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Synaptics well-positioned to capitalize on the secular trends toward smart devices and experience-centric

Post author By lvc-admin
Post date November 16, 2021
No Comments on Synaptics well-positioned to capitalize on the secular trends toward smart devices and experience-centric

Business Strategy and Outlook:

Synaptics is an emerging provider of audio, video, automotive, docking, and wireless products for the consumer Internet of Things market, and to a decreasing extent, a developer of touch, display, and fingerprint solutions for the mobile device and PC markets. As the mobile and PC markets mature and growth opportunities diminish, Synaptics has focused investment efforts and resources on consumer Internet of Things, particularly on automotive, smart homes, and low power edge artificial intelligence, which we view favourably.

Within mobile, legacy solutions include discrete touch circuits that enable touch-based device interaction and user authentication, and display drivers to control LCD, and increasingly OLED, displays. As the mobile industry matures, component suppliers face heightening competitive pressures from industry consolidation, supplier price wars, and fast design refresh cycles. Over recent years Synaptics has worked to abate its mobile business’ decline by building combined products, like touch and display driver integrated chips, or TDDI chips, which, while industry-unique, failed to gain traction in the saturated competitive landscape. Accordingly, the transition to an Internet of Things-focused portfolio is viewed as a smart, necessary move.

Financial Strength:

As Synaptics made the strategic decision to divest its low margin LCD TDDI business in 2020 and transition investment focuses to higher-margin Internet of Things products, the company experienced a return to growth in its top line in fiscal 2021.

Synaptics is in decent financial condition. At the end of fiscal 2021, the firm had $836.3 million in cash and equivalents, compared with $881.5 million of debt on its balance sheet. While the majority of the debt matures in the next year, analysts believe the cash cushion is strong and expect little material impact to future liquidity. Overall, the company generates adequate cash flow to meet its interest expense obligations. The company is anticipated to maintain a cash position that allows it to withstand the cyclical troughs to which semiconductor firms are prone while also maintaining a healthy research and development budget to remain competitive in the cutthroat consumer electronics market. Capital allocation priorities include organic growth investments, strategic acquisitions, debt level management, and opportunistic share repurchases.

Bulls Say:

An emerging leader in the Internet of Things space with its broad portfolio of audio, video, and wireless solutions winning designs in multiple Internet of Things end markets.
The acquired Conexant, Marvell’s multimedia solutions business, DisplayLink, and Broadcom’s Internet of Things business have significantly diversified Synaptics’ product portfolio and opened it up to new high growth areas.
As the automotive industry experiences secular trends toward the digitalization of cars, Synaptics’ rapidly growing TDDI product for infotainment systems is likely to continue fueling success.

Company Profile:

Synaptics is a global producer of semiconductor solutions for the mobile, PC, and Internet of Things markets. The company develops human interface solutions that enable touch, display, fingerprint, video, audio, voice, AI, and connectivity functions for smartphones, PCs, Internet of Things products, and other electronic devices.

(Source: Morningstar)

General Advice Warning

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

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Clean Energy and Safety Investments Support NiSource’s Growth Plans

Post author By lvc-admin
Post date November 16, 2021
No Comments on Clean Energy and Safety Investments Support NiSource’s Growth Plans

Business Strategy and Outlook

After NiSource’s separation from Columbia Pipeline Group in 2015, it now derives all of its operating revenue from its regulated electric and natural gas distribution utilities. About 60% of operating income comes from its six natural gas distribution utilities. The remaining 40% comes from its electric utility business in Indiana. NiSource to invest more than $10 billion over the next four years, including what could be nearly $3 billion of renewable energy projects in Indiana, where NiSource enjoys favorable regulation.

In October 2020, NiSource sold its Columbia Gas of Massachusetts utility and received $1.1 billion of proceeds that it used to strengthen the balance sheet and prepare for its planned infrastructure investments. The sale came nearly two years after a natural gas explosion on NiSource’s Massachusetts system killed one person north of Boston. Insurance covered roughly half of the almost $2 billion of claims, penalties, and other expenses, but the event was a public relations nightmare.

Financial Strength

NiSource has issued a substantial amount of equity in the past few years in part to fund its large infrastructure growth projects and in part to cover liabilities arising from the Massachusetts gas explosion. This dilution and the sale of Columbia Gas of Massachusetts has kept earnings mostly flat since 2018. NiSource’s debt/capital topped 67% at year-end 2017, but huge equity infusions have brought that down to more sustainable levels in the mid-50% range. NiSource issued over $1 billion of common stock and $880 million of preferred stock in 2018 and 2019. The Massachusetts utility sale in 2020 raised $1.1 billion, and NiSource issued $862.5 million of convertible preferred equity units in early 2021.

NiSource has grown its dividend nearly 40% since the 2015 Columbia Pipeline Group spin-off, but the growth has not been consistent. The company increased its dividend in mid-2016 by 6.5% and again by 6.1% in the first quarter of 2017, then by 11.4% in 2018. But the 2019 dividend increase was only 2.6% following the Boston gas explosion. It is Expected that dividend growth might pick up in 2024 once NiSource is past the peak of its five-year capital spending plan and its equity needs shrink.

Bulls Say’s

Dividend is expected to grow near 5% annually during the next few years before accelerating to keep pace with earnings in 2024 and beyond.
NiSource should benefit from Indiana policymakers’ desire to cut the state’s carbon emissions by replacing coal generation with renewable energy, energy storage, and possibly hydrogen.
New legislation has improved the regulatory framework in Indiana for NiSource’s electric and natural gas distribution utilities.

Company Profile

NiSource is one of the nation’s largest natural gas distribution companies with approximately 3.5 million customers in Indiana, Kentucky, Maryland, Ohio, Pennsylvania, and Virginia. NiSource’s electric utility transmits and distributes electricity in northern Indiana to about 500,000 customers. The regulated electric utility also owns more than 3,000 megawatts of generation capacity, most of which is now coal-fired but is being replaced by natural gas and renewables.

(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.