Author: openjargon

Collins Foods Ltd (ASX: CKF) shares are soaring on Tuesday morning.

At the time of writing, the ASX 200 stock is up 10% to $10.30.

This follows the release of the KFC restaurant operator’s FY 2024 results.

ASX 200 stock jumps on FY 2024 results

• Revenue from continuing operations up 10.4% to $1,488.9 million
• Underlying EBITDA from continuing operations up 12% to $229.8 million
• Underlying net profit after tax from continuing operations up 15.6% to $60 million
• Fully franked final dividend of 15.5 cents per share

What happened in FY 2024?

For the 12 months ended 28 April, Collins Foods reported a 10.4% increase in revenue from continuing operations to $1,488.9 million. Continuing operations exclude Sizzler Asia.

Management advised that this was driven by growth across all business units. KFC Europe was the star of the show, reporting a 26.1% increase in revenue to $313.5 million. This was supported by an 11.7% lift in Taco Bell revenue to $54.4 million and a solid 6.6% increase in KFC Australia revenue to $1,121 million.

The ASX 200 stock’s underlying EBITDA from continuing operations grew at a slightly quicker rate of 12% to $229.8 million. This reflects its strong sales growth, operational efficiencies, and cost control.

Once again, it was the KFC Europe business that was the standout. It reported a 29.6% increase in underlying EBITDA to $42.5 million. Whereas KFC Australia’s underlying EBITDA rose 9.8% to $221.4 million and Taco Bell posted an underwhelming $0.7 million loss.

Though, the latter was an improvement from a $1.5 million loss a year earlier. Management notes that Taco Bell developments remain temporarily paused while it optimises its current network of 27 restaurants in suburban metro geographies.

In light of the above, a fully franked final dividend of 15.5 cents per share was declared. This brings its total FY 2024 dividends to 28 cents per share, which is up 3.7% year on year.

Management commentary

Collins Foods’ interim CEO and managing director, Kevin Perkins, was pleased with the results. He said:

Collins Foods maintained its growth momentum, delivering record revenue and positive same store sales across all business units. Growth was driven by our growing footprint with 17 net new restaurants added across the Group, increased adoption of digital channels, new product innovation, and value-led initiatives. Profitability also improved over the year, benefiting from sales growth, greater operational efficiency and cost control.

Our solid FY24 performance is even more impressive given the challenging macro environment. While the QSR sector is one of the most resilient, it is not immune to the ongoing cost-of-living pressures facing consumers. As expected, trading conditions were softer in the second half given the dual impacts of inflation across all input lines and weaker consumer sentiment. We continue to manage our business for the long-term, prioritising brand health by ensuring value across the menu to retain consumer trust.

Outlook

The ASX 200 stock’s growth has moderated since the end of FY 2024.

Management notes that this reflects “the continuation of a weaker consumer environment in Australia and Europe, as well as the lapping of strong growth in the prior year.”

During the first seven weeks of FY 2025, KFC Australia’s total sales increased 1.5%, KFC Europe sales are down 0.1%, and Taco Bell sales are up 0.6%.

Perkins commented:

Significant cost-of-living and inflationary pressures are expected to remain for much of the year ahead, impacting sales growth and we expect margin pressure across the Group.

Current conditions remain challenging, however, they have not dampened our enthusiasm for growth. We’re continuing to grow our KFC network with Australian expansion in FY25 expected to be a little ahead of our development agreement commitment, and a number of new restaurants are planned for the Netherlands. We’re also exploring and evaluating M&A opportunities for KFC in existing markets as well as complementary new geographies.

The post ASX 200 stock jumps 10% on strong FY24 results appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Collins Foods. 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 recommended Collins Foods. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Vanguard Australian Shares Index ETF (ASX: VAS) is a very popular exchange-traded fund (ETF) on the ASX, with $15 billion in funds under management (FUM). But being large is one thing, how it has performed is a completely different matter.

Vanguard aims to provide investors with access to share markets at a very low cost. The investors are the owners of Vanguard itself, and the provider shares its profit with investors by keeping the fees as low as possible.

ETFs can be an effective way to invest and help diversify against risks. On Vanguard’s website, it says:

Rather than trying to pick the winning investment each year, spreading your investments across a wide variety of assets will help reduce the risk of loss. Investors who are well diversified tend to enjoy a smoother investment ride over the long term.

Let’s look at how good the VAS ETF returns have been.

Adequate long-term returns

Every month, Vanguard informs investors how the Vanguard Australian Shares Index ETF has performed over time.

As of 31 May 2024, the VAS ETF has delivered an average net return of:

• 8.98% per annum since its inception in May 2009
• 7.72% per annum over the prior decade
• 7.81% per annum over the last five years
• 6.54% per annum over the last three years

These are not bad returns, but not Earth-shattering either.

It’s interesting to note that in each time period I mentioned, the distribution element of the return from the ASX ETF made up most of the net return, highlighting that dividends are an important part of ASX returns.

In the last 12 months, the VAS ETF has delivered a net return of 12.81% thanks to the rise in the S&P/ASX 300 Index (ASX: XKO).

What is the VAS ETF invested in?

The performance of the underlying holdings decides the returns of an ETF.

Unsurprisingly, ASX financial shares (29.7%) and ASX mining shares (22.7%) still make up more than half of the ASX ETF’s total portfolio.

The top ten positions in the portfolio are some of Australia’s strongest businesses:

• BHP Group Ltd (ASX: BHP)
• Commonwealth Bank of Australia (ASX: CBA)
• CSL Ltd (ASX: CSL)
• National Australia Bank Ltd (ASX: NAB)
• Westpac Banking Corp (ASX: WBC)
• ANZ Group Holdings Ltd (ASX: ANZ)
• Wesfarmers Ltd (ASX: WES)
• Macquarie Group Ltd (ASX: MQG)
• Goodman Group (ASX: GMG)
• Woodside Energy Group Ltd (ASX: WDS)

Consider other ASX ETFs for additional diversification

The ASX only makes up a very small percentage of the global share market, so it could be wise to diversify with other ETFs that provide exposure to international stocks.  

For example, the Vanguard MSCI International Shares Index ETF (ASX: VGS) invests in more than 1,300 businesses in ‘developed’ countries worldwide. Since its inception in November 2014, the VGS ETF has delivered an average annual return of 12.8% thanks to its exposure to numerous growing businesses. This sort of investment could work well if mixed with the VAS ETF.

The post What is the average return of the Vanguard Australian Shares Index ETF (VAS)? 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 positions in and has recommended CSL, Goodman Group, Macquarie Group, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Macquarie Group and Wesfarmers. The Motley Fool Australia has recommended CSL, Goodman Group, 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.

Goodman Group (ASX: GMG) shares are a popular option for investors.

The ASX 200 stock features in countless portfolios across the country and it isn’t hard to see why.

What is Goodman?

Goodman Group is an integrated property group with operations and investments throughout Australia, New Zealand, Asia, Europe, the United Kingdom and the Americas.

It is one of the largest listed specialist investment managers of industrial property and business space globally.

Management notes that Goodman’s global property expertise, integrated own+develop+manage customer service offering and significant investment management platform ensures it creates innovative property solutions that meet the individual requirements of its customers, while seeking to deliver long-term returns for investors.

Well, the company has certainly delivered on the latter. Goodman shares have been incredible performers over the last decade.

During this time, the ASX 200 stock has delivered an average total return of 22% per annum.

To put that into context, a $10,000 investment in Goodman’s shares back in 2014 would now be worth almost $75,000.

Is it too late to buy this ASX 200 stock?

One analyst that remains very positive on Goodman is Niv Dagan from Peak Asset Management.

Peak Asset Management is a boutique investment management firm that is headquartered in Melbourne. It aims to provide private and institutional investors with access to Australia’s most attractive corporate opportunities. The company notes that each opportunity must pass its strict investment process.

According to The Bull, Peak Asset Management’s executive director, Niv Dagan, thinks the ASX 200 stock is a great long term option for investors. This is due to its stability and growth potential. He said:

Goodman is an integrated industrial property group. It reported $12.9 billion of development work in progress across 82 projects on March 31. The company’s solid earnings growth and robust financial health underpin its appeal. Given its global presence and consistent performance, Goodman is a promising candidate for a long-term investment, as it offers stability and growth potential.

Is anyone else bullish?

Analysts at Citi would likely agree with Peak’s positive view on Goodman.

That’s because earlier this month the broker put a buy rating and $40.00 price target on the ASX 200 stock.

Based on its current share price of $35.18, this implies potential upside of almost 14% for investors over the next 12 months. The broker believes Goodman is well-placed for growth thanks to its data centre and warehouse developments.

The post Buy this ASX 200 stock for ‘stability and growth potential’ appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 positions in and has recommended Goodman Group. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Over the past year, Coles Group Ltd (ASX: COL) shares haven’t done so well, dropping 6.5%. While this is better than its rival Woolworths Group (ASX: WOW), which is down 15%, Coles shares have underperformed the S&P/ASX 200 Index (ASX: XJO), which is up 9.3% during the same period.

However, Coles shares have performed better over the longer term. The stock has risen 28.9% over the past five years, outperforming the ASX 200 index by 12%.

Could Coles shares continue to outperform from here on?

Breaking down share price returns

Share returns are influenced by two main factors: earnings growth and valuation multiple growth.

When a company earns more money (earnings), it becomes more attractive to investors, which usually pushes its share price up. Additionally, if investors become more optimistic about the company’s future, they may be willing to pay more for its shares, increasing the price further. In simple terms, higher earnings and positive investor sentiment lead to better share returns.

For example, the current share price of Coles at $17.1 can be split into:

• FY24 earnings per share (EPS) estimate of 81 cents multiplied by a price-to-earnings (P/E) ratio of 21x
• FY25 EPS estimate of 84 cents multiplied by a P/E ratio of 20x

These two factors are based on market expectations, which are constantly updated depending on actual business results from Coles.

How fast can Coles earnings grow?

The earnings estimates by S&P Capital IQ appear to assume Coles’ EPS will increase at a compound annual growth rate (CAGR) of 6.7% over the next three years, as follows:

• 81 cents in FY24, implying a 3.4% growth over the previous year
• 84 cents in FY25, implying a 4.9% growth over the previous year
• 95 cents in FY26, implying a 12.5% growth over the previous year

The FY26 growth estimate of 12.5% is doubtful to me, but the economy may improve by then.

Considering Coles has consistently grown its same store growth between 2.5% and 5.8% over the past three years, the market consensus of high single-digit growth seems reasonable.

This means if the market is willing to keep applying 20x PE, then the Coles share price may increase by 6% to 7% as its earnings grow.

Valuation multiples

The next question is whether the current valuation multiple is fair. While there could be many different ways to look at it, I would use a simple approach here.

A P/E ratio of 20x means investors are paying $100 for an expected annual profit of $5. In other words, this means an earnings yield of 5%. This is different from a dividend yield because not 100% of the company’s earnings will be paid to shareholders.

Then, we can compare this to other alternatives. For example, would investors want a 5% earnings yield from Coles shares rather than putting their money in the bank earning lower interest rates? The answer may be yes, given the cash rate by the RBA is 4.25%.

Also, Coles is one of the two leading grocery chains in the country, providing investors with stable and predictable earnings outlook.

For these reasons, Coles’ PE ratios have rarely traded below 20x over the past 5 years.

So I would say the current PE levels are reasonable.

Can Coles shares outperform the index?

The ASX 200 index generated a total return of 7.6% over the last ten years, including a dividend yield of 4.7%.

As we reviewed earlier, we can estimate Coles shares could generate a total return of approximately 11% based on roughly 6% to 7% return from its earnings growth and by adding its dividend yield of 3.9%.

Based on this simple exercise, I would think there’s reasonably high chance that Coles shares could do better than the ASX 200 index.

The post Can Coles shares outperform the ASX 200 Index from here? appeared first on The Motley Fool Australia.

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Motley Fool contributor Kate Lee 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.

The artificial intelligence (AI) revolution has already helped spur big gains for the S&P/ASX 200 Index (ASX: XJO) tech stock we’ll look at below.

Indeed, if I were going to invest in just one ASX company and one United States-listed company to ride the surging global interest in generative AI and machine learning, they would be Nvidia Corporation (NASDAQ: NVDA) and ASX 200 tech stock Megaport Ltd (ASX: MP1).

Nvidia has tapped deep into the AI money flow with its generative AI chips. That’s helped spur a 212% rally in the Nvidia share price over the past 12 months. Atop the past few years of stellar performance, it gives the US-based company an eye-watering market cap of US$3.11 trillion (AU$4.69 trillion).

The Megaport share price has also been on a tear. Over the past year, shares in the ASX 200 tech stock have soared 71%. This gives Megaport a market cap of AU$1.88 billion.

Both stocks are major beneficiaries of the AI revolution, which really got underway with the introduction of OpenAI’s ChatGPT towards the end of 2022.

Less than two years later we see companies the world over racing to incorporate generative AI to streamline their operations.

While the long-term impacts on the labour market remain an unknown concern, AI appears poised to spur innovations in healthcare, manufacturing, finance and retail, to name a few.

But for businesses to make the most of it, they need to be able to connect easily.

Which brings us back to ASX 200 tech stock Megaport.

What’s happening with the ASX 200 tech stock?

Megaport is a network as a Service (NaaS) solutions provider offering “elastic interconnection services”.

In a nutshell, the company’s software layer provides users with an easy way to create and manage network connections. Through its network of more than 113 unique data centre operators, businesses can deploy private point-to-point connectivity between any of the locations on Megaport’s global network infrastructure.

Its customer connections to major cloud service providers include powerhouse companies like Microsoft Corp (NASDAQ: MSFT) and Google Cloud Platform, the domain of Alphabet Inc (NASDAQ: GOOG).

Among the ASX 200 tech stock’s strengths is its dedicated, founder-led management team.

As legendary investor Warren Buffett says, “A great manager is as important as a great business.”

Now Megaport’s founder, Bevan Slattery will exit his role as chairman of the board at the end of this week. Director Melinda Snowden will take the top spot.

But Slattery will continue to offer advice going forward.

“As founder, I am passionate about Megaport and its success, and I will always be available to the team to provide strategic advice and guidance,” he said last week (quoted by The Australian).

On the financial front

As for Megaport’s recent financial metrics, the AI revolution looks to be already helping drive growth.

At its last quarterly update, the ASX 200 tech stock reported a 30% year on year boost in revenue to $49.5 million.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) soared by 92% to $14 million.

And Megaport had a net cash position of $59.2 million, up from $45.8 million at the end of December.

The ASX 200 tech stock also upgraded its earnings guidance for the full financial year.

Megaport lifted its FY 2024 EBITDA to between $56 million and $58 million, up from the company’s prior guidance of $51 million to $57 million.

The post The AI money flow: Why you can’t afford to miss stocks like Nvidia and this rising ASX 200 tech stock appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 Alphabet, Megaport, 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 Alphabet, Megaport, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

One of the hottest commodities this year has been copper.

Due to a combination of supply risks and improving demand prospects for energy transition metals, the red metal has been soaring since the start of the year.

The good news for investors is that it may not be too late to gain exposure to copper, with one ASX mining stock still offering investors significant upside potential according to analysts.

Which ASX copper stock is a buy?

The company in question is Aeris Resources Ltd (ASX: AIS).

According to a note out of Bell Potter, it believes that a recent pullback has presented investors with a “second chance saloon” to pick up the ASX copper stock. It commented:

AIS has retreated ~36% from its recent share price high of $0.335/sh in late May 2024, correlating closely with the recent rally and pullback in the copper price. Company specific factors are always at play, but we highlighted (March 2024) AIS’ strong leverage to the copper price and, in our view, this has been the key driver of the movements in AIS’ share price.

Updating our sensitivity analysis for our latest commodity price forecasts and modelled assumptions shows AIS remains most sensitive to the copper price, with a ±5% move driving a ±25% swing in our valuation. AIS’ unhedged copper exposure is one of the key tenets of our investment thesis. We remain bullish on the outlook for copper and see the current pullback as an opportunity to gain exposure via AIS’ Australian operations.

30% upside

The note reveals that Bell Potter has reaffirmed its buy rating and 30 cents price target on the ASX copper miner.

Based on its current share price of 23 cents, this implies potential upside of 30% for investors over the next 12 months. It concludes:

There are no EPS changes in this report and our NPV-based valuation is unchanged. AIS is a copper dominant producer with all its assets in Australia. Its near-term outlook is highly leveraged to the copper price and increasing copper grades and production at the Tritton copper mine. Successful delivery offers significant upside to the share price and demonstrates a strategically attractive asset in Tritton, making AIS vulnerable as a corporate target. We retain our Buy recommendation.

Overall, this could be a good option for investors that are on the lookout for exposure to a booming side of the share market right now.

The post Meet the ASX copper stock that could rise 30% appeared first on The Motley Fool Australia.

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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.

Deciding which ASX income stock to buy can be a gruelling process.

Luckily for income investors, analysts have done a lot of the hard work for you and picked out four they think are buys.

Here’s what they are saying about these dividend stock:

APA Group (ASX: APA)

The first ASX income stock to look at is APA Group. It is an energy infrastructure business that owns, manages, and operates a diverse portfolio of gas, electricity, solar and wind assets.

Macquarie is a fan of the company and currently has an outperform rating and $9.40 price target on its shares.

As for income, the broker believes that APA Group’s long run of dividend increases will continue. The broker is forecasting dividends per share of 56 cents in FY 2024 and 57.5 cents in FY 2025. Based on the current APA Group share price of $8.39, this equates to 6.7% and 6.85% dividend yields, respectively.

Coles Group Ltd (ASX: COL)

Over at Morgans, its analysts think that income investors should be buying this supermarket giant’s shares.

The broker currently has an add rating and $18.95 price target on its shares.

In respect to dividends, it is expecting Coles to pay fully franked dividends of 66 cents per share in FY 2024 and 69 cents per share in FY 2025. Based on the current Coles share price of $17.10, this implies yields of approximately 3.85% and 4%, respectively.

Dalrymple Bay Infrastructure Ltd (ASX: DBI)

Morgans also thinks that Dalrymple Bay Infrastructure could be an ASX income stock to buy.

It is the long-term operator of the Dalrymple Bay Coal Terminal. This has been Queensland’s premier coal export facility since all the way back in 1983.

The broker currently has an add rating and $3.05 price target on its shares. As for income, the broker is forecasting dividends per share of 22 cents in FY 2024 and then 23 cents in FY 2025. Based on the latest Dalrymple Bay Infrastructure share price of $2.93, this will mean yields of 7.5% and 7.85%, respectively.

GDI Property Group Ltd (ASX: GDI)

Finally, the team at Bell Potter thinks that this property company could be an ASX income stock to buy.

Its analysts currently have a buy rating and 75 cents price target on its shares.

As well as plenty of upside, the broker believes GDI Property could provide investors with some big dividend yields in the coming years. It is forecasting dividends per share of 5 cents across FY 2024, FY 2025, and FY 2026. Based on the current GDI Property share price of 60 cents, this implies dividend yields of 8.3% for the next three years.

The post 4 ASX income stocks for Aussie investors to buy now appeared first on The Motley Fool Australia.

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