Tag: US Market

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Global stocks

UPS’s Domestic Margin Performance is Solid

Business Strategy & Outlook

UPS is the giant among global small-parcel delivery companies, and it’s one of three commercial providers that dominate the marketplace; FedEx and UPS are the major U.S. incumbents, while DHL Express leads in Europe. UPS has also raised its exposure to the asset-light third-party freight brokerage market, especially with its 2016 acquisition of truckload broker Coyote Logistics. Note the firm divested its LTL trucking division, UPS Freight, in second-quarter 2021 as part of new CEO Carol Tomé’s “better, not bigger” framework. Despite its unionized workforce and asset intensity, UPS produces operating margins well above those of its competitors, thanks in large part to its leading package density—it’s been around much longer than FedEx in the U.S. ground market. In the United States, FedEx’s express and ground units together handled 13.4 million average parcels daily in its four fiscal quarters ending in November 2021, while UPS moved 21.5 million in calendar 2021. 

Shippers appreciate the convenience of using the same driver to handle both express and ground packages in UPS’ single network, but during peak holiday season, FedEx’s separately run ground division’s variable-cost model shows merit. Despite near-term normalization, favorable e-commerce trends should remain a longer-term top-line tailwind for UPS’ U.S. ground and express package business. That said, growth won’t be costless; UPS is amid an operational transformation initiative aimed at mitigating the challenges of a rising mix of lower-margin business-to-consumer deliveries. Amazon has been insourcing more of its own last-mile delivery needs at a rapid pace to supplement capacity access amid robust growth. This removes some incremental growth opportunities for UPS while creating risk that Amazon decides to take in-house the shipments it currently sends through UPS—the retailer made up approximately 12% of UPS’ total revenue in 2021. That said, Amazon still very much needs UPS’ capacity, and taking that all in-house would very likely require a massive level of incremental investment.

Financial Strengths

UPS’ balance sheet is reasonable and healthy, and no medium-term debt service issues. It held $10.3 billion in cash and marketable securities compared with roughly $22 billion of total debt at year-end 2021. Debt/EBITDA leverage came in near 1.4 times in 2021, ignoring underfunded pensions, versus 2.2 times in 2020 as the firm reduced its debt load with help from cash generation and the $800 million UPS Freight sale. EBITDA/interest coverage for 2021 was a very healthy 23 times. One will update a model once the 2021 10K is issued, but for reference, the UPS’ net underfunded pension was roughly $3.5 billion in 2020–a hefty obligation–though as per current view this as manageable given the firm’s solid free-cash generation potential; it’s been manageable historically. Furthermore, that total likely came down for 2021 given certain regulatory changes during the year that lowered UPS’ overall liability. UPS operates with a straightforward capital structure composed of mostly senior unsecured U.S. dollar notes, though it has several pound sterling-, Canadian dollar-, and euro-denominated notes. Outside of major economic disruption, one would expect UPS’ historical pattern of dividend payments to be secure. Share repurchases slowed in 2018 and 2019 on account of heavy capital investment and were suspended in 2020 (into 2021) due to pandemic risk-mitigation efforts (including debt reduction). Share repurchases restarted in 2021 and the firm will likely repurchase around $1 billion worth of stock in 2022.

Bulls Say

  • While residential package demand is normalizing off lofty levels, UPS’ U.S. ground and express package delivery operations should enjoy positive longer-term tailwinds from e-commerce growth. 
  • UPS’ massive package sortation footprint, immense air and delivery fleet, and global operations knit together a presence that’s extraordinarily difficult to replicate. 
  • On top of superior parcel density, UPS uses many of the same assets to handle both express and ground shipments, driving industry-leading operating margins.

Company Description

As the world’s largest parcel delivery company, UPS manages a massive fleet of more than 500 planes and 100,000 vehicles, along with many hundreds of sorting facilities, to deliver an average of about 25 million packages per day to residences and businesses across the globe. UPS’ domestic U.S. package operations generate 62% of total revenue while international package makes up 20%. Air and ocean freight forwarding, truckload brokerage, and contract logistics make up the remainder.

(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

Improving EBITDA Growth Set to Persist at Royal Caribbean With Full Fleet Deployed

Business Strategy & Outlook

Travel constraints and coronavirus hesitancy are receding, so consumer behavior about travel and social distancing have returned to normal for Royal Caribbean, leading to positive operating cash flow and EBITDA at the business. The redeployment of the fleet is complete, and cruise operators have successfully implemented health protocols to ensure the safety of the cruising population (as evidenced by a lower positivity rate than on land). With virus restrictions largely in the rearview mirror, Royal Caribbean should see modest pricing gains as it digests bookings paid for with future cruise credits and takes new reservations. On the cost side, some health protocols and cruise resumption costs could remain high in near-term spending, but should pare back in 2023, aiding profitability. These factors should lead to average returns on invested capital, including goodwill, that are set to languish below the weighted average cost of capital estimate (9.5%) through 2025, supporting no-moat rating. 

While Royal Caribbean has carved out a compelling position in cruising thanks to its contemporary product, it still has to compete with other land-based vacations and discretionary spending for share of wallet. This could intermittently jeopardize top-line growth during transitory periods of land- and sea-based holiday discounting. Royal Caribbean reduced operating expenses and capital expenditures as a result of COVID-19. It also accessed significant liquidity, most recently raising $1 billion in debt in January 2022, to secure its ability to service debt coming due. With $4.2 billion in customer deposits as of June 30, modest liquidity risk exists, as more than $5 billion in debt maturities due in 2023 will force the company to actively seek refinancing. While Royal Caribbean is set to return to positive EPS in the third quarter of 2022, one doesn’t believe either yields or passenger counts will revisit 2019 levels until at least 2023. This should allow Royal Caribbean to generate positive EPS consistently in 2023 and beyond.

Financial Strengths

Royal Caribbean has taken numerous steps to ensure financial flexibility despite headwinds stemming from COVID-19. In March 2020, Royal Caribbean noted it was taking actions to reduce operating expenses and capital expenditures by the tune of $1.7 billion to improve liquidity. Additionally, since the beginning of the pandemic, the firm secured around $17 billion in liquidity through various debt and equity issuances. Furthermore, as of June 30, more than $4.2 billion in customer deposits were still available for use, a decreasing portion of which should represent shift and lift fares as consumers redeem their future cruise credits. Royal Caribbean has been able to amend the majority of its export-credit backed loan facilities to incorporate an extension of debt payments and a waiver of covenant compliance, helping to moderate cash demands, although payments are slated to pick up again in 2023. On the operating expense side, at the start of the pandemic Royal Caribbean’s executives took a pay cut and Royal Caribbean laid off or furloughed more than 25% of its 5,000 shoreside employees. Such efforts helped preserve capital during that difficult time, but have now fully reversed as the industry has redeployed the fleet. The surmise costs per diem will return back to 2019 levels in 2023. The company should be back to consistently positive cash generation in 2023, as restaffing and redeploying efforts are largely complete (which had been a key expense in the $300 million-plus monthly cash burn during the ramp up). With the cash on hand, the Royal Caribbean should have no near-term going concern issues, thanks to 100% of its capacity back on the seas in the summer of 2022, with full occupancy by year-end.

Bulls Say

  • If COVID-19 regulations continue to pare back quickly, yields could rise faster than expected as demand rises. 
  • The normalization of fuel prices could help benefit the cost structure, thanks to Royal Caribbean’s floating energy prices (with only about 50% of fuel costs historically hedged). 
  • The nascent Asia-Pacific market should remain promising post-COVID-19, as the four largest operators previously had capacity for nearly 4 million passengers at the beginning of 2020, which provides an opportunity for long-term growth with a new consumer when cruising resumes in the region.

Company Description

Royal Caribbean is the world’s second-largest cruise company, operating 64 ships across five global and partner brands in the cruise vacation industry, with 10 more ships on order. Brands the company operates include Royal Caribbean International, Celebrity Cruises, and Silversea. The company also has a 50% investment in a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises, allowing it to compete on the basis of innovation, quality of ships and service, variety of itineraries, choice of destinations, and price. The company completed the divestiture of its Azamara brand in the first quarter of 2021.

(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

Despite Demand Tailwinds, Primo Water’s Long-Term Returns Should Be Constrained

Business Strategy & Outlook

Formerly known as Cott, Primo has cycled through multiple iterations over the past decade, going from a private-label manufacturer of ambient beverages, or those that can be stored at room temperature, in 2010 to an all-things-water business in 2020. Nevertheless, the current entity combines the heft of Cott’s former water subsidiaries with the legacy Primo business, and as a pure-play water provider, a more robust top-line trajectory and a structurally improved margin profile. Unsurprisingly, Primo’s strategy has radically evolved over the years —it now uses a conventional razor/blade business model, where it seeks to increase penetration of its water-dispensing appliances to facilitate recurring sales of higher-margin water bottles. Ideally, it wants to deliver these bottles directly to customers to avoid the increased costs and competition that go along with retail intermediation. Pre Pandemic sales skewed to the residential side (roughly 60%), but despite an even greater imbalance currently, its base of small and midsize businesses (where it tends to have higher retention) should be important longer term. 

The right tech and service investments are being made, which together with various secular trends (like wellness and deteriorating trust in municipal water) facilitate a nice runway of growth. Acquisitions are also core to management’s strategy. Given the transformational nature of recent activities, the future deals will be confined to tuck-ins. Due to industry fragmentation, the rationale for efforts to increase scale and route density is sound, but continued management discipline is necessary. Primo does not walk a gilded path. It competes in a largely commoditized market, where no brand equity is evident except at the premium end (where Primo has little presence), so one does not see it as moat worthy. Additionally, the coronavirus pandemic has pressured its commercial business. Nevertheless, the firm will be able to navigate and adapt to the evolving landscape.

Financial Strengths

Primo’s financial health looks fair to us, though it leaves a lot to be desired. A torrid pace of M&A since 2014, when it acquired DS Services, has resulted in debt that has been precariously high at times and a credit rating that remains below investment-grade. Nevertheless, the disposition of its soft drink and juice finished-goods bottling business in 2018 allowed for significant deleverage. The adjusted net leverage (on an internally calculated basis) is below 4 times EBITDA today, and with a solid cash flow profile and potential synergies, the management’s goal to reach 2.0-2.5 times by the end of 2024 is ambitious but not unrealistic. Primo’s free cash flow history is muddied by its perpetual merging and divesting, but the most recent transition to a pure-play water company will improve its cash-generating capabilities. Structurally improved margins and relatively modest working capital requirements should be the primary drivers of this performance, and the model free cash flow to the firm averaging around $150 million annually through 2026 (around 6% of sales). The company’s debt profile includes long-dated senior notes and a revolving credit facility, which replaced a long-standing asset-based lending facility in 2020. The primary covenant that management monitors in relation to these obligations is the interest coverage ratio (calculated as adjusted EBITDA divided by interest), which cannot veer below 3 times. Even amid the coronavirus pandemic, the firm remains in compliance with this covenant, and one does not envision a scenario where this is breached. Additionally, there is ample liquidity, as the firm has over $125 million in cash on hand as of December 2021 and over $100 million in unused revolver capacity.

Bulls Say

  • As a pure-play water solutions provider, Primo will more comprehensively benefit from secular growth in the category and more robust margins. 
  • Unparalleled scale in the home and office water delivery market should yield resources that allow Primo to differentiate its services. 
  • With offerings like water refill and exchange currently nonexistent in Europe, there should be ample room for growth in that region.

Company Description

Primo Water is a pure-play water provider that is the product of the March 2020 acquisition of the legacy Primo business by Cott. The firm’s water solutions ecosystem is anchored by an assortment of water dispensers and its water direct business. In the latter, it receives recurring revenue for delivering large-format (3- and 5-gallon) water bottles to residential and commercial customers for use in the dispensers. Supplementary offerings include water exchange, where consumers can exchange or purchase pre filled containers at retail, and water refill, where consumers have access to the network of self-service refill units that Primo manages. Most sales are generated in North America, with the remainder primarily in Europe and Israel.

(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.

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Daily Report Financial Markets

USA Market Outlook – 03 August 2022

USA-Market-Outlook-03-August-2022Download

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Technology Stocks

Idex has consistently generated returns on invested capital in the upper midteens

Business Strategy and Outlook 

Idex owns a collection of moaty businesses that tend to be leaders in their respective niche end markets, typically holding the number-one or -two market share. It manufactures a wide array of products, ranging from equipment used in DNA sequencing to wastewater pumps to Jaws of Life hydraulic rescue tools. Idex’s lean manufacturing process allows it to effectively operate in a high-mix and low-volume environment, offering customers a wide variety of highly engineered products that are configurable or customizable. Furthermore, a common theme across its businesses is that they specialize in making mission-critical equipment that performs a vital function but typically constitute a small part of the customer’s total bill of materials. This aspect of the business contributes to Idex’s narrow moat through customer switching costs and allows the firm to command premium pricing. In the long run, Idex can be viewed as a GDP-plus business. Organic sales growth will continue to outpace industrial production by around 1%-2% annually as the firm’s commitment to innovation and investments in research and development continue to bear fruit and generate additional revenue through introductions of new or refreshed products. It can be projected organic sales to grow at a roughly low-single-digit clip in fluid and metering technologies as well as the fire and safety segment and the diversified products segment, and at a mid-single-digit rate in the health and science technologies segment.

Additionally, the firm will continue to supplement its organic sales growth with acquisitions. Historically, management has avoided overpaying for acquisitions. As such, despite regular mergers and acquisitions, which add goodwill and assets to the firm’s capital base, Idex has consistently generated returns on invested capital in the upper midteens. Management has remained disciplined in the current elevated valuation environment, and it will continue to manage acquisition risk appropriately and focus on maximizing returns on invested capital.

Financial Strength

Idex maintains a sound capital structure, which will help the firm navigate the uncertainty due to the coronavirus pandemic. As of Dec. 31, 2021, the firm owed roughly $1.2 billion in short- and long-term debt while holding approximately $0.9 billion in cash and cash equivalents. The company can also tap into its $800 million revolving credit facility. Idex will generate average annual operating cash flows of roughly $800 million over the next five years. Given its healthy balance sheet and solid cash flow generation, Idex is adequately capitalized to meet its upcoming debt obligations. Idex will have a debt/adjusted EBITDA ratio of roughly 1.5 times in 2022. Management will continue to prioritize investing in organic growth and executing M&A, growing the dividend, and allocating excess capital to opportunistic share repurchases. The firm has raised its quarterly dividend by an average annual rate of roughly 10% over the last five years, and the dividend will keep growing roughly in line with earnings. The payout ratio will remain around 30% over the next five years.

Bulls Say’s

  • Idex has a portfolio of moaty businesses that have leading shares in niche end markets. 
  • Idex generates strong free cash flows, which have averaged around 16.5% of sales during the last 10 years. 
  • Recent acquisitions of Akron Brass and AWG, as well as new product introductions (including eDraulic and SAM), have reinforced Idex’s already strong competitive position in the fire and safety business

Company Profile 

Idex manufactures pumps, flow meters, valves, and fluidic systems for customers in a variety of end markets, including industrial, fire and safety, life science, and water. The firm’s business is organized into three segments: fluid and metering technologies, health and science technologies, and fire and safety and diversified products. Based in Lake Forest, Illinois, Idex has manufacturing operations in over 20 countries and has over 7,000 employees. The company generated $2.8 billion in revenue and $661 million in adjusted operating income in 2021.

(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 is 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 Shares

Humana appears focused primarily on organic growth, it remains open to partnerships and acquisitions, too

Business Strategy and Outlook 

In the U.S. healthcare system, Humana pays caregivers to provide services through an integrated and value-based approach while also making the insurance experience easy to navigate for end users. Perhaps not surprisingly, given its founding as a nursing home in the 1960s, the firm has a special focus on serving the elderly population, especially in its top-tier position in administering Medicare Advantage plans. Given U.S. demographic trends and the increasing penetration of Medicare Advantage plans in the eligible population, Humana remains at the forefront of one of the fastest-growing areas in U.S. health insurance.

Within Medicare Advantage, insurers like Humana are paid the same amount that the traditional Medicare program pays to provide benefits for its consumers; then the insurer aims to lower the costs associated with caring for users by making them healthier while also providing them additional benefits and generating a profit. Given that dynamic, incentive alignment with care providers remains more important in this product than in other health insurance products and Humana sees this alignment as its key differentiator from other health insurance players. For example, about two thirds of its Medicare Advantage members have primary-care physicians that operate in value-based arrangements, which encourage those caregivers to improve quality and costs. Humana owns some of these caregivers, including primary-care practices and the planned acquisition of the largest home healthcare provider in the United States, Kindred at Home. Also, the firm provides pharmacy benefit management functions, managing that key health input in an integrated fashion primarily for internal members. While especially powerful in the Medicare Advantage market, this integrated approach benefits Humana in its other target markets too, including Medicaid, military, and small-employer plans. With large opportunities in its target markets, management aims to continue growing at a fast pace with a long-term annual earnings per share growth goal of 11%-15%. While Humana appears focused primarily on organic growth, it remains open to partnerships and acquisitions, too.

Financial Strength

Humana maintains a healthy balance sheet. Most of its cash ($3.4 billion at the end of 2021) is held at its subsidiaries, though, and the company aims to hold about $500 million of cash at the parent company typically ($0.9 billion at the end of 2021), which constrains its liquidity a bit. Humana owed $12.5 billion in debt, or 44% debt/capital by the calculations at the end of 2021, which is above management’s typical leverage after the Kindred at Home transaction in 2021. With the divestiture of some non core businesses from that transaction expected in 2022, the leverage to start falling toward the company’s target of 35% in 2022, although share repurchases may constrain that transition a bit. With limited capital expenditure requirements, free cash flows to typically range between about $4 billion-$5 billion annually through 2026. Those cash flows should help the company meet its maturity schedule during the next five years, which cumulatively totals $7.2 billion, and also deleverage after the Kindred at Home transaction.

Bulls Say’s

  • With its prowess in Medicare Advantage plans, Humana looks likely to benefit from strong demographic trends and increasing popularity of that program. 
  • Humana enjoys industry-leading customer satisfaction metrics that positively influence its brand and reputation in the consumer-driven Medicare Advantage and Medicaid insurance sectors. 
  • Humana’s growth trajectory looks strong, with management aiming for 11%-15% EPS growth in the long run.

Company Profile 

Humana is one of the largest private health insurers in the U.S. with a focus on administering Medicare Advantage plans. The firm has built a niche specializing in government-sponsored programs, with nearly all its medical membership stemming from individual and group Medicare Advantage, Medicaid, and the military’s Tricare program. The firm is also a leader in stand-alone prescription drug plans for seniors enrolled in traditional fee-for-service Medicare. Humana offers employer-based plans primarily for small businesses along with specialty insurance offerings such as dental, vision, and life. Beyond medical insurance, the company provides other healthcare services, including primary-care services, at-home services, and pharmacy benefit management.

(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 is 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

ServiceNow’s Differentiated Software Drives Multiple Organic Growth Vectors in Expanding TAM

Business Strategy & Outlook:    

ServiceNow has been successful thus far in executing on a classic land and expand strategy. First, it built a best-of-breed SaaS solution for IT Service Management (ITSM) based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and then the much larger IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies has allowed ServiceNow to bring its process automation approach to HR service delivery, customer service, and finance. More recently, ServiceNow has been offering higher pricing tiers with an increasing array of features, along with industry specific solutions, which have higher ASPs and help drive revenue growth. 

ServiceNow’s success has been rapid and notably organic. The company already offers high-end enterprise-grade solutions and boasts elite level customer retention of 97% to 98%. ServiceNow focuses on the largest 2,000 (G2K) enterprises in the world and these customers continue to renew for larger contracts, with the average annual contract value doubling in the last three years. Further, the company has no small business exposure. Additionally, customers overall are re-upping for more than one solution, as more than 75% of customers are multi-product purchasers, which is driving deal sizes higher. Having the IT function within an enterprise as the initial landing pad is fortunate, as it provides a built-in advocate for software (an IT responsibility) for other functional areas of the enterprise. ServiceNow will continue to use its position to land new IT-driven customers and upsell ITOM features on the platform, but the company will increasingly cross-sell emerging products in HR and customer service, along with the platform as a service (PaaS) offering. The product strength, market presence, and a strong sales push into areas outside of IT, will continue to drive robust growth.

Financial Strengths:  

ServiceNow is a financially sound company. Revenue is growing rapidly, while non-GAAP margins are positive and expanding. The continued traction in ITSM and ITOM, along with adoption of new use cases in customer service and HR service delivery, and the PaaS solution will continue to drive revenue growth in excess of 20% for at least the next five years. As of Dec. 31, 2021, ServiceNow had $3.3 billion in cash, offset by approximately $1.6 billion in debt, resulting in a net cash position of $1.6 billion. Gross leverage sits at 2.1 times trailing EBITDA, which allows for flexibility should the environment worsen. Operating margins are increasing as ServiceNow continues to scale, with 2019 the first year of profitability on a GAAP basis. ServiceNow should be able to drive in excess of 100 basis points of margin expansion annually. Free cash flow margin was 31% in 2021, providing a preview of what will be strengthening margins over the next decade. In terms of capital deployment, ServiceNow does not pay a dividend, does not regularly repurchase shares, and makes only small acquisitions. In fact, ServiceNow has spent only a few hundred million dollars on acquisitions in aggregate since 2011. The company made a variety of tuck-in acquisitions in 2019 and 2020–all for undisclosed amounts. Small, feature-driven acquisitions are expected to continue but have not explicitly modeled any such deals. The company might not initiate a dividend in the foreseeable future, nor regular share repurchases.

Bulls Say: 

  • ServiceNow’s superior product has led to rapid share gains and exceptional retention within the ITSM market. Now the company is using this strength to expand into other areas of ITOM.
  • The company has added additional growth drivers, including customer service and HR service delivery, which should help propel robust growth over the next five years.
  • GAAP operating margin was break-even for the first time in 2019 and see a decade-long runway for expansion.

Company Description: 

ServiceNow Inc provides software solutions to structure and automate various business processes via a SaaS delivery model. The company primarily focuses on the IT function for enterprise customers. ServiceNow began with IT service management (ITSM), expanded within the IT function, and more recently directed its workflow automation logic to functional areas beyond IT, notably customer service, HR service delivery, and security operations. ServiceNow also offers an application development platform as a service (PaaS).

(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

ADP Delivers Robust FY 2022 Result as Labor Markets Prove Resilient Despite Economic Headwinds

Business Strategy & Outlook

ADP has invested heavily over the past decade to develop public cloud native solutions and consolidate its portfolio of disparate platforms. As of fiscal 2021, ADP has successfully migrated most of its small and midsize clients to its strategic platforms and will be migrating enterprise clients to its new HCM platform over the coming decade, as well as rolling out its new underlying payroll and tax engines. While the platform migrations ultimately result in higher retention and profitability, the forced migrations will likely create a catalyst for enterprise clients to reassess providers, temporarily hindering both metrics. ADP faces fierce competitive pressure from nimble upstarts, legacy peers, accounting software, and ERP providers. The new solutions will allow ADP to compete more aggressively on functionality, reduce software maintenance costs, and provide scope for greater operating leverage, supporting margin uplift. However, the increasing competitive pressure will result in greater pricing pressure and force ADP to maintain high levels of investment to ensure the functionality of its product offering remains competitive. 

This investment is in addition to the continued investment in sales and implementation required to roll out new solutions and migrate clients. As such, the ADP’s price increases will be limited to about 0.5% a year on average, in line with recent growth but below long-term averages, limiting margin expansion potential. The increased regulatory complexity, tight labor markets, and growing adoption of hybrid work will underpin strong demand for ADP’s solutions, supporting greater share of wallet and market share gains in the small and midsize market. This includes greater penetration of the outsourced payroll and HR model. However, the expected forced platform migrations to hamper ADP’s enterprise market share growth over the next decade before gradually recovering as the new platform is adopted in the market. In aggregate, the ADP’s overall market share to grow modestly for the five years to fiscal 2027, followed by higher growth as platform migrations complete.

Financial Strengths

ADP is in a strong financial position. At the end of fiscal 2022, ADP’s balance sheet was modestly geared with net debt/EBITDA of 0.3. During fiscal 2021, ADP almost tripled long-term debt to $3 billion to fund share repurchases and optimize its capital structure with low cost debt. The expected ADP’s annual operating income can comfortably cover annual interest expense on its debt at least 60 times over the forecasted period. ADP also has access to short-term funding facilities to meet client’s obligations rather than liquidating available for sale securities. ADP has returned over $20 billion of capital to shareholders during the eight years to fiscal 2022 through dividends and share repurchases. The expected ADP’s strong free cash flow generation will support a dividend payout ratio of about 60% over the period. The balance sheet is robust, and ADP has ample scope to increase leverage to execute on bolt-on acquisitions.

Bulls Say

  • ADP benefits from high client switching costs, a scale based cost advantage, intangible brand assets, and a powerful referral network. 
  • Despite facing fierce competitive pressures and undergoing forced platform migrations, ADP has retained high revenue retention and improved operating margins over the past decade. 
  • ADP has a strong record of returning capital to shareholders through dividends and share repurchases.

Company Description

ADP is a provider of payroll and human capital management solutions servicing the full scope of businesses from micro to global enterprises. ADP was established in 1949 and serves over 990,000 clients primarily in the United States. ADP’s employer services segment offers payroll, HCM solutions, HR outsourcing, insurance and retirement services. The smaller but faster-growing PEO segment provides HR outsourcing solutions to small and midsize businesses through a co-employment model.

(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

USA Market Outlook – 02 August 2022

USA-Market-Outlook-02-August-2022Download

Categories
Global stocks Shares

Spotify may be at the mercy of the record labels in the music industry, as it will need access to content to continue attracting more listeners

Business Strategy and Outlook 

Swedish-based Spotify is the world’s leading music streaming service provider. The fast-growing digital streaming space as becoming the primary distribution platform of choice within the ever-changing music industry. Spotify can benefit from various network effects that will help the firm increase its users and amass valuable intangible assets associated with user data and listening preferences. However, it faces intense competition and has a (mostly) variable cost structure that may limit Spotify’s future operating leverage and profitability. It will not generate excess returns on capital over the next 10 years. Spotify may be at the mercy of the record labels in the music industry, as it will need access to content to continue attracting more listeners. While the distribution side of the industry (Spotify, YouTube, Apple, terrestrial and digital radio, and so on) is fragmented, over 80% of licensing is controlled by the big three major record labels: Universal Music Group, Sony, and Warner Music Group. As these licensors gather royalties from Spotify and its peers, they maintain pricing leverage as content remains king.

The firm’s entry into the podcast space is applaudable. However, while the firm has become the market leader via content acquisition, which further diversifies its revenue, its dependency on labels to be lessened much is not expected. Spotify is ahead of the pack in the growing music streaming and podcast markets, but it faces stiff competition from behemoths such as Amazon, Apple, and Google. Unlike Spotify, these firms don’t rely solely on streaming music or podcasts to drive profitability and can potentially run at break-even, or even as loss leaders, while monetizing users via other products and services. It might also be harder for Spotify to steal share from these competitors over time, as Apple Music and Apple Podcasts listeners are probably entrenched with other Apple products, Amazon Music with Echo, and so on. Thus, they might be relatively more loyal to these music and podcast platforms than the users an operating-system-agnostic platform like Spotify can capture.

Financial Strength

As of the end of 2020, Spotify did not hold any debt on its balance sheet. Spotify’s cash balance at the end of 2020 was $1.7 billion. Spotify has continued to generate cash from operations since 2016; although the firm has incurred hefty operating losses in recent years, cash flow has been better as a good portion of these costs, which are accrued fees to rights holders, have not yet been paid out in cash. While Spotify remains an asset-light business since it uses Google’s cloud platform for data storage and computing, the firm’s annual capital expenditure to be EUR 75 million-EUR 100 million, is likely necessary to provide additional services and tools on the creation side especially for new, up-and-coming, or independent artists. The firm is also likely to take the M&A route with similar objectives, as displayed by its various podcast acquisitions. The free cash flow is to equity/sales, to average around 6% the next 5 years.

Bulls Say’s

  • Spotify’s listener growth may help it negotiate much better terms with record labels over time. 
  • By investing in more services and tools for artists, Spotify may attract artists away from record labels and toward independent distribution, which may allow the company to pay lower royalties over time. 
  • Revenue growth during the next 10 years should accelerate as Spotify keeps investing in different content such as podcasts and video, attracting more users and advertisers.

Company Profile 

Spotify, headquartered in Stockholm, Sweden, is one of the world’s largest music streaming service providers, with over 150 million total listeners. The firm monetizes its users through both a paid subscription model, referred to as its premium service, and an ad-based model, referred to as its ad-supported service. Revenue from premium and ad-supported services represented 90% and 10% of Spotify’s 2017 total revenue, respectively.

(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 is 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.