Author: openjargon

S&P/ASX 200 Index (ASX: XJO) uranium stock Boss Energy Ltd (ASX: BOE) is charging higher today.

The Boss Energy share price closed yesterday at $5.66. In earlier trade shares were swapping hands for $5.79 apiece, up 2.3%. At the time of writing shares are trading for $5.75 apiece, up 1.6%.

For some context, the ASX 200 is up 0.5% at this same time.

The ASX 200 uranium stock is, obviously, best known for its uranium assets at its Honeymoon project in South Australia.

Boss Energy produced its first drum of uranium at Honeymoon in April.

The company recently said it’s on track to ramp up to a steady-state production rate of 2.45 million pounds of U3O8 per year.

However, it’s not uranium that’s got investors bidding up the ASX 200 uranium stock today.

It’s copper.

Here’s why.

ASX 200 uranium stock strikes copper

This morning Boss Energy announced that Canadian-listed First Quantum Minerals Ltd (TSE: FM) maiden diamond drilling program at Honeymoon successfully intersected “basement-hosted base metal mineralisation”.

The copper and gold intersections came in below the Yarramba Palaeovalley, which holds the uranium.

The ASX 200 uranium stock entered into an earn-in exploration agreement with First Quantum back in February 2022.

At the time, management stated:

The agreement enables Boss to remain fully focused on its core business of uranium exploration, development and production while having exposure at no cost to the significant potential associated with a base and precious metals exploration program led by a global major.

That exposure looks to be paying off.

First assay results included:

• 16 metres at 0.27% copper and 0.1 grams of gold per tonne at 288 metres
• 47 metres at 0.19% Cu from 404 metres, with a number of narrower zones of 5 metres to 6 metres containing up to 0.5% Cu and 0.12g/t Au

Under the existing agreement, First Quantum has the right to earn a 51% interest in Honeymoon’s base metal endowment by spending $6 million on exploration and a further 24% interest by sole-funding all base metals expenditure up to a decision to mine.

Following receipt of these results, First Quantum said it will continue to fund further copper and gold exploration at Honeymoon.

However, management noted:

Boss retains the sole right to explore for and exploit all uranium discoveries on the JV Project (being greater than 50% of the in-situ metal value being uranium). Boss will have a first right of offer in respect of any uranium discoveries made by First Quantum within the Curnamona craton of South Australia.

With copper, gold and uranium prices all surging over the past year, Boss Energy’s Honeymoon project could prove to be more profitable than expected.

With today’s intraday gain factored in, the ASX 200 uranium stock is up 110% since this time last year.

The post ASX 200 uranium stock Boss Energy surges on copper news appeared first on The Motley Fool Australia.

More reading

• Why Boss Energy, Meteoric Resources, Pantoro, and Worley shares are falling today
• Will ASX uranium shares run higher on this ‘historic’ supply ban?
• Here are the top 10 ASX 200 shares today
• How to invest in uranium on the ASX
• Is ASX uranium the new lithium?

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 Arafura Rare Earths Ltd (ASX: ARU) share price is having a strong session.

In fact, at one stage today, the rare earths developer’s shares were up as much as 11% to 20.5 cents.

Its shares have eased back a touch since then but remain up 5.5% in afternoon trade.

Why is the Arafura share price zooming higher?

Investors have been fighting to get hold of the company’s shares today in response to the Federal Budget.

The market appears to believe that Arafura Rare Earths will benefit from the government’s target of making Australia a renewable energy superpower. This target includes the Government investing almost $9 billion over the decade into critical minerals supply chains. The Budget explains:

The Government is investing $8.8 billion over the decade to add more value to our resources and strengthen critical minerals supply chains. This Budget establishes a production tax incentive for processing and refining critical minerals at an estimated cost of $7 billion over the decade. It commits up to $1.2 billion in strategic critical minerals projects through the Critical Minerals Facility and the Northern Australia Infrastructure Facility, and pre‑feasibility studies for common user precincts.

Arafura Rare Earths is developing the Nolans Project, which is 135 kilometres north of Alice Springs in Australia’s Northern Territory.

The company highlights that the cornerstone of the project is one of the world’s largest undeveloped Neodymium and Praesodymium (NdPr) resources. With an initial mine life of 38 years and a valuable phosphoric acid by-product, it believes that Nolans will be a long life, low cost operation producing NdPr oxide. This is a critical component of rapidly growing global demand for electric vehicles and renewable energy technology.

Arafura Rare Earths may not be commencing production any time soon, but it already has binding offtake agreements in place. This includes with automakers Hyundai and Kia, and Siemens Gamesa Renewable Energy. In addition, the company has a memorandum of understanding in place with giant General Electric (NYSE: GE), and is progressing advanced negotiations with several prospective offtake partners.

The company has already been a winner from previous government funding. Earlier this year, it secured conditional Commonwealth Government approval for a debt financing package of US$533 million to progress the Nolans Project.

Commenting on that approval, CEO, Darryl Cuzzubbo, said:

Securing debt facilities of US$533 million from EFA and NAIF is a critical achievement for the Nolans Project and signifies its economic importance to Australia and the Northern Territory. “Gaining this level of support from the Commonwealth Government is a critical milestone in becoming a globally significant producer of NdPr, a product essential for electric vehicle and wind turbine manufacturers to achieve future growth targets as part of the energy transition.

Arafura Rare Earths has yet to comment on the Federal Budget.

The post Why is the Arafura share price surging 11% today? appeared first on The Motley Fool Australia.

More reading

• ASX 200 uranium stock Boss Energy surges on copper news
• What the federal budget means for interest rates and ASX shares
• Why this could be the best ASX 200 consumer staples stock to buy in May
• With $1,000 to invest, should I buy ASX growth stocks or income shares?
• Guess which ASX gold stock just rocketed 92% on this ‘outstanding’ new discovery

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.

ASX shares are broadly enjoying a strong run on Wednesday on the heels of the Federal government’s budget announcement.

In early afternoon trade today, the S&P/ASX 200 Index (ASX: XJO) is up 0.5%.

Not surprisingly, given the multi-billion dollars of new support for ASX shares focused on renewable energy and critical minerals, the S&P/ASX 300 Metals & Mining Index (ASX: XMM) is outperforming, up 1.4%.

With the budget potentially fuelling inflation and pushing interest rate relief from the RBA further into the future, ASX financial shares are among the weaker performers, with the S&P/ASX 200 Financials Index (ASX: XFJ) up just under 0.1% at this same time.

Here’s what’s happening.

Will the budget fuel inflation and push out interest rate cuts?

Investors in ASX shares may wish to position their portfolios for higher rates for longer.

With the Federal budget adding an additional $24 billion to the Aussie economy over the next four years, inflation could rekindle.

Treasurer Jim Chalmers has crafted the budget with hopes it will help reduce price rises. As such, Aussie households will receive energy relief in the form of a $300 power bill rebate, to be delivered quarterly. This comes atop the next stage of tax cuts.

“Just as every Australian taxpayer will get a tax cut, every Australian household will get energy price relief,” Chalmers said.

However, the budget itself assumes the RBA will only begin to “gradually ease” the official cash rate from the current 4.35% “around the middle of 2025”. The government expects the cash rate to still be at 3.6% in mid-2026.

But Judo Bank economic advisor Warren Hogan has a far more hawkish outlook, believing investors in ASX shares should prepare for further interest rate hikes rather than cuts in the wake of the Federal budget.

According to Hogan (quoted by Sky News):

I do think they have shown some restraint. I think many Australian governments in the past might have spent more like $20 billion on new measures, but they’ve only done $10 billion. That might mean we only need one or two rate hikes, but it doesn’t change the underlying story about the economy.

I think there is a very strong chance the RBA might have to raise rates again.

AMP’s chief economist Shane Oliver noted that, “The cost-of-living measures will help lower measured inflation. But the new stimulus risks boosting demand.”

Oliver added:

Government support for high wage increases for some sectors risks adding to wages growth given the flow on and influencing effects at a time when wages growth is already at its maximum level consistent with the inflation target. All of which risks making the RBA’s job harder.

Putting all the Federal budget pieces together, Oliver said, “The net effect adds to the risk of higher for longer interest rates but is probably not enough to change our forecast for a rate cut later this year.”

As for the ASX shares that stand to benefit…

What the budget means for ASX shares

ASX shares in the critical minerals space and those involved in green hydrogen and renewables could be set to benefit from the government’s $22.7 billion Future Made in Australia (FMIA) plan.

FMIA will provide $13.7 billion in tax incentives for green hydrogen and processed critical mineral production. There’s also $1.7 billion to drive innovation in producing green iron and other metals along with low emissions fuels.

The plan includes $13.7bn in production tax incentives for green hydrogen and processed critical minerals and a $1.7bn innovation fund for priority sectors including green metals and “low carbon fuels”.

ASX shares that could potentially benefit from the billions in new funds due to their exposure to subsidised metals include Fortescue Metals Group Ltd (ASX: FMG), BHP Group Ltd (ASX: BHP), Pilbara Minerals Ltd (ASX: PLS), IGO Ltd (ASX: IGO) and Liontown Resources Ltd (ASX: LTR).

The tax cuts and energy relief will also put more money back into consumers’ pockets.

That should offer some welcome tailwinds for ASX shares in the retail space such as JB Hi-Fi Ltd (ASX: JBH) and Harvey Norman Holdings Ltd (ASX: HVN).

And ASX shares like Domino’s Pizza Enterprises Ltd (ASX: DMP) could enjoy a lift as lower-income households reopen their pocketbooks.

Commenting on what the overall impact of the budget will be for ASX shares, AMP’s Oliver said, “The budget is positive for spending and hence retail shares, but this may be offset by higher than otherwise rates. Some manufacturers may benefit from FMIA.”

The post What the federal budget means for interest rates and ASX shares appeared first on The Motley Fool Australia.

More reading

• Buying BHP shares? Here’s what’s happening with the Anglo American takeover
• 5 things to watch on the ASX 200 on Wednesday
• Buy BHP and these ASX dividend stocks
• Why more ASX mining shares could soon turn to takeover bids
• Should you buy Fortescue shares for that fat 8% dividend yield?

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 Domino’s Pizza Enterprises. The Motley Fool Australia has positions in and has recommended Harvey Norman. The Motley Fool Australia has recommended Domino’s Pizza Enterprises and Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I love a good ASX 200 consumer staples stock investment. The consumer staples sector can offer investors a few unique traits that are invaluable in a stock portfolio. Those include defensive revenue streams, non-cyclical and inflation-resistant earnings and steady dividends.

I own several consumer staples stocks in my own share portfolio. But there is one stock that I don’t yet own from this sector that I think could be the best one to buy this May.

It is none other than ASX 200 supermarket operator Woolworths Group Ltd (ASX: WOW).

I have long shunned Woolworths shares as a good investment. This has been largely due to concerns about a relatively high price-to-earnings (P/E) ratio valuation (and correspondingly low dividend yield) compared to the company’s arch-rival Coles Group Ltd (ASX: COL).

Put simply, I’ve always regarded Woolworths as a superior investment to Coles, but Coles as the better buy thanks to its far cheaper valuation.

That is no longer the case. It has been one of the roughest years for the Woolworths share price that we’ve seen for a very long time in 2024. Year to date, this famous Australian company is currently down a nasty 16.64%. That’s even after today’s lift of 0.45% up to $31.27 a share (at the time of writing).

Things look even worse for Wooleis over the past 12 months, with the company nursing a loss of 19.5% over this period.

The ASX 200 consumer staples stock has also lost a chunky 25.5% or so since its last all-time high of over $42 that we saw back in 2021. Check that all out for yourself below:

Why is this ASX 200 consumer staples stock looking so cheap?

There’s no doubt these falls have been painful for existing Woolworths shareholders to bear. But even so, it has given new investors a potentially lucrative entry point into this company that hasn’t been previously available.

To illustrate, around this time last year, we conducted an in-depth comparison of Woolworths and Coles as an investment. At the time, Woolworths shares were trading on a trailing dividend yield of 2.56%. That compared to a 3.62% yield on Coles shares.

Today, Woolies stock has a dividend yield of 3.36%, an increase of 31.2%.

And, as we looked at last week, there are now only a couple of points between both companies’ P/E ratios on one current measure.

Now, Woolworths shares haven’t fallen so substantially over the past 12 months for no reason. The company didn’t exactly pull off a smooth leadership transition when its CEO Bradford Banducci announced his sudden resignation earlier this year. And Woolies’ recent results point to the company losing market share to Coles.

Even so, this ASX 200 consumer staples stock remains the dominant player in the Australian grocery and supermarket spaces, commanding the highest market share by some distance.

I don’t think there’s much evidence that Woolworths is locked in a permanent tailspin against Coles. Thanks to its leading industry position and strong brand power, I expect the company to bounce back eventually.

As such, I think this company’s shares are a bargain on the ASX today, making Woolworths the ASX 200 consumer staples stock to buy this May.

The post Why this could be the best ASX 200 consumer staples stock to buy in May appeared first on The Motley Fool Australia.

More reading

• 2 of the best ASX 200 dividend giants to buy in May
• 4 founder-led ASX 300 shares that have helped this fund outperform
• How to help recession-proof your ASX share portfolio in May 2024
• Coles share price holds firm while Woolworths tumbles 18% in 2024. Time to buy?
• 3 ASX shares that look way too cheap to ignore right now

Motley Fool contributor Sebastian Bowen 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 Coles Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

There’s an age-old question about whether it’s best to invest in ASX growth stocks or ASX income shares. I’m going to consider the question from the perspective of investing $1,000.

Saving up $1,000 to invest is an achievement amid this high cost of living. What’s going to be the best place to invest it?

If you’re going to need the money within a year or two, it may be best to save it in a high interest savings account. The interest rate return of around 5% at the moment (from a good account) is solid. There’s a chance the share market may experience volatility at the exact time you need the cash.

ASX income shares

ASX shares that pay dividends are appealing. Receiving passive income cash flow year after year for no effort is a compelling investment.

The great thing about businesses is that they’re capable of both paying dividends and re-investing some profit for long-term growth.

Companies like Wesfarmers Ltd (ASX: WES) and Sonic Healthcare Ltd (ASX: SHL) have shown a skill of paying a decent dividend yield while steadily growing over time.

Other investors may be interested in higher-yielding stocks that can pay a large income. However, I’d only want to invest in businesses where the dividend can grow over time rather than focusing on a temporarily high yield that could be cut substantially.

If a business had a 7% dividend yield, an investor could get $70 of annual dividend income with a $1,000 investment.

Some of my favourite high-yield ASX income shares at the moment are Telstra Group Ltd (ASX: TLS), Metcash Ltd (ASX: MTS) and Medibank Private Ltd (ASX: MPL).

Is this the right choice with $1,000? I’m not sure receiving $50 or even $100 of annual income will change someone’s finances dramatically each year. If there are more $1,000-sized investments to come, or we’re talking about investing $10,000 plus, then investing in ASX income shares could be the right choice.

An investment like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) could make a lot of sense with $1,000 (or more) because it offers a diversified portfolio, can provide a decent grossed-up dividend yield upfront (around 4%) and has a long track record of delivering capital growth and dividend growth.

ASX growth stocks

Over the long term, I believe capital growth can beat the returns offered by (typically) slower-growing ASX income shares.

My colleagues and I at the Motley Fool regularly write about which ASX growth shares could be attractive investments.

If a $1,000 investment grows by 10% per annum, it will double in value (to more than $2,000) in less than eight years. If it keeps growing at 10% per annum, it could be worth $6,700 in 20 years. After 40 years, it might be worth around $45,000.

I don’t know which ASX growth stocks will still be doing well in 40 years, so it might be a good idea to invest in global exchange-traded funds (ETFs) that invest in strong businesses that could deliver good capital growth.

Some of my favourite global ETFs for potential capital growth are Vanguard MSCI Index International Shares ETF (ASX: VGS), VanEck MSCI International Quality ETF (ASX: QUAL), BetaShares Global Sustainability Leaders ETF (ASX: ETHI) and VanEck Morningstar Wide Moat ETF (ASX: MOAT).

In my opinion, the right choice for $1,000 would be either one of the ASX ETFs I mentioned or Washington H. Soul Pattinson shares if decent dividend income is a factor.

The post With $1,000 to invest, should I buy ASX growth stocks or income shares? appeared first on The Motley Fool Australia.

More reading

• Why these ASX ETFs could be fantastic buy and hold options
• 5 things to watch on the ASX 200 on Wednesday
• How much could $10,000 invested in Telstra shares be worth next year?
• If I were Warren Buffett, I’d buy these 3 ASX shares
• Inherited a substantial sum of money? Here’s how I’d spend it (including the ASX stocks I’d buy)

Motley Fool contributor Tristan Harrison has positions in Metcash, Sonic Healthcare, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers. The Motley Fool Australia has positions in and has recommended Telstra Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended Metcash, Sonic Healthcare, VanEck Morningstar Wide Moat ETF, and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

A little-known ASX gold stock is shooting the lights out on Wednesday after reporting on some very promising exploration results.

Shares in the junior explorer entered a trading halt on Monday morning pending today’s announcement. Shares closed Friday trading for 12 cents apiece and leapt to 23 cents apiece in earlier trade, up a whopping 91.7%.

After some likely profit-taking, shares are swapping hands for 21.5 cents apiece at the time of writing, up 79.2%.

For some context, the All Ordinaries Index (ASX: XAO) is up 0.5% at this same time.

Any guesses?

If you said Australian Gold and Copper Ltd (ASX: AGC), give yourself a virtual gold star.

Here’s why investors are bidding up the ASX gold stock today.

What did the ASX gold stock report?

The Australian Gold and Copper share price is going ballistic after the company reported on some “outstanding gold and silver” intersections at its Achilles project, located in New South Wales.

The ASX gold stock has now completed its follow-up drilling campaign at Achilles. This saw nine reverse circulation (RC) holes drilled at the project, for 1,461 metres.

AGC reported that the latest drill program covered more than half a kilometre of strike and has extended mineralisation at Achilles beyond the discovery holes it recently reported.

Having received expedited laboratory analyses from the first holes, the miner looks to be stoking ASX investor enthusiasm today by revealing those results extended and significantly upgraded high-grade gold-silver-base metal mineralisation down dip and along strike.

The top intersections include 5 metres at 16.9 grams of gold per tonne and 1,473 grams of silver per tonne, as well as 15.0% lead + zinc.

AGC cited maximum grades of 45.0g/t gold, more than 3,000g/t silver, and 38.8% lead + zinc.

Commenting on the strong drill results sending the ASX gold stock soaring today, AGC managing director Glen Diemar said, “Achilles is producing some exceptional grades in the drill bit.”

Diemar continued:

The first six holes have produced grades including combined lead and zinc to 38%, gold to 45g/t and silver above 3,000g/t. This silver result is so high grade the laboratory is sending the sample to Canada for further analysis, which is a rare occurrence.

We are extremely happy with how Achilles is taking shape. With drilling now spread across more than half a kilometre of strike we are excited to see how big this can get.

The company said that following on these strong results, it has also expedited assays for the six holes still pending. Those results are expected in the coming weeks.

“I look forward to the results of the next six holes and can already see that Achilles has a prominent future within the Cobar Basin,” Diemar said.

The ASX gold stock’s exploration team is currently designing and permitting the next phase of exploration at Achilles.

The post Guess which ASX gold stock just rocketed 92% on this ‘outstanding’ new discovery appeared first on The Motley Fool Australia.

More reading

• Here is the dividend forecast to 2026 for AMP shares
• Buying BHP shares? Here’s what’s happening with the Anglo American takeover
• Is the CBA share price heading back to $100?
• $8,000 in savings? Here’s how I’d aim to turn that into $1,151 in monthly passive income
• Will the ‘resurgence in demand’ for shopping centres boost ASX REITs?

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.

AMP Ltd (ASX: AMP) shares are becoming a viable option for passive income again because it’s seemingly paying every six months. It didn’t pay a dividend in 2021 or 2022.

However, while AMP’s dividend is recovering, the AMP share price is still far below where it was before COVID-19 – just look at the chart below, it has halved in five years.

In FY22, it paid an annual dividend per share of 2.5 cents, which was increased to 4.5 cents per share in FY23.

Quarterly performance

The broker UBS has issued an updated forecast about where it sees the AMP dividend going in the next few years after seeing the quarterly update for the three months to March 2024.

In that update, AMP said the bank’s total loan book dropped to $23.5 billion, down from $24.4 billion in the 2023 fourth quarter. Bank total deposits grew to $21.4 billion, up from $21.3 billion in the fourth quarter of 2023.

AMP’s platform net cash flow was $201 million, up 32% from the first quarter of 2023 (of $152 million). Platform assets under management (AUM) increased to $74.3 billion, up from $71.1 billion at the end of the 2023 fourth quarter.

The AMP ‘superannuation and investments’ AUM rose to $54.1 billion, up from $51.9 billion in the fourth quarter of 2023. Net cash flow reduced to $371 million, down from $610 million in the first quarter of 2023.

In summary, many of the important numbers are heading in the right direction. Let’s examine what this may mean for the dividend.

FY24

UBS is expecting the AMP net profit after tax (NPAT) to improve by roughly 10% to $220 million, which would translate into earnings per share (EPS) of approximately 8 cents.

This improvement in profit could allow AMP to deliver a dividend per share of 5 cents. That would translate into a dividend yield of 4.5%, excluding any franking credits.

FY25

UBS is expecting another profit increase in FY25, with net profit rising by 15% to $253 million, which would equate to EPS of approximately 10 cents.

The broker is expecting a large hike of the AMP dividend per share to 7 cents per share in FY25, which translates into a dividend yield of 6.4% at the current AMP share price, excluding any franking credits.

FY26

UBS suggests the 2026 financial year will see flat performance compared to FY25.

FY26 net profit could be $255 million, up just $2 million. The broker is expecting EPS of 10 cents again and a dividend per share of 7 cents.

If that happens, the current AMP share price has an FY26 dividend yield of 6.4% and a forward price/earnings (P/E) ratio of 11.

Is the AMP share price a buy?

At the time UBS wrote the note in April, it reiterated a sell rating on AMP shares with a price target of 98 cents, implying a possible fall of around 10% in the next year. UBS wrote:

On our refreshed forecasts, the stock is trading at 11.6x PE (based on UBSe FY25, inclusive of cost reduction targets), which we do not consider cheap relative to peers and considering the weak earnings outlook. Whilst NTA of $1.31/sh may appear to offer value, we think a material discount is fair given weak sustainable RONTA c.5%.

In other words, AMP is only making a return on net tangible assets (NTA) of around 5%, which the broker thinks is weak, making the NTA of $1.31 per share not as appealing as it looks.

The post Here is the dividend forecast to 2026 for AMP shares appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
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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 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.

Buying BHP Group Ltd (ASX: BHP) shares?

Then you’ve probably been following along with the ongoing saga surrounding the S&P/ASX 200 Index (ASX: XJO) mining giant’s takeover bid for Anglo American (LSE: AAL).

BHP shares leapt into global headlines on 26 April after the company lobbed a roughly $60 billion offer to acquire Anglo American.

The ASX 200 miner’s main focus here is Anglo’s copper assets. Copper prices have been soaring and are widely expected to remain elevated over the longer term amid the world’s push towards electrification.

If BHP’s takeover succeeds, the Aussie miner will take the mantle of the world’s biggest copper producer.

As you’re likely aware, Anglo American’s board rejected BHP’s initial offer as significantly undervaluing its assets and growth potential. The board also believes the offer is too complicated and poses risks for Anglo shareholders.

Yesterday we learned that BHP had come back with an improved takeover offer valued at around $64 billion. An offer that Anglo American’s board again rejected.

Commenting on the developments yesterday, CEO Mike Henry said:

BHP put forward a revised proposal to the Anglo American board that we strongly believe would be a win-win for BHP and Anglo American shareholders. We are disappointed that this second proposal has been rejected.

BHP shares closed down 0.2% yesterday.

Will BHP shares ever encompass Anglo American’s assets?

How Anglo American shareholders will respond to the latest BHP takeover offer remains to be seen.

In the latest developments, Anglo American announced it would divest its platinum and diamond businesses and sell its Queensland-based coal mines.

Some analysts have flagged this as a move to potentially thwart BHP’s acquisition, as Anglo’s coking coal assets in Queensland would mesh well with BHP’s operations in the state.

If BHP shares were to encompass Anglo American’s assets, the ASX 200 miner would also look to divest a number of the company’s assets. Those include Anglo’s platinum and iron ore projects in South Africa, and likely its nickel assets as well.

Anglo-American shareholders are now faced with a decision of whether to back Anglo CEO Duncan Wanblad and his vision for the company’s future or BHP’s Henry.

Addressing Anglo American’s turnaround plan Wanblad said (quoted by Bloomberg), “We don’t need BHP to deliver this strategy, we absolutely do not need them at all. We can deliver this.”

Henry had a different take.

“Shareholders must decide which plan creates the greatest value, soonest. Which team has the better track record of execution,” he said.

BHP shares are up 2.6% in morning trade today.

Stay tuned!

The post Buying BHP shares? Here’s what’s happening with the Anglo American takeover appeared first on The Motley Fool Australia.

More reading

• Buy BHP and these ASX dividend stocks
• Why more ASX mining shares could soon turn to takeover bids
• Inherited a substantial sum of money? Here’s how I’d spend it (including the ASX stocks I’d buy)
• BHP share price slides amid no deal on ‘compelling opportunity’
• BHP shares on watch after new $64b Anglo American takeover offer rejected

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 Commonwealth Bank of Australia (ASX: CBA) share price may be materially overvalued according to one leading broker.

As the chart below shows, CBA shares have risen by 17% in the past six months. However, UBS thinks the rise is unwarranted.

The ASX bank share recently reported its FY24 third-quarter result, which UBS provided commentary on to reach its conclusion on where the CBA share price could end up in a year.

Weakening profit

CBA reported cash net profit after tax (NPAT) of $2.4 billion for the FY24 third-quarter, which was down 2% quarter over quarter and down 6% year over year.

UBS noted the net interest income (NII) was largely flat, with a decline of 0.4% with volume growth offset by lower margins from ongoing competitive pressure in deposits and customers switching to higher-yielding deposits.

Non-net interest income was down 6% quarter over quarter, driven by lower markets and dividend income. Operating expenditure increased by around 3% in the quarter, reflecting higher amortisation and staff costs.

The loan impairment charge was $191 million, representing 8 basis points (0.08%) of its lending portfolio, though arrears are increasing.

UBS is expecting further increases in arrears because of continued pressure on real household disposable income.

But, on the positive side, UBS said the CBA FY24 funding position remains “sound” with around $20 billion of new long-term wholesale funding issued in the 2024 financial year to date.

Around $750 million of the previously announced $1 billion on-market share buyback is remaining.

Is the CBA share price headed to $100?

UBS notes that defending the profitability of its existing loan book remains a “key imperative for management.” The bank is using its “proprietary distribution channels to defend and drive volume growth in mortgages,” which has seen CBA grow its loan book at 0.7x the system. In other words, it’s slightly losing market share.

The broker suggests that the FY24 fourth quarter could be softer on the revenue side, though the bank is showing “good cost discipline and management.”

UBS points out that CBA shares are trading at around 2.5x FY25’s estimated book value, which is elevated for the banking sector.

The broker’s price target for the CBA share price is $105, which implies a possible fall of around 10% from where it is today.

At the current valuation, the CBA share price is trading at 21x FY25’s estimated earnings, which is far higher than the price/earnings (P/E) ratio of other major ASX bank shares.

The post Is the CBA share price heading back to $100? appeared first on The Motley Fool Australia.

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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 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.