Day: February 9, 2023

How to burn a billion dollars: AGL shares tumble 10% on painful half-year results

A man witgh a dirty face as though it has been blackened by smoke or a small explosion holds up an electrical wire as he talks on the phone with a worried expression on his face.A man witgh a dirty face as though it has been blackened by smoke or a small explosion holds up an electrical wire as he talks on the phone with a worried expression on his face.

Shares in AGL Energy Ltd (ASX: AGL) were hit with the proverbial sledgehammer on Thursday as hopes of a profitable half were slashed.

The company’s share price powered down 10.33% to finish the day at $7.12 in reaction to the energy retailer’s first-half figures for FY23. Today’s disappointing performance was the worst for AGL shares in more than a year and seven months.

There’s a good chance shareholders were shocked by the staggering after-tax loss of $1.075 billion. A loss that big makes you wonder how?

Blowing out the bottom line by a billion

Once upon a time, Australia’s largest electricity generator was pumping out profits in excess of a billion dollars.

In 2018, AGL delivered revenue of $12.7 billion and net profit after tax (NPAT) of $1.26 billion. Today, the company posted $7.81 billion in revenue ($15.6 billion annualised). Despite achieving greater revenue years later, the energy giant is bleeding money — why is that?

For the most part, it comes down to standard accounting principles. This basically means financial statements need to recognise non-cash items on the profit and loss statement to provide a more accurate reflection of the business. And, oh boy, was the first half a pearler for non-cash items at AGL…

What wreaked havoc on the company’s statutory earnings — sending AGL shares downwards — was one ugly asset impairment.

AGL wrote down the carrying value of its Energy Generation Fleet cash-generating unit — in other words, its coal-fired power station assets — as it plans to bring forward their closure dates.

The magnitude of the impairment was a ground-shaking $706 million post-tax.

Secondly, the company recognised a $622 million reduction in the value of its financial instruments. Large companies, such as AGL, often make use of various instruments to hedge their exposure to the underlying commodity — for example, oil and gas futures contracts.

When combined, the two blew a $1,328 million hole in AGL’s earnings.

Where to for AGL shares from here?

Experts seemed to be split on the outlook for AGL following its first-half result.

On one hand, analysts at Barrenjoey considered it a ‘less positive’ foreshadowing for FY24. Whereas, Sarah Xie of Moody’s indicated that higher earnings could be on the cards from FY24 to FY25 as old hedges expire and wholesale power prices strengthen.

One thing is for sure — shareholders will be hoping there are fewer days like today for AGL shares.

The post How to burn a billion dollars: AGL shares tumble 10% on painful half-year results appeared first on The Motley Fool Australia.

Should you invest $1,000 in Agl Energy Limited right now?

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Motley Fool contributor Mitchell Lawler 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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3 cheap ASX dividend shares (down more than 35%) to buy in February 2023

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.

When share prices go down, I get excited by the opportunity to buy cheap ASX dividend shares at attractive prices.

Inflation and interest rates may have punished many valuations last year, but some have come soaring back. Look at the WiseTech Global Ltd (ASX: WTC) share price and the Lovisa Holdings Ltd (ASX: LOV) share price, both up more than 20% over the past 12 months.

Yet, other names are still trading at steep discounts to where they were a year to 18 months ago.

While the short term may seem uncertain, I think the long term is still positive for the below ASX dividend shares. With their significantly lower share prices, I think these names look like opportunities, with the share prices reflecting the possible short-term pain.

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the leading retailers of furniture in Australia. Not only does the company have the Nick Scali business, but it also owns the Plush brand as well.

Since mid-November, the Nick Scali share price has dropped by more than 35%, which has significantly improved the dividend yield on offer.

Ongoing demand for furniture meant that the FY23 first-half net profit increased by 70%, while the interim dividend per share increased 14.3% to 40 cents.

Commsec numbers currently suggest the ASX dividend share could pay a grossed-up dividend yield of 10.2% in FY23.

With the company’s longer-term plans to roll out more stores (particularly Plush stores), grow its online sales (which are very profitable), and expand its ranges, I think Nick Scali has a promising future once we’re through this difficult economic period.

Pinnacle Investment Management Group Ltd (ASX: PNI)

Pinnacle is a business involved in funds management. It doesn’t manage money itself, rather the ASX dividend share operates by taking sizeable minority stakes in young (or new) funds management businesses and helping them grow.

The company can take care of a number of operational tasks for the fund managers such as legal, distribution services, seed funds under management (FUM), compliance, and so on. It enables the fund manager to focus on the investing side of things.

The Pinnacle share price has fallen more than 45% since November 2021. Investment markets have cooled significantly since then. However, I think this is only going to be a shorter-term headwind. I believe that investors will begin allocating new money to fund managers again in FY24 when interest rates have stopped rising.

Commsec estimates suggest that Pinnacle could pay a grossed-up dividend yield of 4.6% in FY23.

Beacon Lighting Group Ltd (ASX: BLX)

Beacon is a leading retailer of lights and fans. It’s another company to have suffered significant pain from the start of 2022.

Since mid-January 2022, the ASX dividend share has dropped by more than 35%. I think it’s understandable that there has been some pain because of the possibility of fewer homes being built, fewer renovations, and so on during this period.

However, I don’t think the business is worth 35% less than before, particularly with its long-term growth plans of servicing more trade customers, growing its Australian store count from around 120 to more than 180, selling more stuff online, and growing internationally (including in the US).

In FY23, the ASX dividend share could pay a grossed-up dividend yield of 6.7%.

The post 3 cheap ASX dividend shares (down more than 35%) to buy in February 2023 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 Lovisa, Pinnacle Investment Management Group, and WiseTech Global. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group and WiseTech Global. The Motley Fool Australia has recommended Lovisa. 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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Dicker Data share price tumbles to multi-year low. Is it too cheap to miss?

A man rests his chin in his hands, pondering what is the answer?

A man rests his chin in his hands, pondering what is the answer?

The Dicker Data Ltd (ASX: DDR) share price is having a difficult time on Thursday.

At one stage today, the wholesale computer hardware and software distributor’s shares dropped 8% to a multi-year low of $8.55.

This means Dicker Data shares have now lost 40% of their value over the last 12 months, as you can see on the chart below.

Why is the Dicker Data share price under pressure?

Investors have been selling down the Dicker Data share price this week after the company’s unaudited full year results disappointed the market.

For the 12 months ended 31 December, Dicker Data reported a 25% increase in revenue to $3.1 billion but a small decline in net profit after tax to $73.4 million.

In response to the result, Goldman Sachs commented:

DDR’s FY22 trading update was a relatively small miss to consensus (-3% on NPAT), which we previously flagged as a risk. […] however in our view the more pertinent issue is the risk of persistent cost headwinds heading into FY23.

The broker also spoke cautiously about Dicker Data’s outlook due to a number of potential headwinds impacting demand. It said:

In our view demand headwinds may be the next risk for DDR based on (1) pull-forward of PC demand through COVID; (2) commentary from PC OEMs including Microsoft, HP and Dell suggesting a challenging FY23 demand backdrop; and (3) potential slowdown in consumer electronics spending as the impact of higher interest rates is felt in the economy.

Is this a buying opportunity?

The good news is that Goldman Sachs appears to believe that all this and more is now factored into the Dicker Data share price.

And while it has held firm with its neutral rating, its revised price target of $11.35 implies material upside potential for its shares of almost 33%.

Furthermore, it isn’t the only broker that sees plenty of value in its shares. Morgan Stanley has retained its overweight rating with a $13.00 price target this morning. This represents over 50% upside over the next 12 months from current levels.

The post Dicker Data share price tumbles to multi-year low. Is it too cheap to miss? appeared first on The Motley Fool Australia.

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*Returns as of February 1 2023

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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 Dicker Data. The Motley Fool Australia has positions in and has recommended Dicker Data. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://www.fool.com.au/2023/02/09/dicker-data-share-price-tumbles-to-multi-year-low-is-it-too-cheap-to-miss/

Why Morgans just added these ASX 200 shares to its best ideas list

A group of businesspeople clapping.

A group of businesspeople clapping.

As mentioned here earlier, Morgans removed BHP Group Ltd (ASX: BHP) shares from its best ideas list this month. This is the first time it hasn’t been on the list in three years.

Morgans’ best ideas are those that it thinks offer the highest risk-adjusted returns over a 12-month timeframe. They are supported by a higher-than-average level of confidence and are the broker’s most preferred sector exposures.

Replacing the miner was mining and mining services company Mineral Resources Ltd (ASX: MIN).

But that wasn’t the only change. Listed below are the ASX 200 shares that joined the list in February.

CSL Limited (ASX: CSL)

Morgans sees this ASX 200 share as a key pick for a portfolio. It added the biotherapeutics giant to its best ideas list with an add rating and $312.20 price target. The broker commented:

A key portfolio holding and key sector pick, we believe CSL is poised to break-out this year, a COVID exit trade, offering double-digit recovery in earnings growth as plasma collections increase, new products get approved and influenza vaccine uptake increases around ongoing concerns about respiratory viruses, with shares offering good value trading around its long term forward multiple of 31.5x.

Megaport Ltd (ASX: MP1)

This network as a service provider’s shares were added to list with an add rating and $8.25 price target. The broker explained:

MP1 is the world leader in Network as a Services (NaaS). They have first mover advantage, scale and technical expertise which means they are well placed to grow rapidly and maintain a healthy competitive advantage.

Mineral Resources

As mentioned above, Mineral Resources was added to list in the place of BHP this month. Morgans has an add rating and $99.40 price target on the ASX 200 miner’s shares. It commented:

We see MIN’s lithium / iron ore market exposures as an ideal combination to benefit from the China re-opening increase in demand during 1H’CY23. We also see MIN as well placed to grow into its valuation, even if we see unexpected metal price volatility, given the magnitude of organic growth in the pipeline.

Qantas Airways Limited (ASX: QAN)

A final ASX 200 share that has been added to the list is airline operator Qantas. The broker has an add rating and $8.50 price target on the flying kangaroo’s shares. It said:

QAN is now our preferred pick out of our travel stocks under coverage given it has the most near-term earnings momentum. Looking across travel companies globally, airlines are now in the sweet spot given demand is massively exceeding supply. QAN is trading at a material discount compared to pre-COVID multiples, despite having structurally higher earnings.

The post Why Morgans just added these ASX 200 shares to its best ideas list appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and Megaport. The Motley Fool Australia has recommended Megaport. 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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