Day: January 21, 2021

Here’s why the Funtastic (ASX:FUN) share price is sinking today

Child holding cash and scratching head

The Funtastic Limited (ASX: FUN) share price is falling today after the company announced the sale of its confectionery business.

At the time of writing, the Funtastic share price is down 7.6% to 12 cents.

What’s lowering the Funtastic share price?

The Funtastic share price is dropping lower after investors took note of the company’s change in strategic direction.

In today’s release, Funtastic advised it is seeking to bring new products to market, expand e-commerce operations, and explore growth opportunities.

Based on management’s decision to overhaul the company’s existing portfolio, the company has sold off its confectionery business to Sweet Season Pty Ltd.

This follows its recent acquisition of Hobby Warehouse Group, which includes e-commerce businesses Hobby Warehouse, Toys’R’Us and Babies’R’Us.

The agreed sale of its candy business along with current inventory, went for the price of $1.05 million.

The company said that at the end of July 2020, the confectionery business recorded $4.2 million in revenue for the entire financial year. This accounted for 17.1% of total group revenue before the acquisition of Hobby Warehouse Group.

Net assets from the confectionery business amounted to $195,000 at the end of the same period. This represented just 4% of the total assets held by Funtastic.

What did management say?

Commenting on the divestment, Funtastic CEO and managing director Louis Mittoni said:

The sale of the confectionery business is part of the ongoing strategic review of all product ranges, customer segments and operations.

It accelerates materialisation of value for part of the business and will allow investment to build scale and to right-size the business, aligned with the planned growth and focus of the company to deliver our mission of encouraging children to engage with as many forms of play as possible and assist people to explore, create and live life more fully.

Funtastic share price snapshot

Over the past 12 months, the Funtastic share price has zoomed higher, reflecting gains of more than 470%.

The company’s shares took a dive during the March COVID-19 meltdown and were priced at just 0.7 cents per share. However, trading conditions improved, which saw its shares reach a 52-week high of 19.5 cents in October.

Based on the current share price, Funtastic commands a market capitalisation of around $101 million.

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Motley Fool contributor Aaron Teboneras 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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3 reasons the BHP (ASX:BHP) share price could be in the buy zone

3 asx shares to buy depicted by man holding up hand with 3 fingers up

In afternoon trade the BHP Group Ltd (ASX: BHP) share price is on course to end the week with a decline.

At the time of writing, the mining giant’s shares are down 2% to $45.96.

Despite this decline, the BHP share price is up an impressive 34% over the last six months.

Is it too late to buy BHP shares?

While it is unlikely the BHP share price will be generating another 34% gain over the next six months, one leading broker still sees enough value in its shares to recommend it as a buy.

According to a note out of Goldman Sachs, the broker has retained its buy rating and put a price target of $47.90 on the company’s shares.

This price target implies potential upside of 4.2% excluding dividends and 9.2% including them.

Why does Goldman rate BHP?

There are three key reasons why Goldman Sachs has held firm with its buy rating on the BHP share price.

It explained that one of these is its strong earnings and free cash flow.

“(1) Strong earnings growth and FCF: we forecast a c. 20% increase in EBITDA and c. 50% increase in FCF in FY21, equating to a c. 9% FCF yield, driven partly by a fall in capex to US$7bn as major minerals projects are completed, and lower unit costs, but mostly due to our positive view on met coal, copper and oil prices in CY 2021.”

Goldman also likes BHP for its strong production growth potential. Particularly with copper and oil.

“(2) Strong production growth: BHP’s group Cu Eq production should increase by 4-5% in FY22 and FY23, driven by a 250kt lift in copper volumes from Spence and Escondida, 4Mt of met coal with rebounding demand, and 10MMboe of oil volumes with new production from Mad Dog II and Atlantis Phase 3, and the recent 28% acquisition of Shenzi. BHP will likely also see a significant margin kicker in the Pilbara from the high grade South Flank deposit. Longer term, we have a positive view on BHP’s organic growth options, particularly in oil where we see possible 50% volume growth to +150MMboe driven by Trion, T&T North and Scarborough.”

And finally, another reason to be positive is its portfolio reshuffle.

“(3) Benefits from portfolio optimisation: ongoing with the announcement to divest thermal coal and Bass Strait gas.”

All in all, the broker expects this to underpin strong earnings over the next three years.

As a result, it is forecasting dividend yields of approximately 5% per annum through to FY 2023. Which could be very attractive for income investors in this low interest rate environment.

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Motley Fool contributor James Mickleboro 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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Why the Carbon Revolution (ASX:CBR) share price zoomed 8% higher

racing higher

The Carbon Revolution Ltd (ASX: CBR) share price is on course to end the week with a strong gain.

In afternoon trade the carbon fibre wheels-focused advanced manufacturing company’s shares are up 8% to $2.96.

Why is the Carbon Revolution share price storming higher?

The catalyst for the strong gain by the Carbon Revolution share price on Friday was the release of its second quarter update this morning.

According to the release, as expected by management, Carbon Revolution’s sales continued to be impacted by COVID-19 headwinds during the second quarter. The quarter was also subject to manufacturing seasonality on another key customer program.

This led to the company reporting quarterly revenue of $5.6 million. This was down 52.8% on its first quarter revenue and 48.1% on the prior corresponding period.

Quarterly wheels sold were 1,972 for the three months, a decrease of 55.4% from the first quarter and 43.1% from the same period last year.

However, management’s commentary in relation to the second half appears to be the reason the Carbon Revolution share price is heading higher today. It advised that it expects wheel sales growth to return in the second half of FY 2021.

Outlook

Management is positive on the second half. It explained: “The business continues to monitor the local and global impacts and risks related to COVID-19. There remain uncertainties arising from the ongoing impacts of COVID-19 and the automotive industry’s response in the near-term. On the basis of all currently available information, the Company expects to deliver strong sales growth in FY21.”

Supporting its growth will be the company’s investment in its Mega-line manufacturing process. This process is expected to lower costs, increase capacity, and help the company secure larger programs.

Management commented: “The design of the Mega-line manufacturing process has progressed significantly and is now ready to proceed once new programs are awarded. The Company expects that significant new programs will be secured in the next 6 months and these new programs will underpin the decision to invest in the first mega line. This demand for Megaline capacity is anticipated to come from both existing and new customers.”

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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 Carbon Revolution Limited. The Motley Fool Australia has recommended Carbon Revolution Limited. 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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Why the Botanix (ASX:BOT) share price is flying 6%

cannabis leaves on a rising line graph representing growth of ASX cannabis shares

Botanix Pharmaceuticals Ltd (ASX: BOT) shares are lifting off today after the company released its quarterly report. At the time of writing, the Botanix share price is trading 6.06% higher at 17.5 cents.

What is driving the Botanix share price?

The Botanix share price is climbing higher today as the cannabinoid company released its quarterly report to the ASX.

In its clinical development sector, Botanix completed a successful meeting with the United States Food and Drug Administration (FDA) regarding clinical studies for its BTX 1801 synthetic cannabidiol product in the US. According to Botanix, the FDA provided feedback on how the company might obtain fast-track designation for the product’s new drug application (NDA).

Additionally, the FDA advised that the proposed drug development plan and data package presented were sufficient to initiate clinical development in the US and ultimately support an NDA submission. The FDA encouraged Botanix to request a fast-track designation for BTX 1801 following the submission of an IND application.

Furthermore, Botanix reported that its dermatology program, BTX 1702, is poised to commence. The company’s phase 1 clinical study will begin recruitment once travel and clinical trial restrictions across Australia and New Zealand cease.

Corporate update

During the quarter, Botanix had net cash flows of $2.8 million, with $2.2 million being invested in research and development.

Botanix retained $19.2 million in cash at the end of the quarter and claims to be in a strong financial position.

About the Botanix share price

Botanix is a clinical stage synthetic cannabinoid company focused on developing safe and effective treatments for serious skin diseases. It aims to leverage the anti-inflammatory, immune modulating and antimicrobial properties of synthetic cannabidiol to this point.

Investors will be anticipating the outcome of the company’s application for an R&D tax incentive refund of approximately $6.8 million. If received, funds will be invested into product development. In addition, Botanix continues to assess opportunities and partnerships in the development of new products that can be rapidly brought to market for antimicrobial or dermatological applications.

The Botanix share price has increased 75% over the past twelve months and is currently trading just shy of its 52-week high. Based on the current Botanix share price, the company has a market capitalisation of around $141 million.

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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.

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Motley Fool contributor Daniel Ewing 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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