The S&P/ASX 200 Index (ASX: XJO) has seen strong share price gains across the board today. In fact, the index was up by a very healthy 2.5% at the close. This follows strong share price gains yesterday, as general market sentiment continues to lift. These gains are largely being driven by hopes the Australian economy can start recovering from the coronavirus pandemic more quickly than anticipated.

Easing restrictions bring hope to the travel sector

ASX 200 travel shares have been punished harshly in recent months. With severe lockdown restrictions coming into effect in March, both local and international travel has virtually ground to a halt since then.

However, it is now looking increasingly likely that domestic travel will gradually start to pick up in the months ahead. As the Australian government begins to ease lockdown restrictions, renewed hope is starting to flow through to the travel sector. Increased optimism surrounding a possible coronavirus vaccine is also boosting spirits amongst ASX 200 investors.

It’s true that the possibility of international travel resuming to any significant degree before the end of this year is still highly unlikely. There is, however, the possibility of a trans-Tasman bubble that will open up travel between Australia and New Zealand later in the year.

This good news is helping spur on a partial rebound amongst heavily sold off shares within the ASX 200 travel sector. Corporate Travel Management Ltd (ASX: CTD) is up 3.8% today whilst Webjet Limited (ASX: WEB) climbed by 5.5%. Likewise, Flight Centre Travel Group Ltd (ASX: FLT) is up by 8.8% and Qantas Airways Limited (ASX: QAN) surged by 4.9%.

Travel bookings segment hit particularly hard

In the travel bookings segment, Flight Centre has been hit particularly hard by the economic fallout from COVID-19. This is primarily related to the company’s high fixed overhead costs. These are necessary to support the company’s nationwide chain of retail outlets. Despite its strong rally today, Flight Centre’s share price is still down by over 60% since January. In a recent capital raising, Flight Centre successfully raised $700 million from institutional and retail shareholders. The company has also undertaken a range of cost reduction initiatives in order to make it through these unprecedented market conditions.

Due to its online only business model, Webjet may have less overheads than its main rival, Flight Centre. However with bookings drying up, the company has also been forced to enter survival mode in recent months. The Webjet share price has also been hit hard by a highly dilutive equity raising back in April. It would seem though that investors are now feeling a bit more optimistic that domestic flight bookings may begin again soon. Likewise, Corporate Travel Management will be hoping that some corporate travel in Australia will begin to resume in the months ahead. This should continue providing renewed optimism to its investors.

Meanwhile, our national airline carrier, Qantas, has seen its fleet of planes largely grounded over the past few months. However, the company secured additional debt funding of $550 million in early May. It’s strong cash position makes it relatively well placed to ride out the remainder of the coronavirus crisis, before domestic travel starts to resume. This has helped to see its share price rise higher today as news surrounding the sector continues to look more optimistic.

More reading

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• Latest spending data could drive the ASX retail sector higher
• Up another 5%: Is the Webjet share price a buy?
• The latest ASX shares that brokers have just upgraded to “buy”
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Motley Fool contributor Phil Harpur owns shares of Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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 S&P/ASX 200 Index (ASX: XJO) jumped almost 3% today to 5,780 points, it is now out of the bear market territory we’ve been in since March 2020.

The ASX 200 is now down by just 19% from the 21 February 2020 level. Since 23 March 2020 the ASX 200 has risen by 27% in an extraordinary turnaround.

ASX banks boost the index

The big four ASX banks don’t quite make up as much of the index as they used to, but their combined movements can still have a big impact on the share market. They all rose strongly today. 

Looking at those movements:

The Commonwealth Bank of Australia (ASX: CBA) share price rose by almost 4%.

The Westpac Banking Corp (ASX: WBC) share price went up 6.1%.

Australia and New Zealand Banking Group (ASX: ANZ) saw its share price increase by 6%.

The National Australia Bank Ltd (ASX: NAB) share price went up 5.6%.

Investors appear to be much more hopeful about the Australian economy’s trajectory.

ASX 200 travel shares continue to soar

After yesterday’s comments from Treasurer Josh Frydenberg about prolonging support, the travel industry has continued to fly today with investors seeing a return of travel on the horizon.

Some of the ASX 200 travel shares that experienced another large gain today were:

The Flight Centre Travel Group Ltd (ASX: FLT) share price went up 9.5%.

The Webjet Limited (ASX: WEB) share price rose 5.8%.

Infrastructure giant Sydney Airport Holdings Pty Ltd (ASX: SYD) saw its share price fly higher by 4.2%.

The Qantas Airways Limited (ASX: QAN) share price went up 5.4%.

Coca-Cola Amatil Ltd (ASX: CCL) is hurting

The Coca Cola share price fell 1.6% today after the food and beverage business said that its volumes were down heavily whilst also suffering earnings before interest and tax (EBIT) margin pain.

COVID-19 struck at a particularly difficult point with Easter and Ramadan falling during the heaviest restrictions.

The business also withdrew its dividend payout ratio guidance.

More reading

• Why ASX 200 travel shares are soaring higher today
• Latest spending data could drive the ASX retail sector higher
• Why ANZ, CBA, NAB, and Westpac shares are storming higher today
• Up another 5%: Is the Webjet share price a buy?
• The latest ASX shares that brokers have just upgraded to “buy”

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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 Palla Pharma Ltd (ASX: PAL) share price was an impressive performer on the ASX today. Despite a number of gains across the board, Palla Pharma stood out with a big 27.46% share price rise in intra-day trading. As the day went on, Palla Pharma shares pulled back from these levels and closed 12.68% higher at 80 cents per share.

About Palla Pharma

Palla Pharma is a growing global supplier of opiate-based pain relief medicines. It is a fully-integrated opiate manufacturer, involved in a number of activities from poppy straw growing through to tableting production. 

The company is one of three licensed poppy processors in Australia, and the only Australian-owned company. Additionally, it is one of six licensed opiate producers globally.

The company was founded in 2004 as TPI and rebranded in 2019. ASX investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is a major shareholder and its CEO, Todd Barlow, sits on the Palla Pharma board.

What caused the Palla Pharma share price to spike?

This morning, Palla Pharma announced it would not be going ahead with the acquisition of a major UK customer – ending almost a year’s worth of negotiations.

Since July 2019, Palla Pharma has been in discussions with its largest UK customer, a manufacturer of finished dosage codeine phosphate, regarding the potential acquisition of the customer’s UK operations. This was part of Palla Pharma’s strategy to continue to move down the value chain.

According to Palla Pharma, the customer’s manufacturing site has the capacity to tablet over 120 tonnes of codeine phosphate. This equates to revenue of approximately US$120 million.

Acquisition discussions intensified earlier this year after the UK regulator imposed a 3-month suspension of the customer’s operating license. The suspension resulted in a need for working capital and management support, which was provided by Palla Pharma. To address the customer’s working capital needs, Palla Pharma acquired 4 of the customer’s marketing authorisations for the supply of codeine-based products into the UK.

In return for its management assistance and investment of resources in the due diligence process, Palla Pharma noted it had been given an “option to acquire the business at an attractive valuation”.

Fast forward to April and Palla Pharma announced it had acquired further marketing authorisations from the customer. Despite electing not to exercise the option, Palla Pharma stated it was in advanced negotiations with the owners and senior creditors in regard to the potential acquisition. However, there remained “material differences between the parties with respect to valuation”.

All of this takes us to today’s announcement, in which Palla Pharma revealed it had ceased negotiations with the customer as it became evident a commercial agreement could not be reached.

What now?

The UK customer has been recapitalised by a new minority shareholder and Palla Pharma stated it will be seeking to have its current outstanding invoices for codeine phosphate supply in 2019 paid in full.

While exploring the possible acquisition, Palla Pharma acquired 7 marketing authorisations from the customer, which accounted for approximately 70% of the customer’s revenue. The ownership of these authorisations has been transferred to Palla Pharma and manufacturing is in the process of being transferred to the company’s Norway site.

Looking forward, Palla Pharma expects earnings in the second half of FY20 to be “significantly stronger” than the first half. This comes as the company finalises the transition of its sales profile from volume-based commodities to higher-value products. As a result, Palla Pharma anticipates a material uplift in full-year earnings.

Palla Pharma is set to hold its AGM on Thursday, 28 May, where it will provide a more detailed trading update and outlook.

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Motley Fool contributor Cathryn Goh owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. 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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