Author: openjargon

Rio Tinto Ltd (ASX: RIO) shares are falling on Tuesday after iron ore weakness offset some interesting news.

At the time of writing, the mining giant’s shares are down 0.6% to $127.72.

What news was announced?

Rio Tinto has announced plans to invest US$143 million (A$215 million) to develop a research and development facility in Western Australia.

This is to further assess the effectiveness of its low-carbon ironmaking process, BioIron, to support decarbonising the global steel value chain.

According to the release, the development of the BioIron Research and Development Facility in the Rockingham Strategic Industrial Area, south of Perth, follows successful trials of the innovative ironmaking process in a small-scale pilot plant in Germany.

What is BioIron?

Rio Tinto advises that BioIron uses raw biomass and microwave energy instead of coal to convert Pilbara iron ore to metallic iron in the steelmaking process.

When combined with the use of renewable energy and carbon-circulation by fast-growing biomass, BioIron has the potential to reduce carbon emissions by a whopping 95% compared with the current blast furnace method.

And while the company acknowledges that it is aware of the complexities around the use of biomass supply, it is working to ensure only sustainable sources of biomass are used.

The mining giant’s BioIron facility will include a pilot plant that will be ten times bigger than the small-scale pilot plant in Germany. It will also be the first time the innovative steelmaking process has been tested at a semi-industrial scale. Management expects it to be capable of producing one tonne of direct reduced iron per hour.

Importantly, it will provide the required data for Rio Tinto to assess further scaling of the technology to a larger demonstration plant.

‘World-first technology’

Rio Tinto’s Iron Ore chief executive, Simon Trott, is excited by the technology and sees it as a way of helping to decarbonise the planet. He said:

The world needs low-carbon steel to reach net zero, and we are working to make this a reality by finding better ways to turn our Pilbara ores into steel. BioIron is a world-first technology that has the potential to play a significant role in a low-carbon steel future.

This research and development facility will further test the BioIron process, showcase Western Australian innovation capability, and further demonstrates Rio Tinto’s commitment to supporting and enabling the decarbonisation of the steel industry.

Rio Tinto shares are up almost 15% over the last 12 months.

The post Own Rio Tinto shares? Why this ‘world-first technology’ is making news 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.

Fund manager L1 Capital recently held an investor presentation and highlighted two S&P/ASX 200 Index (ASX: XJO) shares.

Some investors may choose to focus on the biggest companies like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and CSL Ltd (ASX: CSL), but there may be other opportunities further down the market capitalisation list.

Indeed, smaller companies may be less monitored by analysts and investors, creating conditions for those ASX 200 shares to be undervalued.

Let’s dive into two companies L1 thinks are “low P/E stocks with enormous cash generation”.

BlueScope Steel Limited (ASX: BSL)

BlueScope is a steel producer operating in Asia Pacific and North America.

The fund manager described the company as resilient and diversified, with “commoditised” earnings streams protected by a downstream branded business (such as Colorbond and Truecore).

L1 thinks US steel markets are “structurally attractive”, and BlueScope has a strong industry position. The fund manager said BlueScope’s balance sheet has low levels of debt and that the company has the ability to use cash flow generated for increased shareholder payouts or acquisitions.

The business has a “track record” of shareholder returns and investments that deliver a strong return on invested capital (ROIC).

L1 said the ASX 200 share is trading at a significant discount to its North American steel peers which are trading at between six to eight times earnings before interest, tax, depreciation and amortisation (EBITDA). BlueScope, on the other hand, is trading at an “undemanding” valuation of around 4.5 times EBITDA.

The BlueScope Steel share price is almost 10% lower than where it started the year, as shown on the chart below.

AGL Energy Limited (ASX: AGL)

The other ASX 200 share that L1 pointed out was AGL. It’s the lowest-cost baseload generator in the key markets of Victoria and New South Wales. The company has “regulated assets with significant barriers to entry”, according to the fund manager.

L1 believes electricity demand is set to grow substantially over the medium term due to data centres, electric vehicles and AI.

The investment team suggests the business can generate strong free cash flow in the medium term, which can “fund high dividends and substantial investment” into the energy transition in areas like batteries, and make solid returns. The fund manager also said the management team at AGL is “disciplined”.

In terms of the valuation, L1 said the ASX energy share is valued at an enterprise value to EBITDA ratio of 4.5 times, which is “well below” its historical range of around six times.

The AGL share price has risen around 8% since the start of 2024, as we can see on the chart below.

The post 2 ASX 200 shares this fund manager rates as really cheap buys 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. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The DroneShield Ltd (ASX: DRO) share price surged to an all-time high in trading on Monday, nudging $1.25 per share.

It opened trading around 1% higher on Tuesday and is currently swapping hands at $1.26 apiece. This brings the counter-drone technology company’s return to a staggering 240% this year to date.

It’s not often you see triple-digit returns in the first half of a year. So, what’s driving this excitement among investors to cause such a feeding frenzy?

CEO Oleg Vornik on growth and strategy

CEO Oleg Vornik has provided valuable insights into DroneShield’s strategic positioning and growth potential.

Speaking on a podcast hosted by Frazis Capital Partners, Vornik was questioned about the potential for a “five-year pathway to $300 to $500 million a year” in the company’s revenues. This is a 10-fold increase from the company’s $55 million revenues last year.

Vornik said the industry’s inflection point is when “customers have completed their certifications and trials; they know what they want; and need much more than what they currently have.”

“[W]e’re looking at the the market and we’re saying okay well customers need to buy 100 times more than what they purchased just because of [the] market situation…”.

This includes both military applications, but also the civilian markets, the counter-drone company CEO said.

Vornik also highlighted the company’s advantage in the hand-held category of the drone detection market. “We believe that there are no other credible providers to the US military right now” he said, adding it had “outperformed” other competitors in trials.

Contract wins helping DroneShield share price

DroneShield’s share price has been soaring in 2024 thanks to a number of catalysts.

Recently, the DroneShield share price spiked following a substantial $5.7 million repeat order from a United States government customer.

According to my colleague James, this order involves delivering DroneShield’s advanced Counter-UxS systems, which target drones across multiple terrains—air, ground, and maritime.

The company expects to complete these deliveries in stages throughout the remainder of 2024.

Growth is a key ingredient in this recipe as well. In its most recent results, the company reported $16.4 million in quarterly revenue â€“ a staggering 900% increase from the prior corresponding period.

Analysts have taken note of this strong performance. Bell Potter recently upgraded the DroneShield share price to a buy and $1.00 price target. This week’s price action has subsequently taken this target out.

The broker forecasts $97 million in sales this year against earnings of $24.4 million. If DroneShield hits these numbers, it will be another tremendous growth period— up 80% and 163% year over year, respectively.

Droneshield share price looking ahead

DroneShield’s strategic positioning in the counter-drone technology market could be another factor exciting investors.

Referring again to the handheld market, Vornik said it’s “the biggest, because it’s relatively cheap”.

Plus, it removes many hurdles for customers. “You don’t need integration”, he says. “In the military space, integration is a big headache because…you have these high thresholds”.

With DroneShield, you can “just invite your local it guide to plug a few cables in everything talks in different way”, he added.

“So no integration is actually really positive”.

The company’s sales pipeline is $519 million with $27 million of orders under contracted backlog. In my opinion, this is robust.

Conclusion

With growing financials, substantial contract wins, and a promising sales pipeline, DroneShield has caught the bid lately.

In the last 12 months, the DroneShield share price has rallied 400% into the green, outpacing the S&P/ASX 200 Index (ASX: XJO) by more than 392%.

The post Why are ASX investors so excited by the DroneShield share price? appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow 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 DroneShield. 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.

Four well-known S&P/ASX 200 Index (ASX: XJO) shares were just rerated by leading brokers.

Three earned upgrades while one was downgraded.

Here’s what’s happening.

(Broker data courtesy of The Australian.)

Three ASX 200 shares earning broker upgrades

The first ASX 200 share getting an upgrade is The Lottery Corp Ltd (ASX: TLC), Australia’s biggest lottery company.

The Lottery Corp share price is up 1.4% in morning trade today at $4.97. That sees the stock up 3.1% so far in 2024.

And the betting company could stand to benefit from the upcoming tax returns most Aussie households will be receiving. While some people will use that to pay down debt, add to savings, or invest in ASX stocks, I imagine others will he happy to take a punt with some of their upcoming refunds.

Citi sees some solid growth ahead, in either case. The broker raised the Lottery Corp to a ‘buy’ rating with a $5.60 price target. That represents a potential upside of just under 13% from current levels.

Lottery Corp shares also trade on a fully franked trailing dividend yield of 2.9%.

Which brings us to the second ASX 200 share getting a broker upgrade, speciality retailer Premier Investments Ltd (ASX: PMV).

Premier also could be one to benefit from the upcoming tax refunds and other cost-of-living relief measures contained in the federal budget.

The Premier share price is up 2.1% today at $29.44, which sees shares up 4.4% year to date. Premier shares also trade on a fully franked dividend yield of 4.2%.

And CLSA forecasts another potential 9% share price gain from here. The broker raised Premier Investments to an ‘accumulate’ rating with a $32 price target.

Rounding off the list of ASX 200 shares receiving upgrades is healthcare provider Ramsay Health Care Ltd (ASX: RHC).

The Ramsay Health Care share price is up 4.0% today at $48.85, which sees shares down 8.2% year to date. The stock trades on a fully franked dividend yield of 1.4%.

Ramsay Health Care is a company that could catch some strong tailwinds from the rapid advancement of artificial intelligence. AI is widely forecast to drive efficiencies and new treatments in healthcare over the medium to longer term.

JP Morgan is getting more bullish on its outlook for this ASX 200 share. The broker raised its rating to ‘neutral’ with a $50 price target, a bit more than 2% above current levels.

And one company getting downgraded

Turning to the ASX 200 share getting downgraded, we have fashion jewellery retailer Lovisa Holdings Ltd (ASX: LOV).

The Lovisa share price crashed 10.4% yesterday and is down 3.2% today, at $29.44 a share.

Despite that big sell-down, the Lovisa share price remains up 20.6% in 2024. And Lovisa shares trade on a partly franked dividend yield of 2.8%.

But investors and brokers alike have been rethinking the growth outlook for the company after it announced that CEO Victor Herrero will be exiting on 31 May next year.

Motley Fool analyst James Mickleboro highlighted why Herrero’s pending departure is dimming Lovisa’s medium-term outlook:

The outgoing CEO has been instrumental in Lovisa’s global expansion. And while a lot of the hard work has certainly been done since his arrival in 2021, there’s still a lot more to come. The market may be concerned that his exit now puts at risk the successful execution of this expansion.

The ASX 200 share was downgraded by a number of brokers including Barrenjoey, Citi, Morgan Stanley and Canaccord.

Canaccord has the lowest price target for Lovisa shares among the brokers, at $29.00. This implies that most of the pain from Herrero’s upcoming exit has now already been priced into the stock.

The post Why these 4 ASX 200 shares were just rerated by top brokers appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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 JPMorgan Chase, Lottery, and Lovisa. The Motley Fool Australia has recommended Lovisa and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The CSL Ltd (ASX: CSL) share price opened trading at $283.70 apiece on Tuesday, having largely tracked sideways for the last three months of business. Meanwhile, the broader S&P/ASX 200 Health Care Index (ASX: XHJ) has followed a similar path, up just 1.2% in that time.

CSL shares have a history of delivering market-beating returns over the long term. But investors haven’t bid up the biotechnology giant’s stock in the past two to three years of trade. Now that we’re well past the “pandemic era,” what’s next?

Let’s take a look to see if the CSL share price can break the $300 barrier by the end of 2024.

Fundies like CSL share price

ECP Asset Management is one fund manager that appears bullish on CSL. Speaking to The Australian Financial Review in April, portfolio manager Sam Byrnes said the $2.9 billion asset manager likes CSL’s prospects.

“We are very positive on the outlook for CSL”, he said, noting the biotech is “now seeing volume growth alongside a decrease in the cost of plasma collections”.

“Capex is set to reduce 30 % this year and its future growth will be less capital intensive with the introduction of more efficient plasma collection devices and a yield enhancement program”.

These factors, Byrnes says, should increase CSL’s return on capital over the next five years. “We’d be happy with $500 [per share] in five years”, he concluded.

CSL share price above $500?

ECP’s Byrnes alludes to Macquarie’s $500 per share target for CSL over the next three years, as covered by my colleague Bernd.

The mammoth valuation, set in April, was built on strong earnings growth in the Behring business. This is expected to drive around 90% of CSL’s profits in the next five years, it says.

Macquarie has a price target of $330 per share on the CSL share price in the short term.

Meanwhile, analysts at Morgans and UBS are both optimistic about CSL’s future.

According to my colleague James, Morgans added CSL to its best ideas list. It cites potential double-digit earnings growth from increased plasma collections and new product approvals.

Morgans has an “add” rating with a price target of $315.40, suggesting a potential upside of 11.17% from the current share price. UBS also retained its buy rating and a $330 price target. It too likes the growth in CSL’s plasma collections market.

Not all roses

Not everyone views CSL through rose-coloured glasses. Atlas Funds Management chief investment officer, Hugh Dive is one. The fund manager likes CSL — no debate — and has owned the stock for more than six years, according to The Australian Financial Review. But he is a little more cautious.

Dives—who did not provide a price target—said that while growing earnings by 10% per year is “achievable in the short term,” it remains “extremely difficult over a long period of time.”

He added that “the law of large compounding numbers” could make it difficult for CSL to grow earnings that fast—not “without some degree of high sustained inflation.”

Foolish takeaway

With analysts’ positive outlook and strategic advancements in plasma collection, CSL appears well-positioned to grow earnings in the next three years, in my opinion.

The consensus among experts suggests that the CSL share price could indeed surpass $300 by the end of 2024, with significant long-term growth potential beyond that.

Regardless of these views, it is essential to remember that investing comes with risks. So, make sure to consider your own personal financial circumstances as well.

The post Could the CSL share price end 2024 above $300? appeared first on The Motley Fool Australia.

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

Life360 Inc (ASX: 360) shares are jumping on Tuesday morning.

At the time of writing, the location technology company’s shares are up 7% to $16.28.

Why are Life360 shares jumping?

Investors have been buying the company’s shares this morning in response to news that it has launched its Nasdaq initial public offering (IPO).

According to the release, Life360 estimates that it will receive net proceeds from this offering of approximately US$84.4 million, assuming an initial public offering price of US$30.43 per share, and after deducting the estimated underwriting discount and estimated offering expenses,

Management explained that the principal purposes of this offering are to increase its capitalisation and financial flexibility and create a public market for its common stock in the United States.

It currently intends to use the net proceeds received from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures.

It may also use a portion of the net proceeds for acquisitions or strategic investments in complementary businesses, products, services, or technologies. However, it does not currently have any agreements or commitments to enter into any such acquisitions or investments.

Once complete, the company expects to trade on Wall Street under the Life360 Inc (NASDAQ: LIF) ticker code.

Why would US investors buy into the company?

Life360 shares have been a popular and successful option for ASX investors since their listing. This has been driven by its rapid sales and earnings growth.

In respect to the former, Life360’s subscription growth has grown from US$86.6 million in 2021 to US$220.8 million in 2023. It is currently guiding to core subscription revenue growth of at least 20% in 2024.

The good news is that management believes it still has a significant market opportunity to grow into in the future, which would be appealing to investors on Wall Street. It highlights:

We are a market leader in family safety, connecting millions of people globally through software and hardware to the people, pets and things they care most about. We offer a range of services including location sharing, safe driver reports, and crash detection with emergency dispatch. The widespread proliferation and continued growth of connected devices has led to a normalization of location sharing for a wide range of consumer applications such as item tracking, communication, social coordination or travel.

The Life360 Platform is currently available in 171 countries through the Apple App Store and 133 countries through the Google Play Store through both tiered and single subscription offerings. We believe that the opportunity for our core subscription offerings alone translates into a TAM of US$75 billion. Our core subscription offering consists of a bundle of services that competes with a variety of single point solutions.

Is this listing good news for ASX investors?

The team at Bell Potter has previously stated its belief that the Wall Street listing would be good news for Life360 shares. It explained:

Key potential catalysts for the stock include another strong quarter of paying circle growth in Q2 (April was another good month), a potential upgrade to the 2024 guidance sometime in H2 and a US listing at some stage in the next 12 months.

We have increased the multiple we apply in the EV/Revenue valuation from 5.5x to 6.5x given the proposed US listing and potential re-rating of the stock given the much higher multiples of comps like Reddit (NYSE: RDDT).

Bell Potter currently has a buy rating and $17.75 price target on its shares.

The post Life360 shares jump 7% on Nasdaq IPO launch 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.

The ASX All Technology Index (ASX: XTX) has been a standout performer in 2024. Delivering an impressive 13.4% gain since the start of the year, the index’s success highlights the growing strength of Australia’s technology sector.

The All Technology Index has been a stellar performer since its launch in February 2020, climbing 69.6% in that period. The index is designed to measure the performance of technology companies listed on the ASX. It includes a broad range of tech-related businesses, including software, hardware, and IT services. 

Key players in the index

The ASX All Technology Index includes a mix of well-established companies and promising newcomers. Some of the most notable companies within the index are:

• Xero Ltd (ASX: XRO): Cloud-based accounting software company offering intuitive financial management tools
• REA Group Ltd (ASX: REA): Operates popular property websites like realestate.com.au.
• WiseTech Global Ltd (ASX: WTC): Provides software solutions to the logistics sector

Factors driving the growth

The COVID-19 pandemic significantly accelerated digital transformation across industries. Companies invested heavily in technology to support remote work, e-commerce, and digital customer engagement. This surge in demand for tech solutions boosted the performance of companies in the sector. 

Increased demand has been reflected in strong earnings reports. Xero reported a 75% increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) in FY24, which reached $527 million. REA reported a 24% increase in EBITDA for the 9 months ended 31 March 2024. Likewise, WiseTech Global reported a 23% increase in EBITDA in 1HFY24. 

A supportive regulatory environment in Australia has fostered growth in the tech sector. Government support through grants, tax incentives, and innovation programs has played a crucial role in fostering a conducive environment for tech companies to scale operations. 

Many ASX-listed tech companies, such as Xero and WiseTech Global, have successfully expanded their footprint beyond Australia, tapping into international markets. This global presence has provided them diverse revenue streams and reduced reliance on the domestic market, further strengthening financial performance.

What is the outlook for the ASX All Technology Index? 

As we move through 2024, the outlook for Australian tech stocks remains optimistic, though not without potential challenges. The continued emphasis on digital innovation and the growing importance of technology in everyday life are expected to sustain demand for tech solutions. Companies within the ASX All Technology Index are likely to benefit from ongoing trends such as the rise of artificial intelligence, cybersecurity, and cloud computing.

Nonetheless, several factors could influence the tech sector’s performance. Economic conditions, including inflation and interest rates, will play a significant role in shaping the investment landscape. Higher interest rates could impact the valuation of tech stocks as investors reassess the risk-reward profile of growth-oriented companies. 

Keeping a balanced perspective and focusing on long-term growth drivers will assist investors in navigating the Australian tech stock landscape and capitalise on opportunities ahead.

The post This ASX index is up 13% in 2024. Is there more up its sleeve? appeared first on The Motley Fool Australia.

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Motley Fool contributor Katherine O’Brien 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 REA Group, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.