Month: October 2022

3 ASX shares that are great-value buys right now: fund manager
It’s always interesting to see what some fund managers are looking at on the ASX share market. Things are particularly volatile at the moment as investors come to terms with high inflation and increased interest rates.

Ophir Asset Management finds ASX shares that look like they can significantly grow earnings over the long term. But, this investment manager likes to look across a range of industries to find opportunities.

The investment team recently went through some of its holdings within the Ophir High Conviction Fund (ASX: OPH) and discussed what it likes about them, with a particular focus on the first ASX share.

AUB Group Ltd (ASX: AUB)

This is a business that provides insurance broking, underwriting and risk services in Australasia. Ophir noted that its recent FY22 result was at the top end of market expectations and guidance for next year was “better than expectations”.

Ophir said that a unique element of the business is that it partners with local management teams of acquired businesses and adopts an owner-driven model to try to deliver the best outcomes for clients. It services around one million clients across 500 locations.

One of the things the fund manager likes is the resilience of the ASX share’s earnings because small and medium enterprises are “unlikely to cancel their insurance cover in market downturns as it is a core pillar of any business, much like accounting”. The fund manager pointed out that AUB performed well during the GFC.

Ophir said that not only is it resilient, but it has grown earnings strongly. Some peers have grown at a similar rate. These businesses can use both organic growth and acquisitions to grow.

It thinks it can grow its broker and agency margins, which lag competitors. The fund manager pointed out there is a valuation gap compared to peers. Historically, its price/earnings (P/E) ratio has traded in line with Steadfast Group Ltd (ASX: SDF) and PSC Insurance Group Ltd (ASX: PSI). A gap has formed, which Ophir suggested could be due to the acquisition of Tysers.

The fund manager suggests there is more upside than expectations for the ASX share because management has been “conservative” with guidance and synergies.

Mineral Resources Limited (ASX: MIN)

Mineral Resources operates as a mining services and processing company in Australia, China and Singapore. It is also a producer of iron ore and lithium. This is one of the few resource businesses that Ophir is invested in.

The business’ lithium result was “very strong” in FY22, according to the fund manager. The company has also announced plans for its Ashburton projection which “should increase the production rate of iron ore whilst also materially reducing average costs”.

Life360 Inc (ASX: 360)

Life360 is an ASX tech share that offers a service that aims to ensure the safety of family members.

Ophir said that it delivered a “strong” recurring earnings beat in its recent result and that a price increase was announced for its membership base.

The investment team said they believe the business will reach breakeven in the near term.

In that update, Life360 said:

We expect Life360 to be on a trajectory to consistently positive adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) and operating cash flow by late calendar year (CY) 2023, such that we record positive adjusted EBITDA and operating cash flow for CY24. This trajectory could be further assisted by the positive impact of potential future price changes.

The post 3 ASX shares that are great-value buys right now: fund manager appeared first on The Motley Fool Australia.

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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 positions in and has recommended Life360, Inc., PSC Insurance Group, and Steadfast Group Ltd. The Motley Fool Australia has positions in and has recommended Steadfast Group Ltd. The Motley Fool Australia has recommended Austbrokers Holdings Limited and PSC Insurance Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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13 October 2022
Goodman share price hits two-year low: Time to buy?
The Goodman Group (ASX: GMG) share price has continued its slide on Thursday.

At one stage today, the integrated property company’s shares dropped to a two-year low of $15.57.

This means the Goodman share price is now down 41% since the start of the year.

Is the Goodman share price weakness a buying opportunity?

While Goodman’s shares are seemingly out of favour with investors right now, it’s quite the opposite with brokers.

A large number of Australia’s leading brokers have the equivalent of buy ratings on its shares with price targets significantly higher than where the Goodman share price trades today.

For example, the team at Citi has a buy rating and $23.50 price target on its shares. This implies potential upside of 50% for investors. Citi commented:

While risks are rising against a higher interest rate backdrop, we retain Buy given the strong underlying rent growth (rents on average -20% below market), embedded performance fees as well as the best balance sheet in the sector, which could see GMG outperforming its peers.

Who else is bullish?

This sentiment was echoed by the team at Goldman Sachs, which currently has a buy rating and $25.40 price target on its shares.

This suggests even greater upside for the Goodman share price of 63% over the next 12 months. Goldman said:

We expect solid rental growth as demand for high quality logistics space continues to outpace available supply. Although the macro environment remains challenged, we believe there is upside risk to its conservative guidance as the Group has historically “Guided light”, coming in ahead of initial estimates. Given GMG’s preference to own, develop and manage high-quality industrial assets in key infill markets globally, we believe it is well-positioned to capture market rental growth, which when coupled with elevated investment demand for industrial assets will assist in contributing to AUM growth over time.

The post Goodman share price hits two-year low: Time to buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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 Scott Phillips.

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13 October 2022
Why Endeavour shares could offer access to an ‘attractive asset’: expert
The Endeavour Group Ltd (ASX: EDV) share price has had a disappointing run of late. The stock has dumped 19% since its August high, with 12% of that fall coming on the back of the company’s full-year earnings.

But Endeavour shares provide the key to what one top broker has dubbed an appealing business: Dan Murphy’s.

The Endeavour share price is down 0.74% right now, trading at $6.74. That’s despite the S&P/ASX 200 Index (ASX: XJO) posting a 0.07% gain.

Let’s take a closer look at what top broker Macquarie reportedly likes about the relatively new ASX 200 stock.

Endeavour shares offer key to ‘attractive asset’: expert

It’s been just 16 months since Endeavour shares hit the ASX following the company’s spin out of supermarket giant Woolworths Group Ltd (ASX: WOW). And what a whirlwind it has been.

Endeavour operates Australia’s largest retail drinks network and a portfolio of licensed hotels. In its short life as a stand-alone company, it has pushed through lockdowns, major floods, and inflation.

But drinks retail brand Dan Murphy’s is one piece of the puzzle that Macquarie particularly likes. The broker was quoted by the Sydney Morning Herald as saying:

As a staple service and product provider with significant organic reinvestment opportunity we believe it is an attractive asset.

Describing the retailer as a “staple service” may mean the broker is confident it can push through current economic uncertainty.

The business has a growing loyal customer base, with the number of active My Dan’s members growing by 15% to 4.5 million in financial year 2022. At the same time, its footprint grew to 258 stores.

Additionally, the broker has named Endeavour among the companies it expects to post positive updates at its upcoming annual general meeting (AGM), The Australian reports.

The company will host its AGM next Tuesday. A trading update on the company’s performance in the first quarter of financial year 2022 is expected to drop the day before.

No doubt all eyes will be watching Endeavour and its share price next week.

The post Why Endeavour shares could offer access to an ‘attractive asset’: expert appeared first on The Motley Fool Australia.

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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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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13 October 2022
Is the Northern Star share price on the comeback trail? Check these charts out
The Northern Star Resources Ltd (ASX: NST) share price is trading in the green on Thursday.

At the time of writing, shares in the gold miner are swapping hands more than 1.3% higher at $8.18 on no news.

Today’s gain marks a 17% rally Northern Star shares have embarked on since bouncing off prior lows of $6.96 on 26 September.

Is Northern Star set to rise again?

To understand the forces at play with the Northern Star share price we have to take a step back and analyse the wider picture.

The key undercurrents that feed into the share are the gold price, and by extension, the macroeconomic landscape.

In particular, the strength of the US dollar has been a headwind for gold bugs this year, with the price of the yellow metal taking a backward step whilst the greenback surges to new highs.

This fits with the long-term correlation between the pair. Both are seen as quality/low-risk assets that investors flock to in times of turbulence.

However, the key difference this time is inflation and interest rates. With the rise in interest rates, investors can realise a positive yield on cash, whereas gold pays no interest.

As seen in the chart below, the inverse-like relationship has been in situ over the past 18 to 20 years, with the most recent rally in the US dollar correlating to a sharp reversal in the gold price.

It now trades at US$1,669 per troy ounce, down from highs of US$2,052/t oz in March.

Given its status as a producer of the precious metal, Northern Star is considered a price taker on the market price of gold.

As such, its share price fluctuates with volatility in the commodity markets, and this year’s heavy sell-off in the gold markets has been reflected in the Northern Star share price.

Despite its most recent rally, it too trades well off previous highs, and has a sharp recovery ahead in order to reach these levels once more.

This activity is seen in the chart below, with the Northern Star share price in black.

Even more interesting, is the path of inflation expectations has been most heavily correlated with the price of gold (and hence, the Northern Star share price) in 2022.

Inflation/gold correlation

Inflation expectations are measured in a particular derivatives contract known as the five-year breakeven rate.

It measures what the market thinks the inflation rate will be over the next five years. As seen in the chart below, the market now believes that US inflation will be 2.32% in five years time, down from 3.6% in March (blue line).

Perhaps unsurprisingly, this is when the gold price peaked as well – despite all the debate on gold’s status as an inflation hedge.

It is therefore a contentious debate as it appears the Northern Star share price is heavily linked to the price of gold, which is heavily linked to macroeconomic indicators like inflation, interest rates and the US dollar.

Northern Star also trades on a forward price-to-earnings (P/E) ratio of 23.7 times, ahead of the industry median of 6.4 times.

However, this does suggest investors expect an above-industry earnings result from the company over the next 12 months.

Meanwhile, the gold miner is also valued at a price-to-book (P/B) ratio of 1.14 times, and generated more than $570 million in free cash flow for FY22.

It’s also rated a buy from 15 out of 15 analysts covering the share right now, with a consensus price target of $10.70, according to Refinitiv Eikon data.

Time will tell if all of these forces combine to inflect positively on the Northern Star share price. With no certainty on interest rates and inflation, the gold price could break out either way.

The post Is the Northern Star share price on the comeback trail? Check these charts out appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow 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 Scott Phillips.

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13 October 2022
After a horror year, what’s next for ASX BNPL shares in the new quarter?
ASX BNPL shares are putting in a mixed performance as we round out the second week of the new quarter (Q2 FY23).

After a difficult Q1, here’s how these four buy now, pay later stocks have performed so far in Q2 (since the closing bell on 30 September):
- Openpay Group Ltd (ASX: OPY) shares are up 5.6%
- Zip Co Ltd (ASX: ZIP) shares are down 8.0%
- Sezzle Inc (ASX: SZL) shares are flat
- Block Inc (ASX: SQ2) shares are up 5.6%
For some context, the All Ordinaries Index (ASX: XAO) is up 2.7% over this same period.

How have ASX BNPL shares performed heading into the new quarter?

ASX BNPL shares have had a year to forget, so far.

The companies’ share prices have all gotten absolutely hammered as investors awoke to the reality that inflation wasn’t transitory, and interest rates across most of the developed world were heading sharply higher.

After posting some truly phenomenal gains in the year-plus following the pandemic recovery trade (commencing late March 2020), things began to slow down for ASX BNPL shares by mid-2021.

As for 2022, here’s how the same four companies have performed to date, over a period that has seen the All Ordinaries tumble 13%:
- Openpay Group Ltd (ASX: OPY) shares are down 74.0%
- Zip Co Ltd (ASX: ZIP) shares are down 85.3%
- Sezzle Inc (ASX: SZL) shares are down 84.3%
- Block Inc (ASX: SQ2) shares are down 49.2%*
See what we mean by a year to forget.

(*Note, Block commenced trading on the ASX on 20 January this year following its successful acquisition of Afterpay.)

Well, those are the quarters gone by.

So, what’s next?

What to expect in the quarter ahead?

When talking about ASX BNPL shares, it’s important to remember we’re taking a broad-stroke approach to the sector here.

Each company has its own management team, different balance sheets, and its own specific market strengths, weaknesses, and potential growth outlook.

With that said, investors in ASX BNPL shares would do well to keep an eye on the outlook for inflation and any resulting rate hikes. Not just from the RBA here in Australia. But, even more importantly, from the US Federal Reserve.

As mentioned, the dismal share price performance of buy now, pay later companies over the first three quarters of the calendar year was largely driven by soaring inflation and hawkish tightening from central banks across much of the world.

ASX BNPL shares are more vulnerable to rising interest rates than many stocks for several reasons.

First, many of them have high debt levels. And as rates rise, the cost of servicing that debt rises as well.

Second, higher rates (and inflation) put greater pressure on their customer base. Sure, a greater number of cash-strapped customers may be tempted to use BNPL services to delay paying for their purchases. But the BNPL companies can expect the number of clients who fail to make those repayments also rise alongside the tougher economic environment.

And third, ASX BNPL shares are largely priced based on forecast future revenues. Those revenues may indeed eventuate. But higher interest rates increase the present cost of those future earnings.

With that in mind, tomorrow’s Consumer Price Index (CPI) figures due out of the US should offer some early indication as to the outlook for these companies in Q2.

If inflation in the world’s top economy comes in below consensus expectations, ASX BNPL shares should receive some welcome tailwinds amid hopes of a less hawkish Fed.

The post After a horror year, what’s next for ASX BNPL shares in the new quarter? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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13 October 2022
2 top Warren Buffett stocks to buy and hold for the long haul
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

One of the keys to Warren Buffett’s phenomenal success over the years has been his willingness to buy stocks of good companies possessing long runways of future growth at discounted prices and then hold them for the long haul.

Using exactly that strategy, Buffett has generated aggregate gains of 3,641,613% since taking control of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) in 1965, for a 20.1% compound annual growth rate (CAGR). In comparison, the S&P 500 has generated 30,209% in total returns over that period, for a CAGR of 10.5%. In other words, there’s a good reason Buffett is referred to as the Oracle of Omaha and people buy, sell, and hold the same stocks he does.

Buffett was relatively late in buying tech stocks, but he’s made up for that since. The following pair of companies represent some of his biggest tech holdings. They fit neatly within his strategy, and you can also buy and hold them for the long run.

Apple

Apple (NASDAQ: AAPL) is not only Buffett’s biggest tech holding but his largest holding overall, representing a whopping 41% of Berkshire Hathaway’s total portfolio. With almost 1 billion shares under his management, the investing oracle has accumulated $128.2 billion worth of Apple stock. With shares down 23% from recent highs and at some of the lowest prices in the past year, it’s a stock you might want to consider acquiring for your own portfolio.

The weakness has to do with the new iPhone 14, which reportedly faces weakening demand. The company reportedly reversed plans to hike production because of it, but such bearishness is all relative.

The iPhone, which was unveiled in September and starts at $1,000, is still selling quite well, beating out low-cost entry-level models elsewhere, and Apple is still planning to produce some 90 million iPhone 14s, which is in line with its original forecast for the device.

Apple still commands about half of the U.S. smartphone market, despite the iPhone getting long in the tooth after having been first introduced 15 years ago. And MacBook shipments are going against the grain, with market intelligence firm IDC reporting shipments surging 40.2% in the third quarter compared with a 15% decline in global PC shipments.

Yet, as much as hardware remains a driving force for Apple, services are the real growth opportunity going forward. Services account for 20% of total sales, though the company is not immune to economic concerns. Analysts estimate App Store revenue dropped 5% in September due to a sharp decline in gaming revenue as inflation and recession fears take a toll on consumers. Growth may be a little slower now than it was, but margins are rising, and at 71.5%, well above Apple’s 43.3% overall gross margins.

There will be ups and downs in any business, but Apple will be commanding a leadership position for years to come and would be a stock to consider now and in the future.

Verisign

Although Buffett first bought Verisign (NASDAQ: VRSN) nearly a decade ago, he has not accumulated nearly as much of its stock as he has of Apple’s. He owns 12.8 million shares, worth some $2.3 billion. Not shabby, but it represents only 0.7% of the Berkshire portfolio, so its rise and fall won’t have as great of an impact on performance. Still, it’s one that investors ought to consider as well.

Verisign is the premier global provider of domain name registry services. It’s the main company charged with doling out the .com, .edu, .gov, and .net domain names you find on the internet, while providing the routing support for them. Its behind-the-scenes operations basically point people to the correct website when they type in any site ending in those designations, helping to keep the world online and connected.

Verisign ended the second quarter with 351.5 million domain name registrations across all top-level domains, all of which pay a fee to it annually. It’s been likened to the exclusive toll collector on the internet’s “toll road,” and it enjoys high-margin recurring revenue while having conversely low capital requirements, leading to very stable free cash flow generation.

There’s no likelihood the internet is going anywhere, and its importance to business, even in the face of a potential recession, only continues to grow. Certainly, there was a massive uptick in the number of people starting their own businesses during the early months of the pandemic — and registering their domain names — that has since normalized, but that just underscores the long-term upward trajectory Verisign has at its back.

Buffett first bought Verisign in the fourth quarter of 2012, investing $143 million at an average of around $42 per share. With near monopoly-like status in its industry, careful stewardship of its business, and a cash-rich stream of revenue, the growth thesis behind Buffett’s purchase of Verisign is still very much intact. With shares down 30% year to date, it may be the perfect time to buy your own stake, too.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 top Warren Buffett stocks to buy and hold for the long haul appeared first on The Motley Fool Australia.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and VeriSign. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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13 October 2022
Are Coles shares a buy ahead of the company’s November AGM?
Coles Group Ltd (ASX: COL) shares have reportedly been tipped as a November winner, with the company’s annual general meeting (AGM) expected to deliver a bout of positivity.

The S&P/ASX 200 Index (ASX: XJO) supermarket operator will host its AGM next month. There, it could provide an update on its activities through the first few months of financial year 2023.

The Coles share price is trading at $16.38 right now, 0.18% higher than its previous close. Meanwhile, the ASX 200 is up 0.23%.

The stock has been outperforming this year so far, falling 8.5% compared to the index’s 12.2% tumble.

Let’s take a closer look at what the market might be expecting to hear from Coles next month.

Could Coles shares be an AGM winner?

There could be an exciting few weeks ahead for Coles shares. The company is preparing to release its sales results for the first quarter on 26 October and host its AGM on 9 November.

Making the near future more exciting, Macquarie has reportedly tipped the supermarket operator to be an AGM winner.

The broker has an outperform rating on Coles shares. It expects the company could benefit from an update at its AGM, the Australian Financial Review reports.

Last November, the company’s leaders revisited its pandemic-induced struggles before looking to the future, with a focus on the Christmas period.

This time around, they might look back at a period defined by the rising cost of living, inflation, and rate hikes.

Of course, being an S&P/ASX 200 Consumer Staple Index (ASX: XSJ) share, Coles is largely protected from such happenings.

Though, the company noted inflation will still likely impact its bottom line this financial year. Additionally, its sales growth could be dinted from the cycling of 2021 lockdowns.

Management could also look to a future without Coles Express. The business is set to be sold to Viva Energy Group Ltd (ASX: VEA) for $300 million.

Getting down to business, Coles’ AGM will see shareholders voting on the election of Terry Bowen and Scott Price onto the company’s board.

Meanwhile, Jacqueline Chow and chair James Graham will be standing for re-election. Graham noted that, if re-elected, he will likely retire before the end of the ensuing term.

Macquarie isn’t alone in expecting big things from Coles shares in the future. Morgans and Citi both also rate the stock a buy, slapping Coles shares with respective price targets of $20 and $20.10.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 positions in and has recommended COLESGROUP DEF SET. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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13 October 2022
ResMed share price drops: Is this a buying opportunity?
The ResMed Inc. (ASX: RMD) share price is trading lower on Thursday.

In afternoon trade, the sleep treatment focused medical device company’s shares are down 1.5% to $33.78.

Why is the ResMed share price falling?

The weakness in the ResMed share price could have been driven by the release of an update from one of one of the company’s rivals.

Overnight, health technology giant Philips revealed that its third-quarter financial performance was impacted by continued supply chain challenges that were more significant than anticipated.

It also warned that the remainder of the second half may not be as strong as expected because of these challenges. The company said:

Looking ahead, Philips still expects a better second half of the year, compared to the first half of 2022. However, the company sees prolonged supply chain disruptions and a worsening macro-environment. Consequently, Philips now expects a mid-single-digit comparable sales decline for the fourth quarter of 2022 with a high-single-to-double-digit adjusted EBITA margin range.

Is this a buying opportunity?

According to a note out of Goldman Sachs, its analysts remain bullish on the ResMed share price.

This morning the broker has retained its buy rating and $36.80 price target on the company’s shares.

Based on where its shares are trading today, this implies potential upside of 9% for investors over the next 12 months. It commented:

We are Buy-rated on RMD. Our 12-month target price of A$36.80 is unchanged and remains based 85% on our NTM EV/EBITDA valuation of A$35.00 (multiple of 27.3x based on weighted average of peers, sector and DCF target multiple) and 15% on our M&A valuation of A$46.90 (multiple of 36.7x).

Goldman also remains neutral on fellow medical device company Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), with a price target of $17.90.

The post ResMed share price drops: Is this a buying opportunity? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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13 October 2022
‘Significant opportunity’ Zip share price turns red as CEO packs his bags for the United States
The Zip Co Ltd (ASX: ZIP) co-founder and CEO Larry Diamond has moved to the USA indefinitely.

Zip shares are down 0.78% today and are currently trading at 63.5 cents. For perspective, the S&P/ASX 200 (ASX: XJO) is 0.19% in the green today.

Let’s take a look at what is going on at Zip.

Zip CEO moves

Zip’s CEO and co-founder Larry Diamond moved to the USA “permanently” on Wednesday with his wife and family, the Financial Review reported.

Diamond sees the USA as a “significant opportunity”. Zip’s USA revenue grew more than the company’s Australian revenue in FY22. After COVID-19 restrictions, Diamond had been spending two weeks in every six in the USA, the publication reported. Commenting on his move, reportedly to Manhattan New York, Diamond said:

It is important to be there to demonstrate what we have done in Australia.

It is hard to be there then come home: I have to be on the ground. There is still a significant opportunity for fintech in the US, as US banks are asleep at the wheel.

Zip made the decision to close its Singapore and UK arms in FY22 to “optimise” the global cost base.

The USA’s Federal Reserve has raised interest rates from nearly zero to 3.25% since March. ZIP USA revenue exploded 69% to $282 million in the 2022 financial year. Australian revenue grew 39% to $297.4 million. At the time, Diamond highlighted the role of BNPL companies amid rising inflation. He said:

In times of heightened inflation and cost of living pressures, BNPL has become even more of an important budgeting tool for everyday consumers.

Meanwhile, the team at Macquarie has recently tipped the Zip share price to drop. Analysts placed a 60 cent per share price target on the Zip share price and gave it an underperform rating.

The Block Inc CDI (ASX: SQ2) share price is up 2.62% today, while Sezzle Inc (ASX: SZL) shares are 2% in the red.

Zip share price snapshot

The Zip share price has descended 85% year to date. In the past year, the Zip share price has sunk 90%.

Back on 19 February 2021, the Zip share price hit a high of $12.35.

Zip has a market capitalisation of about $448 million based on the current share price.

The post ‘Significant opportunity’ Zip share price turns red as CEO packs his bags for the United States appeared first on The Motley Fool Australia.

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Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ZIPCOLTD FPO. 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 Scott Phillips.

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13 October 2022
Missed the boat on Whitehaven shares? This other ASX coal share ‘screams value’: expert
It’s been an exercise in kicking thyself in 2022 for investors who ignored ASX coal shares or got out of them because they thought the transition to renewable energy was going to kill the coal industry quick.

Case in point: Whitehaven Coal Ltd (ASX: WHC) shares have skyrocketed 225% in the year to date.

Other pure-play ASX coal shares have also had many days in the sun this year.

The New Hope Corporation Limited (ASX: NHC) share price is up 194% year to date. Stanmore Resources Ltd (ASX: SMR) shares are up 173% year to date.

But according to Katana Asset Management, it’s not too late to get in on the ASX coal shares party.

Why are ASX coal shares shooting the lights out?

ASX coal shares have skyrocketed in 2022 due to a supply/demand imbalance caused by the Ukraine war.

As we reported in late September, top broker Macquarie raised its outlook for the thermal coal price by 38% to 114% over CY23 to CY27.

The broker reckons developed economies are showing a “willingness to pay a premium to secure energy supply” given the global challenges.

The broker thinks the thermal coal price will lift by 25% to US$410 per tonne in the second half of CY22 and it will be US$367.50 per tonne in 2023.

As my Fool colleague Bruce Jackson notes, elevated coal prices are delivering huge profits to the miners.

Steve Johnson of Forager Funds says some coal companies “are generating almost their whole market cap every year in cash flow“.

The coal price closed at US$405 per tonne overnight. That’s up 66% year over year. The coal price hit a record of US$460 per tonne in September.

The stock to buy if you missed out on Whitehaven shares

Katana’s Hendrik Bothma writes on Livewire that Yancoal Australia Ltd (ASX: YAL) is a sitting duck for ASX investors looking for good value today.

It could be an opportunity for investors who feel they’ve missed out on Whitehaven shares.

Bothma said:

With soaring coal prices these companies have been generating record revenue and eye-watering cash flow.

All bar one has received their share of air-time, and we think this laggard screams value. That company is Yancoal Australia.

Despite a market cap in excess of $7bn it lacks coverage and remains under-researched.

There are a few possible reasons for this… 62% of the company is owned by Yankuang Energy Group Co Ltd based in China, and until recently the company was facing a very different fate with crippling debt. This presents the opportunity, fuelled by strong coal prices the company has significantly de-risked over the past year, and now sits in a net cash position.

This turnaround has gone largely unnoticed due to the lack of coverage leaving the share price trading at a significant discount to peers.

YAL is a clear laggard from a lack of coverage, and their dramatic turnaround has gone largely unrewarded… it’s only a matter of time until they re-rate.

The Yancoal share price is up 113% in the year to date compared to a 225% bump for Whitehaven shares.

Whitehaven shares versus Yancoal shares

Katana has done a comparative analysis of the two ASX coal shares.

Before we get into the detail, here is the bottom line as Katana sees it:

YAL is currently trading on a FY22e P/E of 1.4x and EV/EBITDA 0.9x. By comparison this represents a 71% and 66% discount to their closest peer. It’s not often that you see a company generate billions in profit while trading on a P/E of <2x.

Consensus also forecasts YAL paying an FY22 full-year dividend yield of ~37% (unfranked), which is ~8x the ASX 200 average and means you get over a third of your investment back in dividends in one year. In contrast, WHC paid an effective yield of 15% in FY22 (5% dividend and 10% buyback).

WHC does however intend to undertake an additional 25% buyback if approved at the AGM this month, which would put them on a similar effective yield.

Katana’s analysis comparing Whitehaven shares and Yancoal shares reveals a few salient points.

As per the Livewire article:
- Yancoal and Whitehaven are predominantly thermal coal producers with a rough 85% thermal and 15% metallurgical coal split
- Yancoal sells more than double the volume of Whitehaven and outsells other ASX pure-play producers
- They have similar operating cash costs but Yancoal generates almost double the free cash flow per share. Yancoal has a free cash flow yield of 85% compared to Whitehaven’s 27%. That means investors today would pay 1.2 times free cash flow per Yancoal share compared to four times free cash flow for Whitehaven shares
- At the end of FY22, Whitehaven had a $970 million net cash balance. Yancoal moved from net debt of $3.4 billion with 40% gearing to a net cash position in July.
What’s the latest news from Yancoal?

As my Fool colleague James reported earlier this month, Yancoal recently made a major debt repayment.

It prepaid US$1 billion of debt from available cash. This is expected to save about US$207 million in total borrowing costs over the loan periods.

The Yancoal share price is down 0.33% at the time of writing to $5.96. Whitehaven shares are down 0.7% to $10.61.

The post Missed the boat on Whitehaven shares? This other ASX coal share ‘screams value’: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Bronwyn Allen has positions in Macquarie Group Limited. 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 Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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13 October 2022