Dear Followers&Copiers, Another Financial Year (FY) has passed, the reporting season is over and it’s time to update the equity portfolio of the Global Leaders Portfolio (GLP) in terms of the SIAScore we use. Let’s quickly remind what SIAScore is and how the process :
S1: growing sector 1pts/0pts,
S2: incumbent or prospective global leader 1pts/0pts,
S3: growing or stable wide margins (40%+ gross; 3yr avg) 2pts/0pts,
S4: Net Debt/EBITDA <1.5 (last 3 ended FYs) 2pts/0pts,
S5: above-average cash flows (FCF/MktCap (last 3 ended FYs) > S&P500 Dividend Yield or US 10yr Treasry Yield (higher of the values)) 2pts/0pts;
MAX TOTAL SCORE: 8pts/MIN TOTAL SCORE: 0pts/MIN SCORE TO QUALIFY: 4pts.
In this post I run a SIAScore update for $UBI.PA , which “is a France-based company active in the video game industry by developing, publishing and distributing video games for consoles, PCs (personal computers), smartphones and tablets in both physical and digital formats. It owns several brands and a diversified portfolio of franchises, including Assassin’s Creed, The Crew, Far Cry, For Honor, Tom Clancy’s Ghost Recon, Tom Clancy’s Rainbow Six Siege, Tom Clancy’s The Division and Watch Dogs. The Company, through its subsidiaries is active globally.” (CNBC)
S1-S2: these qualitative points are clear. $UBI.PA both operates in a growing sector (S1) and is among global leaders (S2) in the gaming industry. In both cases the company gets 1 point.
S3: 2 points
2018——2019——-2020——-AVG——-last yr AVG
82,9%…..82,2%………84,1%……..83,07%…….82,17r%
$UBI.PA has a very wide Gross Profit Margin of 80% and manages to improve its 3yr avg in that respect, which is a welcome phenomenon. Such a high GPM allows for sound EPS and FCF (stock does not pay dividends) in the long-term.
S4: 2 points
2018——2019——-2020——-AVG——-last yr AVG
0,37……… 0,52………. 0,52………. 0,47…………0,52
The debt level of $UBI.PA has been growing over the recent years, balanced by a simultaneous increase of cash levels. Hence the average NetDebt/EBITDA has only marginally deteriorated on a YoY basis. Currently the game producer is still comfortably withing the 1,5 S4 limit, but the net debt position is positive and needs to be watched going forward.
S5: 2 points
2018——2019——-2020——-AVG——-last yr AVG
8,40%…..10,30%…….6,30%……..8,33%……….10,6%
The FCF yield is easily above the minimum treshold level, which is currently at higher of the two: the $SPX500 dividend yield (1,53%) and the 10Y treasury note yield (1,6%). $UBI.PA keeps producing long-term shareholder value. Although a substantial deterioration in 2020 must be noted, due to the failure of some of the company’s main releases.
Aggregate SIAScore for $UBI.PA : 8 points (stable YoY).
Conclusion: The company still easily fulfills all the necessary assumptions of SIAScore. Deterioration must be noted in 2020 though: lower FCF, Net Loss and increase in debt level. Given the company’s recent 25% drop reflecting the deterioration in fundamentals, the stock looks an OK value to buy in dips for the long-term.
Best regards, GlobalAlphaS
Disclaimers: None of the ideas, views and thoughts presented here shall ever be taken as a recommendation to buy or sell stocks,bonds,FX,commodities or any other financial instruments as stated in REGULATION (EU) No 596/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC or the Polish Act of 10 February 2017 amending the act on trading in financial instruments and some other acts. The article is for educational reasons and purely presents private views of the author, thus the author shall not be held accountable for any losses of a third party resulting from any potential trading activities in any instruments, both specifically or by category of assets. The author uses his best knowledge and data from sources believed to be reliable, but makes no representations as to the accuracy of the data.Full Disclaimers&Liability Limitations page.
