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We Expect APM Human Services to Be Acquired by MDP
APM Human Services International’s strategy revolves around maintaining its superior service levels to renew existing contracts and gain market share at key government retenders. Over a government contract, which is typically longer than five years, slight market share gains and losses can arise if certain employment service areas, or ESAs, experience faster growth or from reallocation due to contract underperformances. However, inorganic growth has been a key strategy for APM to expand more effectively and service new ESAs outside of government retenders. Industry players may expand their footprint of physical offices into new ESAs but would still need a licence to operate in a new region. Greater scale allows APM to better leverage its personnel, locations, and brand awareness, and allows it to apply learnings and replicate service offerings more easily across its global operations.
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We Expect APM Human Services to Be Acquired by MDP
APM Human Services International’s strategy revolves around maintaining its superior service levels to renew existing contracts and gain market share at key government retenders. Over a government contract, which is typically longer than five years, slight market share gains and losses can arise if certain employment service areas, or ESAs, experience faster growth or from reallocation due to contract underperformances. However, inorganic growth has been a key strategy for APM to expand more effectively and service new ESAs outside of government retenders. Industry players may expand their footprint of physical offices into new ESAs but would still need a licence to operate in a new region. Greater scale allows APM to better leverage its personnel, locations, and brand awareness, and allows it to apply learnings and replicate service offerings more easily across its global operations.
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Upgrading Yageo's Uncertainty Rating to Medium Due to Diversified Product Portfolio
Yageo is one of the leading suppliers of passive components in Taiwan. Passive components are widely used in all kinds of electronic applications; they are necessary to stabilize and control electric flow and to remove electromagnetic noise from circuits. Yageo’s main products are chip resistors and multilayer ceramic capacitors, or MLCCs, in which the firm is ranked first and third in global production volume, respectively.
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We See Value in Tyro Due to Its Increased Utility to Merchants
Tyro Payments provides merchants with the required infrastructure to accept electronic payments, as well as business banking products. It is the fifth-largest merchant acquirer in Australia by terminals, behind the major four banks. The firm mainly caters to small to medium-size enterprises in the hospitality, retail and health sectors. It is also expanding into adjacent verticals like trade, accommodation and services.
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Ameren's Investment Opportunities in Missouri and Transmission Help Offset Illinois Headwinds
Ameren is a regulated utility that operates in Illinois and Missouri, two historically challenging regulatory environments. Improving regulation in Missouri has created significant investment opportunities. However, Illinois has continued to be difficult, though management has proven to be adept at managing through regulatory challenges.
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ChampionX's Impending Acquisition by SLB Remains Good Outcome for Shareholders
ChampionX is a diversified oilfield-services firm providing specialty chemicals solutions and artificial lift services for oil and gas development and production. It also manufactures polycrystalline diamond cutter inserts for drilling and mining rigs. About two thirds of ChampionX’s overall business involves specialty chemicals. The firm is one of the largest specialty chemicals providers in oilfield services: ChampionX and Baker Hughes together control roughly half of the global market.
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Vistra Should Benefit if Electricity Demand Growth Accelerates
Vistra Energy is entering its second phase of life since splitting off as a stand-alone entity in 2016, following the Energy Future Holdings bankruptcy.
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Broadcom is a Diversified Technology Behemoth Between Chips and Software, With a Wide Moat
Broadcom is an amalgamation of high-value chip and software businesses that on the whole are differentiated and moaty, in our view. Broadcom is a terrific aggregator of firms, big and small. Its ability to acquire and streamline generates strong profits and cash flow, and fuels its robust dividend. We laud the firm for its execution and operating efficiency, which build upon its large organic investment and help it to outperform its end markets organically.
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Magna Is One of the Largest Auto Suppliers in the World, Offering Many Products and Services
Magna International is one of the largest and most diversified auto parts suppliers in the world but that size is no guarantee of economic profit. While breadth in product and services can be advantageous regarding cross-selling—commercial activities that bolster content per vehicle and market penetration—we don’t see margins getting high enough to merit moat worthy return on invested capital due to numerous competitors in Magna’s largest segments. The company enjoys customer switching costs, which are common to auto suppliers with moats, but its financial performance does not quite merit one.
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Hawaiian Electric Faces Difficult Road Ahead
Hawaiian Electric Industries derives approximately 75% of consolidated earnings from an electric utility and the remaining from Hawaii-based American Savings Bank, a business mix unique among its utility peers.
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National Bank of Canada Will Likely Face Higher Credit Costs in 2024
National Bank of Canada is the sixth-largest Canadian bank, and this group of six banks collectively holds almost 90% of the nation's banking deposits. National Bank of Canada is the most Canadian-focused of the Big Six, with roughly 85% of its revenue derived from Canada. National Bank of Canada also has the most concentrated branch network in Canada among the Big Six, primarily located in Quebec. The bank has made a point of gradually shifting more of its business outside Quebec over time and in 2023 had roughly 49% of its revenue coming from outside Quebec.
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HF Sinclair Shares Look Undervalued as Payouts Ramp Up
After the acquisition of Sinclair Oil, HollyFrontier, now HF Sinclair, is a fully integrated independent company composed of refining, marketing, renewables, specialty lubricants, and midstream businesses.
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Bread Financial Faces Challenges as Credit Costs Continue to Rise
After the sale of Epsilon in 2019 and spinoff of LoyaltyOne in 2021, Bread Financial is now solely a consumer credit company, with its private-label credit cards and buy now/pay later businesses its only two product lines. However, Bread’s retail credit card business is under pressure as it continues to lose major partners, losing Wayfair and Meijer to Citi in 2020 and BJ's Wholesale Club to Capital One at the start of 2022. We see retail partner loss as an ongoing threat to Bread as the firm does not have a competitive advantage that would give it an edge in retaining partnerships during contract renewal negotiations.
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We Think Xylem's Smart Water Solutions Will Help Drive Profitable Growth
Xylem is one of the leading water technology companies in the world. Its extensive portfolio spans a wide range of equipment and solutions for the water industry, including the transport, treatment, testing, and efficient use of water for public utilities as well as industrial, commercial, and residential customers. Xylem operates four business segments: water infrastructure, applied water, measurement and control solutions, and water solutions and services.
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Kellanova's Commitment to Brand Spending Should Ensure Competitive Edge
After untangling its operations, Kellanova has centered its strategic playbook almost exclusively on its global snacking portfolio. But we don't think it will abandon its focus on increasing investments in its capabilities and brands while extracting inefficiencies. We think it will continue to judiciously tailor its mix to expand pack size options to extend its distribution at home and abroad. However, management's motivation for the split from the cereal business lacked substance, in our view. The primary driver appeared to be unlocking a higher multiple for the faster-growing snack business now that it's unencumbered by the mature North American cereal brands.
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Narrow-Moat Steris’ Leadership in Sterilization Positions the Company for Future Growth
Steris is a leading provider of sterilization products and services to healthcare organizations, biopharma producers, and device manufacturers. The company also has a strong presence across operating rooms and endoscopy centers. Over the past few years, Steris has closed several acquisitions to enhance its healthcare offerings. With more procedures shifting to an outpatient setting, we think Steris’ expanded product portfolio positions itself as a “one-stop shop” that supplies mission-critical sterilization equipment and services. The burgeoning ambulatory surgery centers and physicians’ offices should benefit the most when sourcing from Steris, as they don’t necessarily have the capacity to deal with multiple vendors.
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Toric and Multifocal Lens Adoption Boosts Growth, Myopia Management Keeps Momentum for Cooper
CooperCompanies is one of the largest eyecare companies in the US. It operates in two segments: CooperVision and CooperSurgical.
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National Grid's Rights Issue Is Highly Dilutive, but Removes Uncertainties
National Grid owns and operates energy networks in the United States and the United Kingdom.
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Meridian to Focus on Decarbonizing New Zealand
Meridian Energy is a vertically integrated renewable energy company involved in the generation and retailing of electricity. Nearly 90% of its electricity is generated from low-cost hydro power plants, with wind making up the rest. While the significant hydro capacity is a source of competitive advantage and high returns for Meridian, it also increases the firm's risk during dry conditions when rainfall or snow melt is below average, resulting in substantially lower hydro production.
Company Report
MPACT's Portfolio of High-Quality Singapore Assets Underpins a Resilient Earnings Profile
Mapletree Pan Asia Commercial Trust was established following the merger between Mapletree Commercial Trust and Mapletree North Asia Commercial Trust in July 2022. The combined trust invests in a diversified portfolio of income-producing properties used for office and retail activities in Asia.
Company Report
Hang Lung Properties Is a Good Proxy for China's Demand for Luxury
Hang Lung Properties, or HLP, is a property developer that develops and holds a portfolio of investment properties for rental income in Mainland China and Hong Kong. Beginning in the late 1990s, the company pursued a strategy of pivoting from Hong Kong residential development to Chinese commercial properties. So thorough was the pivot that the company has not made any land acquisitions in Hong Kong for nearly 20 years, until late 2020.