strengths

Raymond James is in fine financial health. At the end of its fiscal 2021, the company had $2 billion of senior notes payable compared with $8.3 billion of equity. It doesn’t have any senior notes coming due until 2024. The company has total leverage of about 7.5 times, representing a combination of the bank, which is leveraged 14 times, and the brokerage operation. These leverage ratios are reasonable, given the profile of the company. Raymond James also has quite a bit of cash on its balance sheet. Typically around $500 million is housed at the parent company with upward of another $1 billion of parent company cash that is housed in Raymond James’ own bank or lent to its other businesses.

Bulls Say

  • Additional acquisitions can provide some lift to earnings if the macro environment falters. 
  • The company may have a greater opportunity to recruit advisors as it fills holes in its geographic footprint and offers both employee and independent advisor affiliation options. Recent advisor headcount growth and the Alex. Brown brand may portend superior advisor recruitment. 
  • Net interest income and earnings will meaningfully rise with interest rates.

Company Description

Raymond James Financial is a financial holding company whose major operations include wealth management, investment banking, asset management, and commercial banking. The company has more than 14,000 employees and supports more than 5,000 independent contractor financial advisors across the United States, Canada, and the United Kingdom. Approximately 90% of the company’s revenue is from the U.S. and 70% is from the company’s wealth-management segment.

(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.

Categories
Global stocks

The strategic rationale for Ipsen’s divestment is to have a greater focus on its faster growing specialty care segment

Business Strategy & Outlook

Ipsen is a global biotechnology company headquartered in France that develops and commercializes medicines across three therapeutic areas: oncology, neuroscience, and rare diseases. Ipsen was founded in 1929 as a consumer healthcare company focused on prescription-based products for digestive disorders and neurological disorders. Ipsen has a global footprint and sells more than 25 drugs in 115 countries, with a direct commercial presence in 34 countries. Over the past nearly 100 years, the company has shifted its focus to its specialty care segment, which comprised 92% of its 2021 revenue. In early 2022, Ipsen announced the divestment of its consumer healthcare segment, which accounted for 8% of 2021 revenue. The strategic rationale for Ipsen’s divestment is to have a greater focus on its faster growing specialty care segment.

Approaching declines in economic profits due to Ipsen’s leading product, Somatuline, facing generic competition in Europe and the United States contributes to the negative moat trend rating. Somatuline accounted for 42% of total sales in 2021, and it will decline to 25% of sales in 2025 due to generic competition impacting sales. Growth from Ipsen’s other marketed products, which have patents that extend until the early to mid-2030s, will somewhat offset the negative impact from generic entry. However, patent expirations for Somatuline and generics gaining market share will likely nevertheless dampen returns by the end of the ten-year explicit forecast period. Thanks to Ipsen’s strong balance sheet, the company is well-positioned to continue funding its internal research and development efforts in addition to external innovation opportunities over the next decade in order to diversify its portfolio. Although the company’s advanced drug candidates are either in the filing stage or Phase 3 with relatively high probabilities of approval due to promising trial data, there is still a degree of uncertainty associated with Ipsen’s clinical and commercial success with these drugs.

Financial Strengths

Ipsen is in decent financial health, and the business continues to continue providing a steady stream of cash. Ipsen made a strategic decision to divest its consumer healthcare segment for EUR 350 million to Mayoly Spindler. This was a strong financial decision since the consumer healthcare segment only accounted for 8% of total revenue in 2021. The management will use the proceeds from the divestment to further expand and diversify its faster-growing specialty care segment. The management team has a history of returning cash to shareholders in the form of dividends. Over the past several years, management has paid a dividend between EUR 0.85 and EUR 1.00 to shareholders. Ipsen announced its 2022 dividend increased by 20% to EUR 1.20. The Ipsen’s shareholder distributions, as mixed as many other biotechnology companies under the coverage, do not pay dividends. The Ipsen’s revenue growth will be constrained by generic competition, so it may better serve long-term investors to reinvest in the company’s pipeline candidates instead of distributing dividends.

Bulls Say

  • Ipsen has a sound financial structure and strong cash generation, which allows it to further develop and expand its pipeline. 
  • Ipsen has a strong and diversified portfolio spanning three key therapeutic areas: oncology, neuroscience, and rare diseases. 
  • The divestment of the consumer healthcare segment allows Ipsen to have an even greater focus on its faster-growing specialty care segment.

Company Description

Ipsen is a global biotechnology company headquartered in France that develops and commercializes medicines across three therapeutic areas: oncology, neuroscience, and rare diseases. Ipsen was founded in 1929 as a consumer healthcare company focused on prescription-based products for digestive disorders and neurological disorders. Over the past nearly 100 years, Ipsen has shifted its focus to specialty care, which comprises the vast majority of its total revenue. In February 2022, Ipsen announced the divestment of its consumer healthcare business, which accounted for 8% of 2021 revenue. Ipsen has a large global footprint and sells more than 25 drugs in 115 countries.

(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.

Categories
Funds Funds

Bennelong ex-20 Australian Equities Fund: Has a track record of adding value by outperforming the market over the long-term

Fund Objective

The Fund’s objective is to grow the value of your investment over the long term via a combination of capital growth and income, by investing in a diversified portfolio of primarily Australian shares, providing a total return that exceeds the S&P/ASX 300 Accumulation Index by 4% per annum after fees (measured on a rolling three-year basis). 

Fund Strategy

The portfolio comprises securities purchased primarily from, but not limited to, the S&P/ASX 300 Index (but excluding those securities in the S&P/ASX 20 Index). The Fund may invest in securities expected to be listed on the ASX except those expected to be included in the S&P/ASX 20 Index upon listing. The Fund may also invest in securities listed, or expected to be listed, on other exchanges where such securities relate to ASX-listed securities. Derivative instruments may be used to replicate underlying positions on a temporary basis and hedge market and company-specific risks. The Fund cannot purchase securities that are in the S&P/ASX 20 Index. However, when a security that is held within the Fund moves into the S&P/ASX 20 Index, that security may continue to be held for so long as deemed appropriate. The investment team will use its discretion in selling down that security, having regard to the best interests of unitholders. In this way, the Fund may hold securities in the S&P/ASX 20 Index from time to time.

Portfolio Performance

Investment Team:

The BAEP investment team consists of eight investment professionals:

  1. Mark East: Chief Investment Officer and Portfolio Manager 
  2. Keith Hwang: Director, Quantitative Research 
  3. Neale Goldstone-Morris: Senior Investment Analyst, Strategy 
  4. Kieran Sisson: Senior Investment Analyst 
  5. Doug Macphillamy: Senior Investment Analyst 
  6. Brad Clibborn: Senior Investment Analyst 
  7. Jack Briggs: Senior Investment Analyst 
  8. Todd Briggs: Investment Analyst 

In the last two years, there has been one hire Doug Macphillamy: Senior Investment Analyst and one departure Julian Beaumont.

BAEP operates under a flat organisational structure with all team members contributing to the investment decision making process. This model has been deliberately adopted to ensure a collaborative effort and avoid a hierarchical structure. Collectively, the investment team has experience in portfolio management; fundamental, macroeconomic, strategy & quantitative research and analysis, and in trading & execution. There is a series of constant checks, balances and back-ups in the business and investment process which support its structure. Mark East (CIO) has the final say on portfolio construction and ultimately accountability/responsibility. The portfolio manager is supported by the extensive resourcing within the broader BAEP investment team. Keith Hwang has primary responsibility for trading and execution, with Kieran Sisson acting as back-up.

About Fund:

Bennelong ex-20 Australian Equities Fund’s objective is to outperform the S&P/ASX 300 Accumulation Index excluding the portion of return attributed to the S&P/ASX 20 Leaders Index, by 4% per annum after fees on a rolling 3-year basis. The Fund invests primarily in Australian shares with high quality business models, strong growth, and underestimated earnings momentum and prospects.

(Source: Banyantree, investmentcentre)

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.