Dividend yields are sky high and multiples are low. It is also indicating that markets participants are not expecting the same level of dividends or earnings that were before over the past, rightly so – given that cashflows are under severe pressure at the backdrop of COVID-19.
The Great Virus Crisis (GVC) has made us see things, which most of us had not seen in our lives. Even the elderlies do not have any sort of experience with the health crisis of this scale. It is indeed – unprecedented – the most used word these days!
However, a fundamental value investor is not concerned with overall markets and cycles rather he is usually more inclined towards the impact of such scenarios on his portfolio companies.
Investing with a long-term vision enables an investor to look beyond the short-term nuisances. During a crisis, it is apt to have a long-term view that will allow an investor to consider the long-term potential of the business.
3 companies with a resilient business model:
FINEOS Corporation Holdings PLC (ASX:FCL)
Headquartered in Ireland, FINEOS provides insurers with customer-centric software for operational effectiveness. It is primarily engaged in life, health and accident insurance industry.
Recently, the Company presented at Macquarie Australia Conference. Its clients include 7 out of top 10 global life and health insurers in the US. In Australia, 6 out of top 10 life and health insurers are its clients.
It is leading the digitisation drive in the life, health and accident insurance industry. FINEOS has three platforms for insurance businesses. These three platforms include AdminSuite, Engage and Insight. FINEOS has collaborated with Cigna Group Insurance. The partnership is developing and implementing components of FINEOS AdminSuite.
The company intends to leverage cross-sell and up-sell opportunities within its client base. It would continue to improve recurring SaaS revenue and migrate its clients to the cloud platform.
Over the near term, FCL would continue to invest in sales and marketing to improve clients base across geographies. It is also committed to innovation and expansion of its FINEOS platform.
On outlook, it was said that business is tracking to meet FY20 revenue guidance of €84 - €86 million and IPO prospectus forecasts. FCL continues to invest heavily for competitive advantages and reach.
On 18 May 2020, FCL was trading at $3.10, down by 3.125 % (at AEST 3:46 PM). Over the past month, FCL has delivered a return of -0.93%.
BWX Limited (ASX:BWX)
BWX has a portfolio of natural skincare and cosmetic brands. It is a global business having a brand presence in the UK, US, Canada and Australia. The Company’s brands include Mineral Fusion, Nourished Life, Sukin, USPA and Andalou Naturals.
In March, the Company announced that it is managing business continuity and supporting retail clients. BWX was increasing working capital facilities and emphasising on costs.
The Company was also hand sanitiser producer during the month. Its Australian manufacturing units were prioritising certain products and split shift was introduced to ensure social distancing measures.
In the US, the Company had asked its manufacturing partner to implement similar protocols. BWX was engaging with its retailers and pharmacies to supply additional inventories.
In the half-year ended 31 December 2020, the Company recorded revenue growth of 23% to $84.1 million compared to revenue of $68.1 million in the previous corresponding period. Its reported profit improved 63% to $4.2 million against $2.6 million in 1H19.
During the previous year, the Company had appointed new CEO and senior level executive positions. In the US, BWX onboarded talent in sales, inventory management and warehousing. And in Australia, the Company hired in sales, marketing and governance and innovation.
In its strategic priorities, BWX will continue to connect with consumers, innovate new products, focus on shelf strategy, invest in e-commerce channels. It is tracking to have $50 million market share supermarket skincare in Australia.
The company intends to pursue organic growth, retail partnership across jurisdictions. In FY20, it was targeting for a 20-25% revenue growth and 25-35% EBITDA growth.
On 18 May 2020, BWX was trading at $3.55, up by 0.282% (at AEST 3:44 PM). Over the past month, SDF has delivered a return of 4.12%.
Steadfast Group Limited (ASX:SDF)
Steadfast is an insurance broking business primarily engaged in General Insurance.
In late April, the Company presented at Goldman Sachs Emerging Leaders Conference. During the March quarter, the business was not materially impacted by COVID-19.
In the YTD period to March 2020, the Company recorded an underlying revenue of $597.9 million, reflecting growth of 25.8% over the pcp. Its underlying EBITA was $147.9 million, up by 21% over the pcp. For the March quarter, increases in premium were 7.3% and results include -$2.9 million due to cancellation of convention.
Its business has diversified earnings base with the highest exposure to Strata and Machinery & Plant, which are not impacted by COVID-19 materially. It was noted that SDF has a resilient business as:
- Insurance is an essential service.
- Client queries have increased to optimise coverage.
- Micro and Small business will benefit from stimulus measures.
- Exposure to micro business in 2% of its broker network GWP.
It is also believed that balance sheet remains strong. In January, SDF increased its corporate debt facilities to $460 million from $385 million with a significant headroom on covenants.
As of 27 April, the Company had $161 million available with the corporate debt facility. It has witnessed no impact on working capital due to insurers offer of premium deferrals. SDF would provide further updates on financial performance and impact of COVID-19 as situations evolve.
On 18 May 2020, SDF was trading at $2.965, up by 1.195% (at AEST 3:43 AM). Over the past month, SDF has delivered a return of 10.15%.
(Note: All currencies in AUD, unless or otherwise stated)