Categories
Technology Stocks

The 2020 merger with Vodafone Australia is one-way TPG Telecom is trying to limit the impact of the NBN

Business Strategy & Outlook

TPG Telecom is grappling with structural changes in the Australian telecommunications industry. Rollout of the national broadband network, or NBN, and take-up of high-traffic products such as internet protocol television and video streaming, will increase the demand for broadband and backhaul capacity. However, the NBN will also force TPG Telecom to become a reseller, impacting its consumer broadband margins. TPG Telecom’s price-leader strategy still sees the company delivering solid subscriber and market share performance. Product bundling has also become a key segment in the market, with all players using broadband as a lead-in product and cross-selling voice, mobile, pay-TV, and digital streaming services. The ownership of submarine cable between Australia and Guam offers the group broader cost advantages. Pricing is mainly a function of demand and supply, available capacity, and the length of cable. 

Economies of scale play a large part in pricing where costs are measured on per unit of volume. A longer cable results in increased material and maintenance costs, meaning cost per unit is higher. Cables with large capacity reduce costs per unit, as costs such as fixed construction and rollout costs are spread across a larger base. A sharp price decline in international traffic remains a risk. Contracts are structured in typical 15-year leases, providing some certainty in revenue. Clients are allocated a fixed bandwidth and have the right to on-sell capacity. The 2020 merger with Vodafone Australia (the third-ranked mobile player in the country) is one-way TPG Telecom is trying to limit the impact of the NBN. Mobile offers a critical strategic path to future-proof the group in the face of onslaught from the NBN. The government entity is already wreaking havoc on the narrow-moat-rated group’s retail fixed-line broadband and could even potentially impact the lucrative enterprise segment.

Financial Strengths

TPG Telecom’s financial health is solid. Historically, management has used debt to finance acquisitions and demonstrated a capacity to pay it down in due course. As at the end of June 2022, and factoring in the AUD 890 million proceeds from the mobile towers’ sale, net debt/EBITDA was 2.0 times, below the covenant limit of 3.5 times.

Bulls Say

  • Cross-selling opportunities remain for both consumer and corporate markets
  • The merger with Vodafone Australia increases the scale of the combined entity and allow it to better compete against Telstra and Optus in the Australian market.
  • Further rollout of its fiber network also boosts growth, while incremental cost from an additional user is small.

Company Description

TPG Telecom is Australia’s third-largest integrated telecom services provider. It offers broadband, telephony, mobile and networking solutions catering to all market segments (consumer, small business, corporate and wholesale, government). The group has grown significantly since 2008, both via organic growth and acquisitions, and in July 2020 merged with Vodafone Australia. It owns an extensive stable of infrastructure assets.

(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

Mercedes-Benz limit exposure to downturns suffered by mass-market auto companies because wealthier customers’ spending is less sensitive to recessions

Business Strategy & Outlook

Daimler AG completed the spinoff of its truck and bus operations on Dec. 10, 2021 and changed its name to Mercedes-Benz Group AG on Feb. 1, 2022. In 2021, the truck and bus business, now called Daimler Truck AG, accounted for 20% of consolidated revenue including discontinued operations and 11% of group adjusted EBIT. The remaining operations of Mercedes-Benz Group include premium and luxury passenger vehicles and light commercial vans as well as Mercedes-Benz Mobility, which includes financial services and other mobility services like ride-hailing. The highly regarded Mercedes-Benz brand is one of the top luxury automobile names in the world. The firm is also a European leader in commercial vans. Even so, Mercedes faces stiff competition in all of its markets. The company operates in the cyclical, capital-intense, highly competitive passenger vehicle industry where raw material commodity costs can be volatile and unionized labor can be expensive.

Geographically diverse sales reduce exposure to the economic conditions of any one region. Even so, premium brands such as Mercedes-Benz limit exposure to downturns suffered by mass-market auto companies because wealthier customers’ spending is less sensitive to recessions. Global population growth of high-net-worth individuals has averaged 5%, increasing Mercedes’ addressable market, faster than the 1%-3% rate it can be estimated for long-term global light-vehicle demand growth. New product is critical to spurring consumer interest and can help results even in an economic downturn. Mercedes-Benz launches new or significantly refreshed models in various markets around the world every year. Research and development spending, including capitalized development costs, is substantial, averaging roughly 6% of sales, which is a necessary part of a long-term strategy. Environmental legislation worldwide forces automakers to design vehicles with more efficient combustion engines and electrified powertrains. By 2030, the company says it will be “ready to go all-electric.”

Financial Strengths

Mercedes-Benz’ balance sheet to be in good shape. The company maintains a substantial cash balance and healthy availability on bank lines of credit. To remain competitive, automakers need high liquidity to fund R&D and capital investment to support product launches throughout economic cycles. At the end of 2021, the company had net industrial liquidity of EUR 21.0 billion (cash and credit line availability less debt). The company has healthy liquidity. The industrial business’ total adjusted debt/EBITDAR, which takes into consideration rent expense and operating leases, has averaged 0.7 times since 2011, which can be viewed as strong for a capital-intensive, cyclical passenger vehicle maker. Financial liability maturities, including financial services, appear to be well laddered and matched with maturing financial loan assets. Mercedes’ consolidated capital structure is complex from its captive finance operations, which support industrial operations’ sales by providing credit to dealers and consumers but also have banking operations and other financial services. Aside from its balance sheet cash hoard, the company relies mostly on notes and bonds for its funding requirements but also uses lines of credit, deposits from banking customers, and commercial paper. The consolidated capital structure’s total debt/total capital historical average since 2011 is 63.0%. Taking Mercedes’ substantial cash position into account, net debt/total capital averages 51.6%. With the financial-services business accounted for on an equity basis, Mercedes’ total debt/total capital averages 13.8%, while net debt/total capital averages only negative 11.5%, denoting an average net cash position.

Bulls Say

  • Mercedes-Benz is a highly recognizable, well-respected global luxury brand, giving the company a modest buffer against the cyclical downturns of auto sales.
  • Mercedes’ strong R&D capabilities and electrified powertrain technologies should prove valuable because of global clean-air legislation.
  • Management’s long-term return on sales targets are higher than the model, so upside potential exists to the valuation.

Company Description

Based in Stuttgart, Germany, Mercedes-Benz Group AG makes premium passenger vehicles and commercial vans. Brands include Mercedes-Benz, AMG, and Maybach. Mercedes-Benz Mobility provides the company’s dealers and its customers with vehicle financing as well as mobility services in ride hailing, car sharing, and charging. Mercedes owns 11.9% of Aston Martin and 9.6% of Beijing Automotive Group. Li Shufu, chairman of Chinese automaker Geely Automobile, owns 9.7% of Mercedes-Benz. Other major shareholders include Kuwait Investment Authority at 6.8% and Beijing Automotive group at 5.0%.

(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
Technology Stocks

Dassault Systemes has the greatest share of the PLM market, and this exposure is responsible for nearly half of the company’s $100 billion addressable market

Business Strategy & Outlook

Dassault Systemes has a hold on the computer-assisted design software market for autos, aerospace and defense, and manufacturing. With 90% of all aircraft and 80% of all autos globally made via Dassault Systemes software, the company will stay well entrenched in engineering teams with help from its significant switching costs and network effect found in its midmarket CAD software, SolidWorks. The wide-moat company has adapted well to new trends in its market exposures, such as electric vehicle design software, which has made us more confident in the longevity of its moat and ability to achieve excess returns on invested capital. Outside of CAD offerings like Catia and SolidWorks, Dassault Systemes has a hefty portfolio of information intelligence, collaboration, content sharing, and simulation software, which all work to serve a part of product production, whether it’s drug research and development, mining planning, or clothing line organization. The most popular of these disparate offerings is Enovia, its product lifecycle management software, which is used in a variety of industries to connect engineers, marketing, and supply chain teams to better orchestrate the lifecycle of a product.

Dassault Systemes has the greatest share of the PLM market, and this exposure is responsible for nearly half of the company’s $100 billion addressable market. While there are new entrants in the PLM and midmarket CAD spaces, Dassault Systemes will be able to work to minimize any additional share that new players would take in its markets by increasing its adoption of its 3DExperience platform. The platform seeks to connect much of Dassault Systemes’ offerings in one place. Over the next two years, Dassault Systemes will be able to significantly increase its platform revenue. With a greater portion of customers on the platform, one should not be surprised to see customer churn come down and switching costs increase as the platform helps to lock in the benefits of using all Dassault Systemes’ software, which used to be more disparate.

Financial Strengths

Dassault Systemes to be financially healthy, given its asset-light model. As of 2021, Dassault Systemes had EUR 3 billion in cash and cash equivalents. The company had EUR 3 billion in long-term debt, much of which is a result of debt financing required to purchase Medidata for $5.7 billion in 2019. The debt/EBITDA will decrease to 1 by 2024, from 2.5 in 2021. Even with significant debt to pay down, Dassault Systemes should be well equipped to generate healthy free cash flow. The firm will continue paying out an annual dividend (with a roughly 30% payout ratio) and continue decent share repurchases.

Bulls Say

  • Dassault Systemes should see strong adoption of its 3DExperience platform, enabling margin expansion due to increasing switching costs.
  • Dassault Systemes’ foray into precision medicine by simulating individuals’ responses to medicine or medical devices should prove profitable over the next 10 years.
  • The integration of Biovia with newly acquired Medidata should provide significant operating leverage and competitive positioning to threaten Veeva’s trial management competitor.

Company Description

Dassault Systemes is a leading provider of computer-assisted design and product lifecycle management software, serving customers like Boeing and Tesla throughout the production process. The company’s top line largely depends on the transportation and mobility, industrial equipment, and aerospace and defense industries.

(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
Technology Stocks

Enphase has generated approximately 80% of its revenue from the United States and has only served the residential market

Business Strategy & Outlook

Enphase is the world leader in micro-inverter technology for distributed solar systems. The inverter is often referred to as the brains of a solar system. Its purpose is to (1) convert direct current produced by solar panels into alternating current used by households/grid; and (2) optimize energy production. Broadly, there are three kinds of inverters serving the solar market: string inverter, central inverter with power optimizer, and microinverters. Simple string inverters typically serve the utility-scale market, while power optimizers and microinverters are more prevalent in rooftop markets. Enphase is in the midst of a transition from a microinverter company to selling home energy solutions. Enphase targets to create a one-stop shop for solar installers: microinverters, energy storage, EV charging, and digital services for installers and homeowners. This strategy is impressive as it leverages its existing position with installers to expand its total addressable market while maintaining the company’s core end market of distributed generation. Additionally, it aligns well with the macro view of increasing distributed generation and electrification of demand.

Furthermore, the company is focused on diversifying its end markets by geography and market segment. In recent years, Enphase has generated approximately 80% of its revenue from the United States and has only served the residential market. The company is looking to build on success domestically to expand internationally, notably in Europe, where the competitive landscape tends to be more fragmented. Enphase plans to introduce a microinverter for the small commercial segment in early 2023, its first product outside the residential market.

Financial Strengths

Following a period of distress in the 2017-time frame, the company has been instilled with a disciplined financial model under a new CEO and CFO. Enphase pursues a capital light strategy and seeks to avoid entering into long-term contracts with suppliers to ensure flexibility. The company has a heavily equity weighted capital structure in line with peers. Current outstanding debt of approximately $1 billion consists of convertible notes due in 2026 and 2028. 

Bulls Say

  • Enphase commands industry-leading gross margins and ROICs based on its high-tech product offering.
  • Enphase serves a growing rooftop solar market with an expanding total addressable market as more consumers adopt solar + storage.
  • Potential policy incentives to address climate change have the ability to meaningfully increase annual solar installations.

Company Description

Enphase Energy is a global energy technology company. The company delivers smart, easy-to-use solutions that manage solar generation, storage, and communication on one platform. The company’s micro-inverter technology primarily serves the rooftop solar market and produces a fully integrated solar-plus-storage solution. Geographically, it derives a majority of revenue from the United States.

(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
Technology Stocks

Boeing’s narrow-body business was severely battered by the extended grounding of its 737 MAX due to two fatal crashes of the plane

Business Strategy & Outlook

Boeing is a major aerospace and defense firm that makes money mostly by manufacturing large commercial airplanes. Its narrow-bodied planes are ideal for high-frequency, short-haul routes, and wide-bodied ones are used for long-haul and transcontinental flights. Worldwide sales of narrow-bodies have increased over the past 20 years with the rise of low-cost carriers and middle-class consumers in emerging markets. Boeing’s narrow-body business was severely battered by the extended grounding of its 737 MAX due to two fatal crashes of the plane before the COVID-19 pandemic. The pandemic cut air travel by two thirds between 2019 and 2020, and Boeing’s primary competitor, Airbus, saw a one-third drop in airplane deliveries while Boeing had to cease deliveries of its workhorse plane entirely for 20 months to rework the navigation and other systems on hundreds of jets. It can be seen that there’s a pent-up demand for air travel adding to the long-term increase in demand for air travel in emerging-market economies. It can be anticipated that Boeing will grow 737 MAX production to meet that demand. Critical to thesis is at least some normalization of U.S.-China trade relations, as it anticipates Chinese carriers will take up to a quarter of new airplanes in the next decade.

Boeing also supplies military products to governments and aftermarket services to its commercial customers. These businesses together generate just over a third of its operating income over a cycle. There’s a GDP-like growth in the defense business and expect the services business will regain profitability faster than Boeing as a whole because aftermarket revenue increases directly with flight activity.

Financial Strengths

Credit metrics are expected to deteriorate as debt costs rise. Interest cover of 5.4 times in fiscal 2022 was well above the 2 times covenant limit. However, interest cover is deteriorating to 2.3 times by 2025 (in the absence of an equity raising) as debt costs rise from extremely low levels, leaving slim headroom to the covenant limit. Some form of remedial action, like an equity raising, may be needed. Other credit metrics are also aggressive. For example, the net debt/ EBITDA of 8 times for the next few years. Nonetheless, the trust has a Baa2 issuer credit rating from Moody’s Investors Service and gearing of 33% is towards the bottom of the 30% to 40% target range and well below the 50% covenant limit. Average debt duration is reasonable at four years and the trust has only modest debt maturities in the next couple of years. But limited interest rate hedging means the trust is exposed to rising interest rates–weighted average hedge maturity is 2.1 years. The trust is to pay out close to 95% of funds from operations, which is aggressive as FFO ignores such things as maintenance capital expenditure, leasing incentives, and debt establishment costs. It is estimated current distributions exceed underlying earnings by about 10%, which could be unmaintainable if property values stop rising. The trust’s portfolio has grown rapidly via acquisitions, requiring substantial equity raisings. Units on issue have increased more than six-fold since 2014.

Bulls Say

  • Boeing has a large backlog that covers several years of production for the most popular aircraft, which gives us confidence in aggregate demand for aerospace products
  • Boeing is well-positioned to benefit from emerging market growth in revenue passenger kilometers and a robust developed market replacement cycle over the next two decades.
  • Commercial airframe manufacturing will remain a duopoly for most of the world for the foreseeable future. The customers will not have any meaningful options other than continuing to rely on incumbent aircraft suppliers.

Company Description

Boeing is a major aerospace and defense firm. It operates in four segments: commercial airplanes; defense, space & security; global services; and Boeing capital. Boeing’s commercial airplanes segment competes with Airbus in the production of aircraft ranging from 130 seats upwards. Boeing’s defense, space & security segment competes with Lockheed, Northrop, and several other firms to create military aircraft and weaponry. Boeing global services provides aftermarket support to airlines.

(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.