Not all the companies listed on the Australian Securities Exchange (ASX) are in fact Australian: about 150 stocks are foreigners, that are also listed in Australia. Here are three of the best in terms of a global investment proposition.
1. Life360 (360, $7.11)
Market capitalisation: $1.1 billion
12-months total return: 27%
Three-year total return: 25.6% a year
Estimated FY24 (year to December) yield: no dividend expected.
Estimated FY25 (year to December) price/earnings ratio: 52.8 times earnings.
Analysts’ consensus price target: $10.52 (Stock Doctor/Refinitiv, seven analysts)
I have written favourably on the San Francisco-based Life360 before it was one of my “five stocks for 2021” in January 2021, at $3.77, and ‘Three Stocks Putting the S in ESG’ in August 2022, at $4.51. It runs a very impressive business, with the caveat that Life360 has not yet achieved net profit.
The company’s business is built around the mobile app it developed of the same name: Life360 is a market-leading app that provides a safety and coordination service for families, with features that range from location and communication, driving safety (including real-time speed monitoring), car crash alerts and roadside assistance, SOS alerts, identity protection, and disaster, medical and travel assistance.
The app is billed as a platform for families, bringing them closer together by helping them better know, communicate with, and protect the people they care about. As at September 2023, the app has 58 million monthly active users (MAU), located in 195 countries, with more than 35 million users in the US. 41% of the app’s users use it daily.
The company says the mission of its app is to “simplify family safety,” both physical and online. One of its major attractions is that it allows parents to track teenage drivers – not just their location, but lets the parents know their child’s driving behaviour, such as speed, phone distraction, hard braking, and acceleration. And if your teenage driver gets into an accident, the app will send you an automatic message and SOS alert for emergency assistance. The company offers its basic product on a “freemium” model: Life360 is free, but if users want to enjoy benefits such as stolen phone coverage, silent SOS help alert, live agent support, and 24/7 roadside assistance, they need to pay for a premium package. It makes most of its money through subscription-based services.
Over the last few years, Life360 has made some transformative acquisitions. In April 2021, Life 360 bought Jiobit, a Chicago-based provider of wearable location devices for young children, pets, and older people, in a US$37 million ($52.9 million) transaction expanding its smartphone base into the wearable device sphere. Then, in November 2021, it bought the California-based Tile, a pioneer in finding technology, in a US$205 million ($293 million) deal, bringing on-board Tile’s Bluetooth-enabled device trackers, which can equip nearly any item — such as wallets, keys or remotes — with location-based finding technology, that alerts the user through a mobile app. In this business, Tile competes with Apple’s AirTags.
In May, Life360 surprised the market, achieving adjusted profitability (that is, adjusted earnings before interest, tax, depreciation and amortisation, or EBITDA), in the first quarter of 2023, faster than expected. The company announced a 34 per cent increase in first-quarter revenue, compared to the first quarter of 2022, to $68.1 million, with its core subscription revenue up 66 per cent on the same time last year. The “adjusted EBITDA” profit of $500,000 for the first quarter of 2023 came one quarter ahead of market expectations.
As at the June 2023 half-year, the app had 54 million global monthly active users (MAU), located in 195 countries (62 per cent of them in the US. In the half-year, Life360 says it sent 921,138 ‘Help’ alerts; 18,645 ambulances were dispatched; 144 billion miles were driven with Life360 Crash Detection; 16 billion ‘safe arrival’ notifications were sent; and there were 19.7 million “item left behind” smart alerts sent through Tile.
Life360 has issued guidance for its 2023 result that expects core subscription revenue growth of more than 50%; revenue in the range of US$300 million—US$310 million; adjusted (underlying) earnings before interest, tax, depreciation, and amortisation (EBITDA) of US$9 million—US$14 million; and operating cash flow of US$5 million—US$10 million. A revenue expectation above US$300 million in 2023 would represent growth of about 31% on 2022’s revenue – a figure that had more than doubled from 2021.
Analysts have pencilled in the current financial year (to December 2024) as the period in which Life360 breaks through to profitability. In the meantime, the company’s numbers are heading in the right direction: there is always the risk that Apple and Google put more competitive products into the marketplace, but Life360 has built a very strong position in the family safety market, especially in the US.
2. Coronado Global Resources (CRN, $1.675)
Market capitalisation: $2.8 billion
12-months total return: –20.1%
Three-year total return: 20.6% a year
Estimated FY24 (year to December) yield: 7.8%, fully franked (grossed-up, 11.1%)
Estimated FY25 (year to December) price/earnings ratio: 5.1 times earnings.
Analysts’ consensus price target: $2.13 (Stock Doctor/Refinitiv, 10 analysts)
US-based coal producer Coronado Global Resources mines and exports high-quality metallurgical (steelmaking) coals. Coronado has three operating mines and a portfolio of high-quality, long-life (about 15 to 25 years) metallurgical (steelmaking) coal assets and development projects in Australia and the USA in the Central Appalachian region in Virginia and West Virginia.) The company has steel-mill customers on five continents. 53% of its sales go into Asia, 28% into the Americas, 15% to Europe, and 4% in Australia. The company’s major product from Australia is hard coking coal (HCC), while in the US it is low-volatility steelmaking coal.
With its 2023 results not yet released (Coronado also uses the calendar year as its financial year), Coronado had guidance in the market for production of up to 16.4 million tonnes. Just over 95% of production is metallurgical (steelmaking) coal, with thermal (electricity) coal less than 5%.
The company’s Australian base is the Curragh Mine Complex, an open-pit coal mine it owns and operates in the Bowen Basin of Central Queensland, Australia. The Curragh complex because it consists of two distinct, active pits — Curragh North and Curragh Main – as well as Curragh Central and Curragh South areas, which may be mined in the future. Approximately two-thirds of Curragh’s output is metallurgical coal, with one-third thermal coal.
The company’s expansion program is underpinned by its Curragh North project, at the Curragh mine, which will be an underground operation, with metallurgical coal quality expected to mirror the existing Curragh North open-cut product. First coal is targeted for late 2024, and the Curragh North project underpins the Curragh strategy to boost production from 9.8 million tonnes in 2022 to 13.5 million tonnes a year by 2025.
The company is also expanding in the US, where its Buchanan mine in Virginia is being upgraded to produce 7 million tonnes a year by 2025, and the new Winifrede mine at the Logan complex entered production in the third quarter of 2022.
Whatever the argument for or against electricity coal, metallurgical coal has a strong future, with steel critical to virtually of the newer proposed renewable energy sources, and to electric vehicles (EVs) – on top of steel’s use in virtually every aspect of the world’s infrastructure, including buildings, bridges, rail systems and houses. According to Coronado, the average EV contains 900 kilograms of steel, requiring 700 kilograms of metallurgical coal to make.
Although steelmaking processes such as the electric arc furnace, which do not require metallurgical coal are on the rise, in 2023 the dominant blast furnace method, for which steelmaking coal is essential, represented 71% of the market globally, and 79% in Asia. Coronado cites data from resources brokerage Wood Mackenzie that forecasts that in 2050, the blast furnace will still account for 53% of global steel manufacture, and 62% in Asia. The upshot is that the world’s annual global crude steel production is forecast to grow by 13%, to 2.2 billion metric tonnes by 2050 – underpinning an ongoing and increasing need for high-quality metallurgical coal.
In India, one of Coronado’s biggest export customers, the company says steel production is expected to almost quadruple by 2050, to 535 million tonnes. By that point, Australia is projected to be supplying 52% of the export metallurgical coal market, at 321 million tonnes.
CRN is going to be underpinned by strong metallurgical coal fundamentals well into the medium term. It appears very cheap on a price/earnings (PE) basis, and analysts are bullish on the price target. It is showing a prospective dividend yield that looks too rich – investors should not bank on those numbers being achieved – but it has been a very robust dividend payer in the past.
3. Fineos Corporation plc (FCL, $2.06)
Market capitalisation: $1.1 billion
12-months total return: 10.2%
Three-year total return: –18.3% a year
Estimated FY25 yield: no dividend expected.
Estimated FY25 price/earnings ratio: no profit expected.
Analysts’ consensus price target: $2.59 (Stock Doctor/Refinitiv, five analysts)
Irish-based software development company Fineos specialises in software solutions for the insurance industry. The company provides enterprise software for life, accident, and health (LA&H) insurers, and government social insurance. It has a cloud-based platform across three main product categories:
• FINEOS AdminSuite for core process administration (including the flagship product, FINEOS Claims, which provides clients with an end-to-end software solution that manages insurance claims, from initial uptake through to closure). AdminSuite also has modules in Payments, Provider, Absence, Policy, and Billing.
• FINEOS Engage for digital engagement capabilities; and
• FINEOS Insight for data analytics, intelligence, and insights.
The FINEOS platform is the only purpose-built, end-to-end software-as-a-service (SaaS) insurance solution for the LA&H market. The company has 60 major insurers around the world as customers, including seven of the top ten US insurers and six of the top ten Australian insurers. About 78% of its revenue comes from North America, which is home to more than 30% of the LA&H market. 17% of revenue comes from Asia-Pacific, with the rest from EMEA (Europe-Middle East-Africa).
The beauty of FINEOS’ business (and its investment proposition) is that its insurer customers rely on its software to manage the insurance claims process; FINEOS enables full “quote-to-claim” administration. The increased regulatory pressure in the industry – for example, on privacy of customer data, and the audit trail of transactions – is a big business driver for FINEOS; as is the demand for a better customer experience. The legacy systems that most insurers use can’t cope easily with these pressures; but using FINEOS’ software, which can both automate most processes and improve customer service, can bring significant cost savings to insurers. Bringing its user-friendly technology to market to replace insurance firms’ outdated legacy systems is the company’s growth opportunity.
FINEOS is not yet profitable but is targeting a free-cash-flow-positive position in FY24. The company’s subscription revenue is now the largest source of revenue, having overtaken services revenue; the company’s strategy is to prioritise subscription revenue growth. Fineos says its larger clients are scaling-up their use of the platform; more ‘legacy’ platforms are being made redundant because of the growing usage of the FINEOS product.
FINEOS does not have guidance in the market, but as it continues to convince customers to use its software, scale-up their usage of it and move its clients away from legacy core systems, it expects to achieve positive cash flow in the second half of FY24 (year to June) and in FY25. Analysts do not see the company achieving net profit before FY26, but the consensus feeling is that it is making good progress; FINEOS has plenty of room for long-term growth in the multi-billion-dollar global ‘insurtech’ (insurance technology) industry.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
