Author: openjargon

BHP Group Ltd (ASX: BHP) shares have been getting even more attention than usual in recent weeks.

As the largest company listed in Australia, the S&P/ASX 200 Index (ASX: XJO) mining giant is already a frequent headline leader.

But investor and media interest in BHP shares ramped up to the next level on 26 April. That’s when the miner announced it had made a non-binding offer to acquire Anglo American (LSE: AAL).

The all scrip offer amounted to 31.1 billion British pounds, or roughly AU$60 billion.

As you’re likely aware, BHP is eyeing Anglo American with an eye on its copper assets.

Copper represents 30% of Anglo American’s total production. Should BHP’s takeover succeed, the ASX 200 miner would become the world’s top copper producer, producing around 10% of global output.

Amid growing demand and limited new supplies, the copper price has surged 16% year to date to US$9,905. And most analysts expect copper prices to continue trending higher from here.

It’s a markedly different story for iron ore, the top revenue earner for BHP shares. The iron ore price is down 16% in 2024 at US$116 per tonne, with many analysts forecasting it will trend lower from here.

Take two?

Now, as you’re also likely aware, Anglo American’s board rejected BHP’s offer on 29 April.

Anglo American chair, Stuart Chambers said the offer significantly undervalued the company and its future growth prospects.

Rumour has it that BHP is likely to come back with an improved offer. The company has until 22 May to place a formal offer under UK acquisition regulations.

But if you’re buying BHP shares for the takeover potential, Aitken Mount Capital Partners stockbroker Angus Aitken cautioned the result could be a “complete mess”.

Why BHP shares could get walloped by the Anglo American takeover

According to Aitken (courtesy of The Australian Financial Review), BHP is primarily interested in Anglo American’s copper and coal assets. Meaning that it could look at selling numerous other projects, including the Barro Alto nickel mine in Brazil.

And that could throw up some longer-term headwinds for BHP shares.

According to Aitken:

In our view, this deal really does have the potential to be a complete mess for BHP long-term. This is like BHP is trying to buy a six-bedroom house, just to get the garage. There are multiple large risks in BHP long-term in trying to sell off the assets they don’t want.

He added that this strategy “seems crazy to us”.

And the takeover proposal is far from simple.

“If you are a BHP shareholder and think this is a simple transaction, you have rocks in your head,” he said.

Aitken continued:

BHP are the single worst sellers of assets in the world with Rio Tinto a close second, and yet a lot of this potential deal involves BHP on-selling assets for good prices, and we are cautious on that. How are you going to get a full price for the assets they want to divest when everyone knows you are a non-natural owner of them?”

Certainly, not everyone agrees with Aitken’s bearish take on the proposed acquisition.

Both Argo Investments and Wilson Asset Management believe the takeover can add value to BHP shares over time.

The post Buying BHP shares for the Anglo takeover? Here’s why it might be a ‘crazy’ move appeared first on The Motley Fool Australia.

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• Maximizing dividends: 3 of the best ASX shares for income investors right now?

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.

It was a huge week for investors in S&P/ASX 200 Index (ASX: XJO) bank shares.

Three of the big four banks reported quarterly or half-year results over the week. And one traded ex-dividend.

Here’s what happened.

Three ASX 200 bank shares reporting results

Westpac Banking Corp (ASX: WBC) released its half-year earnings results on Monday.

For the six months through 31 March, the ASX 200 bank share reported a 4% year-on-year decline in net operating income to $10.59 billion. And ongoing competition saw net interest margins (NIMs) come down 0.07% to 1.89%.

With operating expenses up 8%, Westpac’s net profit before one-offs was down 8% to $3.51 billion.

But management pleased passive income investors by declaring a fully franked dividend of 90 cents per share.

Westpac also announced an additional $1 billion on-market share buyback. Westpac shares closed up 2.7% on Monday.

On Tuesday, it was Australia and New Zealand Banking Group Ltd (ASX: ANZ) that reported half-year results.

As with Westpac, ANZ’s NIM declined, though by a lesser 0.02%.

The ASX 200 bank share’s statutory profit after tax declined by 4% from the prior half to $3.41 billion, with cash profits dipping 1% to 3.55 billion.

Management declared an interim dividend of 83 cents per share, franked at 65%. That’s up from last year’s interim dividend of 81 cents per share.

And not to be outdone by Westpac, ANZ also announced a $2 billion on-market share buyback.

ANZ shares closed up 0.1% on the day.

Two days later, on Thursday, Commonwealth Bank of Australia (ASX: CBA) reported its third-quarter update.

Compared to the prior corresponding quarter, the ASX 200 bank share saw operating income slip by 1%, while operating expenses increased by 2%.

As you’d expect, that led to lower profits for the three months, with unaudited statutory net profit after tax declining 5% year on year to $2.4 billion.

CBA remains well-capitalised with a Common Equity Tier 1 (CET1) ratio of 11.9%. That’s a significant safety margin over the minimum 10.25% ratio required by the Australian Prudential Regulation Authority (APRA).

And one trading ex-dividend

National Australia Bank Ltd (ASX: NAB) reported its half-year results on 2 May, a week earlier.

As with the other ASX 200 bank shares, NAB’s net operating income slipped year on year, down 0.9% to $10.14 billion. The big four bank’s cash earnings declined by 12.8% to $3.55 billion.

That didn’t hold management back from declaring a fully franked dividend of 84 cents per share, up from 83 cents per share last year.

NAB shares traded ex-dividend on Tuesday.

As investors buying the ASX 200 bank share on Tuesday were no longer eligible for the upcoming dividend payment, the NAB share price closed the day down 1.5%.

The post It was huge week for ASX 200 bank shares. Here’s why 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.

Investors that are the lookout for technology exposure might want to consider TechnologyOne Ltd (ASX: TNE).

That’s the view of analysts at Goldman Sachs, which see the ASX 200 tech stock as a great option right now.

What is the broker saying about this ASX 200 tech stock?

Ahead of the release of the enterprise software provider’s half year result later this month, Goldman is predicting sales growth ahead of consensus estimates. It said:

We estimate TNE will report (1) SaaS ARR [annual recurring revenue] of A$425mn or +35% y/y vs +34% Visible Alpha Consensus Data; (2) Total revenue of A$241mn or +19% y/y vs A$231mn consensus; (3) Profit before tax of A$62mn or +18% y/y vs +19% consensus. We expect TNE to provide its typical +10-15% full-year PBT growth guidance, although based on recent strong ARR growth in combination with a small amount of margin leverage we expect TNE can comfortably exceed the top-end in November (GSe +16%).

Overall, the broker believes the ASX 200 stock is operating ahead of guidance and feels this isn’t being reflected in its share price. It adds:

In our view TNE’s above-trend ARR and earnings growth outlook, improved earnings visibility and upside levers to management targets (e.g. SaaS+, UK) are not being fully reflected in valuation. Execution on sustainable +115% NRR could help to close TNE’s recent underperformance vs tech peers given 1H24 is the first result without a material sequential cloud flip tailwind (ie. substantially all growth will be underlying).

Decent upside predicted

Today’s note reveals that Goldman has reiterated its buy rating with a slightly improved price target of $18.10.

Based on its current share price of $16.24, this implies potential upside of 11.5% for investors over the next 12 months. The broker also expects a modest 1.4% dividend yield to sweeten the deal further.

But it may not stop there. In its bull case, Goldman sees scope for the ASX 200 tech stock to rise to $27.40, which is almost 70% higher than current levels. It explains:

We highlight our recent TNE bull case analysis of A$27.4 which factors in low-to-mid teens top line growth in ANZ (still assumes the 115% NRR target is not met), as well as a 30% revenue CAGR in the UK, where we ascribe A$21.3 to the ANZ business and A$6.1 for the UK. On this basis, market pricing (A$16.3) could be (1) implying that ANZ NRR decelerates materially below <115% in coming years and that TNE has little success in new product cross-sell; and (2) placing little value on UK, despite recent local government and higher ed customer wins.

The post Buy this ASX 200 tech stock now before it’s too late: Goldman Sachs appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Technology One. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and 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.

The QBE Insurance Group Ltd (ASX: QBE) share price is marching higher today.

Shares in the S&P/ASX 200 Index (ASX: XJO) insurance company closed yesterday trading for $17.59. At the time of writing in the early morning trade on Friday, shares are changing hands for $17.78 apiece, up 1.1%.

For some context, the ASX 200 is 0.3% at this same time.

This comes following the release of QBE’s performance update for the first quarter of 2024 (Q1 2024).

Here are the highlights.

What did the ASX 200 insurer report?

The QBE share price is marching higher after the company announced a 2% year on year increase in gross written premium for the three months in both a reported and constant currency terms.

Renewal rate increases of 7.3% were in line with the company’s expectations. Management said this “reflected reduced rate increases across certain property and reinsurance lines compared to the prior corresponding period”.

Excluding rate increases, premiums fell 2% in constant currency terms. This was due to lower Crop premium along with property portfolio exits in its North America and Australia operations.

The ASX 200 insurer said it expects organic growth to partially offset the impact of lower commodity prices in its Crop segment. QBE forecasts Crop gross written premium will be around $3.9 billion in FY 2024.

On the claims front, the company had a net cost of catastrophe claims of approximately $300 million in the four months to April. QBE’s catastrophe allowance for 1H 2024 is $609 million.

Management noted that catastrophe costs were driven by a number of storm events, mostly in Australia and North America.

The QBE share price could also be getting some support with the ASX 200 insurer reporting that supportive interest rates and favourable returns in its risk asset portfolio delivered strong investment returns in Q1.

QBE’s first quarter exit core fixed income running yield of 4.7% ticked up from the 4.6% FY 2023 exit running yield.

Total investment funds under management (FUM) of $30.3 billion was up $200 million from FY 2023. Management said risk assets now accounted for some 15% of the portfolio.

The company also noted that higher risk-free rates resulted in a $130 million unrealised loss on its core fixed income securities. Although this was broadly offset by the company’s claims liability discount benefit. The final result was a neutral impact from QBE’s asset-liability management activities for the quarter.

As for what’s ahead for QBE shares, management reaffirmed full-year guidance of constant currency gross written premium growth in the mid-single digits. Premium rate increases are expected to remain supportive.

QBE’s FY 2024 group combined operating ratio is forecast to be approximately 93.5%.

The company is scheduled to release its first half results on 9 August.

QBE share price snapshot

The QBE share price has been a strong performer in 2024, up about 22% year to date.

The post The QBE share price is marching higher on Friday. Here’s why 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 Life360 Inc (ASX: 360) share price is on the slide on Friday morning.

In early trade, the ASX 200 tech stock is down 9% to $14.15.

Why is the Life360 share price sinking?

Investors have been selling the location technology company’s shares today following the release of its quarterly update.

While some of the numbers were pre-released last month in a trading update, the ones that arguably matter most are now public knowledge and investors are responding negatively.

According to the release, Life360 delivered a 15% year on year increase in revenue to US$78.2 million during the first quarter. This was driven largely by a 23% lift in core subscription revenue to US$57 million.

At the end of the quarter, Life360’s annualised monthly revenue (AMR) stood at US$284.7 million, which is up 19% year on year.

This led to the company achieving positive adjusted EBITDA of US$4.3 million for the three months (up from US$0.5 million) and a reported EBITDA loss of US$4.1 million.

What were the drivers of this result?

A record quarter of subscription growth underpinned this solid result.

Life360’s global monthly active users (MAU) increased by 4.9 million during the three months to 66.4 million. This represents a 31% increase year on year. Management also notes that this was achieved with significant momentum, particularly in a seasonally lower period for MAU growth.

Also increasing strongly was its global Paying Circle metric. It posted net additions of 96,000 for the quarter, which was a record. This was up 21% year on year and brings the total to 1.9 million. Management advised that this was supported by improved conversion and retention.

Life360’s co-founder and CEO, Chris Hulls, was pleased with the record quarter. He said:

Life360’s Q1’24 results showed continued momentum, with net Paying Circles additions nearly doubling to 96 thousand from 54 thousand in Q4’23, achieving a new first quarter record. In addition, our efforts in relation to both our free members and international expansion are paying off, with 4.9 million new Monthly Active Users (also a new first quarter record.

Hulls doesn’t believe the ASX 200 tech stock’s growth is anywhere near over given its massive global market opportunity. He adds:

The market opportunity is on a global scale, and we believe we have significant headroom to grow as we expand to new regions, and launch new features that expand our relevance to different life stages.

Outlook

Pleasingly, Hulls revealed that the second quarter has started strongly for Life360. He said:

This momentum has continued so far in Q2’24 with the achievement of 32 thousand net Paying Circle additions during the month of April.

Looking further ahead, the ASX 200 tech stock has maintained its guidance for FY 2024. It continues to expect to report consolidated revenue of US$365 million to US$375 million, adjusted EBITDA of US$30 million to US$35 million, and an EBITDA loss of US$8 million to US$13 million.

It is likely to be this guidance that has put pressure on the Life360 share price today. Given its exceptionally strong start to the year, the market appears to have been expecting management to lift its guidance with this result. With no guidance upgrade coming, investors have been quick to hit the sell button.

But that doesn’t take away the fact that this is a high quality company growing at a rapid rate.

The post Why is the Life360 share price sinking 9% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. 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.