Day: 4 May 2023

The share price of S&P/ASX 200 Index (ASX: XJO) lithium producer Allkem Ltd (ASX: AKE) is rising after the company announced it has discovered a new high grade zone.

An additional swarm of spodumene-bearing pegmatite dykes have been uncovered at the James Bay Project, located in Canada.

Right now, Allkem shares are swapping hands for $12.03 apiece – 0.3% higher than the stock’s previous close.

Meanwhile, the ASX 200 is currently down 0.74%.

Let’s take a closer look at today’s news from the ASX 200 lithium share.

ASX 200 lithium share gains on new high grade zone

The Allkem share price is moving upwards on the announcement of what managing director and CEO Martin Perez de Solay called “outstanding” drill results.

The company’s winter drilling program uncovered the find, which is located directly northwest of known mineralisation at the project. It includes intercepts including:

• 125 metres at 1.7% lithium oxide from 68 metres in drill hole JBL-23-048
• 72 metres at 1.89% lithium oxide from 11 metres in drill hole JBL-23-024

Such results represent downhole thicknesses. True thicknesses are estimated to be 60% to 80% of downhole thicknesses.

Additionally, drilling in the eastern portion of the deposit confirmed both the continuity and lithium grade of spodumene-bearing pegmatite dykes.

Perez de Solay commented on the news driving the Allkem share price today, saying:

The significant grade and thickness of these drill results is outstanding and the addition of a new zone of mineralisation to the [northwest] of the current resource provides scope for potential additions to resources and reserves as we further drill out this area.

The company’s winter drilling program, which concluded last month, saw 130 drill holes completed for a total of 29,164 metres. Around 6,700 assays from the program have been received, with a further 2,400 still to come.

Allkem plans to update James Bay’s mineral resource estimate following the receipt of all assays. It’s also preparing to undergo further work to better understand the new find.

The company has been busy increasing its tenement holdings in and around the James Bay project over the last six months. It has staked 29 new claims and acquired another 131 claims.

Allkem share price snapshot

The Allkem share price has been outperforming the ASX 200 for some time now.

The stock has risen 9% so far this year. It’s also currently 1% higher than it was this time last year.

Meanwhile, the ASX 200 has lifted 4% year to date and has slumped 1% over the last 12 months.

The post ASX 200 lithium share Allkem lifts on ‘outstanding’ find appeared first on The Motley Fool Australia.

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More reading

• What’s the forecast for the lithium price in May?
• Top ASX shares to buy in May 2023
• These are the ASX 200 lithium shares to buy due to a new ‘game changing’ technology
• Here are the top 10 ASX 200 shares today
• Making it rain: Could this signal a boom for ASX 200 lithium stocks?

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 Scott Phillips.

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ASX 200 lithium shares have been gaining popularity in the last couple of years, but only some of them pay a dividend.

Two ASX 200 lithium shares that could be buys for passive income are Pilbara Minerals Ltd (ASX: PLS) and Mineral Resources Ltd (ASX: MIN).

Let’s take a look at these two ASX 200 lithium shares in more detail.

Mineral Resources

Mineral Resources is not just an ASX 200 lithium share, the company also produces iron ore. The company has part ownership of two lithium mines – the Mt Marion Lithium Project and the Wodgina Lithium Project, both in Western Australia.

Mineral Resources delivered a dividend of $1.20 in the first half of this year and $1 in the second half of last year.

This means in the past year, Mineral Resources has delivered $2.20 worth of dividends to investors. This represents a trailing dividend yield of 3.06% based on the company’s last closing price of $71.93.

On this basis, I could have earned $100 a month ($1200 yearly) if I had invested $39,216 in Mineral Resources shares in the last year.

Mineral Resources shares have risen 28.26% in the past 52 weeks but have fallen nearly 7% in the last month.

Looking ahead, analysts at Morgans are tipping Mineral Resources to pay a fully franked dividend of $5.79 in the 2024 financial year. This represents a forward dividend yield of 8.05% based on the current share price.

If this was to eventuate, I would only need to invest $14,907 a year or $1,242 a month over 12 months to achieve a monthly passive income of $100 (or yearly income of $1,200) from this ASX 200 lithium share.

Pilbara Minerals

Pilbara Minerals announced a maiden interim dividend in the first half of this year of 11 cents per share.

However, analysts are tipping Pilbara’s dividend could increase in the future.

Macquarie is tipping Pilbara to pay fully franked dividends per share of 42 cents in total in FY23.

Looking at this forecast, a 42 cents per share dividend for the financial year would equate to a dividend yield of 10% based on Pilbara’s last closing share price of $4.20.

On this basis, you could achieve $100 income a month ($1,200 annually) from Pilbara shares if you invested $12,000 a year (or $1,000 each month for a year) in the company’s share price.

Pilbara shares have returned 58% in the last year and are currently fetching $4.20.

Pilbara produced 148,131 dry metric tonnes (DMT) of spodumene concentrate in the March quarter of 2023. This was down 9% on the March quarter. However, the company’s cash balance increased 21% on the previous quarter to $457 million.

The post 2 ASX 200 lithium shares to buy for $100 monthly passive income each appeared first on The Motley Fool Australia.

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More reading

• Guess who has just downgraded Mineral Resources shares to a sell rating
• Here are the top 10 ASX 200 shares today
• Why Flight Centre, Jumbo, Pilbara Minerals, and Ramelius shares are charging higher
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• What’s the forecast for the lithium price in May?

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 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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The Lake Resources N.L. (ASX: LKE) share price failed to gain traction in April despite the company releasing numerous exciting updates.

After closing March at 44.5 cents, the stock soared to its April peak of 56 cents on 17 April.

Sadly, its gains weren’t to last. Shares in the lithium hopeful plummeted to a 52-week low of 40.5 cents on 27 April before recovering slightly to close the month at 42 cents.

That marks a 5.6% fall for the 30-day period.

For comparison, the S&P/ASX 200 Index (ASX: XJO) climbed 1.8% last month.

So, what got the Lake Resources share price down in April? Let’s take a look.

Lake Resources share price slumps amid Kachi milestones

The Lake Resources share price slumped last month despite a barrage of news of the company’s flagship Kachi Project.

First up, the lithium hopeful revealed independent testing found lithium produced at the project had purity grades of over 99.8%. Stock in the company jumped 8% on the news.

It marked a major win for both the project and the direct lithium extraction technology (DLE), developed by partner Lilac Solutions, used there.

The technology was previously slammed by short sellers who were sceptical that it would work to make the process of extracting lithium from brine more sustainable.

And that wasn’t all. Lake Resources announced the project’s maiden production just two weeks later, sending its share price soaring 18%.

Kachi’s lithium pilot plant produced 2,500 tonnes of lithium carbonate equivalent using Lilac’s DLE technology. In a joint statement, both companies’ CEOs said:

Today, we’ve proven that it is possible to produce high-purity lithium faster and without evaporation ponds – all while protecting surrounding communities and ecosystems.

Finally, the ASX 200 lithium up-and-comer dropped its report for the March quarter on the final trading day of April.

The market remained unfazed by the $113 million of cash and $206 million of unused financing facilities found on the company’s balance sheet as of 31 March.

Lake Resources stock underperforms ASX 200

Unfortunately, last month’s slump was just the latest experienced by the Lake Resources share price.

The stock is currently 38% lower than it was at the start of 2023. It has also fallen 72% since this time last year. Meanwhile, the ASX 200 has risen 4% year to date and has fallen 1% over the last 12 months.

Not to mention, the lithium stock remains one of the most shorted on the ASX. It had a short position of 8.57% as of 27 April.

The post The Lake Resources share price dumped another 6% in April. Here’s the lowdown appeared first on The Motley Fool Australia.

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More reading

• What’s the forecast for the lithium price in May?
• Here are the top 10 ASX 200 shares today
• Here are the 10 most shorted ASX shares
• 2 ASX lithium shares this US institutional investor is buying up big (and one it’s selling)
• Making it rain: Could this signal a boom for ASX 200 lithium stocks?

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 Scott Phillips.

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If you’ve been to an airport over the past six months, you would hardly think that Australia and the world are at the brink of economic calamity.

There are travellers climbing over each other to pay a fortune for plane tickets, desperate to fly off for a trip.

Who would even know mortgage holders have copped 11 interest rate rises in the space of just one year?

The team at Elvest Fund this week revealed that it’s taking full advantage of this theme through its holdings in two ASX travel shares:

‘Rapid recovery in leisure travel’

Helloworld Travel Ltd (ASX: HLO) shares have, believe it or not, already rocketed 124% so far this year. 

But Elvest analysts reckon there’s plenty more where that came from, as the travel agent seems to have underplayed its prospects for the current quarter.

“The new guidance range of $38 to $42 million implies EBITDA slows during the seasonally strong June quarter — an unlikely scenario given the upward trajectory of travel activity,” they said in a memo to clients.

The last quarter was admittedly extremely strong.

“Third quarter FY23 EBITDA came in at $14.2 million, up from a $4.9 million loss in the prior corresponding period,” read the memo.

“Helloworld upgraded FY23 EBITDA guidance by a further 33% (at the midpoint), driven by the continued rapid recovery in leisure travel during the March quarter.”

The wider professional community concurs with the Elvest analysts. Five out of six analysts currently surveyed on CMC Markets rate Helloworld shares as a buy.

Huge contract win

Corporate Travel Management Ltd (ASX: CTD) shares haven’t quite doubled like Helloworld, but have still served investors pretty well with a 39.3% hike year to date.

The big catalyst came last month.

“Corporate Travel announced a large two-year travel management contract with the UK Home Office,” read the Elvest memo.

“Estimated at $3 billion of total transaction value, the contract is for the management of accommodation and travel for asylum seekers.”

In fact, the share price soared more than 10% on the morning of the announcement.

The team has the same confidence in Corporate Travel as it does with Helloworld, although the former’s business-orientated clientele might mean the performance boost is delayed.

“The broader outlook for Corporate Travel is improving,” read the memo.

“Though we expect Corporate Travel’s post-COVID recovery will lag by six to 12 months as airline capacity normalises.”

Elvest’s peers are more divided on Corporate Travel than Helloworld, with nine analysts on CMC Markets rating it as a buy versus seven saying hold. One holdout is urging a strong sell.

The post 2 ASX travel shares poised for a massive 2023 appeared first on The Motley Fool Australia.

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More reading

• 5 top ASX shares that would have more than doubled your money in 2023
• These were the best-performing ASX 200 shares in April
• Why Allkem, Blackmores, Helloworld, and St Barbara shares are charging higher
• 2 ASX All Ordinaries stocks leaping higher following strong quarters
• These ASX 200 growth shares could generate big returns: broker

Motley Fool contributor Tony Yoo has positions in Corporate Travel Management. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Helloworld Travel. The Motley Fool Australia has positions in and has recommended Helloworld Travel. The Motley Fool Australia has recommended Corporate Travel Management. 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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ASX dividend shares can unlock some good passive income. But, there are a few that have particularly high dividend yields which could be worth knowing about.

Businesses that have a low price/earnings (P/E) ratio and/or have a particularly high dividend payout ratio can have a large dividend yield.

Investors should ensure that if they’re going for a dividend yield, the underlying business has a good future and the valuation makes sense. The following two names could pay large yields in FY23 and beyond.

Adairs Ltd (ASX: ADH)

Adairs is a business that sells furniture and homewares through three different brands – Adairs, Mocka and Focus on Furniture.

The business is expected to pay a very large dividend yield in FY23. Estimates on Commsec suggest that the ASX dividend share could pay an annual dividend per share of 16.8 cents in FY23 and 19 cents per share in FY24. This could mean the grossed-up dividend yield for FY23 may be 10.6% and the FY24 grossed-up dividend yield might be 12%.

This business has seen plenty of volatility over the past two years. But, after dropping around 50% since June 2021, the business is now on a very low valuation in terms of its P/E ratio.

It might generate 27.2 cents of earnings per share (EPS) in FY23 and then 30 cents of EPS in FY24, according to Commsec. These forecasts put the Adairs share price at 8 times FY23’s estimated earnings and under 8 times FY24’s estimated earnings.

The ASX dividend share is aiming to grow its profit through opening new stores, upsizing some stores to bigger locations (which are more profitable), growing its loyalty member base and increasing its online sales.

Pacific Current Group Ltd (ASX: PAC)

Pacific Current describes itself as a multi-boutique asset management business. It uses its strategic resources, including capital, institutional distribution capabilities and operational expertise to help its partners excel.

In other words, it invests in fund managers around the world to help them grow. One success story has been GQG Partners Inc (ASX: GQG) which grew into one of the biggest fund managers on the ASX. Some of the fund managers that it’s invested in include Aether, Banner Oak, Carlisle, Proterra and Victory Park.

Pacific Current has grown its dividend each year since 2018 and dividends are expected to keep rising for the years to come, according to Commsec. The FY23 dividends per share could be 41 cents and 46.5 cents per share in FY24.

These estimates suggest that the ASX dividend share could pay a grossed-up dividend yield of 8.1% in FY23 and 9.2% in FY24.

The underlying fund managers are seeing growth of funds under management (FUM), which can then help revenue, earnings and the dividend. In the three months to 31 March 2023, aggregate FUM grew 6.9% in Australian dollar terms. It continues to make the occasional investment into another fund manager, opening up another avenue of growth for the business.

Assuming asset markets keep growing over the long term, as they have in the past, this is a useful organic boost for the ASX dividend share’s ability to make a profit and pay dividends.

The post 2 ASX dividend shares with seriously huge payouts appeared first on The Motley Fool Australia.

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More reading

• Investing 15% of my salary could yield $500 in a monthly second income
• 2 ASX dividend shares offering exciting yields over 7%
• Want $1,000 in monthly passive income? Buy 29,270 shares of this ASX All Ords stock
• 1 under-$10 ASX dividend stock to buy for monthly passive income
• I’m buying ASX 200 dividend stocks ahead of the next bull market

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 Adairs. The Motley Fool Australia has positions in and has recommended Adairs. 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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The Zip Co Ltd (ASX: ZIP) share price declined in the month of April but it was not the only buy now, pay later (BNPL) share to fall.

Zip shares fell 8.9% from 56 cents at market close on 30 March to 51 cents at market close on 28 April.

Let’s take a look at what weighed on the Zip share price during the month of April.

What went on?

Zip outperformed multiple ASX BNPL shares during the month. For example, Block Inc (ASX: SQ2) shares declined 11% in April, while Sezzle Inc (ASX: SZL) shares plunged 18%.

Market sentiment for the BNPL sector appeared to be bearish in April amid wider market turmoil and ongoing US recession talk.

ASX BNPL shares including Zip followed in the footsteps of US counterparts. Affirm Holdings Inc (NASDAQ: AFFM) slid 12.51% in the month of April, while Block’s US listing Block Inc (NYSE: SQ) slid 11.24%.

Zip’s major announcement to the market during the month was a quarterly update on 20 April. On the day of this announcement, Zip shares climbed nearly 2%.

Group quarterly revenue lifted 15% on the prior corresponding quarter, transaction volume also jumped by 9% to $2.2 billion.

The company’s cash transaction margin also rose to 2.8% for the quarter, up from 2.5% in the third quarter of FY22. Revenue margin also leapt to 8.3%, up from 7.9% in the prior corresponding quarter.

Zip said its US business is experiencing “solid momentum” and is on track to end FY23 EBTDA positive. Zip’s CEO and co-founder Larry Diamond moved to the USA in October, stating at the time “there is still a significant opportunity for fintech in the US”.

Commenting on Zip’s outlook, CEO, managing director and founder Larry Diamond said:

We recognise that many household budgets are under pressure, whether it be inflation or
the rising cost-of-living, which means our mission and purpose has never been more
relevant.

Also during the month, Zip became the new partner of the fitness platform Peloton Australia. ZIP ANZ CEO Cynthia Scott said this will offer Zip customers “a flexible and transparent financing option for Peloton’s products”. She added:

This is also incredibly timely, with shifts in spending habits and preferences in a post-pandemic world becoming the new norm. 

Zip share price snapshot

The Zip share price has declined 56% in the last year.

Zip has a market cap of about $388.3 million based on the last closing price.

The post Why did the Zip share price dump 9% in April? appeared first on The Motley Fool Australia.

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More reading

• Short sellers reveal 4 ways to spot dud ASX shares
• Here are the 10 most shorted ASX shares
• The Zip share price is down 49% in a year. Here’s why I still won’t buy
• These are the 10 most shorted ASX shares this week
• Why Bank of Queensland, Link, Silk Laser, and Zip shares are pushing higher

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 Zip Co. 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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ASX growth shares have taken a beating over the last year and a half. But I think there are opportunities to pounce on before a possible recovery.

Just because something has gone down doesn’t automatically mean it’s going to rise again. But the two businesses I’m going to talk about have seen significant falls, even though their futures looks promising.

I think their current valuations look really good for the long term.

SiteMinder Ltd (ASX: SDR)

SiteMinder describes itself as a hotel technology provider. It says it’s the world’s number one channel manager and hotel booking software provider.

Over the past year, the SiteMinder share price has dropped by more than 30%, making it much better value in my opinion. This decline has happened even though travel demand has soared.

The quarterly update the business announced last week was very promising, in my opinion. Revenue rose 28.7% year over year to $37.3 million, while annualised recurring revenue (ARR) increased 28.5% year over year to $150.3 million.

It also said that net subscriber additions accelerated, as did the uptake of transaction products.

The ASX growth share is still seeing underlying free cash outflows ($8.5 million for the quarter), but it’s quickly improving. It had available liquidity, including undrawn debt, of $86.7 million at the end of the quarter.

This is the type of software business where its subscription revenue has a high gross profit margin, meaning that new revenue is rapidly boosting the bottom line. The company is expecting to be free cash flow neutral by the fourth quarter of FY24, on a quarterly basis.

Temple & Webster Group Ltd (ASX: TPW)

The former COVID darling has fallen heavily. The Temple & Webster share price is down by around 25% over the past year alone.

I can understand why the market is worried in the short term – higher interest rates could hurt demand for furniture and homewares from the online retailer. Higher interest rates also may be a likely factor in pulling down the company’s valuation. As well, COVID lockdowns are over and shops are trading without restrictions so consumers may be less likely to buy items online compared to FY21.

However, I think the long term is promising for this ASX growth share.

The company’s active customer base is now substantially larger than it was pre-COVID — and those customers are coming back to Temple & Webster regularly. The company said in its FY23 half-year result presentation that 57% of orders are now from repeat customers. Temple & Webster said this will increase returns on marketing spending.

HY23 revenue per active customer increased 7%, driven by both average order value and repeat orders.

The business is seeing growth with both its trade and commercial division, as well as its home improvement products. Both of these market segments are worth billions, which is a larger opportunity for the business.

Management expects it will be able to achieve much higher profit margins in the coming years as it scales. The company has also noted Australia’s furniture and homewares market “significantly lags the online penetration of other countries such as the US and UK”, suggesting this can help the company’s revenue as more people shop online more often.

As this business grows revenue in future years, I think it can become much more profitable and this could excite investors.

The post 2 ASX growth shares I’d buy today before it’s too late appeared first on The Motley Fool Australia.

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More reading

• Here are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares this week
• Why I think it’s a great time to start buying ASX growth shares
• Supercharge your portfolio with these 3 ASX growth shares: brokers
• After steep falls, these ASX All Ords shares look dirt cheap to me

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 SiteMinder and Temple & Webster Group. The Motley Fool Australia has positions in and has recommended SiteMinder. The Motley Fool Australia has recommended Temple & Webster 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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The team at Morgans regularly picks out its best ASX share ideas. These are the ASX stocks that the broker thinks offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence.

Among its best ideas for May are the two top ASX 200 stocks listed below. Here’s what the broker is saying about them:

Aristocrat Leisure Limited (ASX: ALL)

Morgans has this ASX 200 gaming technology company on its best ideas list in May. The broker believes Aristocrat is well-placed for long-term growth. It also highlights the company’s strong balance sheet, which provides it with opportunities to bolster its growth organically and inorganically. It said:

We have three key reasons for being positive on ALL. They are: (1) long-term organic growth potential. ALL is better capitalised than many of its competitors and has what we regard as a strong platform to continue investment in design and development in both its land-based gaming and digital businesses; (2) strong cash conversion and ROCE. ALL is a capital-light business despite its ongoing investment in Gaming Operations capex and working capital. It has a high level of cash conversion and ROCE; and (3) strong platform for investment. ALL has funding capacity for organic and inorganic investment in online RMG, even after the recent buyback. Its current available liquidity is $3.8bn.

Morgans has an add rating and $43.00 price target on Aristocrat’s shares.

CSL Limited (ASX: CSL)

This biotherapeutics company is on the broker’s best ideas list again in May. Morgans has labelled CSL as a key portfolio holding. This is due to its significantly improved outlook and attractive valuation. The broker explains:

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 ~30x.

Morgans has an add rating and $337.92 price target on the ASX 200 stock.

The post Morgans names the best ASX 200 stocks to buy in May appeared first on The Motley Fool Australia.

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More reading

• Why analysts are bullish on these ASX 200 growth shares
• Can the CSL share price crack a new, all-time high in 2023?
• These ASX 200 shares could be top options for your retirement portfolio: experts
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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. 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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The National Australia Bank Ltd (ASX: NAB) share price will be one to watch closely today.

That’s because the banking giant has just released its eagerly anticipated half-year results.

Unfortunately, it appears as though the bank has fallen short of expectations, which could potentially put pressure on its shares.

NAB share price on watch following half-year results

• Statutory net profit of $3,967 million
• Cash earnings up 17% to $4,070 million
• Fully franked interim dividend up 13.7% to 83 cents per share
• Net interest margin (NIM) up 16 basis points to 1.77%

What happened during the first half?

For the six months ended 31 March, NAB reported a 19.3% increase in revenue or 16.6% excluding the impact of the Citi consumer business acquisition. Management advised that this reflects higher margins combined with stronger volumes and Markets & Treasury (M&T) income.

Speaking of margins, NAB reported a 16 basis points increase in its NIM to 1.77%. However, this is down slightly since the end of the first quarter. It is also short of Goldman Sachs’ estimate for a NIM of 1.83% for the half.

NAB advised that its NIM reflects higher earnings on deposits and capital as a result of the rising interest rate environment, partially offset by home lending competition and higher funding costs.

The bank’s expenses increased by 11.6% during the half. Though, excluding the impact of the Citi consumer business, expenses rose just 6.3%. Key drivers of this include salary increases, continued investment in technology capabilities, and compliance and remediation including activities. These impacts were partially offset by productivity benefits.

This ultimately led to NAB reporting a 17% increase in cash earnings to $4,070 million. While this is strong growth on paper, it falls short of the consensus estimate of $4,151 million.

Also falling a touch short was NAB’s fully franked interim dividend of 83 cents per share. Goldman Sachs had pencilled in an 84 cents per share dividend for the period.

Management commentary

NAB’s CEO, Ross McEwan, was pleased with the half. He said:

We have delivered a strong 1H23 financial performance with cash earnings up 17.0% compared with 1H22 and all businesses contributing to underlying profit growth of 25.5%. Our results have benefitted from the execution of our strategy over multiple years. This includes consistent investment in long term growth opportunities, while making choices for more targeted growth against the backdrop of a slowing economy and increasing competition.

The higher interest rate environment has also been an important near term driver of revenue this period. Staying safe and maintaining prudent balance sheet settings has been a key strategic focus which positions us well for the risks and volatility stemming from recent rapid monetary policy tightening.

Strong capital position

McEwan also revealed that NAB’s capital position remains strong. Which should be some comfort to investors following recent banking collapses. He adds:

Capital levels are above our targets, liquidity is strong, collective provision coverage remains well above pre COVID-19 levels and our FY23 term funding task is well advanced with $23 billion(1) raised in 1H23.

The CEO also commented on current trading conditions and how the cost of living crisis is impacting customers. He said:

The impact of higher living and interest costs on household spending and the broader economy is becoming more evident and we have a range of options available for customers needing support.

Finally, McEwan revealed that he is feeling positive about the company’s outlook. Especially with inflation showing signs of slowing. He concludes:

Early signs that inflation is moderating are encouraging and we remain optimistic about the outlook – our bank and most customers enter this period from a position of strength and we are well placed to continue managing our business for the long term. We remain focused on the disciplined execution of our strategy to drive sustainable growth in earnings and shareholder returns over time.

The NAB share price is down 12% over the last 12 months.

The post NAB share price on watch after half-year earnings fall short of expectations 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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One leading broker is warning investors that Mineral Resources Ltd (ASX: MIN) shares could be seriously overvalued at current levels and is urging them to sell.

Who is bearish on Mineral Resources shares?

The team at Goldman Sachs is behind the bearish call on this mining and mining services company’s shares.

According to a note from this morning, its analysts have downgraded Mineral Resources shares to a sell rating with a $53.00 price target.

Based on its current share price of $71.93, this implies potential downside of 26% for investors over the next 12 months.

It is also worth noting that Goldman isn’t expecting big dividend yields like some analysts are predicting. It only expects dividend yields of 2.1% in FY 2023 and just 0.4% in FY 2024.

This is due to its belief that the company’s free cash flow generation will be extremely challenging in the coming years.

What did the broker say?

There were three key reasons that Goldman Sachs downgraded Mineral Resources shares. It explains:

[We] downgrade MIN to Sell (from Neutral) based on: (1) Fully valued vs. peers and downside to revised PT (2) Lithium price expected to decline further from 2H23-25, (3) Positive medium term volume growth but negative FCF across FY24 & FY25 and stretched balance sheet.

In respect to its free cash flow, the broker adds:

Due to a step-up in growth capex at Ashburton and payments to Wodgina JV partner Albemarle, and our below consensus lithium price forecasts, we forecast negative FCF across FY23-25 and a FCF yield of -8%/-7%/-5% over these years.

All in all, the broker believes this makes Mineral Resources a resounding sell at current levels.

The post Guess who has just downgraded Mineral Resources shares to a sell rating appeared first on The Motley Fool Australia.

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More reading

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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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