Viewpoint: Bullish
Yesterday Zip Co (Z1P) delivered a very impressive report for the December quarter and the market certainly responded with the stock soaring 23% in just one session however we believe Z1P still appears very cheap when compared to its peers in the BNPL space like Afterpay (APT) and Affirm (AFRM US). Customers for Z1P almost doubled YoY to 5.7m while importantly merchants increased to 38,500, these impressive stats rolled through to an 88% increase in revenue.
Afterpay (APT) is now valued at $42.5bn compared to Zip (Z1P) at $4bn but APT only transacts ~2.5x more than Z1P. I like Z1P’s attitude to chase quality growth as opposed to any growth, a goal which translated to bad debts as a factor of turnover falling 20% from the previous quarter.
South32 (S32) operate a number of mines around the world producing alumina, aluminum, coal, manganese, nickel, silver, lead, and zinc.
Netwealth (NWL) +11.72%: the independent platform names continue to see inflows above the market rate, this time Netwealth reported better than expected numbers for their Dec Quarter with FUA up 14%. The $4.8b was split reasonably evenly between a positive market move ($2.2b) and net additions ($2.6b) to see total FUA to $38.8b. They also upped their expectations for FUA flows as the industry continues to consolidate, now looking for over $8.5b of net flows for FY21, around 20% growth on current numbers.
TWE has been under significant pressure with a wine glut in North America and the painful impact of a trade war with China but investors should look through these clouds because suitors will as they asses the companies value around $9. Also, even if someone doesn’t lob in a bid for the entire company the prospect exists to sell off parts of the business with Penfolds alone arguably worth today’s market cap of TWE. This is the sort of buy and restructure strategy PE firms love.
The companies delivered the combination of underwhelming results / downgrades and it’s a situation stock courtesy of China but again after falling more than 50% I’m sure its catching some long term investors’ attention.
CWN is arguably my favourite in todays small list as we have a perfect combination of a keen seller (Jamie Packer 36.8%), a busines that probably needs fresh / changed ownership structure to solidify its casino licence in Sydney and the share price is depressed courtesy of COVID. The embattled casino operator has already seen private equity group Blackstone buy 10% of its shares last year, I have no doubt they will be looking to add value to this stake in some manner whether through its property holdings or orchestrating a sell out by Packer.
ORI could be on the menu for Wesfarmers (WES) fitting nicely with its chemical business. Importantly ORI is now attractive at current levels after being smashed in 2020, this leading provider of explosives for the mining industry which is enjoying a huge uplift as reflation takes hold. As commodity prices rise miners worldwide will consider resources previously not viable and these are likely to require more explosives and chemicals for extraction.
Victorian based ORI delivered a weak first half result but we feel moving forward the business is well positioned to turn the ship around helped by an easing of COVID restrictions. Investors are clearly looking for post pandemic bargains and these have become thin on the ground, I can see ORI enjoying some attention sooner rather than later.
Following a ~20% correction, Aristocrat Leisure (AAL) sprang back to life yesterday rallying over 4% to head the leader board in the Consumer Services Sector. This world leader of gaming technology looks well positioned for future growth as casinos reopen across the globe, and online gaming only grows in popularity.
Treasury Wine Estates (TWE) operates vineyards and wineries. The Company focuses on sourcing and growing grapes as well as manufacturing wines. Treasury Wine Estates markets and distributes its products around the world.
Orica Limited (ORI) is a diversified manufacturing company. The Company produces industrial and specialty chemicals, polyethylene, surface coatings for vehicles, food and beverage flavoring and fragrances, packaging and appliances. The Company also supplies explosive and blasting services to the mining, quarrying and construction industries.
Ramsay Health Care (RHC) provides health care services. The Company offers private hospital services, including, rehabilitation, psychiatric care, day, and complex surgery. Ramsay Health Care owns, operates, and manages health care facilities throughout Australia, Indonesia, and Europe
