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Morningstar runs the numbers

Lex Hall  |  06 Oct 2020Text size  Decrease  Increase  |  
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We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 2 October.

$12 billion

Australians have spent an additional $12 billion in the 12 months to July 2020 compared to the previous corresponding period. While much has been made of the strength of the online shopping business models during this period, this retail activity is not all online either, writes Quay Global Investors portfolio manager. “During the recent Scentre group earnings call, it was noted that portfolio in-store retail sales during July were actually above those of July 2019, including Victoria (which went into lockdown on 9 July). We can observe similar data trends in retail sales in the US. While it is not quite as strong as Australia, total retail sales are nevertheless higher on a rolling 12-month basis”.

34 per cent

That’s the estimated five-year revenue compound annual growth rate for newly listed data analytics company Palantir. Morningstar equity analyst Mark Cash views Palantir as a land-and-expand story. “After converting trial customers to its software platform, its software subscriptions proliferate in organisations and the incremental revenue outpaces associated investments required,” Cash says. “With improvements in up-front installation costs and the cadence of subsequent software updates, we expect substantial operating margin improvement to the mid- to high 20s on an adjusted basis by 2025, up from negative 45 per cent in 2019.”

3 terawatts

Tesla founder Elon Musk aims to have 3 terawatt hour (TWh) (3,000 gigawatt hour, or GWh) of battery capacity by 2030, writes Morningstar’s Anthony Fensom. This compares to the current lithium-ion battery market, estimated by Benchmark Mineral Intelligence at just 210 to 220 GWh. (BMI had estimated the market would reach 2.7 TWh in 2030 for the world’s 167 battery factories). Seth Goldstein, who heads Morningstar’s electric vehicle committee, says Tesla’s production target equated to about nine times 2019 lithium demand, requiring increased supply regardless if Tesla proved successful with its mining plans. As a result, Goldstein says Morningstar “continue[s] to forecast lithium prices will begin to rise in late 2021.

$700 million

NBN’s $700m planned investment to improve fibre accessibility and affordability for businesses will loosen TLS’ stranglehold on the enterprise market, mainly in regional areas, writes Morningstsar equity analyst Brian Han. “While the estimated $150m in EBITDA hit is just 2 per cent of group earnings, it again underscores the importance of TLS’ current $2.5bn cost-out program,” Han writes. “That estimated $160m earnings hit on TLS stems from the NBN’s plans to extend its non-metropolitan business fibre network, while cutting ethernet enterprise prices for companies in these areas to a level comparable to those in metropolitan cities.”

$35 billion

Alibaba-spinoff Ant Financial is set to become the biggest flotation of all time when it launches in this year, writes Morningstar’s James Gard, potentially raising $35 billion. Investors are still awaiting Airbnb’s move to go public before the end of 2020. Despite the global pandemic and stock market volatility earlier in the year, investor appetite for new issues seems as keen as ever: cloud software company Snowflake launched at $120 on 16 September but doubled in the first few days as a public company. Despite a lack of enthusiasm for UK equities broadly, a number of high-profile companies such as The Hut Group have just floated, while others such as supercar maker McLaren and IPA maker BrewDog are still mulling the IPO option.

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is senior editor for Morningstar Australia

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