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The Descartes Systems Group Inc
Descartes’ Global Logistics Network is a more modern approach to electronic data interchange, or EDI, that ties together the disparate software systems of many connected parties. In doing so, the platform modernizes the model, which consists of a variety of different data formats that were not necessarily compatible. The GLN also provides deeper intelligence than EDI was capable of. This is especially important as shipping regulations become increasingly complex in a global supply chain.
With so many connected parties on the network, Descartes has a captive audience for its software portfolio. Over time, the firm has developed solid positions in niche markets, mainly for customs and regulatory compliance. We also view both the trade management modules and the broker and forwarder enterprise systems as better positioned competitively, with routing, mobile, and telematics operating in a more competitive niche. E-commerce has also become an important pillar of the business, especially during the COVID-19 pandemic. While the network and software modules are sticky separately, we think they are stronger together, as the firm enjoys strong retention rates of 95%.
Descartes relies on acquisitions to expand its software portfolio and help drive growth. Since 2014, the company has completed 25 acquisitions for $840 million in aggregate. Management is focused on areas that fill holes across the portfolio and functionality that customers request. This strategy has been executed consistently over more than a decade now. We think acquisitions drive approximately half of the company’s growth, and we expect several small deals each year. We see acquisition opportunities as abundant in this highly fragmented $15 billion market.
Bulls Say
- Descartes operates the largest neutral shipping network, connecting parties across air, land, and sea transportation modes.
- The company enjoys a growing portfolio of software solutions that address challenges specific to the shipping, supply chain, and logistics industries.
- Increasing globalization of the supply chain drives increasing complexity, which benefits Descartes.
Bears Say
- Descartes’ acquisition model makes organic performance impossible to parse out and makes ROICs look worse. Acquisitions may also increase costs, distract management with integration issues, and increase the risk of overpayment.
- Instead of more traditional guidance, the company offers “baseline calibration,” which is a view of what revenue and adjusted EBITDA will be in the quarter if no additional customers are signed and no acquisitions are made.
- Ultimately, Descartes is competing with the major ERP vendors.
Source:Morningstar
Disclaimer
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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Medibank Private Ltd
We now assume Medibank can grow policyholders around 3% per year out to fiscal 2025, compared with around 2% previously. With the market estimated to grow at 1% per year, this reflects our expectation that Medibank’s market share edges up to 30% by fiscal 2025 from an estimated 27.2% currently
In the first nine months of fiscal 2021, industry policyholders have grown around 2.5%, or by 166,000, to 6.9 million. In other words, around 18,500 new policyholders a month. Medibank has averaged policyholder growth of around 6,100 per month over the first 10 months of fiscal 2021. This implies Medibank is winning 33% of new policyholders, higher than its existing share of the market. We have increased our fiscal 2021 policyholder forecasts to 4% from 3%, this is in line with Medibank fiscal 2021 guidance to grow policyholder numbers by 3.5% to 4%. Our fiscal 2021 dividend is at the top end of management’s 75%-85% target range.
Medibank being a large and more profitable insurer is able to spend more on marketing and has greater brand awareness than many competitors, hence is more likely to attract new to industry joiners. We also believe Medibank’s advertising of in-home care resonated with the public, especially at a time where aversion to hospital stays increased. Reducing the number of days a patient spends in hospital should prove to be cheaper for the insurer, meaning a slight benefit to average claims paid per policyholder. Medibank also has in-house healthcare and telehealth services, which we believe support better customer outcomes. These factors, along with Medibank benefitting from scale benefits in hospital contracting and claims integrity, provide the insurer sustainable competitive advantages, which underpin our narrow moat rating.
Profile
Medibank is the largest health insurer in Australia. Its two brands, Medibank Private and ahm, cover over 4.7 million people. Medibank and Australia’s fourth-largest health fund NIB Holdings are the only listed health insurers. In addition to private health insurance, the firm provides life, pet, and travel insurance, as well as health insurance for overseas students and temporary overseas workers. The Medibank Health division provides healthcare services to businesses, governments, and communities across Australia and New Zealand.
Source:Morningstar
Disclaimer
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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AusNet Services Ltd
Revenue is highly secure and predictable between regulatory resets, being close to 90% regulated. Less-favourable regulatory conditions pose headwinds to earnings and distributions.
- The tougher regulatory environment is a headwind. Earnings are expected to remain subdued in coming years following less generous regulatory resets, though a cost efficiency program should help.
- The soft economy and high energy utility bills are pressuring the regulator to cut network returns to protect households as much as possible. The environment is likely to remain tough for the foreseeable future.
- Financial position and distribution policy are relatively conservative, positioning the company well to withstand the tough environment.
AusNet Services owns three regulated energy networks in Victoria: the state’s main high-voltage electricity transmission network; an electricity distribution network; and a gas distribution network. It also owns minor unregulated assets and a third-party asset management business. We like the secure cash flow, solid balance sheet, and full ownership of underlying assets. However, medium-term earnings face major headwinds as the regulator cuts returns to protect households and businesses from high and growing energy bills. AusNet is considered to have no moat, as sustainable excess returns are unlikely, given regular resets and the tough regulatory environment.
Around 85% of AusNet’s revenue is regulated, offering predictable and secure cash flow between regulatory resets. These assets are subject to review by the Australian Energy Regulator, usually every five years. The regulator sets tariffs to provide a fair return for investors after covering forecast costs. AusNet received favourable regulatory decisions for its electricity transmission and distribution assets in past years, including the Advanced Metering Infrastructure program. However, more recent regulatory decisions were relatively unfavorable. We expect future resets will be even tougher, given the soft economy and high energy bills, a key risk for all regulated utilities. Household gas and electricity bills have doubled in the past 10 years because of higher fuel prices, expensive network modernization and government policies to promote green energy.
Long-term government bond yields are a key determinant of regulatory returns, affecting both the cost of debt and the cost of equity allowances. As bond yields have fallen sharply in recent years, regulatory returns have fallen in sympathy. Additionally, rules were changed to give the regulator more power in reducing allowances for other costs. Staggered resets smooth the impact, but all assets will likely generate lower returns in coming years. The electricity distribution network resets in early 2021, the electricity transmission network resets in early 2022, and the gas distribution network resets in early 2023.
Source:Morningstar
Disclaimer
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.
The renowned investment bank remains a sceptic of bitcoin and other cryptocurrencies. While cryptocurrencies like bitcoin have gotten a lot of publicity, Goldman says Bitcoin is “not an asset class”.
The previous Goldman Sachs research was pessimistic about cryptocurrency and stated that it was not an asset class. According to “Goldman Sachs, it was not an asset class because of the following characteristics: –
No cash flows –
No earnings –
Unstable correlations –
High volatility –
Goldman Sachs claimed that the only reason that Bitcoin has value is because other people are willing to buy it. They also compared it to a number of other periods of market euporia.
Goldman Sachs, on the other hand, released a study on May 21st addressing their previous stance that Bitcoin was not an asset class changed. The top of the report is headlined ‘Crypto: a new asset class’ they interviewed Mike Novogratz (CEO of Galaxy Digital Holdings Ltd.). He claims that the institutional adoption we’ve observed will likely continue as long as the macro trends we’ve witnessed persist, he also believes that Defi, NFTs, and payments, all of which are currently built on Ethereum, will drive some of the most interesting growth in the crypto world.
Zach Pandl who is one of Goldman’s top strategists agrees with Novogratz, he believes that the Bitcoin has the potential to become a major global macro play factor. Jeff Currie, Heading commodity research, believes that for cryptocurrencies to be an excellent store of value, it must have applications other than price speculation.
Christian Mueller Glissman, a senior strategist at Goldman Sachs illustrated that even a minor investment to Bitcoin (5%) in a traditional 60/40 bond equities portfolio would have outperformed the market. He claims that this is due to Bitcoin’s relative lack of correlation with traditional assets, despite the fact that this correlation has increased significantly over the past year.
They compared the price increase of crypto with those of other assets throughout the course of the year. What’s shocking is the Goldman Sachs Commodities index’s tremendous surge (refer a link below). This indicates that more inflation is on the way. Report also has a chart that shows the volatility that have had for these assets over the year. Report also illustrated that the year’s volatility for various assets. While cryptocurrency is volatile, it must be weighed against the possibility for profit. As the blockchain becomes more widely used, this volatility is likely to decrease over time. As a result, utility demand rises, boosting the currency’s value. They also demonstrate that the people with the biggest pockets are the ones who are most inclined to “Hold on for dear life” in the long run.
(Snap*)
There’s a reason Goldman has shifted its stance on Bitcoin: their clients are asking for exposure to the cryptocurrency. If they believe it isn’t an asset class, they won’t be able to serve these clients. They’ve even set up internal trading desks that have just completed a derivative linked swap transaction.
Get an access of report – https://www.goldmansachs.com/insights/pages/crypto-a-new-asset-class.html