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.

The post Consider these 2 ASX fintech shares before they take off appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3eqkzAS

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
• My ASX share for the week
• Top brokers name 3 ASX 200 shares to buy next week
• 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.

The post Is A2 Milk Company going to acquire another infant formula company? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/37RcuCt

The S&P/ASX 200 Index (ASX: XJO) gained 1.6% last week, returning to its recent strong form. Early sales data for May boosted the market on Friday, alongside positive sales results from retailers. According to the ABS, retail sales rose 16.3% in May, with large rises in spending on clothing, footwear, personal accessories, cafes and restaurants. 

The technology sector also contributed to gains with the All Technology Index (ASX: XTX) up 1.75%. Afterpay Ltd (ASX: APT) hit new heights, climbing another 12% over the week, while Altium Limited (ASX: ALU) shares were up 10%.

Here we take a look at last week’s top 5 performers. 

Clinuvel Pharmaceuticals Limited (ASX: CUV)

The Clinuvel Pharmaceuticals share price climbed 21.3% last week to finish the week at $27.30. Shares in the healthcare company have more than doubled in value since March, far exceeding broader market gains – by comparison, the ASX 200 is up around 30% since its March low. 

Clinuvel has spent 15 years developing its product, Scenesse, the world’s first systematic photoprotective drug. The drug is used to treat Erythropoietic Protoporphyria (EPP), a metabolic genetic disorder which causes an intolerance to light. Clinuvel’s drug Scenesse provides EPP patients with photoprotection, providing them with the ability to lead a “normal” life.

Clinuvel had its first full year of commercial operations and first year of profits in FY17. Profits rose in FY18 and FY19, with Clinuvel recording its 8th consecutive half year profit in the period ending December 2019. Earnings per share increased from 18 cents in 2017 to above 30 cents in 2019. 

The company is debt free and has cash and equivalents of over $60 million, providing it with an attractive balance sheet. Clinuvel’s strategy is to specialise in treatments for unmet needs in rare genetic indications. Beyond 2020, it is seeking to evolve into a diversified pharmaceutical company providing treatments for multiple indications.

Orora Ltd (ASX: ORA)

The Orora share price rose 20.7% last week to close the week at $2.31. Orora provides packaging and visual communication solutions, designing and manufacturing products such as bottles, cans, boxes, paper and signage. 

Orora completed the sale of its Australasian Fibre business for $1.73 billion in April. Net proceeds after tax and costs are approximately $1.55 billion. The sale has prompted a strategy review of the continuing businesses, with an update expected later this calendar year. 

As a result of the sale, Orora has surplus capital, which is being returned to shareholders – $600 million will be paid out via a special dividend of $450 million and a $150 million capital return. 

Thanks to the proceeds from the Fibre sale, Orora is operating with little to no debt, giving it a strong position in the current economic environment. The company will pursue potential growth investment opportunities should the right opportunity present. In the absence of such an opportunity, the company will consider a further return of excess capital to shareholders. 

Healius Ltd (ASX: HLS)

Healius shares gained 19.8% last week, finishing the week at $3.03, as the healthcare company announced the sale of its medical centres business. The sale will take place at an enterprise value of $500 million, with proceeds used to reduce net debt and free up capital for investment. 

The medical centres sale is consistent with Healius’ strategy of simplifying its portfolio and focusing on its diagnostics and day hospital business. Healius will continue to operate pathology collection centres and imaging centres located within the medical centres under long term leases. 

In April, Healius noted early signs of recovery and stabilisation in its revenues following an initial downturn resulting from COVID-19. Since then, Healius has experienced good growth in its diagnostics business, supported in part by increased COVID-19 testing. As business returns to normal levels, Healius is looking to reset its cost base by entrenching a number of short-term cost reductions undertaken as a result of COVID-19. 

Appen Ltd (ASX: APX)

The Appen share price climbed 14.7% over the week to close at $33.83. Appen shares are now up 97% from their March low. There was no news out of Appen to prompt the rise in share price, however the artificial intelligence company has been a favourite of investors over the past couple of years, in which time its share price has tripled. 

Appen develops human-annotated training data for machine learning and artificial intelligence. The high growth artificial intelligence market relies on high-quality training data. Obtaining this data is identified as a major challenge. Appen’s leading technology and track record of quality and reliability position it strongly in this market. 

Appen has a strong record of revenue and earnings growth. Revenue increased by a compound annual growth rate of 59% between 2015 and 2019. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) has grown at a compound annual rate of 64% over the same period. The company expects the COVID-19 pandemic to have a negligible impact on outlook based on currently available information. Full year underlying EBITDA for the year to 31 December 2020 is expected to be between $125 million and $130 million. 

Viva Energy Group Ltd (ASX: VEA)

Viva Energy shares gained 14.2% last week to close the week at $1.805. Shares in Viva surged on Tuesday when the energy company provided better than expected earnings guidance. Group underlying EBITDA for 1H2020 is expected to be in the range of $257.5 million to $287.5 million, compared to $297.4 million in 1H2019. 

COVID-19 resulted in a drop in fuel volumes sold in April and May, with petrol and jet fuel most impacted. Diesel and petrol volumes are expected to recover more quickly than jet fuel, with signs this recovery has begun. Weaker global demand growth and increased production is weighing on gasoline margins. Global demand for oil products will take time to restore as restrictions are removed and economies recover. 

Viva has managed the impact of COVID-19 by deferring projects to reduce capital costs and scaling back airport refuelling operations to reflect significantly reduced requirements. Capital expenditure for FY20 is expected to be between $145 million and $180 million, compared to $161 million in FY2019 and $242 million in FY2018. 

More reading

• These 5 ASX shares saw the biggest losses last week
• A $73m boost sends the Austal share price to the top of the ASX 200 today
• Is there a better buy than JB Hi-Fi shares today?
• Altium share price sinks 7% lower after FY 2020 trading update
• Is the a2 Milk share price a buy after falling nearly 5% on Friday?

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. 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.

The post These 5 ASX shares were last week’s top performers appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3dheGV6