Offshore Portfolio Clients

Walmart – The Best Offense starts in Defense

Last week, Walmart released their Q1 2025 results. The group’s revenue reached $161.5 billion for the quarter, growing 6% year-on-year. Operating income rose by 9.6% to $6.8 billion. Walmart’s gross margin increased from 23.7% a year ago to 24.1% this quarter. This improvement was due to fewer inventory markdowns compared to last year. Additionally, Walmart’s advertising business, which typically has a higher gross margin than general retail, has been growing faster than other parts of the business, contributing to the overall margin increase. With this in mind, Walmart’s management team stressed that they are trying to keep their product gross margin as low as possible so as to incentivise more customers to shop with them. Walmart indicated that they have seen a meaningful increase in higher-income earners shopping at their stores. Walmart’s e-commerce business grew by 22% on a quarter-to-quarter basis, showing good returns on their technology spend.

Walmart and other large retailers generally perform well in inflationary environments. They can buy in bulk, which helps lower their prices. Additionally, when they place orders in advance, they secure prices at that time. Once the goods are delivered and ready to be sold, the new, higher inflationary prices are evident in the economy. This allows them to sell at those higher prices or slightly less, giving the impression of saving customers money compared to smaller and/or less efficient businesses that order closer to the time of sale.

Walmart faces intense competition worldwide. They not only compete against local retailers but also against giants like Amazon, which has a highly profitable cloud business. From its inception, Walmart has focused on serving underrepresented locations, offering customers an all-in-one store with “everyday low prices.”

Walmart is held in the Lunar BCI Worldwide Flexible Fund and by Lunar Capital’s Offshore Portfolio Clients.

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

188.33

Last Week

201.89

This Week

204.58

% Change YTD

8.63%

Index / Fund / Rate

JSE ALSI

Start of Year

76 893

Last Week

78 464

This Week

79 531

% Change YTD

3.43%

Index / Fund / Rate

NASDAQ Composite

Start of Year

15 011

Last Week

16 341

This Week

16 686

% Change YTD

11.16%

Index / Fund / Rate

S&P 500

Start of Year

4 770

Last Week

5 223

This Week

5 303

% Change YTD

11.18%

Index / Fund / Rate

Prime Lending Rate

Start of Year

11.75%

Last Week

11.75%

This Week

11.75%

% Change YTD

0.00%

Index / Fund / Rate

USD/ZAR

Start of Year

18.30

Last Week

18.46

This Week

18.17

% Change YTD

-0.71%

Index / Fund / Rate

EUR/ZAR

Start of Year

20.17

Last Week

19.91

This Week

19.78

% Change YTD

-1.93%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

76.97

Last Week

82.75

This Week

83.93

% Change YTD

9.04%

Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

Walmart – The Best Offense starts in Defense Read More »

Snowflake – Trying to be a Snowball

Weekly Stocktake / By VCS Agency

Beneath every artificial intelligence application lies a vast sea of data. Snowflake allows companies to store their structured, semi-structured, and unstructured data in one location, and access it from anywhere around the world. Moreover, companies can seamlessly tap into third-party datasets through Snowflake’s Market Place. Currently, Snowflake is expanding its suite by integrating Generative AI tools into their products, enabling users to interact in natural language with Snowflake applications. Sridhar Ramaswamy has replaced Frank Slootman as CEO, as Snowflake tries to further develop its AI strategy. Ramaswamy held the position of Senior Vice President of AI at Snowflake.

For Q4 2024, Snowflake’s net revenue increased 33%, reaching $775 million. Simultaneously, Snowflake’s operating loss increased by 5.7%, now standing at ($276mn). A positive shift is evident in Snowflake’s gross margin, which increased from 73% a year ago to 74% this quarter. Additionally, the operating loss margin improved, decreasing from -44% a year ago to -36% this quarter.

Breaking down the expenses, Sales & Marketing, and Research & Development each constituted 47% of the revenue. Notably, a significant portion of this allocation was attributed to stock-based compensation. This practice is prevalent among smaller companies like Snowflake that have limited financial resources and use stock options to top up cash payments for staff. The aim is to incentivise employees to stay at their company for longer by offering them a higher amount of equity. In contrast, larger entities such as Microsoft, Amazon, and Meta, can rely more on cash-based compensation to secure top-tier talent.

Snowflake faces stiff competition from other well-resourced AI businesses, including Microsoft and Amazon. This compels them to make significant investments in sales and marketing for customer acquisition and engagement. Snowflake operates on a pay-per-use model, which has its own set of challenges. Companies tend to utilise less of their Snowflake credits during times of perceived uncertainty. Snowflake’s focus is to get more businesses to join their data cloud, while making their products easier for individuals to use.

Snowflake, Microsoft, and Amazon are held in the Lunar BCI Worldwide Flexible Fund. They are also held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

188.33

Last Week

207.05

This Week

205.68

% Change YTD

9.21%

Index / Fund / Rate

JSE ALSI

Start of Year

76 893

Last Week

74 213

This Week

72 775

% Change YTD

-5.36%

Index / Fund / Rate

NASDAQ Composite

Start of Year

15 011

Last Week

15 997

This Week

16 274

% Change YTD

8.41%

Index / Fund / Rate

S&P 500

Start of Year

4 770

Last Week

5 089

This Week

5 137

% Change YTD

7.70%

Index / Fund / Rate

Prime Lending Rate

Start of Year

11.75%

Last Week

11.75%

This Week

11.75%

% Change YTD

0.00%

Index / Fund / Rate

USD/ZAR

Start of Year

18.30

Last Week

19.31

This Week

19.09

% Change YTD

4.32%

Index / Fund / Rate

EUR/ZAR

Start of Year

20.17

Last Week

20.89

This Week

20.68

% Change YTD

2.53%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

76.97

Last Week

81.66

This Week

83.33

% Change YTD

8.26%

Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Snowflake – Trying to be a Snowball Read More »

Nvidia – Fear of Missing Out

Weekly Stocktake / By VCS Agency

Companies and nations are investing substantial funds to keep pace in the AI race, focusing on establishing their proprietary artificial intelligence infrastructure. Nvidia is currently reaping the rewards of this trend. They are a semiconductor designer specializing in high-powered chips crucial for training models in accelerated computing and generative AI applications. In addition to these chips, Nvidia provides the essential components that link them, forming supercomputers. This ranges from the switches and wiring to the requisite coding language (CUDA) necessary for running these advanced models on their chips.

Last week, Nvidia unveiled its Q4 2024 results. Their revenue surged by 126% compared to FY2023, reaching $60.1 billion for FY2024. Net profit increased by 581%, soaring to $29.7 billion. Noteworthy is the substantial improvement in the gross profit margin, escalating from 56.9% in FY2023 to an impressive 72.7% in FY2024. Nvidia, as the designer, relies on semiconductor fabrication plants, such as TSMC, for chip manufacturing. This explains the disproportionately higher growth rates in gross and net profit compared to revenue, highlighting Nvidia’s operational leverage.

Companies and countries can’t get enough of Nvidia’s chips, with demand surpassing their current supply capabilities. Nevertheless, there remains a significant concentration among chip buyers. In Q4 2024, 40% of Nvidia’s data centre revenue was attributed to the three primary cloud service providers – Alphabet, Microsoft, and Amazon. These industry giants are still in the early phases of developing accelerated computing and generative AI products. This prompts the following questions:

Is AI a true megatrend, or will it fade away?
Will companies be able to generate sufficient additional revenue or enhance productivity to justify their expenditures on AI technology, including Nvidia’s chips?
What are the enduring implications on society?

Nvidia’s stock price has surged by more than 230% in the past year due to their rapid capacity expansion amid growing demand. However, formidable challenges persist. Intense competition looms, with Microsoft, Amazon, and Google striving to develop their own semiconductors for data centres, aiming to reduce dependency on Nvidia. The company faces towering expectations, and even minor deviations from anticipated performance can have a significant impact on their stock price.

Nvidia, Microsoft, and Amazon are held in the Lunar BCI Worldwide Flexible Fund. They are also held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

188.33

Last Week

203.05

This Week

207.05

% Change YTD

9.94%

Index / Fund / Rate

JSE ALSI

Start of Year

76 893

Last Week

73 616

This Week

74 213

% Change YTD

-3.49%

Index / Fund / Rate

NASDAQ Composite

Start of Year

15 011

Last Week

15 776

This Week

15 997

% Change YTD

6.56%

Index / Fund / Rate

S&P 500

Start of Year

4 770

Last Week

5 006

This Week

5 089

% Change YTD

6.69%

Index / Fund / Rate

Prime Lending Rate

Start of Year

11.75%

Last Week

11.75%

This Week

11.75%

% Change YTD

0.00%

Index / Fund / Rate

USD/ZAR

Start of Year

18.30

Last Week

18.87

This Week

19.31

% Change YTD

5.52%

Index / Fund / Rate

EUR/ZAR

Start of Year

20.17

Last Week

20.34

This Week

20.89

% Change YTD

3.57%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

76.97

Last Week

83.23

This Week

81.66

% Change YTD

6.09%

Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Nvidia – Fear of Missing Out Read More »

Mega Caps’ Big Week

Weekly Stocktake / By VCS Agency

Last week, five Mega Cap companies: Alphabet, Amazon, Apple, Microsoft, and Meta, released their results for the quarter ending 31 December 2023. All five companies are technology companies, with some similarities and differences in their respective businesses. There are overlaps in areas like cloud computing and advertising, but the approaches to leveraging and delivering technology services can differ significantly. And this affects their results differently.

Here is a summary of the key highlights from the recent results.

Alphabet
Alphabet reported a 13% increase in quarterly revenue, reaching $86.3 billion, with a notable 52% growth in net profit, totalling $20.7 billion. During the earnings call, the company highlighted its strategic focus on leveraging AI to enhance existing products in addition to introducing new AI offerings such as the multi-modal (it can understand different formats of information) LLM: Gemini. Adverts from Youtube, the video-sharing platform owned by Alphabet, generated a revenue of $9.2 billion for the quarter. In comparison, Netflix generated $8.8 billion for its most recent quarter. Youtube don’t have to spend large amounts of money on creating content like other streaming platforms. Rather, content creators receive a share of advert and subscription revenues, based on how well their content does on the platform.

Amazon
For the quarter, Amazon witnessed a 14% increase in net sales, reaching $170.0 billion compared to the same quarter last year. Notably, the operating income showed a substantial increase from $2.7 billion in Q4 2022 to a whopping $13.2 billion in Q4 2023. Amazon have focussed on cost-cutting over the last 2 years whilst still prioritising faster and cheaper deliveries to clients. They have also continued to invest in certain strategic projects. The primary drivers of revenue and operating income growth over the last year are AWS, advertising, and third-party seller services. Amazon’s advertising service experienced a 27% growth in the quarter compared to the same period last year.

Apple
In the latest quarter, Apple reported a 2% increase in revenue at $119.2 billion, with net income growing by 13% to $33.9 billion. The company boasts an impressive installed base of 2.2 billion active devices. Like other major tech firms, Apple’s large and loyal user base gives it an advantage when launching new products or services. The net income growth is impressive given the low revenue growth. The expanding margin was a result of the services revenue increasing at a higher rate than what the cost of sales for the services segment increased by.

Microsoft
In the quarter, Microsoft reported robust financials with a revenue of $62.0 billion and a net profit of $21.9 billion, marking impressive year-on-year increases of 18% and 33%, respectively. Notably, the cloud revenue, encompassing Azure, Onedrive, and other cloud services, surged by 24% to $33.7 billion, constituting over 50% of Microsoft’s total earnings for the quarter. Despite this growth, operating expenses for Microsoft increased by 3% year over year. The company’s scalability as a tech giant allows it to boost revenue without a proportional increase in operating costs.

Meta
In the recent quarter, Meta achieved a revenue of $40.1 billion, accompanied by a net profit of $14.0 billion, marking a 201% increase in profit compared to the same quarter last year. Across all Meta products, including Facebook, Instagram, and WhatsApp, there were 3.19 billion daily active users, reflecting an 8% year-over-year growth. Noteworthy corporate changes include several restructurings throughout the year, resulting in a 22% reduction in headcount by the end of 2023 compared to the end of 2022. Additionally, Meta declared its first-ever dividend during this period.

Amazon, Apple (via Berkshire Hathaway) and Microsoft are held in the Lunar BCI Worldwide Flexible fund. They are also held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

188.33

Last Week

195.25

This Week

195.68

% Change YTD

3.90%

Index / Fund / Rate

JSE ALSI

Start of Year

76 893

Last Week

75 084

This Week

74 174

% Change YTD

-3.54%

Index / Fund / Rate

NASDAQ Composite

Start of Year

15 011

Last Week

15 455

This Week

15 629

% Change YTD

4.11%

Index / Fund / Rate

S&P 500

Start of Year

4 770

Last Week

4 891

This Week

4 959

% Change YTD

3.96%

Index / Fund / Rate

Prime Lending Rate

Start of Year

11.75%

Last Week

11.75%

This Week

11.75%

% Change YTD

0.00%

Index / Fund / Rate

USD/ZAR

Start of Year

18.30

Last Week

18.79

This Week

18.90

% Change YTD

3.28%

Index / Fund / Rate

EUR/ZAR

Start of Year

20.17

Last Week

20.38

This Week

20.37

% Change YTD

0.99%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

76.97

Last Week

83.09

This Week

77.40

% Change YTD

0.56%

Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Mega Caps’ Big Week Read More »

ASML: Cycle Up

Weekly Stocktake / By VCS Agency

ASML, the Dutch firm behind the production of lithography equipment essential for semiconductor manufacturing, released their 2023 full year financial results last week. In the semiconductor production process, lithography employs light to intricately design patterns on silicon. Semiconductors serve as foundational components (basically the brain) in all electronic devices: ranging from everyday appliances to the smartphones, and the high-powered Graphic Processing Units (GPUs) crucial for training and operating Large Language Models (LLMs) like ChatGPT.

Semiconductors vary widely in transistor count, with some containing tens of billions of transistors. The smaller the transistor, the greater the number that can be accommodated on a semiconductor, resulting in enhanced performance and energy efficiency. ASML’s cutting-edge lithography machines can create patterns with transistor sizes as small as 3nm (nano meters, i.e. one thousandth millionth of a meter), and they are currently building the capacity for their 2nm technology. Some argue that the technology they have developed is the most intricate ever devised by humankind.

ASML reported €27.6 billion in revenue for the past year, marking a 30% increase compared to the previous year. The net profit for the company increased 39%, reaching €7.8 billion for FY2023. ASML noted that the current fiscal year will yield results similar to FY2023, emphasizing the ongoing recovery of the semiconductor industry from the trough of its economic cycle. ASML’s primary clientele comprises major fabrication plants in the semiconductor sector, including TSMC, Samsung, and Intel. Notably, ASML’s clients have given them indications that they want to increase capacity for 2025. This is evidenced by a significant growth in their order book.

ASML holds a virtual global monopoly in the sale of lithography equipment. Due to this dominance and the fact that semiconductors play a vital role in military applications, companies dealing in such equipment require licenses to sell their products. The United States and several allied nations, including the Netherlands, have imposed trade restrictions, restricting the sale of their most equipment to China. ASML anticipates that this will result in a 10-15% decline of their sales to the Chinese market.

ASML is held in the Lunar BCI Worldwide Flexible fund. It is also held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

188.33

Last Week

191.75

This Week

195.25

% Change YTD

3.67%

Index / Fund / Rate

JSE ALSI

Start of Year

76 893

Last Week

72 661

This Week

75 084

% Change YTD

-2.35%

Index / Fund / Rate

NASDAQ Composite

Start of Year

15 011

Last Week

15 311

This Week

15 455

% Change YTD

2.96%

Index / Fund / Rate

S&P 500

Start of Year

4 770

Last Week

4 840

This Week

4 891

% Change YTD

2.54%

Index / Fund / Rate

Prime Lending Rate

Start of Year

11.75%

Last Week

11.75%

This Week

11.75%

% Change YTD

0.00%

Index / Fund / Rate

USD/ZAR

Start of Year

18.30

Last Week

19.01

This Week

18.79

% Change YTD

2.68%

Index / Fund / Rate

EUR/ZAR

Start of Year

20.17

Last Week

20.71

This Week

20.38

% Change YTD

1.04%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

76.97

Last Week

78.63

This Week

83.09

% Change YTD

7.95%

Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

ASML: Cycle Up Read More »

Lululemon: Three x 2

Weekly Stocktake / By VCS Agency

Lululemon’s three growth drivers are product innovation, guest experience and market expansion in athleisure wear. It aims to double (X2) its digital and men’s wear business to achieve a quadruple growth in its non-US sales by 2025. Lululemon is renowned for its athleisure designs catering to various sports codes.

Last week, Lululemon, a business owned by Lunar Capital, unveiled its Q3 2023 results, reported a notable 19% surge in revenue, reaching $2.2 billion for the quarter. Sales in North America saw a 12% increase, while international sales increased by 49%. The latter was mainly attributed to sales in China, which has recently encouraged growth in its economy through favourable policies.

Lululemon’s gross margin for the quarter increased by 110 basis points to achieve 57%. However, there was a 4% decrease in income from operations, settling at $338.1 million. This dip in profit was predominantly a result of an impairment charge incurred on their Mirror product range. Lululemon have decided to discontinue the sale of the hardware associated to the Mirror. Mirror is a subscription service to access thousands of streaming exercises. This service will continue in partnership with Peloton.

Lululemon’s stock price has surged 51% this year, reaching a share price $489.64 per share and boasting a market cap of $61.96 billion as of Friday. Several factors have contributed to the positive sentiment surrounding Lululemon:

Diverse Product Pipeline: Lululemon exhibits a clear product roadmap, introducing a variety of new products targeting different sports codes and children’s wear.
Robust Online Presence: For the quarter; 41% of Lululemon’s sales were conducted online. Scaling online sales has the potential to yield a higher operating margin compared to traditional in-store sales.
Thriving Asian Market: Lululemon has established a robust presence in the international market, particularly in Asia, where a growing demand for their products is evident.
Adaptability to Market Trends: The recent emergence of weight-loss drugs like Ozempic may benefit athleisure companies like Lululemon, as these clients need to replace their wardrobes and exercise more. Lululemon, along with other clothing brands, stands to benefit from this trend.

Lululemon is currently enjoying a favourable position and it appears that its Three x 2 strategy is working despite facing intense competition in the market. The challenges come not only from established competitors like Nike, who boast a stronger balance sheet, but also from emerging players entering the field. These newcomers have the potential to introduce novel styles and trends that might resonate more effectively with customers. Despite the competitive landscape, Lululemon’s strengths and strategic advantages position it well in navigating the dynamic and evolving nature of the market.

Lululemon is held in the Lunar BCI Worldwide Flexible fund. It is also held by Lunar Capital’s Offshore Portfolio clients.

This marks the final stocktake for the year, and we’ll resume our updates in January. Our team will continue monitoring the market and the portfolios we manage; and supporting our clients.

We extend our heartfelt gratitude for an incredible year and wish all our clients, staff and partners a joyful and safe festive season.

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

141.43

Last Week

183.29

This Week

184.35

% Change YTD

30.35%

Index / Fund / Rate

JSE ALSI

Start of Year

73 049

Last Week

75 534

This Week

73 791

% Change YTD

1.02%

Index / Fund / Rate

NASDAQ Composite

Start of Year

10 467

Last Week

14 305

This Week

14 404

% Change YTD

37.61%

Index / Fund / Rate

S&P 500

Start of Year

3 840

Last Week

4 595

This Week

4 605

% Change YTD

19.91%

Index / Fund / Rate

Prime Lending Rate

Start of Year

10.50%

Last Week

11.75%

This Week

11.75%

% Change YTD

11.90%

Index / Fund / Rate

USD/ZAR

Start of Year

16.98

Last Week

18.63

This Week

18.97

% Change YTD

11.72%

Index / Fund / Rate

EUR/ZAR

Start of Year

18.44

Last Week

20.29

This Week

20.42

% Change YTD

10.74%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

85.95

Last Week

79.26

This Week

75.81

% Change YTD

-11.80%

Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Lululemon: Three x 2 Read More »

Roche – Recovering Post Covid

Weekly Stocktake / By VCS Agency

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

141.43

Last Week

175.19

This Week

170.40

% Change YTD

20.48%

Index / Fund / Rate

JSE ALSI

Start of Year

73 049

Last Week

70 198

This Week

69 452

% Change YTD

-4.92%

Index / Fund / Rate

NASDAQ Composite

Start of Year

10 467

Last Week

12 984

This Week

12 643

% Change YTD

20.80%

Index / Fund / Rate

S&P 500

Start of Year

3 840

Last Week

4 224

This Week

4 117

% Change YTD

7.21%

Index / Fund / Rate

Prime Lending Rate

Start of Year

10.50%

Last Week

11.75%

This Week

11.75%

% Change YTD

11.90%

Index / Fund / Rate

USD/ZAR

Start of Year

16.98

Last Week

19.03

This Week

18.84

% Change YTD

10.95%

Index / Fund / Rate

EUR/ZAR

Start of Year

18.44

Last Week

20.15

This Week

19.91

% Change YTD

7.97%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

85.95

Last Week

92.16

This Week

90.01

% Change YTD

4.72%

Source: Iress

Roche is a Swiss-based biotechnology company, specialising in diagnostics and pharmaceuticals.

In diagnostics, Roche has solutions for diagnosis kits for cardiometabolic, diabetes, cancer, and other diseases. Diagnosing diseases early or before they occur in susceptible people, can improve treatments choices, treatment outcomes, reduce suffering, and increase lifespans in patients.

In pharmaceuticals, Roche has treatments for haematology (blood diseases), oncology (cancer), ophthalmology (eye diseases), respiratory, and women’s diseases, amongst others.

In summary, for the comparative 9 months to end September; Roche revenues were down 6% to ƒ44.1bn (Swiss francs), with Pharmaceuticals up by 1% and Diagnostics down by 25%; in 2023 versus 2022. The main reasons for the decline and low growth in revenues is due to almost zero demand for Covid-19 related diagnostic kits and treatments.

Encouragingly, the uptake of new medicines and diagnostics showed strong growth in both the divisions. Roche also have launches of several products in the fourth quarter and into next year.

Vabysmo, a treatment for specific conditions leading to a loss or deterioration of vision was launched in 2022 and is expected to become a blockbuster drug, with sales exceeding ƒ2bn in 2023.
Polivy, launched in 2019, and used in the treatment of lymphoma (cancer) has also shown significant in sales growth in 2023.
Roche’s Elecsys IL-6 is used in diagnosing sepsis in neonates (new borns) allowing early treatment that can prevent deaths in approximately 84% of cases.

Roche has invested in technology and use AI/ML (Artificial Intelligence/Machine Learning) tools in several areas of their business, including in research and development, clinical development, manufacturing, and commercialisation.

Biotechnology businesses are subject to strict regulations and are required to get approvals from every country’s regulatory authority to be able to sell their products in those countries. Work in research and development for specific mdeicines can take many years and there is no guarantee of success.

Roche is held by Lunar Capital’s Offshore Portfolio clients and in the Lunar BCI Worldwide Flexible Fund.

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Roche – Recovering Post Covid Read More »

ASML – Riding the Cycle

Weekly Stocktake / By VCS Agency

Advanced Semiconductor Materials Lithography (now renamed simply ASML), is based in cycling country, The Netherlands and released their FY2023 Q3 results on Wednesday last week.

ASML manufactures the lithography equipment to mass produce semiconductor or more commonly called computer chips. Lithography allows one to “print” complex circuits onto silicone wafers creating a semiconductor chip. The process and materials used is highly complex and requires a very high level of precision.

In this last quarter, AMSL experienced a slowdown in new orders, after the significant growth post the Covid-19 slump and the significant take-up following the AI hype. However, ASML expects a significant increase their revenues in 2025.

Let’s look at ASML’s FY2023 Q3 results:

Sales

€6,673bn

Decreased by 3.33% since the last quarter.

No. of Units sold

105 new units
7 used units

Lower by 2 new and 1 used unit since the last quarter.

Gross Profit

€3,462bn

Decreased by 2.31% since the last quarter.

Gross Margin

51.9%

Up from 51.3% since the last quarter.

Net Income

€1,893bn

Decreased by 2.52% since the last quarter.

Net Margin

28.4%

Up from 28.14% since the last quarter.

Despite the slowdown in sales and profits, ASML is still highly profitable and still earns high margins. ASML is almost a monopoly in developing Extreme Ultraviolet Lithography (EUV) technology required to develop smaller (very, very tiny) but more powerful semiconductors or chips.

ASML’s largest client is TSMC (Taiwan Semiconductor Manufacturing Company) who is currently building new factories (or fabs as they are called) in the USA and Germany. This is to mitigate the tensions between the USA and China. In fact, just last week the Biden administration introduced stricter curbs on exporting advanced semiconductor to China. These new fabs will require AMML’s EUV and DUV (Deep Ultraviolet) lithography equipment to mass produce chips at these fabs. Hence, ASML’s positive view of significant increase in sales and profits in 2025.

The semiconductor industry is cyclical and subject to export restrictions.

ASML is held by Lunar Capital’s Offshore Portfolio clients and in the Lunar BCI Worldwide Flexible Fund.

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

141.43

Last Week

176.11

This Week

175.19

% Change YTD

23.87%

Index / Fund / Rate

JSE ALSI

Start of Year

73 049

Last Week

72 920

This Week

70 198

% Change YTD

-3.90%

Index / Fund / Rate

NASDAQ Composite

Start of Year

10 467

Last Week

13 407

This Week

12 984

% Change YTD

24.05%

Index / Fund / Rate

S&P 500

Start of Year

3 840

Last Week

4 328

This Week

4224

% Change YTD

10.0%

Index / Fund / Rate

Prime Lending Rate

Start of Year

10.50%

Last Week

11.75%

This Week

11.75%

% Change YTD

11.90%

Index / Fund / Rate

USD/ZAR

Start of Year

16.98

Last Week

19.01

This Week

19.03

% Change YTD

12.07%

Index / Fund / Rate

EUR/ZAR

Start of Year

18.44

Last Week

19.98

This Week

20.15

% Change YTD

9.27%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

85.95

Last Week

91.12

This Week

92.16

% Change YTD

7.23%

Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

ASML – Riding the Cycle Read More »

Birken’s Stock

Weekly Stocktake / By VCS Agency

Last week, Birkenstock Holding, along with the majority-shareholder private-equity firm L Catterton, raised approximately $1.5 billion through an initial public offering (IPO) for the German shoe brand, Birkenstock. About one-third of the proceeds were allocated towards alleviating some of Birkenstock’s existing debt, while the remaining portion was distributed to L Catterton. Birkenstock was valued at $9.3 billion, with an IPO price of $46 per share.

Birkenstock, founded in 1774 and known for their iconic cork-based sandals, had a majority stake acquired by L Catterton in 2021. It valued the company at $4.8 billion at the time. L Catterton, backed by LVMH (the luxury brand conglomerate,) said they bought the stake with the intention of increasing Birkenstock’s presence in India and China; and also increasing its direct-to-consumer segment. Between 2020 and 2022 fiscal year-end, sales for Birkenstock increased from $771 million to $1.24 billion, with direct-to-consumer sales making up 38% of the sales in 2022.

In addition to prioritizing direct-to-consumer sales, the company has developed strategic collaborations with luxury fashion labels like Dior and Manolo Blahnik. These co-branded shoes, despite selling far less in terms of volume, command much higher prices (and higher gross margins). Some of these co-branded sandals can go for us much as €1600; while Birkenstock’s standard models, like the Barbados, are priced at approximately €45.

One of the reasons Birkenstock sandals are popular is because they are designed to distribute your body weight throughout your entire foot, rather than on specific pressure points like your heels or balls of your feet. They are also adjustable for different foot widths and the cork footbed gets moulded to the shape of your foot. Originally developed as orthopaedic shoes, Birkenstocks now have a cult like following, and were featured in the recent Barbie movie which has led to further interest in the brand.

Birkenstock’s shares fell by over 20% last week from its IPO price. IPO’s are used to raise capital for growth initiatives, debt settlement, or to provide liquidity to the shareholder base. Private-equity firms often use IPO’s to realise value from an investment that they made in a company. This often leads to large tranches of shares being available in the market post the IPO: resulting in a drop in the share price. This is one of the reasons that we, at Lunar Capital, generally avoid buying shares in a company when it IPO’s.

LVMH is held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators

Index / Fund / Rate

Start of Year

Last Week

This Week

% Change YTD

Index / Fund / Rate

Lunar BCI WW Flexible Fund

Start of Year

141.43

Last Week

176.38

This Week

177.11

% Change YTD

25.23%

Index / Fund / Rate

JSE ALSI

Start of Year

73 049

Last Week

71 657

This Week

72 920

% Change YTD

-0.18%

Index / Fund / Rate

NASDAQ Composite

Start of Year

10 467

Last Week

13 431

This Week

13 407

% Change YTD

28.09%

Index / Fund / Rate

S&P 500

Start of Year

3 840

Last Week

4 309

This Week

4 328

% Change YTD

12.70%

Index / Fund / Rate

Prime Lending Rate

Start of Year

10.50%

Last Week

11.75%

This Week

11.75%

% Change YTD

11.90%

Index / Fund / Rate

USD/ZAR

Start of Year

16.98

Last Week

19.34

This Week

19.01

% Change YTD

11.96%

Index / Fund / Rate

EUR/ZAR

Start of Year

18.44

Last Week

20.49

This Week

19.98

% Change YTD

8.35%

Index / Fund / Rate

Brent Crude ($'barrel)

Start of Year

85.95

Last Week

84.56

This Week

91.12

% Change YTD

6.02%

Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Birken’s Stock Read More »