SUMMARIES OF RESULTS FOR ASML META RMD UNH & LVMH

 Note the disclaimer. i have not included any of the charts for these as they are a painful exercise to insert into this format. If anyone wants the full report, please ask. 

LVMH 4Q 25

LVMH is a well-run company. Why do I say that? Firstly, we can see operational cost control with margins only falling from 24% to 23% 2024 to 2025 despite poor revenue growth. We can also see operational cash flow improving despite lower profits as working capital is managed well. We can also see value being added to acquisitions that benefit from being in the LVMH stable. Management appears genuine, longer-term planners and growers of the business. all good. They are also active in the management of the businesses and in the portfolio. Arnault has recently moved above 50% ownership.

The result was unusually hit by FX volatility, being the relative strength of the EUR compared to third currencies. FX is hard to predict, and we can take that as an uncontrollable.

There are issues with the operations. The following graphs show that LVMH has not shaken off the post C19 gloom.

The question is whether this is secular or cyclical. Looking at the change in mix of revenues and profits from 2022 to 2025, we see a few significant changes.  Fashion and leather goods (FLG) are the key to LVMH, it is 72% of operating profits and having a high margin. FLG has fallen over the last three years in the mix by 2% and 1%, in revenues and profits. This would impact gross margins. The division with the largest increase is Selective Retailing, +4% and +6% in mix. A large move, and although Sephora’s rise is noteworthy and commendable, it comes with a lower margin. The other notable is Wine and spirits, which has been very poor, down -2% and -5% in the mix, but is less than 1/10^th the size of FLG.

Looking through this lens, LVMH needs to generate organic growth in FLG as a main priority. In troughs, we usually ponder secular decline, is fashion still important, is the new generation buying leather bags, and are they willing to pay these prices? Along with many industry operators, LVMH experienced price rises in the C19 consumer spending spree. This has now potentially come back to bite them. Maybe there is a replacement cycle in bags that we have yet to see? LVMH's customer base is more aspirational than the very wealthy, like the Hermes customer base, so macro plays more of a part.

We need to see GM stabilisation as a sign that FLG is back. LVMH is a solid business, but it is not a strongly growing business or has an unusually high NPAT margin. It does look to be under-earning at this stage. For example, ROE was 19.2% for the 14 years to 2025 and was 15.8% in 2025.

At 543e and assuming 9% eps growth for 5 years, and an exit Pe of 22X gives a return of 6%. Not that compelling. These numbers assume an exit ROE of 18.5%. To give a 10% return, a price of 450e is required. Assuming an average exit ROE in the valuation only adds 1% to the growth rate and an entry price of 480e. Looks like a solid hold, but upside is limited.

RMD FH26

The remediation of part of the SaaS business continues. In 2018, RMD bought Matrix Care for US$750m, which included low-margin manual care like nursing and senior care. RMD are attempting to focus the business on its Saas parts and out of the low-growth, low-margin care elements, is my read. RMD indicated improvements are expected over the next few quarters.

GM were better and continued the improving trend seen over the last couple of years, mainly due to improving logistical and supply side efficiencies. RMD expect further, albeit smaller gains. They specifically called out incremental gains to 2030. FY26 guidance 62-63% (currently around 62%).

No product exposure to US competitive bidding changes or tariffs is expected or seen. So a positive.

RMD indicated it is actively looking to deploy capital to make its devices easier to use and monitor. The chain, as they see it, is awareness, patient testing, diagnoses, treatment and adherence. All of these can be improved to keep patients for life.

Revenue growth was devices 9%, masks 13%, RCS 6%. RCS is being addressed above. The rest are growing well, and RMD believes it is taking share.  

A small restructuring charge of $6m was taken.

Operating margins improved to 36.3% versus 34% pcp.

There was some interest in the impact of oral GLP-1 pills, given the recent increase in their use. RMD continued to describe the inflow of patients as positive for CPAP uptake. Some brokers have undertaken channel checks that appear to support RMD claims that the GLP-1 users are more motivated and likely to combine GLP-1 with CPAP usage. Continues to be a monitoring situation.

At $37.50 and assuming 11% 5y eps compounding, a PE exit of 25X gives a 10% return, which I find attractive in this market. The result was better than my forecasts by a few %. I have added more recently, and it is a reasonably sized holding.

UNH FY25

UNH FY25 4Q

UNH is a relatively new position and is a turnaround situation. Being a turnaround, (messy and dirty) I will address it as such. What do we want to see in a turnaround?

1.      Balance sheet- the BS is sound enough at ND/ebitda of 1.3X and ICover at 4.8X, using the low 2025 numbers. These numbers are important as they take pressure off management and allow them to focus on improvements.

2.      Asset realisations – UNH doesn’t have a broad portfolio, but there have been moves to realise some offshore operations, so that’s good.

3.      Management and board changes. The old CEO has been brought back, and board changes include a new governance committee and the appointment of a former FDA Commissioner to the board. The CEO is viewed as a temporary move to stabilise the company before a new CEO is brought on at some point. These changes are positive.

4.      Restructuring. In Q425 the company announced a large $2.5b restructuring provision. There are also significant portfolio changes being made, repricing and exiting certain lines. UNH flagged $1b in opex savings going forward.

5.      Identification of errors. There is an admission of strategic error and being too expansionist in growing the business. The thesis here relies on the existence of a small but highly unprofitable group of customers that can be removed over the next year or two. The result we will see is a slowdown in the top line and an improvement in margins. UNH has flagged dropping about 6% of customers. The ability to quickly reprice is important here, as health insurers are a short-tail business. Medicare Advantage, which UNH is a leader in, is a particular focus.

6.      Focus on core competitive advantages. UNH is a leader and has the scale to improve its business economics. Moves are being made in this direction.

Risks

Besides execution risks, the other risks are industry-wide. The position that the industry plays in the management of health outcomes may be changed by Government policy. The core issue here is that underlying medical costs continue to increase, and premium increases are required to cover these costs, but that makes insurance less affordable to the Government, public and corporate consumers. The recent CMS gambit of no increase in industry premiums is an example of this risk, but as this is an opening gambit, the final result will see a more reasonable outcome for the insurers; there will be ongoing pressure to manage industry cost increases.

Guidance - UNH provides detailed guidance; below are the UNH and Optum guidelines before eliminations. UNH is a core insurance provider, while Optum handles managed care, analytics, and pharmacies.

			2024	2025	2026
UNH			298	345	335	16%	-3%
ebit			15.6	9.8	10.8	-37%	10%
Customers			49.4	49.8	47.2	1%	-5%
profit per cust.			$      0.32	$      0.20	$      0.23
Optum			253	271	258	7%	-5%
			16.7	9.5	13.2	-43%	39%
			6.6%	3.5%

 

SUMMARY and VALUATION

The current numbers look poor, and the investment thesis becomes, can UNH recover to anywhere near historic margins, with the changes already in place taking effect? The largest swing factor may be the industry dynamics. Some numbers around the recovery, ebit margins averaged 8% over the last 12 years and NPAT margins 5.2% in the 10 years to 2025. The current numbers are ebit margin of 4.4% and the NPAT margin of 3.1%. The following assumes target exit margins of 4.4% in 2030 and revenue growth of 4%pa, versus 11%pa  revenue growth for the 10-year period to 2025.

Turnarounds are messy and fraught with issues; the main positives here are the incumbency of this insurance leader, the plans in place and the ability to execute. The negatives are if industry profitability is permanently impaired. We are well into the turnaround, and visible signs are emerging, but more is expected in 2027.

At $292, and using the above assumptions, generates 13% growth in earnings and an exit PE of 18X, giving a 11% compound return. The assumptions could prove conservative. 2027 looks like the year we need to see significant improvement.

 META FY25

The FY25 result was strong, with revenues 2% above my numbers and NPAT 5% above, once adjusting for the Q3 tax impost.

Meta stands as perhaps the largest beneficiary of incorporating AI advances into its operating model and getting significant results. The AI infusion is across the full stack of apps (Facebook, Instagram and WhatsApp) and includes improvements for creators, users and advertisers. Generally, the effort is to improve creator productivity to increase original, entertaining and interesting content, secondly to increase the user time on the site by targeting the content feed to users' specific interest areas, thirdly to improve conversion rates for advertisers through better ads and ad placement. All of these metrics have seen significant improvements with the commensurate increase in Meta profitability. Sifting through the enormous amount of data and utilising the data properly and productively has been the task of the AI investment.

The operations are quite impressive with ad pricing up 6% over the year, due to ad performance, impressions up 18%, but importantly, ad load, being the frequency of ads not up a lot due to longer time on site and AI placement of ads. There is nothing wrong with the core franchises; it's on fire.

However, the story does not end there and becomes more complex. Investors first need to consider how long these AI-driven advancements will continue at the current impressive rate and scale. The answer is unknown, but Meta indicates that the path is long. Secondly, the cost of this process must be considered, and it is costly. Overall, I am satisfied with the investment in the core and the results to date and consider we have some runway to go. Meta works on an organic creative “brain” and a separate advertiser “brain”, the AI investment is to merge the efforts of these to better target ads. The core is certainly more effective and of better user quality.

Meta has a history of investing in ambitious projects. Virtual Reality is perhaps the best example. FY25 saw losses of $19B for Reality Labs, about 19% of ebit. Part of this is speculation on the future user interaction, and part is attempts to build a Meta operating system, so that Meta is no longer reliant on Android and iOS. Reality Labs' investment is being redirected from VR to wearable devices and making a platform. The change is understandable, but it does launch a second large attempt at a platform and building a Superintelligence capability, which will be very costly and speculative in nature. Capex was guided to $115-135B ($69B pcp). We can only assume most of this spend is in superintelligence and platform (wearables) rather than the core. The number is huge regardless, and questions of earning an adequate ROIC will inevitably occur.

There was also a comment by the CFO below.

Despite the meaningful step-up in infrastructure investment, in 2026, we expect to deliver operating income that is above 2025 operating income

We also have a $16.6b excess tax in 2025 that will not repeat into Fy26 that will help GAAP earnings, but the comment above is quite bearish as the organic growth is large and taken on face value, pointing to an enormous increase in costs to expense, almost countering the large operating income gains. Maybe management is being too conservative and building a low bar; we don’t know. Certainly, there is likely to be volatility in earnings expectations.

So what is the prize? An operating system to rival Apple is probably wishing far too much. Meta gave some hints, but they are not specific. A subscription model was mooted based on maybe AI ad efforts, like the Manis acquisition, a subscription-based personal assistant, shopping assistant and different types of ads. “There are all these different things as well as several things that we think are new that we're going to try that are not just extensions of the current things that we're doing….So yes, we are focused on things beyond ads”

SUMMARY and VALUATION

Despite incredible profitability, Meta's returns on capital are declining. These declines are expected to continue for at least this year. That will lead to volatility from time to time. Although huge, the capex is not a company-threatening venture but is likely to throw up opportunities to add at some point as progress waxes and wanes. The core business remains very strong, and although the new ventures may not prove disastrous, but maybe disappointing; we do not know yet.

At $738 and assuming 16% 5y eps growth, and an exit Pe of 22X gives an 8% return. A 10% pa return is then generated at a $680 buy price. This assumes a relatively successful profit path. Under a scenario where costs grow at a pace above revenues for an extended period, an entry price below $600 looks warranted.

 

ASML FY25--ASML actually sneaks into the top 10 holdings

A lot is going on here, and almost all of it has tipped to the positive. There is an improvement in base profitability for ASML, and whether this is sustainable is the question.

There were a few positive surprises in the result. Firstly, bookings that were lagging compared to revenues surged in Q4. Secondly, there was some concern in the market that lithography intensity would fall away with memory chip advances. Not only did memory demand spike and look sustainable, but litho intensity was expected to increase as well. A double positive.

ASML produces 44 EUV machines and now has the capacity to expand that to 90 machines, as well as DUV growing from 279 to 600. The 2025 revenues were 33Be, and guidance for 2030 is 44-60Be. There is a chance that if demand holds, this number will be raised. The progress is limited by the build rate for customer FABs and ASML executing manufacturing well. TSMC has committed to extra growth, memory makers as well, and Intel could increase further.

GM are also expected to climb and have been solid, mix changes will impact with the percentage of EUV/DUV, wet/dry immersion and the amount of upgrade/install work, all helping to increase margins.  There will be movements from period to period.

The adoption of High NA was a concern, but it appears to be making headway. GM will be initially diluted as high NA is installed. ASML noted that installation is rarely backtracked, and the machines are getting positive results in the field.

ASML is a specialty manufacturer, and as revenues and units increase, there is likely to be positive operational leverage.

SUMMARY and VALUATION

As good as the numbers look for ASML, it must be kept in mind that much is dependent on the AI investments continuing from the downstream customers. The chip makers and tool makers, like ASML, are benefitting greatly from this spend.

Portfolio concentration risk must be kept in mind that these companies are largely driven by the same forces. TSMC, NVDA and ASML etc are all beneficiaries of the downstream AI spending.

Using a scenario analysis of differing eps growth rates over the next 5 years and different exit PE from my base case to more bullish cases, we see the following.

SP 1455usd	CAGR returns
	EPS
exit PE	16%	20%	25%
27	3%	6%	11%
30	5%	9%	13%
35	8%	12%	17%

 

My conclusions are that ASML is a hold at these levels and maybe waiting or selling a bit, and awaits future volatility is best. Buying around 1100 (usd) looks attractive.