Author: openjargon

The S&P/ASX 200 Index (ASX: XJO) closed up a stellar 1.4% on Tuesday 7 May.

This great run was fuelled by the Reserve Bank of Australia’s meeting on the day, which saw the central bank leave Australia’s official interest rate steady at 4.35%.

However, the minutes of the RBA’s meeting, released today, reveal that ASX 200 investors came closer than many expected to witnessing another rate hike as the inflation outlook remains highly uncertain.

The ASX 200 is down 0.2% in early afternoon trade today.

Here’s what we learned from the RBA’s inflation outlook and interest rate expectations.

ASX 200 investors dodged a rate rise bullet

It turns out the speculations of another potential 2024 interest rate increase from the RBA weren’t so far out of the ballpark after all.

And judging by the tone of the RBA board’s minutes, ASX 200 investors shouldn’t write off this possibility just yet.

In the meeting, chaired by Governor Michele Bullock, the RBA noted:

Raising the cash rate at this meeting could be appropriate if the board formed a view that the judgements underpinning the staff forecasts risked being overly optimistic about the forces that would drive down inflation, leaving the balance of risks tilted to the upside.

Among the bigger inflationary concerns that could lead to ASX 200 investors having to bear another rate hike is Australia’s tight labour market.

“Labour market conditions had eased by less than had been anticipated three months earlier,” the RBA said. “Conditions in the labour market appeared to be tighter than those consistent with full employment.”

The board also noted that while inflation had eased further in the March quarter “the pace of disinflation had slowed and the recent inflation data were stronger than had been expected in February”.

Indicating how close Australia was to another interest rate hike, the RBA said “Most of the data received since the previous meeting had been stronger than expected.”

According to the minutes:

Taken together, these data suggested that there may be somewhat less slack in the economy than previously assessed. Inflation in Australia had declined more slowly than anticipated. Conditions in the labour market had eased by less than expected over prior months and were tighter than those consistent with full employment.

In what was good news for the ASX 200 on the day, the final decision was to leave the cash rate unchanged.

At least, for now.

“Members agreed that it was important to convey that recent data and other information had signalled that the risks around inflation had risen somewhat,” the board highlighted.

Noting “the considerable uncertainty about the outlook for both inflation and the labour market”, the RBA’s board members “agreed that it was difficult either to rule in or rule out future changes in the cash rate target”.

The post The ASX 200 was almost hit by an RBA interest rate hike in May. Now what? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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.

The Star Entertainment Group Ltd (ASX: SGR) share price is taking a tumble today.

Shares in the S&P/ASX 200 Index (ASX: XJO) casino operator were down 10.1% in earlier trade at 48.5 cents. After some likely bargain hunting, shares have recouped much of those losses, currently trading for 52.5 cents apiece, down 2.8%.

For some context, the ASX 200 is down 0.2% at this same time.

This comes after another update on media speculations surrounding potential takeover discussions with Hard Rock International.

Hard Rock responds

As the Motley Fool reported yesterday, Star had confirmed media rumours saying it has received interest from “a number of external parties regarding potential transactions”.

Management noted that they were not yet in “substantive discussions”. But that didn’t stop the Star Entertainment share price from soaring after coming out of the morning trading halt, ending the day up 20.0%.

The big rally may have been driven by the rumours of Hard Rock’s potential interest in the stock.

Yesterday, The Australian Financial Review cited sources close to Star had indicated Hard Rock Hotels and Casinos was among those external parties potentially interested in acquiring the embattled casino operator.

Overnight, the United States-based global chain denied that in no uncertain terms.

According to Hard Rock:

Any misuse of the Hard Rock name in unauthorised business dealings is taken very seriously. We are currently investigating this matter and will pursue all necessary legal actions to protect our brand and reputation.

Star Entertainment released an update in response to the media speculation during trading hours yesterday.

“The Star confirms that it has not received a proposal directly from Hard Rock Hotels and Casinos (Hard Rock),” the company noted.

Star continued:

However, the company has received inbound interest from a number of other external parties regarding potential transactions including a consortium of investors which includes the entity Hard Rock Hotels & Resorts (Pacific), which The Star understands is a local partner of Hard Rock.

The nature of the interest to date has been confidential, unsolicited, preliminary and non-binding. At this stage, none of the approaches has resulted in substantive discussions.

To clarify its position following Hard Rock’s litigation threats, Star Entertainment followed up with another statement this morning:

The company today notes the statement issued by Hard Rock International which clarifies that Hard Rock International is not involved in, nor has it authorised, any discussions, activities or negotiations on its behalf in connection with a proposal for The Star.

Star Entertainment share price snapshot

The Star Entertainment share price is down 55% over the past full year. But shares in the ASX 200 casino operator look to have found support over the past months, with shares down just over 1% in 2024.

The post Star Entertainment share price dives 10% on Hard Rock update appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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.

The Telstra Group Ltd (ASX: TLS) share price is weakening on news the telecom giant plans to oust up to 2,800 employees.

Despite the move being marketed as necessary, shares in Australia’s thirteenth-largest listed company are down 2.1% to $3.60 in light of the update. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) — Australian investors’ yardstick — is only 0.1% lower.

Resetting costs during ‘ongoing inflationary pressures’

Today, Telstra announced it will begin a ‘reset’ of its enterprise business. Up to 2,800 employees are expected to be removed as part of this restructuring.

The decision follows a review of the declining product segment, which experienced a 66.7% fall in earnings before interest, taxes, depreciation, and amortisation (EBITDA) in the first half of FY2024. Telstra noted a decline in connectivity and calling at that time, dragging the division’s EBITDA down from $213 million to $71 million.

Telstra CEO Vicki Brady described the impetus behind the decision, saying it’s needed to accommodate continued investments to deal with ‘ever-increasing growth in data volumes’ and provide better connectivity for its customers.

Yet, the Telstra share price is still moving lower today.

Additionally, Brady highlighted the tough backdrop Telstra is facing, stating:

This is occurring within a dynamic environment, with an evolving competitive landscape, rapid advances in technology, changing customer needs, and the ongoing inflationary pressures facing all businesses.

To reduce costs, Telstra highlights the following key items:

• Reducing the number of network applications and services (NAS) products by almost two-thirds
• Simplifying its sales and service model, and
• Reducing the cost base of its tech services, with a particular focus on NAS products

Telstra management expects the majority of the cuts will be complete by the end of the year.

Finally, the telco is also scrapping annual inflation-linked postpaid mobile plan price reviews.

What about earnings guidance?

Making swift and broad cuts comes at a cost. Telstra is pencilling in $200 million to $250 million in one-off restructuring costs between FY24 and FY25. Although, these costs will not be included in the company’s guidance.

Speaking of which… Telstra reaffirmed its FY24 guidance and pulled back the curtain on FY25. The company forecasts $8.4 billion to $8.7 billion in underlying EBITDA in the next financial year, reassuring investors that it is committed to achieving its ‘T25’ goals.

Has the Telstra share price lagged the market?

The Telstra share price is down 16% compared to last year. This is a distinct departure from the return of the Australian benchmark, which was roughly 8% over the same timeframe.

Even after dividends, Telstra’s returns over the past 12 months are negative. Profits have increased slightly during this time. However, revenue and net profits after tax remain noticeably lower than at the end of 2018.

The post Telstra share price slips amid 2,800 cuts for growth appeared first on The Motley Fool Australia.

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

I’m always on the lookout for ASX shares that seem too cheap to ignore. Buying great value stocks can lead to outperforming the S&P/ASX 200 Index (ASX: XJO) over the longer term.

Cheap can mean several different things, such as trading at a large discount to the business’ net asset value (NAV). In this article, I’ll focus on companies that trade on a low price/earnings (P/E) ratio.

I believe the market is materially undervaluing the long-term growth prospects of the below ASX shares.

GQG Partners Inc (ASX: GQG)

GQG is a funds management business based in the US. One of the stock’s appealing factors is that it’s growing geographically in places like Canada and Australia, expanding its potential customer base.

The company has deliberately set up its funds to have minimal (or no) performance fees, meaning management fees generate the significant majority of its revenue and profit. Therefore, higher funds under management (FUM) is a key driver of earnings.

At 31 December 2023, GQG had FUM of US$120.6 billion. The FUM rose 17.7% to US$142 billion at 30 April 2024, driven by strong investment performance and net inflows of US$6.3 billion for 2024 to date. I’m expecting more inflows over the rest of 2024 with clients attracted to GQG’s funds’ ability (thus far) to deliver long-term outperformance of their respective benchmarks.

The ASX share has committed to a generous dividend payout ratio of 90% of distributable earnings. Based on the forecast on Commsec, the GQG share price is valued at under 11x FY25’s distributable earnings, which looks cheap to me.

Close The Loop Ltd (ASX: CLG)

This company is heavily involved in the circular economy.

It collects, sorts, reclaims and reuses resources and materials that would otherwise go to landfill, such as electronic products, print consumables and cosmetics. Close The Loop also enables the reusing of toner, and utilises post-consumer plastics for an asphalt additive. Finally, the company creates packaging that includes recyclable and made-from-recycled content.

In a world where countries, companies and households are looking to reduce their impact on the planet, this company operates in an attractive area of the economy with growth tailwinds.

The financials are going in the right direction. In the FY24 first-half result, revenue rose 76% to $103.1 million, the operating profit rose 97% to $12.4 million and the operating cash flow increased 105% to $12.3 million. The growth was particularly strong in that period thanks to the acquisition of ISP Tek Services.

The ASX share is beating growth expectations, leading management to upgrade the earnings before interest, tax, depreciation, and amortisation (EBITDA) guidance to between $44 million and $46 million for FY24.

How cheap is it? According to the forecast on Commsec, it’s trading at an incredibly low 6x FY25’s estimated earnings. I’m looking to buy more Close The Loop shares when I have the capital to do so.

The post 2 great value ASX shares I want to buy appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Close The Loop. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Close The Loop. The Motley Fool Australia has recommended Close The Loop. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Rio Tinto Ltd (ASX: RIO) share price is in the red today.

Shares in the S&P/ASX 200 Index (ASX: XJO) mining stock closed yesterday trading for $135.87. In morning trade on Tuesday, shares are changing hands for $134.96 apiece, down 0.7%.

For some context, the ASX 200 is down 0.2% at this same time.

The Rio Tinto share price is under selling pressure amid news that the company is pausing alumina shipments to third parties from its Queensland refineries.

Rio Tinto share price slips on alumina disruptions

Citing sources wishing to remain anonymous, The Australian Financial News reports that the ASX 200 miner has declared force majeure on its Queensland alumina shipments.

A force majeure, if you’re not familiar, relates to any force of nature (or man) that’s well beyond a company’s control. Like wild weather, war, or in Rio Tinto’s case, a shortage of gas to power its alumina refineries.

For its full-year results, reported in February, Rio Tinto noted:

Alumina production of 7.5 million tonnes was unchanged from 2022, with the Yarwun and Queensland Alumina Limited (QAL) refineries showing improved operational stability.

Alumina is the raw material that is processed into the aluminium we’re all more familiar with.

The anonymous sources said Rio Tinto’s refineries haven’t been able to produce at normal capacity due to regional gas shortages impacting the East Coast. Back in March, the miner reported fires in the state could have impacted the gas pipelines that supply Yarwun.

The miner’s own aluminium operations are not expected to be impacted.

The Rio Tinto share price remains up 25% over 12 months.

The post Rio Tinto share price sinks amid gas woes appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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.

S&P/ASX 200 Index (ASX: XJO) tech stock Technology One Ltd (ASX: TNE) is marching higher today.

The TechnologyOne share price closed yesterday at $16.02. In morning trade on Tuesday, shares are swapping hands for $16.14 apiece, up 0.75%.

For some context, the ASX 200 is down 0.1% at this same time.

This comes following the release of the software company’s half-year results for the six months ending 31 March.

Read on for the highlights.

ASX 200 tech stock marching higher on revenue and profit boost

• Total revenue of $244.8 million, up 16% year on year
• Total annual recurring revenue (ARR) of $423.6 million, up 21%
• Profit after tax of $48.0 million, up 16% from the prior corresponding period
• Total expenses of $183.2 million, up 16% year on year
• Record interim dividend of 5.08 cents per share franked at 65%, up 10% from the prior interim dividend

What else happened for Technology One during the half year?

Other key metrics that look to be helping boost the ASX 200 tech stock include the 117% net revenue retention for the half year, exceeding management’s target by 2%.

TechnologyOne also reported a 21% increase in revenue from its SaaS and recurring business, which came in at $223.1 million.

Management noted that, as expected, cash flow generation was negative $3.8 million for the six months. However, they noted that cash flow generation will be strong over the full year.

On the research front, R&D investment (before capitalisation) also increased by 15% year on year to $56.9 million. This represents 24% of the company’s revenue.

And the United Kingdom business was a strong performer with ARR in the UK up 36% to $28.8 million.

As at 31 March, TechnologyOne held cash and investments of $172.0 million, up 24% from last year.

Impressively, this marks the 15th year of record first-half profit, revenues, and SaaS fees.

What did management say?

Commenting on the results boosting the ASX 200 tech stock today, CEO, Ed Chung said, “These are strong half year results for TechnologyOne and validate the strength of our SaaS strategy, which continues our strong growth trajectory in both Australia and the UK.”

Chung continued:

Net revenue retention (NRR), which is the net amount of new ARR from existing customers, was 117% for the 12 months to 31 March. This was an outstanding result given that best-in-class in the ERP market is considered between 115% and 120%.

We expect to meet our 115% target for the full year. By growing NRR at 115%, we can double the size of our business every five years, which shows the strength and resilience of our strategy and deep customer relationships

What’s ahead for the ASX 200 tech stock?

Looking at what could impact the ASX 200 tech stock in the months ahead, the company’s FY 2024 guidance foresees a 12% to 16% increase in profit.

This is expected to be driven by ARR growth of 15% to 20% and net profit before tax margin growth of around 1% for the full year.

Guidance for FY24 – profit up 12% to 16%, underpinned by strong ARR growth up 15%-20% and net profit before tax margin growth of approximately 1% for the full year.

“We expect strong growth for the full year FY 2024 and the company sees significant growth opportunities in the coming years,” Chung said.

Looking at what’s further ahead for the ASX 200 tech stock, Chung added:

We are on track to surpass total ARR of $500 million-plus by FY 2025, from our current base of $424 million. We will continue to invest for the long-term in R&D to build platforms for growth to continue to double in size every five years.

TechnologyOne share price snapshot

With today’s intraday moves factored in, the ASX 200 tech stock is up 6% so far in 2024.

The post ASX 200 tech stock lifts off on another record-setting half-year profit appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben 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 Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) has risen to become a nearly $1,000 stock again, which is usually a threshold where investors start to expect a stock split. While there’s no hard and fast rule about when to expect a split (some companies never do), history tells us that Nvidia could be considering one now.

Additionally, May 22 may be the day that one is announced, which is right around the corner. The last time Nvidia announced a stock split, the stock went wild and rose significantly. So, should you buy ahead of this potential announcement?

The last stock split was announced at a similar time in 2021

The last time Nvidia enacted a stock split was on July 20, 2021. That four-for-one split broke each Nvidia share into four separate pieces, thus increasing the share count fourfold and cutting the stock price to 25% of its original value. Without this split, Nvidia’s stock would be around $3,600 today.

However, the timing of this last split announcement sets the stage for a potential announcement on May 22 during its first-quarter fiscal year 2025 earnings release. In its Q1 fiscal year 2022 earnings release (which occurred on May 26, 2021), Nvidia announced to shareholders that the board of directors agreed to split the stock. This is perfect timing, as the annual meeting of stockholders was set to occur only a few weeks later so that shareholders could approve the vote. At that time, Nvidia was trading at around $600, so the stock is far more expensive today than when it decided to split its stock.

With the stage set for nearly the same scenario three years later, I would not be surprised if Nvidia announced a stock split on May 22. The question is, will it ignite a run-up like it did last time? After Nvidia’s Q1 results were announced, up until the stock split date, the stock went on an impressive tear.

NVDA data by YCharts

With the stock rising 30% in the days after the stock-split announcement, who wouldn’t want to get ahead of that movement? However, investors should not expect that kind of reaction again.

Should Nvidia’s stock increase by 30% from current levels, its market cap would increase from $2.3 trillion to roughly $3 trillion. That would allow Nvidia to surpass Apple as the second-largest company in the world and put it within striking distance of Microsoft as the largest company in the world.

I doubt that a stock-split announcement will create nearly $700 billion in value. Fortunately, there are other reasons to buy the stock.

Nvidia’s growing business is driving the stock price higher

While the threshold where companies split their stocks differs for each business, the reason remains the same: Their stock price has gotten too expensive. This occurs because the business is succeeding — a great problem to have.

Nvidia’s business has been on fire lately, with its graphics processing units (GPUs) selling at an unbelievable pace to satisfy the demand for data centers built to power the artificial intelligence (AI) arms race.

Any stock movement from a potential stock-split announcement should be attributed to its GPU business, as it’s the driving force behind the stock. With management guiding investors for Q1 revenue of about $24 billion (indicating 234% growth), we’re slated to see a monster quarter reported again.

While a stock-split announcement may be coming, investors should look beyond that to determine if Nvidia is a potential buy (or not). 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post History says an Nvidia stock-split announcement might be coming on May 22 appeared first on The Motley Fool Australia.

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Keithen Drury 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 Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.