The Austal Limited (ASX: ASB) share price surged after the US government agreed to pump US$50 million ($73 million) into the company’s US shipyard.

The Austal share price jumped 7.7% to $3.62 in morning trade and is the best performer on the S&P/ASX 200 Index (Index:^AXJO).

Gold miners are in distant second and third places. The Saracen Mineral Holdings Limited (ASX: SAR) share price jumped 4.9% to $4.95 and Northern Star Resources Ltd (ASX: NST) added 4.5% to $13.62.

ASX COVID-19 winners

While precious metals are in favour in this risk-off environment, Austal is the real standout as it is also a big COVID-19 beneficiary.

The US Department of Defence (DoD) signed a Defense Production Act Title III Agreement with Austal USA. The agreement is part of the US government’s national response to COVID-19 to maintain, protect and expand critical domestic shipbuilding and maintenance capacity.

Austal will likely match the DoD’s investment to take the total capex budget to around US$100 million.

Austal catches coronavirus stimulus

While details on how the cash will be spent is yet to be worked out with the DoD, management intends to “commence investment in the development of additional capacity for steel naval vessel construction”.

The US government funding is also aimed at protecting and creating jobs in Mobile, Alabama, where the local economy is hit hard by the coronavirus pandemic.

Austal is promising to release more details in the coming months, but it’s easy to see why investors are excited – and it’s not only because of the cash amount.

More than money

The large financial commitment by the US government shows how important Austal is to the US Navy. This is an important signal after Austal missed out on the Guided-Missile Frigates FFG(X) contract, which was awarded to a competitor.

Austal is one of my top picks in the industrials space as its earnings are more resilient to the global COVID-19 recession.

Another ASX stock to for your watchlist

Interestingly, Austal isn’t the only ASX stock that is likely to benefit from US government funding. I believe that rare earths miner Lynas Corporation Ltd (ASX: LYC) is in the box seat to get a cash injection from Uncle Sam.

There’s speculation that Lynas might be overlooked due to intense lobbying by Lynas’ US competitors for its government to back local companies.

But Lynas is the only non-Chinese miner that have rare-earths operations of any significance, and I think it will get a piece of the action.

The US is trying desperately to develop its own supply of rare earths to ease its dependence on China.

Rare earths are used in a range of critical equipment, including weapons and electronics.

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Brendon Lau owns shares of Austal Limited and Lynas Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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While many have been looking the other way, a handful of ASX fintechs have been building the foundations of great companies. Payment processing is one area where consumer behaviour is changing and the trend has only been accelerated by COVID-19. Many places I shop at today are already cashless. Others have a stated preference for contactless payments. 

This is an area already crowded by the big banks. The Commonwealth Bank of Australia (ASX: CBA) prides itself on being the nation’s largest digital payments processor. Nonetheless, small Aussie fintech startups are carving out niches in these markets.

Why take on the banks?

Tyro Payments Ltd (ASX: TYR) is a very impressive payment processing fintech. It entered a market dominated by the banks and has become Australia’s largest EFTPOS provider of all authorised deposit-takings (ADI) outside of the big 4 banks.

From 25 March the company has reported their transactions weekly for transparency during the pandemic. Tyro’s Trading Update 7 showed April transactions were down by 38% against the prior comparable period (PCP), while  Trading Update 11 showed May down by 18%.

However, for the financial year to date, the company is up by 16% on the PCP. In addition, the company reported a compound annual growth rate (CAGR) of transactions of 27% in its H1 FY20 presentation.

Alternate revenue streams

As a fintech, Tyro provides a business banking service including fee-free, interest-paying accounts. Moreover, the company provides merchant financing in the form of small business loans with a simple fee structure.  Although it has yet to report full-year earnings, its H1  FY20 earnings report was very impressive.

I think this fintech is undervalued on the market today and could be one of the 10 baggers of the next decade. 

Profitable charity 

Pushpay Holdings Ltd (ASX: PPH) saw its share price rise by around 18% last week. The company provides simplified digital payment processing for non-profit organisations, faith-based communities and education providers. Its software-as-a-service (SaaS) donor management system includes donor tools, finance tools and a custom community app.

Approximately 98% of its customers are in the USA. Which means it is an integral player in one of the world’s biggest faith-based markets. Although only listed since 2016 the company has already shown significant growth. Its gross sales have increased by 41.8% per year, on average, over the past 4 years. In addition, it has produced a return on equity of over 30% for the past 2 years. 

I think this is a great niche fintech addressing the problem of taking donations digitally. While this company has a significant price-to-earnings (P/E) ratio I believe it is a great company at a reasonable price. 

Foolish takeaway

The ASX fintech sector is one of the most vibrant in the world. I think these 2 companies are likely to enjoy share price growth in the near to medium term. They also lack the level of inflation that we see in the buy now pay later market.

More reading

• The NAB share price has fallen 24%. Should you buy?
• Where to invest $10,000 into ASX shares right now
• ASX share price winners and losers of last week
• ASX 200 Weekly Wrap: ASX back in the green
• Top brokers name 3 ASX 200 shares to sell next week

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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 A2 Milk Company Ltd (ASX: A2M) share price is trading lower today after responding to media speculation.

At the time of writing the infant formula and fresh milk company’s shares are down 2% to $18.19.

What is the speculation?

Over the weekend, The Australian speculated that a2 Milk might be looking to put its hefty cash balance to use with an acquisition.

According to the report, the company could be a frontrunner in the competition to buy New Zealand-based Mataura Valley Milk for NZ$400 million.

Mataura Valley Milk is a nutritional company which sources its produce from one of the finest grass-producing regions in the world – Southland, New Zealand.

Its products include infant and toddler nutritional powders, skim and whole milk powders, and instant fortified whole milk powders. Importantly, it holds a China Food and Drug Administration (CFDA) registration.

Is a2 Milk Company acquiring Mataura Valley Milk?

During the first half, a2 Milk generated operating cash flow of NZ$160.6 million. This left it with a closing cash balance of NZ$618.4 million.

Although some of these funds have since been spent increasing its stake in Synlait Milk Ltd (ASX: SM1), I suspect it will still have well over NZ$700 million of cash on its balance sheet at the end of FY 2020. Which is more than enough to fund this potential acquisition.

However, this morning the company’s CEO, Geoffrey Babidge, was remaining tight-lipped on the speculation.

He responded to the report by confirming that a2 Milk “has had, and continues to have, various discussions with a number of parties in relation to potential strategic options relating to participation in manufacturing capacity and capability.”

The company will continue to keep the market informed in accordance with its disclosure obligations. This includes if and when any such discussions were to reach a conclusion.

More reading

• Is the a2 Milk share price a buy after falling nearly 5% on Friday?
• Where to invest $10,000 into ASX shares right now
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• How to become a millionaire in 25 years with $20 a day

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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