Day: November 27, 2021

Morgans rates these ASX 100 shares as buys

A man with a yellow background makes an annoncement, indicating share price changes on the ASX

The S&P/ASX 100 Index (ASX: XTO) is home to a number of blue chip shares. Two that have recently been named as buys by analysts at Morgans are listed below.

Here’s why its analysts are bullish on them:

Tabcorp (ASX: TAH)

Morgans is feeling positive about the Tabcorp share price. This is due partly to the belief that the market is undervaluing its Lotteries and Keno (L&K) business.

The broker currently has an add rating and $5.70 price target on the gambling company’s shares.

Morgans commented: “While COVID restrictions have impacted the earnings recovery for Wagering & Gaming Co, we continue to view the risk/return profile of TAH as asymmetrically skewed to the upside over the next ~12 months as the demerger of the high quality, infrastructure-like Lotteries & Keno business progresses.”

“At current levels, we think L&K is trading on ~15x EBITDA and think this multiple can re-rate to between 16-20x on a standalone basis over time, supported by offshore peer comps and domestic infrastructure names,” it added.

Westpac Banking Corp (ASX: WBC)

Another ASX 100 share the broker is positive on is Westpac. Australia’s oldest bank is Morgans’ preferred pick of the majors due to its belief that it offers the most compelling valuation in the group.

And while there were aspects of its recent full year results that disappointed, Morgans believes the sell off that ensued was an overreaction.

Its analysts currently have an add rating and $30.50 price targets on the bank’s shares.

Morgans explained: “We find the management of the margin-volume tradeoff in Australian home lending in FY21 to be disappointing and we hope for better management of this tradeoff going forward.”

“Having said this, our view has been that the stock was not being priced for perfection and was offering considerable value. While the NIM has now re-based notably lower, we continue to see considerable value in the stock particularly due to our expectation of significant cost out by FY24F,” it added.

The post Morgans rates these ASX 100 shares as buys appeared first on The Motley Fool Australia.

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

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Motley Fool contributor James Mickleboro owns shares of Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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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Wesfarmers (ASX:WES) plans for e-commerce to fuel Bunnings growth

A hard hat on a podium.

Wesfarmers Ltd (ASX: WES) is planning for online growth and digitalisation with Bunnings.

That’s according to reporting by the Australian Financial Review. Bunnings is planning to grow its e-commerce operations, invest in new systems and install a new analytics platform.

How much is Bunnings already selling online?

Bunnings is one of the biggest businesses in Australia. In FY21 it generated $2.19 billion of earnings before tax (EBT) on $16.9 billion of revenue.

Its percentage of online sales is steadily growing. In FY20, 0.9% of sales were online. Then in FY21 it had 2.3% of sales come from online.

At the annual general meeting (AGM), Wesfarmers said that 6% of Bunnings sales had been online in FY22 so far, though lockdowns were impacting the Melbourne and Sydney markets.

Wesfarmers said that all of its businesses have been effective in managing the disruptions on global supply chains and are well positioned with inventory for the important Christmas trading period.

Bunnings’ plans

It was reported that Bunnings wants to improve the customer experience as well as encouraging a friendly atmosphere between people joining the business who are more used to digital things, and existing employees.

Most of the digital transformation is being done by an in-house Bunnings team, not an outsourced IT provider.

Michael Schneider, the boss of Bunnings, says that improving its digital operations is not just about growing online sales, but deepening engagement with 53,000 employees and improving the business for the next generation.

The employee platform that Bunnings is using is Workplace from Facebook, which can create online communities within companies. More than 40,000 employees are using it. Part of the attraction is Bunnings can understand employees better .

One of the things that Bunning has reportedly has done is lifted its game for helping tradespeople. It recently launched a new website that is mobile friendly, compared to the old process of an email system with a click and collection through a smartphone, according to the AFR.

Bunnings has updated its product finder app with interactive store maps. It even shows customers “the best and fastest course around the stores to get all the products on their list.”

It was also reported that lots of commercial customers are using the PowerPass app which allows them to scan as they go around the store and skip the traditional checkout process. In FY21, PowerPass processed 2.2 million transactions, saving 70,000 hours of employee time.

New cloud-based platform

Bunnings is transitioning customer data onto an online platform which will be used for operations of the whole business, including inventory management. This is expected to be finished by the end of FY22. It will come with advanced analytical tools, giving management greater insights about the store network, buildings and systems.

Management commentary

The boss of Bunnings, Michael Schneider, said that the business wants to feature in graduate minds. The AFR quoted him:

I would like them to think it’s a pretty nice shopping experience and the team seem pretty engaged, and it’s probably going to be a good place to work

We are deep in a really genuine tech transformation – we’re going pretty solidly at it, both from a resourcing point of view and an investment point of view.

Those are the sorts of things that when you’re wanting to build your career in the technology space, you’re really looking for, and Bunnings is providing that, alongside all the things that we’re famous for in terms of culture.

The post Wesfarmers (ASX:WES) plans for e-commerce to fuel Bunnings growth appeared first on The Motley Fool Australia.

Should you invest $1,000 in Wesfarmers right now?

Before you consider Wesfarmers, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Wesfarmers wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers 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 CBA (ASX:CBA) is spruiking risks of ‘not participating’ in crypto

Man holding a bitcoin and looking at the market price.

Commonwealth Bank of Australia (ASX: CBA) is gearing up to launch crypto trading services on its CommBank app. The decision to support crypto and blockchain technology comes as Australia’s largest bank recognises the risks of not participating.

At Friday’s market close, CBA shares finished the day down 1% to $94.81.

CommBank set to offer crypto-based services

Customers will soon be able to tap into the CommBank app and begin trading across 10 crypto assets. This includes popular coins such as Bitcoin (CRYPTO: BTC)Ether (CRYPTO: ETH), Bitcoin Cash (BCH), and Litecoin (LTC).

The first bank to adopt crypto trading among the big four, CBA wants to become a leader in the digital asset sector. It believes the booming industry is here to stay for the foreseeable future.

In fact, CBA has partnered with the Gemini crypto exchange and blockchain analysis firm Chainalysis to launch its crypto services.

A pilot is scheduled to launch in the coming weeks for a number of limited customers. A full-service rollout is expected to occur sometime in 2022.

It’s clear that inaction by the bank could leave it falling behind as the market quickly adopts the decentralised currencies.

CBA CEO Matt Comyn commented:

We see risks in participating, but we see bigger risks in not participating. It’s important to say that we don’t have a view on the asset price itself, we see it as a very volatile and speculative asset, but we also don’t think that the sector and the technology is going away anytime soon.

However, the Australian Securities and Investments Commission (ASIC) remains cautious on crypto and its technology. The national corporate regulator noted that it is unable to oversee the sector and presents risks for investors. This is because the asset class does not come under the banner of “financial products” within Australia.

ASIC chair Joe Longo recommended that investors refrain from putting all their hard-earned savings in crypto. Instead, they should opt for a diversified approach across a number of different asset classes to safeguard them from volatile movements.

About the CBA share price

In 2021, the CBA share price added around 15% in value for investors. However, when looking at this time last year, its shares are up roughly 17%, highlighting modest returns for a blue-chip company.

On valuation grounds, CBA is the biggest company on the ASX with a market capitalisation of approximately $161.78 billion.

The post Why CBA (ASX:CBA) is spruiking risks of ‘not participating’ in crypto appeared first on The Motley Fool Australia.

Should you invest $1,000 in CBA right now?

Before you consider CBA, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and CBA wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company The Motley Fool Holdings Inc. owns shares of and recommends Bitcoin and Ethereum. 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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When might Fortescue (ASX:FMG) Future Industries become profitable?

A green-caped superhero reveals their identity with a big dollar sign on their chest.

Market watchers are likely aware of Fortescue Metals Group Limited‘s (ASX: FMG) now-infamous green-hydrogen-focused, renewable energy branch, Fortescue Future Industries (FFI).

The subsidiary has recently signed a contract to build a hydrogen manufacturing equipment facility in Queensland. It has also entered an agreement that will see it selling 10% of its hydrogen output to United Kingdom-based entities.

But, with Fortescue Metals sinking 10% of its profits into the venture, how long will it take FFI to turn a profit?

That question was posed to Fortescue Metals’ CEO Elizabeth Gaines at the company’s annual general meeting earlier this month. Here’s how she responded.

Fortescue Future Industries profitability ‘some time’ away

Unfortunately, Gaines didn’t provide an estimate for how long it will take for FFI to earn its keep. Instead, she noted, “there will be some time between now and [when FFI becomes profitable]”.

However, she did say the business isn’t really about profits:

At the core of the activities of FFI is actually the decarbonisation of Fortescue, and we see that as a very important part of FFI’s activities.

If you think about our goal to be carbon neutral by 2030, we see that as a significant commercial opportunity for Fortescue to generate more profits, to lower our costs, to get a premium for our iron ore – which will be green.

Though, Gaines said the company still predicts its green energy leg will generate “significant profits” in the future:

There’s great reasons to undertake this transition to green energy, but at the forefront of that is the commercial opportunity, and we will use the same discipline we’ve taken in the past to develop in the iron ore business and apply that same rigour and capital discipline to any projects for FFI…

If we don’t decarbonise… we [risk losing] the diesel fuel rebate, we will see a new carbon charge introduced, the cost of offsets will skyrocket…

So, not doing it will actually have a significant detriment on our overall profitability.

Gaines also said the risks facing the company’s bottom line include increasingly volatile fuel costs.

FFI is working to create a fleet of hydrogen-powered vehicles to support Fortescue Metals’ iron ore production. The company’s goal is to make sure the hydrogen-powered fleet is cheaper to run than the diesel-powered alternative.

As of Friday’s close, the Fortescue Metals share price is $17.19.

The post When might Fortescue (ASX:FMG) Future Industries become profitable? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Fortescue Metals right now?

Before you consider Fortescue Metals, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Fortescue Metals wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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