DNA Sequencing Equipment and Procedures – Better, Faster, Less Expensive

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In the past year, we’ve seen a lot of change in the DNA/Genome sequencing industry with the introductions of new instruments to make processes faster and more affordable.

However, DNA sequencing equipment creates significant financial complications for labs, increasing the pressure on maintaining the expenses for biomedical research. This demand for more affordable instruments and the need for cost-effective procedures has resulted in Illumina’s new plans to decrease procedure costs to as low as $100, spurred various scientists in the US and Sweden to develop a DNA-analyzing kit that can run on a smartphone, and much more.

With the industry’s technology improving quickly, we’re also seeing rising interest from potential competitors abroad – specifically in China’s market for DNA sequencing. In 2015, the Chinese sequencing market reached $877.6 million, and is expected to reach almost $2.5 billion by 2021, according to a recent statistics from PR Newswire.

As a whole, sequencing instruments, consumables and others as a market is expected to grow from $546.8 million in 2016 to $976.6 million by 2021 at a CAGR of 12.3%.

Our insights on the industry shows that as the market grows year over year, much of the equipment, even though introduced only a couple years ago, loses value quickly and becomes inferior to the latest generation of instruments. As more companies race to develop better, faster, and more cost-feasible sequencing equipment, we’re looking ahead to see what new and exciting capabilities are introduced.

Solar on the Rise – with Germany, Italy, and the US Taking Lead

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On a global basis, Europe has taken the lead as the most advanced market for solar energy generation, with Germany holding the title for having the largest installed energy capacity followed by Italy, the US, Spain and China, who produces 2/3 of the global supply of photovoltaic (PV) cells, or solar panels. As of 2015, there are approximately 240 electrical solar power generation facilities in the U.S. Currently solar energy provides less than 1% of the entire energy consumed. The U.S. market is highly concentrated, with the top 10 utility companies accounting for approximately 80% of the total solar generating capacity. Current forecasts call for solar generated electricity consumption to grow at an annual compound rate of 9% from 2015-2018.   Large scale solar installations are responsible for the majority of industry growth.  According to the Federal Energy Regulatory Commission (FERC), in 2013 the industry grew by 43%, adding 2.9 GW of solar energy to the grid.

Industry drivers, or those that materially affect supply and demand for solar inverters and the market as a whole, include energy prices and government policies.  As crude oil and related traditional energy prices rise, consumers and businesses will look to alternative forms of energy in order to lower costs, which should benefit the solar market.  The solar market is also highly dependent on government policies, including both regulations and incentives.  Consumers and businesses often receive tax benefits for utilizing solar power and if those benefits were to expire or disappear it would have a significant negative impact within the industry.

The solar inverter market, an input in the overall solar industry, has become increasingly competitive and, as a consequence, profit margins have fallen and larger companies are acquiring smaller rivals.  Solar inverter manufactures are optimizing their competitiveness by improving technology as opposed to cutting costs.  This includes DC/AC ratio optimization, increased voltages and neutral point clamped topology (NPC).  These help to lower production costs and improve inverter efficiency.  Current voltage standards have been moving from the traditional 600V of direct current to 1000V of direct current facilities, thereby allowing for the installation of larger solar projects producing more energy at less cost and improved efficiency.  Current trends for solar inverter technology include moving to a transformer-less system by improving the internal components of the inverter, which allows them to operate independently as well as increasing voltage and throughput capacity.

America’s Amusement Parks

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The U.S. amusement parks and arcades industry includes about 3,400 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $15 billion. Amusement parks account for about 15 percent of the establishments and about 90 percent of the revenue; arcades account for about 85 percent of the establishments and about 10 percent of the revenue. Demand and business activity is highly dependent on consumer spending – since amusement parks and family fun centers are relatively expensive entertainment and the number of customers declines during economic downturns. With high fixed-costs, even a small drop in attendance can have major financial consequences.

The profitability of individual companies depends on good marketing. Large companies can more easily build expensive rides and have economies of scale in operations and advertising. Smaller companies can compete by serving smaller markets or offering special rides. The U.S. industry is highly concentrated: the 50 largest companies generate about 85 percent of revenue.

Container Shipping Industry – Another Record Year (nothing to be proud of)

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2016 has been a year of record M&A activity in the shipping industry – not the kind of record to be proud of. Many of the world’s largest shipping lines have either merged, consolidated or been acquired by larger competitors, hoping to stay competitive. Container shipping capacity is expected to increase 6% in 2016 on top of a previous increase of 9% in 2015.   Demand growth is forecasted to be 3%-4.5% in 2016, an improvement over the paltry 2% in 2015. According to an article published in January 2016 by Drewry Maritime Research, global freight rates fell by as much as 9% during 2015 compared to 2014. The Boston Consulting Group reported that overcapacity of TEU will continue to rise and may double by 2020. Industry capacity will be between 8.2% and 13.8% larger than demand by the end of 2020, compared with the 7% excess supply in 2015.

Cereal and Granola Manufacturing and the Health Concious Revolution

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Our diverse clientele residing in many different industries allows us to hone our valuation skills in everything from aerospace equipment to herbal vitamin manufacturing. Recently,  our valuation projects in the cereal and granola industry, an arena seeing much transformation with Americans’ increased concerns of dietary transparency.

In recent years, you’ve probably noticed the influx of gluten-free alternatives. While breakfast cereals and bread toast are still commonly consumed in many developed countries, the cereal industry has faced challenges overcoming unhealthy perceptions due to campaigns of the high sugar content found in some brands. In response, cereal manufacturers have moved towards high-fiber alternatives that are growing in popularity. Additionally, gluten-free alternatives have moved into breakfast cereals as well. According to a study in Nutraceuticals World, although in value terms, gluten-free brands account for just 1% of global HW breakfast cereal sales in 2015, they grew by an impressive 79% between 2010 to 2015 – the second fastest growing category fueled by demand in the US, Australia, and the UK. As of 2015, clean-labeled breakfast cereals were worth $3 billion, with “no artificial colors” and “no artificial flavors” delivering $2 billion in sales each.

In lieu of the health conscious trend, convenience has also taken up the spotlight. Snack bars are also filling in the need for eaten-on-the-go, portable options that are extremely popular with Millennials, valued at $11 billion in 2015.

As we continue to conduct research in these diverse and dynamic industries, we’re interested to see how well-known brand names in the industry evolve to consumer lifestyles and health preferences – and ultimately how these trends and preferences affect valuations.