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Investment options profiles

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Your investment options

At Craigs we provide you with the flexibility to build a portfolio of investments from our list of investment options.

We have over 240 investment options available for you to invest in. Our investment options include a range of equity, fixed interest, investment trusts, NZ managed funds, index funds and listed property trust investments, available on local and international listed and unlisted markets.

If you would like to review and make changes to your portfolio please contact your Craigs investment adviser or our Client Services team.

Read our research insights on three of our current investment options below.

Serko

SKO.NZX | Technology
Our Classification: Niche
Risk indicator: 7/7
Sustainability score: 4.4/5

About Serko

Serko is the leading online corporate travel booking and expense management provider in Australasia, which is now expanding globally. Serko launched in 2007 and listed on the NZX in June 2014. The company provides cloud-based enterprise grade solutions to travel management companies who resell Serko to their corporate customers. At its core, Serko’s platform helps corporates manage their travel and expense programs. Serko addresses the limitations of legacy booking channels (limited content, clunky interfaces) which ultimately improves the traveller experience, reduces a corporate’s travel expenses and increases travel management company revenues.

What makes Serko different?

Serko has agreements as a preferred online booking tool across all major corporate travel management companies in Australia and New Zealand. Serko’s growth strategy comprises two major components. The first being its core managed travel business supplying its online corporate booking tool to travel management companies in Australasia and North America. The second is its partnership with Booking.com for Business to capture and service the unmanaged SME travel market. Unmanaged corporate travel represents an under-serviced segment of the global corporate travel market, as SME’s typically book direct with airlines or hotels as they are too small to engage the services of a travel management company. Travel management companies tend to focus on corporates with material travel budgets.

Opportunities and threats

Serko uses a Software as a Service business model. Revenue is primarily comprised of three recurring components generated on a pay per transaction and commission basis, along with non-recurring services revenue. The three recurring components are booking fees (for which there is a fixed fee per booking), expense platform fees (which are paid monthly) and supplier commissions (a percentage of the booking value). Currently, Serko’s revenue represents a small fraction of all travel spend processed by the company’s products.

Our view and outlook

Serko has a sizeable opportunity outside of Australasia given it constitutes a minor portion of the $2 trillion global expenditure on corporate travel. While online booking and expense tools only capture a very small proportion of corporate travel spend, it is clear that the market opportunity is significant. In this regard, investors will be watching both 1) Serko’s attempts at expanding in North America in the managed travel segment, and 2) growth via the Booking.com for Business partnership globally. It is important to note that the impacts of COVID-19 are likely to mean that this growth trajectory may take longer to materialise and is largely reliant on corporate travel returning to normal levels. While Serko offers attractive growth, this does come with an elevated level of execution risk – consequently risk profile may not be appropriate for all investors.

Xero

XRO.ASX | Technology
Our Classification: Supplementary
Risk indicator: 7/7
Sustainability score: 4.8/5

About Xero

XRO is a cloud-based accounting platform for small-to-medium sized businesses that provides a near-real-time view of business information for its customers and their accountants. Amidst a growing ecosystem of over 1000 connected apps and over 300 connections to banks and financial service partners, XRO also facilitates everything from invoicing and payroll to inventory management and point of sale functionality. The company offers base packages and then earns additional fees from functionality add-ons, creating a growing revenue stream as subscribers use more of the ecosystem.

What makes Xero different?

Despite years of growth, the opportunity for XRO to grow its subscriber base remains substantial as cloud accounting remains significantly underpenetrated in many international markets. More tech-savvy small business owners, the digitisation of tax and compliance, and ongoing innovation in financial services should all continue to drive market growth. As an example, the UK’s “Making Tax Digital” initiative, which seeks to simplify the tax administration process for all parties concerned, has accelerated cloud-based accounting adoption in the UK market. XRO is dominant in its core Australian and New Zealand markets, which have a relatively high uptake of cloud accounting; the key opportunities for the company are in the UK and US markets, and a growing presence in markets such as South Africa and Singapore. A successful foray into non-English speaking countries (potentially Europe) could further improve the growth profile.

Opportunities and threats

One of XRO’s innovations has been to use accountants as its key sales channel. XRO has enticed accountants with great success in Australia, New Zealand and the UK by enabling them to offer better value services to clients through fully integrated cloud-based software. Accountants can move their accounting practice into the cloud without paying for the software and can have real-time and more meaningful advice-driven conversations with their clients.

Our view and outlook

XRO has created a strong brand presence in New Zealand, Australia and the UK, leaving it in a good position to continue building its subscriber numbers and long-term profitability. We see cloud accounting as a market with high barriers to entry, given 1) the volume of end-users required to be economic, 2) the investment required in localised compliance, and 3) the stickiness of accounting software.

XRO’s share price remains sensitive to changes in interest rates. Growth in the UK has been disappointing, but currently seems more a function of weak economic conditions than a step-change in longer-term growth. New CEO, Sukhinder Singh Cassidy, has started to stamp her vision on the business by reducing headcount and focusing on more disciplined growth.

Martin Marietta Materials Inc

MLM.NYSE | Materials
Our Classification: Supplementary
Risk indicator: 7/7
Sustainability score: N/A

About Martin Marietta Materials Inc

MLM produces and sells aggregates and other construction materials such as asphalt, ready-mixed concrete and cement. The company typically generates its revenues as a result of infrastructure, residential and non-residential construction activity.

Public spending on infrastructure has lagged in the developed world as most governments have underinvested in infrastructure over several decades. In the US, this has left a significant infrastructure deficit that requires a long-term uplift in spending. At the federal level, a bipartisan infrastructure deal known as the Infrastructure Investment and Jobs Act has been enacted as legislation, which includes US$110 billion in new funding for roads, bridges and other key infrastructure assets. At the state level, strong support from voters for local infrastructure projects is likely to see robust spending from state governments too. This upward pressure on funding should provide a medium to long-term tailwind for MLM.

What makes Martin Marietta Materials Inc different?

MLM is a leading provider of construction aggregates in the US. The company has accumulated significant aggregate reserves in key geographies, creating structural advantages due to the challenges of permitting new reserves and the high costs associated with transporting aggregates. Furthermore, aggregate production flexibility allows for production to be throttled back during demand down cycles to prevent inventory glut. Aggregate quarries can be shut down and restarted at minimal cost. These factors all contribute to significant pricing power in the aggregates market. As a result, industry pricing has consistently risen regardless of the business cycle.

Opportunities and threats

Given the key driver of growth for MLM is construction activity, we see the cyclicality that comes from a decline in demand during economic downturns as a key risk for MLM. Infrastructure spending depends on the outlook for federal and state budgets, and whether officials have the ongoing capacity and willingness to prioritise spending on infrastructure. Very supportive federal and state infrastructure policies are likely to extend the US construction cycle, as will energy and domestic manufacturing projects (underpinned by the CHIPS Act and Inflation Reduction Act). Weather also adds uncertainty to MLM and wet weather in key states like Colorado and Texas can constrain activity. Significant cost inflation (mostly high energy and raw material costs) has impacted earnings and margins, although the dynamic between selling prices and cost inflation is now shifting in MLM’s favour.

Our view and outlook

The aggregates industry is a mature cyclical business dependent upon activity within the construction marketplace. Underlying demand trends are strong due to past underinvestment in public infrastructure and healthy activity levels in non-residential construction. Increased funding for public infrastructure, energy and domestic manufacturing projects will provide good tailwinds for the industry over the medium-term. Residential construction is slowing for affordability reasons and poses a near-term risk if tighter lending conditions persist. However, overall demand has been encouraging, buoyed by a shift to heavy commercial categories and MLM has established strong pricing momentum.

About risk indicators and sustainability scores

Risk indicators are assessed by Craigs Private Wealth Research team and are rated from 1 (low) to 7 (high). The rating reflects how much the value of the company goes up and down (volatility). A higher risk generally means there is the potential for higher returns over time, but with the risk of higher losses, and there are likely to be more ups and downs along the way.  To help you clarify your own attitude to risk, work out your risk profile at craigsip.com/risk-profiler or speak to your Investment Adviser.

Sustainability scores are assessed by Craigs Private Wealth Research sustainability team and are calculated as an average rating out of five for environmental, social and governance factors. An N/A sustainability score means a sustainability assessment has not been made. For further information on how we calculate these scores, please refer to this report or speak to your Investment Adviser.

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