along with the valuable data that they generate, makes Facebook attractive to advertisers in the short and long term. The combination of these valuable assets and expected continuing growth in online advertising bodes well for Facebook, as the firm generates strong top-line growth and remains cash flow positive and profitable. Facebook has increased users and user engagement by providing additional features and apps to keep them engaged within the Facebook ecosystem. With more Facebook user interaction among friends and family members, sharing of videos and pictures, and the continuing expansion of the social graph, we believe the firm compiles more data, which Facebook and its advertising clients then use to launch online advertising campaigns targeting specific users. While utilization of the data is under scrutiny in different markets, we think Facebook’s large audience size will still attract the ad dollars. Growth in Facebook’s average ad revenue per user indicates advertisers’ willingness to pay more for Facebook-placed ads, as they expect high return on investment from the targeted ads.
We believe Facebook will continue to benefit from an increased allocation of marketing and advertising dollars toward online advertising, more specifically social network and video ads where Facebook is especially well positioned. The firm’s Facebook app, along with Instagram, Messenger, and WhatsApp, is among the world’s most widely used apps on both Android and iPhone smartphones. Facebook is taking steps to further monetize its various apps, such as providing interactive video ads. It is also applying artificial intelligence and virtual and augmented reality technologies to various products, which may increase Facebook user engagement even further, helping to further generate attractive revenue growth from advertisers in the future.
We assign Facebook a wide moat rating based on network effects around its massive user base and intangible assets consisting of a vast collection of data that users have shared on its various sites and apps. Given its ability to profitably monetize its network via advertising, we think Facebook will more likely than not generate excess returns on capital over the next 20 years.
Financial Strength
In an industry where continuing investments are required to remain competitive and maintain market leadership, we believe Facebook is well positioned in terms of access to capital. The firm has a very strong balance sheet with $62 billion in cash, cash equivalents, and marketable securities and no debt.The firm generated $39 billion cash from operations in 2020, 7% higher than the prior year. We expect faster growth in cash flow during the next five years owing to operating leverage after 2022. Facebook’s strong operational and financial health is demonstrated by the 28% average free cash flow to equity/revenue during the past three years. We project average annual FCFE/sales to be in the 35%-40% range through 2025, as a result of strong top-line growth and slight operating margin expansion beginning in 2022. We do not expect Facebook to issue a dividend as it remains in a rapid-growth phase. The firm may use some portion of its cash, as it remains active on the merger and acquisition front.
Bull Says
- With more users and usage time than any other social network, Facebook provides the largest audience and the most valuable data for social network online advertising.
- Facebook’s ad revenue per user is growing, demonstrating the value that advertisers see in working with the firm.
- The application of AI technology to Facebook’s various offerings, along with the launch of VR products, will increase user engagement, driving further growth in advertising revenue.
Company Profile
Facebook is the world’s largest online social network, with 2.5 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktops. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada and 25% from Europe. With gross margins above 80%, Facebook operates at a 30%-plus margin.
(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.
Business Strategy and Outlook
Blackstone has built a solid position in the alternative asset-management industry, utilizing its reputation, broad product portfolio, investment performance track record and cadre of dedicated professionals to not only raise massive amounts of capital but sustain the reputation it has built for itself as a “go-to firm” for institutional and high-net-worth investors looking for exposure to alternative assets. Unlike the more traditional asset managers, who have had to rely on investor inaction (driven by either good fund performance or investor inertia/uncertainty) to keep annual redemption rates low, the products offered by alternative asset managers can have lockup periods attached to them, which prevent investors from redeeming part or all of their investment for a prolonged period of time.
Financial Strength
Blackstone’s business model depends heavily on having fully functioning credit and equity markets that will allow its investment funds to not only arrange financing for leveraged buyouts and/or additional debt issuances for the companies it operates but cash out of them once they’ve run their course. The company entered 2021 with $5.7 billion in longer-term debt (on a principal basis) on its books, with 56% of that total coming due during 2030-50. The company also has a $2.25 billion revolving credit facility (which expires in November 2025) but had no outstanding balances at the end of June 2021.
Blackstone should enter 2022 with a debt/total capital ratio of 44%, debt/EBITDA (by our calculations) at 1.3 times, and interest coverage of more than 25 times. On the distribution front, share repurchases have been rare over the past decade, with the company repurchasing (net of issuances) less than $2 billion of stock (most of which was bought back in the past three calendar years). During the first half of 2021, Blackstone repurchased 3.2 million shares of common stock for $289 million. Dividend payments, meanwhile, exceeded $21 billion during 2011-20 and are expected to account for 85% of distributable earnings annually going forward.
Bulls Say’s
- Blackstone, with $499 billion in fee-earning AUM at the end of June 2021, is a “go-to firm” for institutional and high-net-worth investors looking for exposure to alternative assets.
- The company’s ever-increasing scale, diversified product offerings, long track record of investment performance and strong client relationships position the firm to perform well in a variety of market conditions.
- Customer demand for alternatives has been increasing, with institutional investors in the category limiting the number of providers they use—both positives for Blackstone’s business model.
Company Profile
Blackstone is one of the world’s largest alternative asset managers with $684 billion in total asset under management, including $499 billion in fee-earning asset under management, at the end of June 2021. The company has four core business segments: private equity (27% of fee-earning AUM, and 31% of base management fees, during 2020); real estate (32% and 39%); credit & insurance (25% and 15%); and hedge fund solutions (16% and 15%). While the firm primarily serves institutional investors (87% of AUM) it does serve clients in the high-net-worth channel (13%). Blackstone operates through 25 offices located in the Americas (8), Europe and the Middle East (9), and the Asia-Pacific region (8).
General Advice Warning
Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.
Last trade price of PM Capital is A$ 1.49. Their Outstanding shares is 390.11 Million. PGF’s provides Public Float which is 279.25 Million. PM Capital Global Earnings Per Share (EPS) is $0.415 while the Price Earning ratio is 3.59 percent.
Currently, PM Capital’s Annual Yield is 5.03 percent while their Annual revenue TTM is $218.56 Million.
On 24th September 2021, Net Tangible Asset backing per ordinary share before tax accruals is $1.63 while NTA after tax is $1.47. Gross Dividend yield per annum is 9.6 percent.
The Company also announced that due to its strong profits reserve position, it intends to maintain a minimum dividend of 5.0cps for both the interim and final dividend for FY22, representing a full year FY22 dividend of at least 10cps. As at 30 June 2021, the Company has 5 years dividend coverage at 10cps.
On 12 August 2021, PM Capital Global Opportunities Fund ((PGF)) announced a final dividend for FY21 of 5.0cps, fully franked, a 100% increase on the FY20 final dividend.
The increased dividend announcement represents a significant uplift in yield. Based on the share price at the close of 19 August 2021, the full year dividend declared for FY21 represented a dividend yield of 4.8%. The forecast FY22 dividend would represent a yield of 6.4%, fully franked, which is strong for a global equity focused LIC.
Company Profile
PM Capital Global Opportunities Fund Ltd. engages in investing in a portfolio of listed securities across global securities markets. Its investment objective is to increase the value of its portfolio by providing long term capital growth. The company was founded on October 1, 2013 and is headquartered in Sydney, Australia.
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.
This IPO was led by Morgan Stanley, JPMorgan Chase & Co. and Bank of America Corp. Venture capital firm Accel Partners and New York-based technology investment giant Tiger Global Management were early investors in the company.
Freshworks Inc. made a stellar debut on NASDAQ exchange on 22 September, 2021, Wednesday. With this, the company becomes the first Indian ‘SaaS’ company and the first unicorn to be listed on the NASDAQ exchange.
The company was valued at $12.2 billion in its debut after shares opened 21% above the IPO issue price, indicating strong demand for firms that have thrived during the pandemic.
Freshworks boosted revenue about 40% last year after the coronavirus pandemic prompted businesses to go digital, and sales continued to grow in the first half of 2021 while its net loss declined. With 52,500 customers, the company witnessed its revenue growth in the first six months of year 2021 to $169 million, up from $110 million in the first half of 2020. Its net loss shrank to $9.8 million from $57 million which was a year ago, according to its filings.
The shareholding pattern of the company is as shown below:
The company provides a suite of products that helps businesses with customer management, such as a messaging platform and an artificial-intelligence powered chatbot for customer support. The technology offered by Freshworks is used by more than 50,000 companies, including high-profile names such as Delivery Hero SE, Swedish payments firm Klarna, Cisco Systems Inc. and General Electric Co.
About the company:
Freshworks Inc. provides software as a service platform that enables small and medium-sized businesses to support customers through e-mail, phone, website, and social networks. The Company offers multi-product support, a knowledge base, self-service portal, community forums, and tools to leverage mainstream social media for customer support. Freshworks serves customers worldwide. The company was founded by Mathrubootham and Shan Krishnasamy as Freshdesk in 2010 and was rebranded as Freshworks in 2017. Freshworks started from a 700 sq ft warehouse in Chennai and has gone on to disrupt the customer relationship management (CRM) market, where it competes with the likes of Salesforce.
(Source: bloomberg.com, economictimes.com)
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.
Investment Thesis
- Ex Covid-19, stock trades on an attractive gross dividend yield.
- VCX is concerned that weak domestic economic data points around the consumer will necessitate adjusting cap rates and asset valuations.
- Strong specialty growth across retail categories, especially Luxury stores (+30.2% over the 12 months to 31 December 2019)
- High-quality property portfolio (high occupancy, stable rental growth, etc.) with repositioning to withstand a declining retail sales environment.
- Good development pipeline to drive growth at a reasonable initial yield and IRR
- The retail climate is challenging, and is anticipated to stay so for the next 12 months, as households continue to be hampered by high debt levels and a lack of wage growth, despite stable unemployment in the eastern states.
Key Risks
- The Corona virus has an impact on consumer attitude and retail outlets, which has an impact on VCX tenants.
- Interest rate hikes have a negative impact on the company’s cost of debt and consumer spending in the retail industry.
- Increased unemployment leads to lower consumer retail spending, which has an impact on rental growth and property valuations. Inability to mitigate consequences that arise from weak retail environment.
- Property fundamentals are weaker than projected.
- Tenancy risk/retailer failures result in more vacancies across the asset portfolio (e.g., Dick Smith) and a negative impact on profitability.
- Delays in the development timetable and project cost overruns.
- Any drop in interest in bond-proxy stocks among investors.
FY21 Results Highlights
Despite the impact of Covid-19, Vicinity Centres (VCX) declared strong FY21 results.
- Funds from operations (FFO) increased to $558.8 million, or 12.28 cents per share, from $520.3 million, or 13.66 cents per share, in FY20, mainly to considerable Net Property Income (NPI) growth of +8.7% to $743.4 million.
- Cash collections over FY21 improved, with 4Q21 gross rental billing of 93% vs 74% in 1Q21 74%. This indicates trading conditions will and do improve as restrictions are eased.
- Final DPS of 6.6cps was declared for 2H21.
- VCX’s balance sheet remained robust, with low gearing of 23.8 percent, investment grade credit ratings of A/stable (S&P) and A2/stable (Moody’s), $2.4 billion in liquidity, and no debt maturing until FY23. Based on drawn debt, VCX’s weighted average debt maturity is 4.4 years and 5.8 years.
Management Note: VCX made a modification to their strategy, announcing the creation of “new revenue streams in the following three areas: 1. Adjacent products and services, which use core assets and capabilities to create new products and services; 2. Mixed-use developments, which bring new users to our retail assets and new forms of rental income; and 3. Third-party capital, which creates strategic partnerships with aligned capital partners and a funds management business to drive fee income.”But management’s caution on the Delta variant of Covid-19, VCX’s trading multiples and valuation appear attractive.
Company Profile
Vicinity Centres Ltd (VCX) is a ASX listed REIT holding a quality retail portfolio and fully integrated asset management platform. VCX owns ~A$15.7 billion of retail assets. Some notable retail assets that Vicinity Centres owns or has an interest in: Chatswood Chase (NSW), Chadstone Shopping Centre (VIC), DFO South Wharf (VIC), QueensPlaza (QLD), Emporium Melbourne (VIC) and DFO Homebush (NSW). VCX is the result of the merger between Federation Centres and Novion Property Group.
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.
Investment Thesis
- Mandatory product safety standards for baby goods in Australia limit supply sources and provide barriers to entry to international competitors.
- BBN has the largest presence in Australia amongst specialty baby goods retailers.
- Low risk that online sales threaten high service business model of brick-and- mortar stores to showcase goods and in-store advice.
- Solid growth story via new store openings (targeting 100+ stores network).
- Strong market shares (currently sits at 30% in a highly fragmented market).
Key Risks
- Retail environment and general economic conditions in addressable markets may deteriorate.
- Competition may intensify especially from online retailers such as Amazon, specialty retailers, department stores, and discounted department stores.
- Customer buying habits/trends may change. Rapid changes in customer buying habits and preferences may make it difficult for the Company to keep up with and respond to customer demands.
- Higher operating and occupancy costs. Any increase in operating costs especially labour costs will affect the Company’s profitability.
- Poor inventory control and product sourcing may be disrupted.
- Management performance risks such as poor execution of store rollout especially into ex-metro areas.
FY21 Results Highlights
- Sales of $468.4m were up +15.6%, with same-store comparable sales up +11.3%. Online sales grew by +54.2% and now make up 19.4% of total sales (vs 14.5% in pcp).
- Gross profit of $173.7m was up +18.3% on pcp, with GP margin up +83bps to 37.1%. Cost of doing business (CODB) as a percentage of sales improved 14bps to 27.8%, aided by store expense leverage and warehouse volume leverage (cost fractionalization).
- Operating earnings (EBITDA) were up +29.2% to $43.5m (with EBITDA margin up +100bps to 9.3%) and NPAT was up +34.8% to $26.0m.
- Operating cash flow was weaker versus previous corresponding period (pcp), driven by higher working capital – driven by an increase in inventories and also cycling particularly low levels in the pcp.
- The Company declared a final dividend of 8.3cps, taking the full year dividend to 14.1cps (up +34.1% on pcp). The Board continues to target a payout ratio in the range of 70-100% pro forma NPAT.
- Private label sales were up +31.1% vs pcp and now make up 41.4% of group sales (vs 36.5% in FY20). The Company remains on target to achieve 50% of sales from private sales.
Company Profile
Baby Bunting Group Limited (BBN) is Australia’s largest nursery retailer and one-stop-baby shop with 42 stores across Australia. The company is aspecialist retailer catering to parents with children from newborn to 3 years of age. Products include Prams, Car Seats, Carriers, Furniture, Nursery, Safety, Babywear, Manchester, Changing, Toys, Feedingand others.
(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.
Investment Thesis:
- GMG’s high-quality investment portfolio which is globally diversified and gives exposure to developed and emerging markets
- Strong property fundamentals enabling valuation uplifts
- With more than 50% of earnings derived offshore GMG is expected to benefit from FX translation and a prolonged period of lower rates
- Transitioning to longer and larger projects in development
- Strong performances in Partnerships such as with Cornerstone
- GMG’s solid balance sheet provide firepower and access to expertise to move on opportunities in key gateway cities with demand for logistics space (and supply constraints) and diversify risk by partnering (i.e. growth in funding its development pipeline) or co-investment in its funds and or make accretive acquisition opportunities
- Expectations of continual and prolonged lower interest rate environment globally (albeit potential rate hikes in the US) should benefit GMG’s three key segments in Investments, Development and Management
Key Risks:
- Any negative changes to cap rates, net property income
- Any changes to interest rates/credit markets
- Any development issues such as delays
- Adverse movements in multiple currencies for GMG such as BRL, USD, EUR, JPY, NZD, HKD and GBP
- Any downward revaluations
- Poor execution of M&A or development pipeline
- Key man risk in CEO Greg Goodman
Key highlights:
- GMG delivered operating profit $1,219.4m, up +15.0% over the pcp, and operating EPS of 65.6 cents, up +14.1%. DPS of 30.0cps was in line with expectations.
- Management provided solid FY22 earnings guidance stating: “FY22 forecast operating EPS is 72.2cps, up +10% on FY21. Forecast full year distribution for the coming year is 30cps”.
- The Group is well positioned to maintain WIP of around $10bn throughout FY22, with multi-storey developments remaining a meaningful contributor.
- Customer demand in our markets is also translating into high occupancy, rental growth and strong investment returns which should see AUM grow to in excess $65bn and support the performance of our management business.
- GMG saw strong uplift in revaluations of $5.8bn driving growth in total AUM to $57.9bn (up +12%). GMG expects development WIP will organically grow AUM (which management expects to exceed $65bn in FY22).
- GMG’s portfolio had high occupancy at 98.1%, weighted average lease expiry of 4.5 years, and like-for-like NPI growth at 3.2%. 3.9m sqm of leasing equated to $517.1m of annual rental property income.
Company Description:
Goodman Group Ltd (GMG) own, manage, develop industrial, warehouse and business park property in Australia, Europe, Asia and Americas. GMG actively seeks to recycle capital with development properties providing stock for ownership by either the trust or third-party managed funds, with fees generated at each stage of the process.
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.