Day: February 27, 2021

1 great way for Aussies to get exposure to Tencent and Alibaba

Wooden blocks depicting letters ETF, ASX ETF

There is a great way for Aussies to get exposure to the Asian technology giants of Tencent and Alibaba. It’s an exchange traded fund (ETF) called Betashares Asia Technology Tigers ETF (ASX: ASIA).

What is Tencent and Alibaba?

Tencent are Alibaba are two of the biggest technology businesses in the world. They both have very diverse operations and assets.

Alibaba is actually more than 20 years old. The company is best known for its large retail businesses including Taobao, Tmall and Alibaba. It also has divisions focused on food delivery, logistics, videos, organisation collaboration software and cloud computing.

Tencent is also over 20 years old. It has investments and operations in things like online games, WeChat, QQ, video, news, music, online literature, mobile payments and cloud computing. But it’s not solely a Chinese-based business, it’s invested in businesses like Riot Games, Epic Games, Supercell and Miniclip.

Both of these businesses have been growing revenue and profit at a fast pace for many years and the share prices have largely been following that too.

But Tencent and Alibaba are not directly listed on the ASX. However, there is one way to Aussie investors to get a good amount of exposure to them in a single investment.

Betashares Asia Technology Tigers ETF

This is where the ETF comes in.

It gives Aussies exposure to 50 of the largest technology businesses outside of Japan.

Looking at the holdings of this ETF, Alibaba and Tencent make up 15.4% of the portfolio combined. This is a very sizeable position for just two businesses.

But there are also several other businesses which have a weighting of more than 5% of the ETF. They are: Taiwan Semiconductor Manufacturing (10.9%), Samsung Electronics (10.7%), Meituan (9.2%), JD.com (5.2%) and Pinduoduo (5.1%).

Whilst all of the businesses in Betashares Asia Technology Tigers ETF count as technology, BetaShares has split the portfolio into different sectors and shows the allocation: internet and direct marketing retail (28.2%), semiconductors (18.8%), interactive media and services (17.8%), technology hardware, storage and peripherals (13.9%), interactive home entertainment (8.2%), IT consulting and other services (5.3%), electronic manufacturing services (2.3%), movies and entertainment (1.1%), semiconductor equipment (0.9%) and other (3.5%).

It has a lot of diversification for just 50 different businesses.

It’s true that the majority of the ETF is actually invested in businesses in China – with a weighting of 55%. However, there’s another 21.4% listed in Taiwan, 18.1% in South Korea, 4.9% in India, 0.2% in Hong Kong and 0.4% in ‘other’.

The cost of this ETF is an annual fee of 0.67% per annum.

The returns of this ETF have been very strong. Over the last year, it has delivered a net return of 71.5%. Since inception in September 2018, the ETF has made returns of an average return per annum of 37.2%.

BetaShares shows the returns of the index that Betashares Asia Technology Tigers ETF tracks. Over the last five years the index has returned an average of 28.3% per annum.

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*Returns as of February 15th 2021

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended BETANASDAQ ETF UNITS. 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 compelling ASX shares to buy in March 2021

steps to picking asx shares represented by four lightbulbs drawn on chalk board

There are plenty of ASX shares that may be compelling opportunities in March 2021.

The share market has taken a bit of a tumble recently, so that gives investors the opportunity to buy shares at a lower price.

The two ASX shares below have already demonstrated the ability to make strong long-term returns.

Betashares Global Cybersecurity ETF (ASX: HACK)

According to BetaShares, this exchange-traded fund (ETF) gives investors exposure to many of the world’s leading cybersecurity companies with a single investment.

The portfolio of this ETF includes both worldwide cybersecurity leaders as well as emerging businesses from various global locations.

Why is cybersecurity a compelling investment? BetaShares says:

With cybercrime on the rise, the demand for cybersecurity services is expected to grow strongly for the foreseeable future.

In terms of exposure, the biggest 10 positions in the portfolio are: Crowdstrike Holdings, Zscaler, Cisco Systems, Accenture, Splunk, Fortinet, Fireeye, Palo Alto Networks, Sailpoint Technologies and Proofpoint.

Most of the portfolio is listed in the US, almost 90% of it. There are only four other countries with a weighting of more than 1%: the UK, Israel, Japan and France.

It has an annual management fee of 0.67% and the net returns have been an average of 20.9% per annum since inception in August 2016. Over the last three years the average returns per annum have been 25.1%.

Xero Limited (ASX: XRO)

Xero is a software ASX share that provides ‘beautiful’ accounting tools for business owners, accountants, bookkeepers and financial advisors.

It has become one of the largest tech businesses on the ASX with a market capitalisation of $17.6 billion, according to the ASX.

A few months ago Xero reported its FY21 half-year result which, according to management, demonstrated the resilience of its global subscriber base, and its proactive response supporting customers and partners, in a challenging COVID-19 environment. While COVID-19 had some impact on Xero’s ability to acquire new customers during the period, subscribers grew by 19% to reach 2.45 million with all markets showing positive progress. Australia has become the first market with one million subscribers.

In that half-year result, Xero grew its operating revenue by 21% to NZ$410 million and earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 86% to NZ$120.8 million. The NZ$71.2 million revenue increase led to a NZ$55.9 million rise of EBITDA, a NZ$49.4 million increase of free cashflow and a NZ$33.2 million increase in net profit.

Xero’s gross margin percentage rose from 85.2% to 85.7%, which means that a higher percentage of revenue can help the EBITDA grow.

In terms of the outlook, Xero said:

Xero is a long-term orientated business with ambitions for high-growth. We continue to operate with disciplined cost management and targeted allocation of capital. This allows us to remain agile so we can continue to innovate, invest in new products and customer growth, and respond to opportunities and changes in our operating environment.

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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 February 15th 2021

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS and Xero. 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 ASX 200 shares to buy for income

man handing over wad of cash representing ASX retail capital return

There are some very good S&P/ASX 200 Index (ASX: XJO) shares that could be worth owning for income.

Some businesses are paying dividends with yields that are much higher than what other assets are paying right now.

The two ASX 200 shares in this article operate in fairly defensive and growing industries:

Centuria Industrial Reit (ASX: CIP)

This real estate investment trust (REIT) gives Aussie investors exposure to the largest domestic pure play industrial property investment vehicle.

It’s rated as a buy by UBS with expectations of more acquisitions and continuing high-quality tenants at its properties. The broker has a share price target for Centuria Industrial REIT of $3.38.

It currently owns around 60 industrial assets that are worth around $2.5 billion. The aim of the REIT is to grow both the income and capital value. It has around 90% of the portfolio weighted to Australia’s strong-performing eastern seaboard industrial markets. It currently has an occupancy rate of 97.7%.

Centuria Industrial Reit has a weighted average lease expiry (WALE) of 9.8 years, which has increased by 5.5 years since December 2016.

Whilst the portfolio has been growing, the gearing of the ASX 200 dividend share has been reducing. It has fallen 13.3 percentage points from 42.9% at December 2016 to 29.6% at December 2020.

The REIT’s net tangible assets (NTA) per unit has been steadily growing over time. In the FY21 half-year result it revealed that its NTA had grown year on year from $2.83 to $2.99.

Centuria Industrial Reit has upgraded its guidance twice for FY21. It’s now expecting FY21 funds from operations (FFO) to be no less than 17.6 cents per unit.

In FY21 the REIT is expecting to pay an annual distribution of 17 cents per unit, which equates to a distribution yield of 5.75% for income-seekers.

Bapcor Ltd (ASX: BAP)

Bapcor likes to describes itself as the leading auto parts business in Australasia. It operates a number of different brands including Burson, Precision Automotive Equipment, AAD, Bearing Wholesalers, Commercial Truck Parts, Autobarn, Autopro, Midas and ABS.

It’s one of the few ASX 200 shares that grew the dividend in FY21, even if it was just an increase of 2.9%.

The FY21 dividend is shaping up to be a much larger increase after a half-year dividend increase of 12.5%.

There was particularly strong growth in its retail businesses during the six-month period with Autobarn same store sales up 37.1%.

Bapcor still has a large growth targets. Over the next five years it wants to increase its number of trade stores from 195 to 240, whilst also growing the percentage of own brand sales from 29% to 35%.

For its commercial vehicle segment, it wants to reach 40 light vehicle locations (currently 16) and 50 heavy vehicle locations (currently 31).

Looking at Autobarn, it wants to reach 200 Autobarn stores, it currently has 133. It’s targeting 500 service locations, which would be an increase from the current 105.

One growth area that the ASX 200 share is really targeting is South East Asia. It now has six locations in Thailand, but it wants to reach at least 80.

In the FY21 half-year result it saw revenue growth of 25.8% to $883.6 million, earnings before interest and tax (EBIT) growth of 45% and net profit growth of 49.7%.

Based on the last 12 months of dividends, it has a grossed-up dividend yield of 3.9%.

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Returns As of 15th February 2021

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. 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 of the best ASX 200 results from last week

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Last week was another busy one for investors with an endless stream of results releases.

Three results which were arguably among the best released over the period are summarised below. Here’s what you need to know about them:

Cochlear Limited (ASX: COH) 

This hearing solutions company released a surprisingly strong half year result last week. For the six months ended 31 December, Cochlear posted an underlying net profit of $125.3 million. Impressively, despite facing tough trading conditions caused by COVID-19, Cochlear’s profit was down only 4% in constant currency from its record first half profit in the prior corresponding (and COVID-free) period.

Looking ahead, a strong second half is expected by management. It has provided full year underlying net profit guidance of $225 million to $245 million. This represents a 46% to 59% increase on FY 2020’s profits.

This went down well with analysts at Macquarie. In response to its result, the broker retained its outperform rating and lifted its price target to $245.00.

Goodman Group (ASX: GMG) 

Goodman Group is on form again in FY 2021 and delivered a strong half year result. The global integrated property company reported a 16% increase in operating profit to $614.9 million for the six months ended 31 December. This was driven by new developments, strong demand, and like-for-like net property income growth of 3%.

Also going down well with investors was management’s guidance for the full year. It now expects operating profit growth of 12% in FY 2021. This compares to its previous guidance of 9% year on year growth.

Macquarie was also impressed with this result. It responded by upgrading Goodman’s shares to an outperform rating with an improved price target of $20.39.

Zip Co Ltd (ASX: Z1P) 

This buy now pay later provider has continued its meteoric growth in FY 2021. Last week it released its half year results and reported a 141% increase in total transaction volume (TTV) to $2.32 billion. This underpinned a 130% jump in half year revenue to $160 million.

Zip’s stellar growth was driven largely by a significant lift in active customers. At the end of December, the company had a total of 5.7 million active customers, which was an increase of 217% over the prior corresponding period. In addition to this, it revealed that it now has more than 38,500 merchants across the United States, Australia, New Zealand, and the UK. Looking ahead, Zip advised that it has global momentum and the foundations to accelerate growth in the second half.

In response to the result, analysts at Morgans retained their add rating and lifted their price target to $12.00.

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 February 15th 2021

More reading

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 Cochlear Ltd. and ZIPCOLTD FPO. The Motley Fool Australia has recommended Cochlear 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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