Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Thematic (Sector/Industry)

Blockchain is full of promise. Investment in the space totals billions of dollars. Large corporations, venture capital funds, and initial coin offerings are funding projects. The activity is not completely misguided; blockchains have the potential to disrupt economic activities ranging from simple payments to the structure of a corporation as it currently exists. We see three broad categories of applications for the technology: financial transactions, data management, and marketplace activity. Companies that engage in these functions are seemingly at risk, as blockchain technology can potentially lower transaction costs as well as the costs of recordkeeping. However, we've identified some narrow- and wide-moat companies that will be less vulnerable to the blockchain threat. These companies provide value-added services along with simpler transaction processing and recordkeeping functions. Then, we point out that the early-stage technology still suffers from a handful of technical issues, including problems with scalability, privacy, and leadership.<h2>Key Takeaways</h2><ul><li>Ideally, a blockchain is trustworthy, transparent, and decentralized. These features provide most of the technology's appeal, allowing businesses to solve problems related to trust, recordkeeping, and transaction costs.</li><li>Blockchain technology provides a way to decentralize three important economic functions: financial transactions, identity and data management, and marketplaces. Decentralized solutions could disrupt companies that create value by centralizing such activities.</li><li>The financial services sector abounds with companies that serve to centralize financial transaction activity. Blockchain technology removes the need for a trusted third party and lowers transaction costs.</li><li>Centralized control of data and identity management is increasingly creating security and privacy issues. Blockchains allow individuals to maintain control over their own digital identities.</li><li>Marketplaces such as <a href="https://www.smartkarma.com/entities/409" target="_blank" data-smartkarma-citation="entities:409:1">Amazon.com Inc (AMZN US)</a> and <a href="https://www.smartkarma.com/entities/6669" target="_blank" data-smartkarma-citation="entities:6669:1">Expedia Inc (EXPE US)</a>, which serve as intermediaries between buyers and sellers, have arisen in numerous sectors. Marketplace activity can conceivably migrate to a blockchain, removing the need for a corporate intermediary.</li><li>Corporations exist to lower transaction costs and solve problems of trust. Blockchain technology therefore can also enable entirely new forms of economic organization.</li><li>Moats arising from network effects and cost advantages are, on the surface, most vulnerable to a technology that decentralizes activity and reduces transaction costs. Moats arising from switching costs and intangible assets are less vulnerable.</li><li>Blockchain technology removes the need for a trusted third party and potentially lowers transaction costs, but cost advantages are seldom the only variable in play. Many intermediaries provide value-added services in addition to commoditized transaction processing and recordkeeping, and companies often benefit from multiple moat sources. Even in commoditized lines of business, incumbents often benefit from massive economies of scale.</li><li>Blockchain technology is in its infancy, with major technical hurdles to overcome before reaching mainstream viability. Scalability and cost are primary concerns, as are privacy issues, despite the security inherent to encrypted, distributed ledgers. Decentralized control can exacerbate differences, slow progress, and lead to balkanization. Ironically, private and permissioned blockchains might better balance the benefits of decentralized ledgers with those of centralized systems. In this case, the benefits of blockchain technology could accrue to incumbents or their customers.</li><li>Narrow- and wide-moat companies serving as trusted intermediaries in several industries are trading at significant discounts to fair value. <a href="https://www.smartkarma.com/entities/916" target="_blank" data-smartkarma-citation="entities:916:1">American Express Co (AXP US)</a>, <a href="https://www.smartkarma.com/entities/18151" target="_blank" data-smartkarma-citation="entities:18151:1">Mckesson Corp (MCK US)</a>, <a href="https://www.smartkarma.com/entities/4668" target="_blank" data-smartkarma-citation="entities:4668:1">Anixter International Inc (AXE US)</a>, <a href="https://www.smartkarma.com/entities/16449" target="_blank" data-smartkarma-citation="entities:16449:1">Tripadvisor Inc (TRIP US)</a>, and <a href="https://www.smartkarma.com/entities/665" target="_blank" data-smartkarma-citation="entities:665:1">Facebook Inc A (FB US)</a> are some of our top current picks among these companies.</li><li>Utility token demand rests on 1) the ability of an individual token to add value for users, and 2) the lack of viable alternatives to its use. We believe that value creation in the token world will depend not only on networks of users and developers, but also durable competitive advantages over both decentralized and centralized competitors.</li></ul>Analysts: Jim Sinegal, Joshua Aguilar, Rodney Nelson, Brian Bernard, RJ Hottovy, Matt Young, Michael Wong, Ali Mogharabi and Dan Wasiolek

Blockchain is full of promise. Investment in the space totals billions of dollars. Large corporations, venture capital funds, and initial coin offerings are funding projects. The activity is not completely misguided; blockchains have the potential to disrupt economic activities ranging from simple payments to the structure of a corporation as it currently exists. We see three broad categories of applications for the technology: financial transactions, data management, and marketplace activity. Companies that engage in these functions are seemingly at risk, as blockchain technology can potentially lower transaction costs as well as the costs of recordkeeping. However, we've identified some narrow- and wide-moat companies that will be less vulnerable to the blockchain threat. These companies provide value-added services along with simpler transaction processing and recordkeeping functions. Then, we point out that the early-stage technology still suffers from a handful of technical issues, including problems with scalability, privacy, and leadership.Key TakeawaysIdeally, a blockchain is trustworthy, transparent, and decentralized. These features provide most of the technology's appeal, allowing businesses to solve problems related to trust, recordkeeping, and transaction costs.Blockchain technology provides a way to decentralize three important economic functions: financial transactions, identity and data management, and marketplaces. Decentralized solutions could disrupt companies that create value by centralizing such activities.The financial services sector abounds with companies that serve to centralize financial transaction activity. Blockchain technology removes the need for a trusted third party and lowers transaction costs.Centralized control of data and identity management is increasingly creating security and privacy issues. Blockchains allow individuals to maintain control over their own digital identities.Marketplaces such as Amazon.com Inc (AMZN US) and Expedia Inc (EXPE US), which serve as intermediaries between buyers and sellers, have arisen in numerous sectors. Marketplace activity can conceivably migrate to a blockchain, removing the need for a corporate intermediary.Corporations exist to lower transaction costs and solve problems of trust. Blockchain technology therefore can also enable entirely new forms of economic organization.Moats arising from network effects and cost advantages are, on the surface, most vulnerable to a technology that decentralizes activity and reduces transaction costs. Moats arising from switching costs and intangible assets are less vulnerable.Blockchain technology removes the need for a trusted third party and potentially lowers transaction costs, but cost advantages are seldom the only variable in play. Many intermediaries provide value-added services in addition to commoditized transaction processing and recordkeeping, and companies often benefit from multiple moat sources. Even in commoditized lines of business, incumbents often benefit from massive economies of scale.Blockchain technology is in its infancy, with major technical hurdles to overcome before reaching mainstream viability. Scalability and cost are primary concerns, as are privacy issues, despite the security inherent to encrypted, distributed ledgers. Decentralized control can exacerbate differences, slow progress, and lead to balkanization. Ironically, private and permissioned blockchains might better balance the benefits of decentralized ledgers with those of centralized systems. In this case, the benefits of blockchain technology could accrue to incumbents or their customers.Narrow- and wide-moat companies serving as trusted intermediaries in several industries are trading at significant discounts to fair value. American Express Co (AXP US), Mckesson Corp (MCK US), Anixter International Inc (AXE US), Tripadvisor Inc (TRIP US), and Facebook Inc A (FB US) are some of our top current picks among these companies.Utility token demand rests on 1) the ability of an individual token to add value for users, and 2) the lack of viable alternatives to its use. We believe that value creation in the token world will depend not only on networks of users and developers, but also durable competitive advantages over both decentralized and centralized competitors.Analysts: Jim Sinegal, Joshua Aguilar, Rodney Nelson, Brian Bernard, RJ Hottovy, Matt Young, Michael Wong, Ali Mogharabi and Dan Wasiolek

Credit Analyst, BondAdviser

Jack Pobjoy

Credit Analyst

Australian bonds & fixed income research

BondAdviser

BondAdviser is the central reference point for intelligent information on Australian fixed income markets. We help you make informed decisions by providing unbiased research, transparent pricing data, analytics, portfolio tools and education.

BondAdviser has the broadest coverage of retail-accessible ASX-listed and over-the-counter Australian bonds and fixed income securities. We make it easy for you to review and compare investments before you place an order with your broker or dealer.

Credit

On the 17th of April 2018, <a href="https://www.smartkarma.com/entities/26940/insights" target="_blank">Afterpay Touch Group Limited (ASX: APT)</a> launched an offer for Afterpay Touch Notes. The Notes are expected to be issued on the 26th of April 2018 and the offer is expected to raise $40 million (with the ability to take oversubscriptions). The proceeds will be used to support the growth trajectory of the APT receivables book. These securities are sold to wholesale investors only (no Prospectus being issued) and are not listed on the Australian Securities Exchange (ASX).These securities are structured as direct, senior unsecured notes and interest payments are non-discretionary, fixed rate (coupon rate guided to be set between 7.25 - 7.50% p.a.) and paid on a semi-annual basis. Although the notes will be issued from the non-operating parent entity, a guarantee is given by the Group’s material domestic operating subsidiaries. The Guarantors must comprise at least 90% of Australian-generated EBITDA of the Group at all times.APT has the right but not the obligation to redeem some or all of the notes prior to maturity on the 27th of April 2020 at 102.5% of par value and each interest payment date thereafter until the 27th of April 2021 where the redemption price will become 101% of par value at each interest payment date until legal final maturity (27th of April 2022). Noteholders have the right to early redemption, if a Change of Control Event occurs, at 101% of par value.Investors are protected by a series of covenants including a negative pledge (subject to a collective permitted secured security interest of $1 million for the Issuer and Guarantors), minimum interest cover ratio of 2.00x (first test date on 31 December 2018) and a dividend stopper.

On the 17th of April 2018, Afterpay Touch Group Limited (ASX: APT) launched an offer for Afterpay Touch Notes. The Notes are expected to be issued on the 26th of April 2018 and the offer is expected to raise $40 million (with the ability to take oversubscriptions). The proceeds will be used to support the growth trajectory of the APT receivables book. These securities are sold to wholesale investors only (no Prospectus being issued) and are not listed on the Australian Securities Exchange (ASX).These securities are structured as direct, senior unsecured notes and interest payments are non-discretionary, fixed rate (coupon rate guided to be set between 7.25 - 7.50% p.a.) and paid on a semi-annual basis. Although the notes will be issued from the non-operating parent entity, a guarantee is given by the Group’s material domestic operating subsidiaries. The Guarantors must comprise at least 90% of Australian-generated EBITDA of the Group at all times.APT has the right but not the obligation to redeem some or all of the notes prior to maturity on the 27th of April 2020 at 102.5% of par value and each interest payment date thereafter until the 27th of April 2021 where the redemption price will become 101% of par value at each interest payment date until legal final maturity (27th of April 2022). Noteholders have the right to early redemption, if a Change of Control Event occurs, at 101% of par value.Investors are protected by a series of covenants including a negative pledge (subject to a collective permitted secured security interest of $1 million for the Issuer and Guarantors), minimum interest cover ratio of 2.00x (first test date on 31 December 2018) and a dividend stopper.

Australian Credit: Afterpay Touch Launches Its Inaugural High-Yield Bond Issue

New Zealand

Trade Me Group Ltd operates an online marketplace for New Zealanders.  The website features online auctions and fixed-price sales for new and used goods including automobiles, real estate and employment advertising.  Trade Me also offers accommodations, dating and group buying advertisements.

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Trade Me (TME AU)

Disruption by Decentralization?

Blockchain is full of promise. Investment in the space totals billions of dollars. Large corporations, venture capital funds, and initial coin...

Morningstar, Inc.

Australian Credit: Afterpay Touch Launches Its Inaugural High-Yield Bond Issue

On the 17th of April 2018, Afterpay Touch Group Limited (ASX: APT) launched an offer for Afterpay Touch Notes. The Notes are expected to be issued...

BondAdviser

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