Technology
New Street takes advantage of recent share price weakness post WISE's 4Q23 update to upgrade the stock to Buy - whilst TPV was a touch light, they think the market's focus should be firmly on the new steer for NII which drives material upgrades to EBITDA (40% in fiscal 2025). The market has been contorting itself to keep near-term EBITDA margins at ~20% (as per mid-term guide) when in reality it will be nigh on impossible to reinvest a significant portion of NII gains on any sort of near-term basis. Along with street upgrades, potential MSCI inclusion (May) is another catalyst. TP increases to £6.75.
Edition: 159
- 28 April, 2023
Gas and LNG: The cawing of crows
Last year, investors who went short on EU gas and global LNG made a wise decision. However, with the crows once again cawing, David Roche reckons it may be time to go long on both. Global oil supply is predicted to fall, with the price of Brent crude oil reaching USD140/bbl in 2024. Russia is being forced to cut production, Europe’s natural gas inventories are falling and LNG storage is down to 45%. The crows would see the fall in EU gas prices as food for optimistic cawing and prognostications, but David remains doubtful that a zero-productivity growth economy with big government, big deficits and swathes of social protection can sustain low inflation for more than the flickering of an historical eye.
Edition: 154
- 17 February, 2023
Eurobank (EUROB GA) Greece
Financials
Doubles its stake in Hellenic Bank to 26% to become the largest shareholder in Cyprus’ second biggest bank - valuation wise, EUROB is paying a higher multiple than when it bought its original stake (July 2021), but the truth is the outlook has improved a lot, thanks to higher rates by the ECB and HB’s enormous cash balance of €5.3bn (excl. TLTRO) equal to 27% of its total assets. ResearchGreece expects HB to revise its RoTE target >10% from c.7% previously. Using 12% CoE they find the fair P/TBV to be closer to 1.0x, which implies EUROB bought the stake at a 50% discount to fair value.
Edition: 150
- 09 December, 2022
Technology
Misunderstood cross-border payment provider with structural cost advantage - WISE has built a “Moat” as the low-cost provider in the space by establishing direct connections with local payment networks and regulatory bodies while obtaining the necessary licenses to operate in its various geographies. Concerns over declining take rates are unwarranted; management lowered rates strategically (which has actually helped to expand gross margins). Despite sustainable 25-30% revenue growth, high 60%s gross margins, >20% EBITDA margins, WISE’s current 4-5% FCF yield more closely resembles a value stock. 2-yr TP £7.00 (100% upside).
Edition: 138
- 24 June, 2022
UK: A hike into a recession
Carl Weinberg is fully aware of the Bank of England’s price stability mandate, but their latest decision certainly isn’t a wise one. We are living in unusual times with an impaired supply curve heating up inflation, so why would the BoE seek to reduce the demand curve to match this? The MPC is ignoring the obvious problem: energy prices are rising faster than other prices! Carl says a negative or zero interest rate is needed, otherwise the BoE is marching us into recession at an even faster rate than is necessary.
Edition: 135
- 13 May, 2022
Technology
Inflection Point Research, LLC
Will beat and raise guidance when they report results for their most recent quarter (due 9th Mar) driven by robust execution and increased customer adoption. Russia's invasion of Ukraine will result in a material increase in cybersecurity spending. CRWD is the next-gen endpoint security leader in the cloud-native EDR space and the rapidly emerging XDR space. While there is currently too much hype and confusion caused by other security vendors over the true definition of XDR, as the dust settles CRWD’s superior / differentiated solution will be even better positioned to grow share at the expense of competitors whose solutions do not stack up technology-wise.
Edition: 130
- 04 March, 2022
Frontier markets: A compelling strategic case
Frontier markets (FM) have performed remarkably well through this selloff, outperforming both DM & EM. FMs still look good technicals-wise with solid breadth. Despite a tick-up in valuations, the strategic case remains compelling with expected equity returns on par with EM and favourable demographics. FM FX also appears oversold with valuations moving further cheaper. Callum Thomas remains bullish.
Edition: 121
- 15 October, 2021