by Amy | Dec 5, 2024 | Stock Insight, Technology
Recently we attended EML strategy day and met with management. EML outlined a clear and focused 2.0 strategy centered around three key pillars: nurturing and growing their existing core business, accelerating into new verticals, and expanding into new geographic markets. This strategy is underpinned by three strategic enablers: implementing a single global operating model, reviving their revenue engine, and building a new global technology platform.
(Source: EML)
On the core business, EML acknowledged they have a solid foundation with a presence in three of the world’s largest and fastest growing payments markets – Europe, North America, and Australia. They process over $23 billion in GDV and have $2.1 billion in stored value float, providing a strong revenue base. The focus here will be on extracting more value from their existing 1,100 customer relationships through cross-selling and deepening partnerships.
To accelerate into new verticals, EML sees opportunities in areas like insurance disbursements, mobility/fleet, and travel where they believe complex payment flows remain underserved. They have a track record of identifying gaps in the market and building unique solutions, like their salary packaging and perks businesses. The plan is to take a structured and resourced approach to selling across all products and markets.
For geographic expansion, EML will be opportunistic, partnering with existing schemes, banks or infrastructure providers to enter new markets, rather than investing ahead of revenue. This capital-light approach allows them to follow the opportunities rather than trying to create new demand.
Enabling this strategy are three key initiatives. First, implementing a global operating model with centralised shared services and best practices, under new global COO Brian Lewis. Second, rebuilding their sales and revenue engine, led by new CRO Shabab Muhaddes, after years of underinvestment. And third, transitioning from three legacy technology stacks to a single global platform, at a cost of $12-15 million, which will drive significant operational efficiencies. 
Financially, EML is targeting double-digit transaction revenue growth and a 35% EBITDA margin by FY2028. This equates to $95 million EBITDA, $60 million of free cashflow and 13 cents EPS. In the near-term, they have reaffirmed FY2025 EBITDA guidance of $54-60 million, with Q1 trading in line with expectations.
The company expects interest income to moderate over time as rates decline, but this will be offset by growth in the core business and operational efficiencies. They project a flat cost base over the medium-term, with $15-20 million in savings offsetting inflation and investment in sales/marketing.
Overall, EML is confident in their ability to execute on this plan, noting a renewed sense of urgency and focus within the organisation after a challenging period. The strategy is clear, the financial targets are ambitious but achievable, and the leadership team has the experience to deliver. If successful, it will transform EML from a good business to a great one, delivering sustainable double-digit growth and material margin expansion.
The TAMIM Takeaway
EML Payments is at a pivotal juncture. With a renewed sense of focus and urgency within the company, the 2.0 strategy has the potential to drive sustainable growth and material margin expansion. Momentum in new sales is beginning to emerge, supported by ambitious but achievable financial targets.
Moreover, with a $95 million EBITDA target in three years versus a current EV of approximately $350 million, EML presents itself as a compelling takeover candidate. A bid in the range of $500-600 million ($1.50 per share) seems highly plausible within the next six months, offering significant upside for shareholders.
For investors seeking exposure to ASX small caps with transformative potential, EML stands out as a stock to watch in 2025.
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Disclaimer: EML Payments (ASX: EML) is held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
by Amy | Nov 28, 2024 | Resources, Stock Insight, Technology
In what ended up being an emphatic victory for Republicans, Donald Trump has been re-elected President of the United States. Despite the inauguration not taking place until January 20, financial markets have moved swiftly to price in the new administration and its proposed pro-business policies.
Investors seem to like what they see, with the S&P 500 continuing to hit all-time highs post election day. Below we detail three companies held in the Global High Conviction Fund we think will be beneficiaries of Trump’s second term as President.
1. Taiwan Semiconductor Manufacturing Co ADR (NYSE.TSM)
Throughout the campaign, President Trump has cajoled blue-collar workers with the promise of making the United States a “manufacturing powerhouse”. He has flagged lowering the corporate tax rate to 15% to support a boost to investment. From his public comments, we also expect Trump to supercharge incentives (subsidies, tax credits) and cut red tape to reshore US manufacturing jobs.
As the world’s largest semiconductor manufacturer, Taiwan Semiconductor Manufacturing Co (TSMC) will be a direct beneficiary.
TSMC pioneered the “fabless” chip production model. Instead of deploying resources to chip manufacturing, companies such as Apple (NASDAQ.AAPL) and NVIDIA (NASDAQ.NVDA) outsource production and focus primarily on designing and marketing products. This means producers can focus primarily on what they do best (creating great products) and TSMC is left to refine the intricate process of chip manufacturing. Today, TSMC semiconductor market share exceeds 60%. More impressively, the company boasts a near monopoly on advanced chip production used for high-performance computing, defence applications and machine learning.
Because of TSMC’s strategic and geopolitical importance, Western nations have increasingly encouraged the company to build foundries domestically. The business received US$6.6 billion in funding and up to US$5 billion in loans from the CHIPS and Science Act to support the construction of three foundries in Arizona. The first foundry began wafer production in April, with “highly satisfactory” results with a “very good yield”.
TSMC has also announced plans for a foundry in Germany. We expect governments, including the Trump administration, to continue to subside TSMC’s growth ambitions to secure domestic chip supply and reshore manufacturing. The TSMC share price has increased 77% this year, shrugging off concerns of a broader slump in chip demand. We expect orders will recover over the medium term and underwrite the next leg of growth for the business.
2. Schlumberger NV (NYSE.SLB)
Schlumberger (NYSE.SLB) is a global technology company that provides equipment and services to the energy sector. At its core, the business focuses on oil and gas projects, from evaluating reservoir feasibility to new well construction and production systems for transporting hydrocarbons. Producers employ SLB because they are world leaders in optimising operations and performance, which translates into higher output and returns on investment.
Under President Trump, investors should expect a marked shift in energy policy. Beneath the jovial “Drill baby drill” catchphrase encompasses a raft of pro-fossil-fuel policies such as expediting new project approvals and increasing access to public lands and waters, in addition to reversing – for a second time – the nation’s commitment to the Paris 2050 Climate Accord. The President believes this will ultimately lower the cost of electricity for households, while also boosting the competitiveness of US industry and manufacturing.
It’s relatively straightforward to see how a pro-hydrocarbon administration will positively impact SLB. Equally exciting however is the company’s growing sustainability and digital divisions, which should increase in importance as oil and gas majors aim to curb emissions. For over three decades SLB has been modelling and commercialising carbon capture technologies for clients. More recently, the business has agreed to a partnership with the French Atomic Energy and Alternative Energies Commission for producing clean hydrogen. The investment, called Genvia, aims to build the most effective and cost-efficient electrolyser in “hard-to-abate industrial settings”.
3. HCA Healthcare Inc (NYSE.HCA)
HCA Healthcare (NYSE.HCA) is one of the largest healthcare providers in the United States. The company owns a portfolio of hospitals, surgery centres, emergency facilities and rehabilitation clinics in 20 states, with a small presence also in the UK.
In the trading session after it became clear Trump would return to the Whitehouse, shares of HCA fell 5%. Markets believed his election would be a net negative, with prior comments indicating healthcare funding cuts, specifically to Medicaid. However we think the market has this wrong, and still remain bullish on the company during a Trump presidency.
Firstly, Medicaid represents only 11% of HCA’s total revenue base. Secondly, Trump has indicated funding for Medicare, which focuses on older Americans, would be boosted via funding increases for insurers. Medicare represents nearly a third of HCA’s revenue, and with all else being equal, would more than offset any changes to Medicaid.
Independent of policy changes, healthcare broadly is a sector we are attracted to due to its defensive characteristics. Few patients forego care, while inflation is largely passed onto end payers (governments and/or health insurers). Moreover, HCA is somewhat shielded from competition given the sizable cost and land requirements of new hospitals, particularly in urban areas.
The TAMIM Takeaway
The re-election of Donald Trump signals a continuation of pro-business and pro-energy policies that could shape global markets. Companies like Taiwan Semiconductor Manufacturing Co., Schlumberger, and HCA Healthcare are well-positioned to benefit from these policies.
TSMC’s strategic role in semiconductor manufacturing, backed by government subsidies and geopolitical necessity, underscores its importance in reshoring manufacturing capabilities. Schlumberger stands to gain from a resurgence in fossil fuel exploration while leveraging its expertise in carbon capture and clean hydrogen technology. HCA Healthcare, despite initial market skepticism, remains an attractive investment given its exposure to Medicare and the demographic shift of an aging U.S. population, projected to grow by 47% to 82 million by 2050.
For investors seeking opportunities in a changing political and economic environment, these global shares illustrate the potential for growth amid structural shifts and supportive policies.
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Disclaimer: Taiwan Semiconductor Manufacturing Co ADR (NYSE.TSM), Schlumberger NV (NYSE.SLB) and HCA Healthcare Inc (NYSE.HCA) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
by Amy | Nov 28, 2024 | Market Insight
Investing as a “sophisticated investor” opens the door to unique opportunities and benefits, but it also comes with responsibilities and risks that are not often understood. At TAMIM Asset Management, we believe that informed decisions form the cornerstone of successful investing. Whether you’re new to the concept or familiar but looking to deepen your understanding, this article explores what it means to be a sophisticated investor under Section 708 of the Corporations Act 2001, the risks and benefits involved, and why it matters for your financial journey.
What Does It Mean to Be a Sophisticated Investor?
The term “sophisticated investor” is defined in Australian law to describe individuals who are deemed financially capable of making investment decisions without the same level of regulatory oversight provided to retail investors.
As outlined by the Australian Securities and Investments Commission (ASIC), sophisticated investors are exempt from receiving regulated disclosure documents like a Product Disclosure Statement (PDS) when purchasing certain financial products. This exemption allows issuers to streamline the investment process, particularly for high-value transactions.
To qualify as a sophisticated investor, one of the following criteria must be met:
- Financial Certification: Present a certificate from a qualified accountant stating that you have net assets of at least $2.5 million or an annual income of $250,000 or more for the last two years.
- Large Investment Threshold: Invest a minimum of $500,000 in a single offer, which automatically classifies you as sophisticated for that transaction.
This classification is often seen as a gateway to exclusive investment opportunities, but the implications are significant.
Benefits of Being a Sophisticated Investor
1. Access to Exclusive Opportunities
Sophisticated investors gain access to wholesale investment products and opportunities unavailable to retail investors. These include private equity, early-stage ventures, and wholesale managed funds. Often, these products are designed to offer higher potential returns, albeit with higher risk profiles.
2. Tailored Investments
With fewer regulatory constraints, sophisticated investors can access customised investment solutions that may not comply with the rigid structure of retail products. This flexibility can be a significant advantage for those seeking to align their investments with specific financial goals or risk tolerances.
3. Reduced Bureaucracy
Wholesale investments often bypass the lengthy processes associated with retail investments, such as detailed disclosure documents and compliance checks. For those comfortable with conducting their own due diligence, this efficiency can make the investment process quicker and less cumbersome.
4. Networking and Insight
Many brokers and advisers build close relationships with their sophisticated clients, providing them with market insights and early access to investment deals. This level of engagement can be a valuable asset in an increasingly competitive investment landscape.
Risks of Being a Sophisticated Investor
While the benefits are enticing, the risks of operating as a sophisticated investor cannot be overlooked.
1. Reduced Protections
One of the most significant risks is the loss of protections provided to retail investors. Without a regulated PDS, investors may not have a complete understanding of the product they are purchasing. If an investment underperforms or fails, recourse is limited compared to the protections available under retail investment regulations.
For example, in wholesale investments, there are no mandated requirements for issuers to disclose all material risks or provide detailed documentation. This shifts the burden of due diligence entirely onto the investor.
2. Higher Risk Investments
The opportunities available to sophisticated investors often come with higher levels of risk. Early-stage ventures or private equity deals, while potentially lucrative, are inherently volatile. Without the safety net of detailed risk disclosures, sophisticated investors must be prepared to face the consequences of potential losses.
3. Complexity and Expertise
Sophisticated investments frequently involve complex financial instruments or structures that may not be immediately comprehensible. Investors need a deep understanding of market dynamics, legal structures, and risk management to navigate these products effectively. A lack of financial literacy, despite meeting the wealth or income thresholds, can lead to poor decision-making.
4. Caveat Emptor: Buyer Beware
As a sophisticated investor, you operate under the principle of caveat emptor, or “buyer beware.” This means that the onus is on you to fully understand the terms and conditions of any investment. Brokers and advisers have limited accountability, as the law assumes you possess the knowledge and expertise to evaluate these opportunities independently.
5. Over-Qualification Misconception
Meeting the financial thresholds does not necessarily equate to financial sophistication. The current legislation assumes that wealth or income is a proxy for investment acumen, which is not always true. This disconnect can leave some investors vulnerable to making uninformed decisions.
Striking the Balance: Is It Worth It?
Whether investing as a sophisticated investor is worthwhile depends on your financial goals, risk tolerance, and level of expertise. The classification is not an automatic endorsement of your capabilities but rather an acknowledgment of your financial standing. To maximise the benefits and minimise the risks, consider the following:
1. Know What You’re Signing Up For
Before entering a wholesale investment, take the time to read all available documentation and ask detailed questions. If something is unclear, seek professional advice.
2. Leverage Expertise
Even sophisticated investors can benefit from external expertise. Engaging a financial adviser or investment manager with experience in wholesale investments can help mitigate risks and identify opportunities aligned with your objectives.
3. Diversify Your Portfolio
Given the higher risks associated with wholesale products, diversification becomes even more critical. Spreading investments across various asset classes and geographies can help balance risk and reward.
4. Align with Your Goals
Ensure that any investment you undertake as a sophisticated investor aligns with your broader financial strategy. While exclusive opportunities are enticing, they should not come at the expense of your long-term objectives.
5. Stay Informed
Legislation and market conditions evolve. Keep up to date with changes to the sophisticated investor criteria and broader market trends to ensure you remain well-positioned.
Legislative Reform: What’s on the Horizon?
Recognising the shortcomings of the current system, legislative reforms have been proposed to redefine the criteria for sophisticated investors. These include incorporating financial literacy assessments into the qualification process. While these changes have not yet been implemented, they highlight a growing recognition that wealth alone does not equate to financial sophistication.
TAMIM Takeaway
At TAMIM Asset Management, we believe in empowering investors to make informed decisions that align with their financial goals. The classification of sophisticated investors offers both opportunities and challenges. It opens the door to exclusive investment options but also demands a higher level of vigilance and expertise.
For those considering wholesale investments, our advice is simple:
- Educate Yourself: Understanding the nuances of sophisticated investor classification is key to navigating this space effectively.
- Evaluate Risks and Benefits: Always weigh the potential returns against the risks involved.
- Seek Professional Guidance: Partnering with a trusted investment manager can help you capitalise on opportunities while mitigating risks.
At TAMIM, we specialise in delivering tailored investment solutions for sophisticated investors. Whether you’re exploring wholesale funds or looking to diversify your portfolio, we’re here to guide you every step of the way. Let’s work together to turn sophistication into strategy and opportunities into outcomes.
For more information on how TAMIM can help you navigate the sophisticated investor landscape, contact us today.
by Amy | Nov 28, 2024 | Weekly list
This week’s TAMIM Reading List ventures into the paradoxes of modern innovation, power, and hidden truths. Witness Nvidia’s meteoric rise as it crowns the AI kingdom, juxtaposed with the quiet mobilisation of America’s microchip industry. Ponder how passive investing reshapes markets with both chaos and calm. Dive beneath the ocean’s surface to uncover the ethereal journey of your data, while engineers race against time to perfect the tire that could define the EV revolution. As Fortune charts the 100 titans of business, we find ourselves asking: who truly steers the ship in an era of turbulence? Each article whispers a piece of the grand puzzle.
📚 100 Most Powerful People in Business
📚 How Jensen Huang Built Nvidia Into the $3 Trillion King of AI:
📚 The Great American Microchip Mobilization
📚 Assessing the Impact of Passive Investing over Time: Higher Volatility, Reduced Liquidity, and Increased Concentration
📚 The Race to Create the Perfect EV: Tire
📚 Your Data’s Strange Undersea Voyage
by Amy | Nov 21, 2024 | Weekly list
This week’s TAMIM Reading List takes you on a journey through finance, culture, and innovation. Delve into the ongoing reckoning with inflation and explore the rise and fall of Google’s prediction markets. Celebrate the simple joys of the world’s greatest pen and uncover the surprising tricks of Big Toilet Paper. Learn how the CIA recruits Russian spies and follow Paul Mescal’s path to Gladiator II. Be inspired by the cyclists who revolutionised Afghanistan and question if U.S. stocks are overvalued. Finally, explore the rapid adoption of generative AI and what makes a “once-in-a-generation” investment opportunity. Each article brings fresh insights into the challenges and opportunities shaping our world.
📚 The reckoning with inflation
📚 The Death and Life of Prediction Markets at Google
📚 A Love Letter to the Greatest Pen of All Time
📚 How Big Toilet Paper dupes us all
📚 How Does the CIA Recruit Russian Spies?
📚 Paul Mescal’s Road to ‘Gladiator II’
📚 The Alchemists: They led a cycling revolution in Afghanistan
📚 Are U.S. Stocks Overvalued? When stocks go up presidents get too much credit and when they go down they get too much blame.
📚 Many retailers offer ‘returnless refunds.’
📚 What Does a Once-in-a-Generation Investment Opportunity Look Like?
📚 The Rapid Adoption of Generative AI
