Day: January 9, 2021

Leading broker names the emerging ASX shares to buy in 2021

man looking at mobile phone and cheering representing surging asx share price

Analysts at Bell Potter have been busy finding ASX shares from several industries that they believe are best placed to have a strong 2021.

On this occasion, I’m going to look at emerging shares. Here are a couple that they rate highly:

PointsBet Holdings Ltd (ASX: PBH)

Bell Potter is a fan of this sports betting company and has placed a speculative buy and $15.10 price target on its shares.

The broker notes that the company has a significant opportunity in the United States market, where it currently has partnerships in 12 US states with a combined population of 94 million. It also sees huge potential from a “company transforming” media partnership with NBCUniversal.

Bell Potter commented: “This incorporates the largest sports audience of US media companies of 184m, spanning the NBC and Telemundo (Hispanic) national networks, 8 Regional Sports cable channels, as well as other cable channels and digital networks.”

Looking ahead, the broker appears to believe that PointsBet is well placed to “execute on its target of generating US$1bn of annual revenue by 2025, with a pathway to 10% market share in each US state.”

The PointsBet share price ended the week at $12.00.

Resimac Group Ltd (ASX: RMC)

Another emerging company the broker is positive on is Resimac. It has a buy rating and $2.50 price target on Australia’s leading nonbank mortgage provider.

It notes that the company is currently servicing over 50,000 customers with principally funded assets under management of $12.7 billion.

However, it appears to believe this could grow strongly in the future. Especially given how it “does not have the overhead of maintaining an extensive nationwide branch network, rather it has relationships with over 85% of Australia’s mortgage brokers, where customer service and a quick approvals process have been key factors for RMC increasing originations.”

Looking ahead, the broker is expecting a strong first half result. Noting that management’s profit guidance implies an increase of ~75% on the second half of FY 2020.

It is also expecting the company’s full year result to be strong, thanks partly to the benefits of a lower impairment charge. The broker notes that Resimac has seen the percentage of customers in COVID payment deferrals reduce from 10% to 4.4%.

The Resimac share price ended the week at $2.13.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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What are the best dividend shares to buy now for a passive income?

little pig piggy banks falling from the blue sky, indicating a windfall of income from ASX dividend shares

Taking the time to identify the best dividend shares to buy now could be a useful exercise for all passive income investors.

After all, the world economy faces a challenging period that could cause disruption when it comes to shareholder payouts.

As such, finding high-yielding shares with affordable dividends that can grow in the coming years could be a sound move. It may lead to an attractive income return in the long run.

Financially-sound companies can make the best dividend shares

The financial strength of a business is likely to have an impact on whether it is among the best dividend shares to buy today. The challenging operating conditions of 2020 could spill over into 2021. As a result, many companies may face threats from weak consumer confidence, rising unemployment and lower levels of business investment that have a negative impact on their financial prospects.

Therefore, buying dividend shares with sound financial positions seems to be a logical approach – especially in the current economic climate.

Companies with low net debt levels, or even net cash positions, and significant headroom when making interest payments on debt could offer greater resilience when paying dividends. Similarly, companies that are well within their banking covenants may be less likely to need to cut dividend payouts in order to satisfy their lenders.

Although assessing the financial positions of companies can help an investor to find the best dividend shares, it is by no means a water-tight method. However, it can significantly reduce the risk of a disappointing passive income through increasing the reliability of dividend payouts in the coming years.

Dividend growth potential over the long run

As well as financial stability, the best dividend shares are likely to offer long-term passive income growth. The scale of monetary policy stimulus enacted over the past 12 months means that higher global inflation could result over the coming years. This may have a negative impact on the spending power of investors who are unable to generate attractive growth in passive income from their portfolio.

As such, buying companies that have an attractive earnings growth profile could be a sound move. Higher earnings may mean they can afford to pay a rising dividend that beats inflation. Similarly, businesses that pay out a low proportion of net profit as a dividend may find it easier to raise shareholder payouts in the coming years.

Identifying companies with high earnings growth and low dividend payout ratios may mean obtaining a lower dividend yield today. Such companies could be in high demand due to their impressive future outlooks.

However, if they deliver strong dividend growth, they could prove to be the best dividend shares available today for long-term investors. They may also produce attractive capital returns, as an improving financial performance generally merits a higher share price.

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Returns As of 6th October 2020

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Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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4 top ASX share picks for 2021

asx shares to shine in 2021 represented by the numbers 2021 lit up against night sky

There are some ASX shares that a market expert thinks are top picks for 2021.

James Gerrish from Market Matters has identified some businesses that could be worth watching this year.

Market Matters are very bullish about shares and the overall ASX in 2021. Here are three of those picks:

Commonwealth Bank of Australia (ASX: CBA)

Mr Gerrish’s low risk pick in the banking sector is CBA. He acknowledged that the biggest bank isn’t an earth-shattering pick. Market Matters thinks that bank prices could rally for at least the next six to twelve months. Mr Gerrish thinks the CBA share price could rise back to the mid-$90s.

One of the points for banks is that they borrow for the short-term and lend for the long-term. CBA is benefiting from a steepening yield curve at a time when loan growth is likely to surge.

As a reminder, FY20 statutory net profit after tax (NPAT) dropped 12.4% to $9.63 billion and cash NPAT declined 11.3% to $7.3 billion. The net interest margin (NIM) declined by another 2 basis points to 2.07% because of the impact of lower interest rates.

The latest financial result was the FY21 first quarter trading update which showed that CBA generated $1.9 billion of statutory NPAT and $1.8 billion of cash profit, down 16% on the prior corresponding period. CBA said that income was stable, but expenses (excluding customer remediation) were up 2%. In that latest quarter, the CET1 ratio continued to strengthen as it grew 20 basis points to 11.8%.

Looking at the Commsc earnings estimates for CBA shares, it’s valued at 21x FY21’s estimated earnings.

Lendlease Group (ASX: LLC)

Mr Gerrish said that Lendlease is in the sweet spot as property values rebound strongly and governments focus on infrastructure development. The target share price for Lendlease over the next 12 months is $17, which is just over 30% higher than the current Lendlease share price.

The FY20 result was heavily disrupted by COVID-19 impacts. The FY20 bottom line was a statutory loss after tax of $310 million. The core business delivered a net profit after tax of $96 million, though the second half of FY20 saw a net loss of $202 million. The core business has a development pipeline of $113 billion, which is up 48%. One of the key projects is the San Francisco Bay area project which is a $21 billion deal with Google to develop three of the internet giant’s major districts in the San Francisco Bay area over 10 to 15 years into mixed-use communities.

It recently completed the sale of its engineering division, though it kept the Melbourne Metro project – amending documents have been signed to deliver the tunnels and stations.

According to Commsec, the Lendlease share price is valued at 23x FY21’s estimated earnings.

Monadelphous Group Limited (ASX: MND)

Mr Gerrish said that Monadelphous, which is skewed towards engineering and construction in the mining sector, had an initial $13 price target but the strong pipeline of work brings a potential share price of $18 into play. At a current price of just over $14, that suggests room for growth of almost 30%.

Monadelphous recently announced it had secured new construction and maintenance contracts with both Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP) with a combined value of approximately $60 million.

There is a three-year master services contract with Rio Tinto for the delivery of sustaining capital projects across various mine sites and port operations through the Pilbara region in Western Australia. There’s another three-year contract with Rio Tinto to provide mechanical, electrical and access maintenance services for fixed plant shutdowns at Rio’s Gove operations in the Northern Territory.

The BHP contract is a 12-month extension to its existing mechanical and electrical maintenance, shutdown and project services across BHP’s WA nickel operations.

According to Commsec, it’s priced at 23x FY21’s estimated earnings.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

More reading

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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2 of the best ASX shares to buy this month

Best asx shares represented by multiple hand reaching for winners cup

A new year is here, so what better time to look at giving your portfolio a lift with a new addition or two.

But which shares should you buy? Listed below are two top ASX shares which have been tipped as potential market beaters over the next few years. Here’s what you need to know about them:

Kogan.com Ltd (ASX: KGN)

Kogan is one of Australia’s leading ecommerce companies. It has been growing very strongly this year after the pandemic accelerated the adoption of online shopping.

Pleasingly, its strong form has continued even after retail stores reopened as normal once again. For example, during the first four months of FY 2021, Kogan’s sales were up 99.8% on the prior corresponding period and its operating earnings were up an even greater 268.8%.

And with more and more spending expected to shift online in the future, Kogan looks well-positioned for growth over the 2020s. The company is also looking to accelerate its growth with earnings accretive acquisitions such as Mighty Ape.

Canaccord Genuity has a buy rating and $25.00 price target on the company’s shares. It was pleased with the Mighty Ape acquisition and sees the potential for significant revenue and cost synergies.

NEXTDC Ltd (ASX: NXT)

Another share to look at is NEXTDC. It is a leading data centre-as-a-service provider with a growing network of centres in key locations across Australia. As with Kogan, it has been a very strong performer this year because of tailwinds caused by the pandemic.

The accelerating shift to the cloud has led to a significant increase in demand for capacity in its data centre and underpinned strong revenue and earnings growth.

Looking ahead, the company still has a long runway for growth in Australia and opportunities to expand internationally. In respect to the latter, the company has recently opened offices in Singapore and Tokyo and is weighing up its options in these markets.

Morgan Stanley is a fan of the company and believes it is well-placed for growth. The broker has an overweight rating and $14.60 price target on its shares.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

More reading

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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