Author: therawinformant

The S&P/ASX 200 Index (ASX: XJO) was almost flat today, rising slightly to 6,590 points.

Here are some of the highlights from the ASX:

Westpac Banking Corp (ASX: WBC)

Westpac revealed today that it is going to sell Westpac General Insurance Limited and Westpac General Insurance Services Limited to Allianz and enter into an exclusive 20-year agreement for the distribution of general insurance products to Westpac’s customers.

The sale price of $725 million represents a multiple of 1.3x FY20 gross written premium and is estimated to result in a small post-tax gain on sale in FY21. The sale of the general insurance business adds around 12 basis points to Westpac’s common equity tier 1 (CET1) capital ratio.

The transaction also includes contingent payments subject to integration milestones and business performance over the next five years, as well as ongoing payments in accordance with the distribution agreement.

The new distribution arrangement expands the ASX 200 bank’s existing partnership with Allianz, which has seen Westpac distribute a range of Allianz’s products to customers including auto, travel, boat and business insurance since 2015.

Westpac group CEO, Peter King, said: “This transaction is another step in simplifying our business while continuing to help customers with their general insurance needs.

“General insurance products are important for many Australians and we are pleased to be entering a long-term partnership with a global insurance expert to continue to help customers protect the things they value.”

Westpac will retain responsibility for certain pre-completion matters and provide protection to Allianz via a combination of provisions, warranties and indemnities.

Completion of the transaction is subject to various regulatory approvals and is expected to occur in the second half of 2021.

The Westpac share price finished up by 0.2% in reaction to this news.

Mesoblast Limited (ASX: MSB)

The Mesoblast share price went up around 7% today after making an announcement saying that the US Food and Drug Administration (FDA) has granted ‘fast track’ designation for remestemcel-L in the treatment of acute respiratory distress syndrome (ARDS) due to COVID-19 infection.

The ASX 200 share said that fast track designation by the FDA is intended to facilitate development and expediate the review of therapies to treat serious and life-threatening conditions with no or limited treatment options so that an approved product can reach the market quickly. Under the fast track designation, a biological license application (BLA) for remestemcel-L is eligible for both rolling submission and priority review.

Downer EDI Limited (ASX: DOW)

Only a couple of weeks ago Downer announced it was selling its blasting services business for $62 million. Today, the company announced that it was going to divest 70% of its laundries business for $155 million.

The proposed buyer of the majority shareholding is Australian private equity outfit, Adamantem Capital.

Grant Fenn, the CEO of Downer, said that this deal represented a significant step in Downer’s urban services strategy:

“The sale of 70% of laundries achieves the objective of removing one of the most capital-intensive businesses from the Downer balance sheet. Laundries continues to perform well as it recovers from the COVID-19 lockdowns in New Zealand and Victoria and by retaining a 30% interest we will participate in this ongoing recovery.

“We look forward to working closely with Adamantem and its management team providing market-leading services for our customers and employment opportunities for our people.”

More reading

• Why this fund manager believes Qantas (ASX:QAN) could emerge “larger and more valuable”
• Why the Oz Minerals (ASX:OZL) share price, up 61% this year, could run higher
• Which ASX 200 sectors performed the best in November? 
• Why Laybuy, Mesoblast, Sandfire, & Telix shares are charging higher
• ASX 200 down 0.2%: Zip’s November update, Mesoblast jumps, Westpac’s asset sale

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Qantas Airways Limited (ASX: QAN) share price has shrugged off its morning losses to be up 1.65% in late afternoon trading.

At $5.56 per share, it’s still 22.8% down since 2 January, having yet to recover from the drubbing delivered by the global pandemic. As domestic and international air travel ground to a halt, Qantas share price plummeted 70% by 19 March.

Still, the 158% rally from the 19 March low is massive. For comparison, the broader S&P/ASX 200 Index (ASX: XJO) is up 45% from its own 23 March low.

But despite that strong rally, and numerous headwinds still facing the airline in the mid-term, Montgomery Investment Management director Tim Kelley says there are good reasons why the Qantas share price could run higher.

We’ll get to that in a tick. But first…

What does Qantas do?

Qantas is Australia’s largest airline for regional, domestic and international travel. Qantas launched the low-cost carrier Jetstar in Australia in 2004 in answer to Virgin Australia’s low-cost offerings. Jetstar-branded airlines now operate across Asia Pacific, so long as borders are open.

The company’s subsidiary businesses include Qantas Freight Enterprises, Qantas Frequent Flyer and Qantas Loyalty. Qantas shares began trading on the ASX in 1999.

The case for further upside in Qantas’ share price

Writing in Livewire, Tim Kelley explains why there could be further upside for the Qantas share price:

As we noted in May, QAN entered the pandemic in a strong position, with a capable management team, a good liquidity position, and a business that relies more on domestic (which is likely to resume sooner) than international travel for profitability. It also benefits from a strong loyalty business which has continued to generate revenue through the pandemic.

Citing Virgin –which went into administration on 21 April owing almost $7 billion to creditors – Tim points out that Qantas’ relative strength could allow it to come out of the pandemic shutdowns strongly even as other airlines lose out on market share.

While lasting impacts from the company’s proactive initiatives during the pandemic shutdowns remain to be seen, Tim concludes:

“It is reasonable to think that Qantas’s relative strength going into COVID-19 will prove to be a very valuable asset, and that post-COVID it may be a larger and more valuable business than it had been.”

As domestic borders reopen and the world moves closer to a vaccine that could see the return of international travel, the fund manager believes the Qantas share price will be one to watch.

More reading

• Why the Oz Minerals (ASX:OZL) share price, up 61% this year, could run higher
• Which ASX 200 sectors performed the best in November? 
• REX Airlines (ASX:REX) share price flies as promotional fares go on sale
• ASX 200 down 0.2%: Zip’s November update, Mesoblast jumps, Westpac’s asset sale
• Meet the most unpopular ASX large cap stock according to analysts

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Although the pandemic has stifled the growth of a number of companies in FY 2021 such as A2 Milk Company Ltd (ASX: A2M) and Ramsay Health Care Limited (ASX: RHC), not all companies are struggling.

Two companies which have continued to deliver very strong growth in FY 2021 are listed below. Here’s what you need to know:

Afterpay Ltd (ASX: APT)

This payments company has been an outstanding performer during the pandemic. Thanks to the accelerating shift to online shopping and the growing popularity of the buy now pay later payment method, Afterpay is on course for another stellar result in FY 2021.

During the first quarter of the financial year, Afterpay reported a 115% increase in underlying sales to a record of $4.1 billion. This was driven by a 229% increase in US underlying sales to $1.6 billion, a 346% jump in UK underlying sales to $0.3 billion, and a 63% lift in Australian underlying sales to $2.2 billion. Repeat usage, another large increase in merchant numbers, and a whopping 98% increase in active customers to 11.2 million helped drive the strong quarterly result.

Pleasingly, its strong form has continued since the end of the quarter. At its recent annual general meeting, co-CEO Anthony Eisen revealed that trading in October and November was strong.

Mr Eisen commented: “October was another record month for underlying sales globally and we are performing ahead of this in November. The growth of new customers is accelerating since the end of Q1 in both the US and UK as the pipeline of new merchants go live on our platform.”

Xero Limited (ASX: XRO)

Another company which has been on form this year despite the pandemic is Xero. After a bumper result in FY 2020, Xero has followed this up with an even stronger first half to the new financial year.

During the half, the company’s operating revenue grew 21% over the prior corresponding period to NZ$409.8 million. This led to Xero’s annualised monthly recurring revenue (AMRR) growing 15% to NZ$877.6 million.

Pleasingly, things were even better for its earnings thanks to further operating leverage. Xero’s earnings before interest, tax, depreciation and amortisation (EBITDA) increased by an impressive 86% to NZ$64.9 million and its net profit after tax was 26 times greater than the prior corresponding period at NZ$34.5 million.

Since this release, the company has launched a US$600 million convertible notes offering. These funds will be used to support its growth plans. There is speculation that this could mean a sizeable acquisition in the near future.

More reading

• Why the Afterpay (ASX:APT) share price continues to dominate
• 5 things to watch on the ASX 200 on Wednesday
• Why the Xero (ASX:XRO) share price zoomed 20% higher in November
• Why healthcare, tech and consumer staples shares underperformed the ASX 200 in November
• Why the Afterpay (ASX:APT) share price and these ASX stocks could get a boost next week

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you want to construct a balanced portfolio, having a few blue chip ASX shares in there would be a smart move.

Blue chip shares tend to be companies that are well-known, long-established, and have strong financial positions. In other words, they are not going anywhere any time soon. This tends to make them safer than the average share.

Though, it is worth remembering that not all blue chip ASX shares are equal and some are better than others.

With that in mind, listed below are two ASX blue chip shares that come highly rated:

Goodman Group (ASX: GMG)

Goodman Group is an integrated commercial and industrial property group. It has been growing at a solid rate in recent years and has been tipped to continue this positive form in the years to come. This is thanks to future developments and the strength of its portfolio.

Goodman’s portfolio has a focus on high-quality properties in key locations that management believes will deliver sustainable returns for investors. These include logistics and warehouse facilities which have exposure to the growing ecommerce market through relationships with Amazon, DHL, and Walmart.

Analysts at Macquarie were impressed with Goodman’s first quarter performance and believe it is well placed for growth over the coming years. Its analysts have an outperform rating and $19.86 price target on its shares.

Sonic Healthcare Limited (ASX: SHL)

Sonic Healthcare is a leading medical diagnostics company with operations across the world. It has been a very impressive performer in FY 2021. Sonic recently released its first quarter update and revealed a 29% increase in revenue to $2,144 million and a 71% lift in EBITDA to $580 million.

The key driver of this growth was exceptionally strong demand for COVID-19 testing services globally. Though, it is worth noting that the rest of the business performed positively as well. And while this level of growth is expected to moderate in the coming quarters, Sonic has been tipped to deliver a very strong full year result next year.

Morgan Stanley, for example, is pleased with its strong growth so far in FY 2021 and remains positive on the future. In light of this, it recently reaffirmed its overweight rating and $40.40 price target on its shares.

More reading

• Why are ASX property shares on the rise today?
• Why healthcare, tech and consumer staples shares underperformed the ASX 200 in November
• 2 ASX 200 healthcare shares that outperformed in November 
• 3 ASX dividend shares rated as buys
• 2 of the best ASX shares for your retirement portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Salesforce.com Inc (NYSE: CRM) is one of the largest and oldest ‘cloud’ companies in the world. And it looks set to become even larger. Salesforce announced this morning (AEDT time) that it will acquire the workplace communications company Slack Technologies Inc (NYSE: WORK).

About the companies

Salesforce was founded back in 1999, and today provides customer relationship management services as well as marketing automation, analytics, and application development services. This company has been on a tear in 2020 (and before that). Salesforce shares have climbed 44.53% in 2020 so far. It gets better. The company has climbed 193% over the past 5 years, and 576% over the past decade. On the current share price of US$241.35 a share, Salesforce has a gigantic market capitalisation of US$219.6 billion.

Slack is a US$25 billion company which specialises in intra-workplace communication via its eponymous flagship app. Billed as an ’email killer’, Slack allows colleagues to communicate and share data, documents and other items with each other. It has been growing handsomely in recent years, including posting an annual revenue growth number of 49% in a recent quarterly update.

Acquisition news

Salesforce announced it would be acquiring Slack in a stock/cash arrangement. Each shareholder of Slack will receive US$26.79 in cash per share under the deal, as well as 0.076 shares of Salesforce for every share of Slack owned. That offer values Slack at a market cap of roughly US$27.7 billion

Slack shares had been trading between US$25-$29 for most of November. However, the stock jumped almost 40% last week to roughly US$40 a share when rumours of this deal began circulating. Last night (our time), Slack shares closed at US$43.84, representing a market cap of US$25.01 billion.

Salesforce + Slack: A blessed union

Salesforce had this to say on the merger:

[The] combination of [the] #1 CRM platform with the most innovative enterprise communications platform will create the operating system for the new way to work, enabling companies to grow and succeed in the all-digital world… This is a match made in heaven. Together, Salesforce and Slack will shape the future of enterprise software and transform the way everyone works in the all-digital, work-from-anywhere world. I’m thrilled to welcome Slack to the Salesforce Ohana once the transaction closes.

Slack’s management was equally exuberant, with CEO Stewart Butterfield stating the following:

Salesforce started the cloud revolution, and two decades later, we are still tapping into all the possibilities it offers to transform the way we work. The opportunity we see together is massive… Personally, I believe this is the most strategic combination in the history of software, and I can’t wait to get going.

It seems this announcement is a done deal. However, it’s worth noting that, although the boards of directors of both companies have approved the deal, Slack shareholders have yet to sign off on it. Although, Slack’s management has recommended they do so. If they indeed give the green light, the merger is only expected to be completed “in the second quarter of Salesforce’s fiscal year 2022″.

More reading

• 2 fantastic blue chip ASX shares to buy today
• Why the Chalice Gold Mines (ASX:CHN) share price is down 5% today
• 3 ASX REITs with notable ESG scores
• Why the Oz Minerals (ASX:OZL) share price, up 61% this year, could run higher
• Santos (ASX:STO) share price rated top buy in sector by Citigroup

Sebastian Bowen owns shares of Slack Technologies. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Salesforce.com and Slack Technologies. The Motley Fool Australia has recommended Slack Technologies. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Chalice Gold Mines Limited (ASX: CHN) share price has returned from its trading halt and is dropping lower.

In afternoon trade the mineral exploration company’s shares are down 5% to $3.86.

Why was the Chalice Gold Mines share price in a trading halt?

Chalice Gold Mines requested a trading halt on Monday whilst it launched an institutional placement.

This morning the company revealed that it has received firm commitments to raise $100 million through a placement at $3.75 per share. This represents a discount of 7.6% to its last close price.

Management advised that the placement was strongly supported by a range of domestic and international institutions.

It will now push ahead with a share purchase plan (SPP) which aims to raise up to $10 million at the same price.

What is the money being used for?

According to the release, the proceeds from the placement and SPP will be used to accelerate its exploration activities at its Julimar Ni-Cu-PGE Project in Western Australia.

This includes ~160,000 metres of resource definition drilling in order to define a maiden mineral resource estimate for the Gonneville discovery by mid-2021.

It also intends to complete scoping and pre-feasibility studies for the Gonneville discovery by the fourth quarter of 2021 and and fourth quarter of 2022, respectively.

Funds will also be used for initial drilling at new EM anomalies within the Julimar State Forest and initial regional exploration activities within the new West Yilgarn province.

Chalice’s Managing Director, Alex Dorsch said: “The demand for the placement was incredibly strong, with the book covered multiple times over the desired amount. This is testament to the scale and quality of the discovery at Julimar, but also the potential of the region to become a new world class base and precious metals mineral province.”

“Approximately 160,000 metres of diamond and RC drilling is now planned at Gonneville to support the delivery of a maiden Mineral Resource in mid-2021, which will then lead into mining studies planned over the following 18 months. We have also earmarked significant funding for initial drill testing of the compelling multi-kilometre scale targets within the Julimar State Forest once approvals are obtained,” he concluded.

More reading

• Why Appen, Chalice Gold Mines, Piedmont Lithium, & Zip shares are dropping lower
• The 13 ASX shares that could have doubled your money in 2020
• Metal Hawk (ASX:MHK) share price surges 35% on IPO debut
• 2 ASX shares making all-time highs today
• Why Aristocrat Leisure, Chalice Gold, Westpac, & Whitehaven Coal shares are charging higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In its 2019 annual report, the Principles for Responsible Investment (PRI) organisation pointed to Australia as one of the fastest growing countries with a commitment to responsible investment.

And, according to Nuveen’s head of engagement Peter Reali, the COVID-19 pandemic will lead to environmental, social and governance (ESG) factors being even more important for investors.

In light of this, we take a closer look at 3 ASX real estate investment trusts (REITs) that have low ESG risk ratings.

Vicinity Centres (ASX: VCX)

As Australia’s second largest shopping centre landlord, this $7.60 billion company has assets skewed to large shopping malls.

Sustainalytics (a provider of ESG and corporate governance research and ratings to investors) has given this REIT a very low ESG risk score, ranking it first among its real estate industry peers when it comes to ESG. The rating service provider said Vicinity Centres is at negligible risk of experiencing material financial impacts from ESG factors, due to its low exposure to, and strong management of, material ESG issues.

At the time of writing, the Vicinity Centres share price is $1.68 per share, up 17% year to date.

Dexus Property Group (ASX: DXS)

Dexus is one of Australia’s largest office and industrial REITs and has a market capitalisation of around $10.70 billion.

It has a similar low ESG risk rating to that of Vicinity Centres, with a slightly riskier score under “governance risk”. Sustainalytics ranks Dexus as number 2 within its industry group, just behind Vicinity.

In its recent annual general meeting address, Dexus management highlighted its belief that as Australia opens up after lockdowns, office markets will continue to benefit from urbanisation and growth in capital cities, and that investors should expect a revival in the Australian property market.

At the time of writing, the Dexus share price $9.68, up 6% year to date.

Stockland Corporation Ltd (ASX: SGP)

Stockland Corp is another REIT with low ESG risk, according to its Sustainalytics score. Stockland has a market capitalisation of around $10.90 billion, and operates a diversified portfolio of residential, retail and logistics assets.

Sustainalytics has given Stockland Corp a low ESG risk score, recognising that the company is focusing on strengthening its ability to endure material risks by implementing organisation-wide sustainability programs. According to Stockland Corp’s governance and risk report, this program involves the development of environmental management systems and a cyber risk management plan.

The Stockland Corp share price has enjoyed an upward rally since April, and at $4.49 per share at the time of writing it has almost returned to its pre-Covid price level of $4.60.

More reading

• Which ASX 200 sectors performed the best in November? 
• Why the Afterpay (ASX:APT) share price and these ASX stocks could get a boost next week
• Why Harvey Norman, Northern Star, Stockland, & TechnologyOne shares are charging higher
• Stockland (ASX:SGP) share price up 3% after new chief announced
• Dexus (ASX:DXS) share price flat despite pocketing $694 million from property sale

Motley Fool contributor Miles Wu has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Shareholders of OZ Minerals Limited (ASX: OZL) can look back on a highly profitable 2020, so far. Despite plummeting 41% in the pandemic-driven market rout earlier this year, the OZ Minerals share price is up 61% since 2 January.

In comparison, the broader S&P/ASX 200 Index (ASX: XJO) is down 1.5% year-to-date.

The OZ Minerals share price action since the 23 March lows has been stellar, with the miner trading up 184% from those lows. And despite the strong share price gains Oz Minerals has already booked, there could be more ahead.

That’s because OZ Minerals’ owes much of its good fortune to the soaring price of copper, its primary focus. And as with most miners, its share price tends to rise (and fall) significantly more than the price of the metals it digs from the ground. Which is why you’ll often hear that miners are ‘leveraged’ to the price of their metals.

Copper, not coincidentally, also bottomed out on 23 March at US$4,630 (AU$6,300) per ton. At time of writing, it’s trading for US$7,694 per ton, a price increase of 66%.

That’s a 7-year high for copper. But many market veterans are thinking back further, to 2011 when copper fetched more than US$10,000 per ton.

We’ll look at why below, but first…

What does OZ Minerals do?

Based in South Australia, OZ Minerals is mining company primarily focused on copper. It owns and operates the high-quality Prominent Hill copper-gold mine and the Carrapateena advanced exploration copper-gold project. Both sites are located in South Australia.

OZ Minerals also has extensive operations in Brazil and an exploration project in Sweden.

Why copper – and the OZ Minerals share price – could run higher

A boom in expected government infrastructure spending and even larger forecast growth into green energy stimulus spending are both touted as supporting higher copper prices. The highly conductive metal is used in building construction and a core component of batteries.

Mark Hansen is the chief executive of London-based metals trading house Concord Resources Ltd. As reported by Bloomberg, Hansen says:

We’re in an unprecedented situation as there’s more money than ever before sitting around looking for something to do. Copper may not have had an investment theme with the potential of ‘green’ applications since the demand-driven bull market 10 years ago.

Copper market veteran David Lilley, founder of hedge fund, Drakewood Capital Management, adds:

The world is re-engineering transportation, power generation, information storage and goods distribution… Governments across the world are supporting and encouraging the transition. The consequences for metals demand are exciting.

The OZ Minerals share price is up 2.05% at $16.94 in afternoon trading.

More reading

• Which ASX 200 sectors performed the best in November? 
• ASX 200 down 0.2%: Zip’s November update, Mesoblast jumps, Westpac’s asset sale
• Meet the most unpopular ASX large cap stock according to analysts
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises on Tuesday

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Oil-exposed ASX stocks are on edge today but this is a good time to be buying the Santos Ltd (ASX: STO) share price.

That’s the view of Citigroup as it called the Santos share price its top pick in the sector.

Jitters about whether OPEC will extend production curbs weighed on oil prices overnight. This triggered early losses in the ASX energy sector which is flip flopping between gains and losses.

Santos share price recovers from early selling

The sector’s heavyweights seem to be faring better in after lunch trade though. The Oil Search Ltd (ASX: OSH) share price gained 0.5% to $3.69, the Woodside Petroleum Limited (ASX: WPL) share price climbed 0.8% to $22.37 and the Santos share price added 0.9% to $6.26.

There’s more room for the STO share price to climb, according to Citi. The broker put a 12-month price target of $7.34 on Santos and outlined six reasons why it’s the best ASX energy stock to own now.

Why the Santos share price is the top pick

The first is management’s consistent track record since 2016. Then there’s its balance sheet which is underpinned by CPI indexed production that will enable Santos to keep its investment grade credit rating as long as the oil price stays above US$25 a barrel.

“[Santos has] the highest returning growth, with capex opportunities in both the base business and major growth projects having long run marginal costs well above long term commodity price assumptions, in turn delivering the best combination of EBITDAX growth and ROE expansion,” said Citi.

“[It’s] the only company we feel comfortable with for farming down growth projects to support the balance sheet.”

Cheapest large cap ASX energy stock

Further, emission reductions can become a net present value [NPV] positive endeavour and the Santos share price is cheaper than its peers.

The broker estimated that the Santos share price implies an oil price of US$45 a barrel, while the Woodside share price implies a US$55 a barrel price and Oil Search share price implies a US$51 a barrel price.

Additional upside from going net zero

Also, what’s not captured in Citi’s valuation is potential upside for Moomba phase 1 carbon capture and storage project.

The unaccounted upside includes LNG price slope premiums from stapling carbon credits to LNG cargoes.

There’s also upside from access to third party CO², enabling competitive hydrogen price at less than $2/kg, or less ESG related risk for raising debt and equity capital.

More reading

• Which ASX 200 sectors performed the best in November? 
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises on Tuesday
• How this ASX share is riding the rapid growth of ESG investing
• Santos (ASX:STO) share price on watch after guidance upgrade

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While the S&P/ASX 200 Index (ASX: XJO) lifted more than 9.5% in November, some sectors performed significantly better than others. Here’s the rundown of which sectors did the heavy lifting last month. 

S&P/ASX 200 Energy Index (ASX: XEJ) 

The ASX 200 Energy Index rallied 29.4% in November but was still down 29.6% year to date. The rise followed a 23% improvement in crude oil prices to US$44 a barrel.

Energy giants, Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO), Oil Search Ltd (ASX: OSH) and Origin Energy Ltd (ASX: ORG) all finished November in a similar fashion, with their share prices increasing between 27% and 45%. 

S&P/ASX 200 Financials Index (ASX: XFJ) 

The ASX 200 Financials Index increased 15% in November, driven by the significant share price improvements across the big four banks.

The Reserve Bank of Australia (RBA) committed to supporting the economy through a number of channels including lowering the cash rate to a record low of 0.1% in November. The RBA provided the following commentary with its recent monetary policy measures:

Lower borrowing costs free up cash flow for both households and businesses, some of which will be spent. Lower interest rates also support asset prices, which boost balance sheets and consumption and investment. And a lower structure of interest rates leads to a lower value of the Australian dollar than would otherwise be the case. The end result is a stronger economy and more jobs. 

While banks have experienced a significant reduction in earnings and dividends, things have taken a turn for better. The Commonwealth Bank of Australia (ASX: CBA) updated the market on 11 November with its COVID-19 temporary loan repayment deferral data for the month of October. This update saw a net reduction in total loan deferred facilities of 59% during October. Approximately 52,000 loans remained in deferral as at 31 October, down 75% from 30 June. 

S&P/ASX 200 Communication Services Index (ASX: XTJ) 

The ASX 200 Communication Services Index is heavily weighted towards Telstra Corporation Ltd (ASX: TLS). Both the index and the Telstra share price increased 12.5% in November. This followed the announcement of a potential restructuring of the company to create three separate legal entities. Telstra CEO, Andrew Penn, believes the restructure will allow the company to take advantage of potential monetisation opportunities for its infrastructure assets. The company also reaffirmed its FY21 guidance that was provided to the market with its full year results in August. 

S&P/ASX Real Estate Index (ASX: XRE) 

The ASX 200 Real Estate Index improved 11.5% in November. The easing of restrictions in Victoria saw a significant improvement in retail conditions and rental billings for shopping centre real estate investment trusts (REITs) including GPT Group (ASX: GPT), Vicinity Centres (ASX: VCX), Stockland Corporation Ltd (ASX: SGP) and Scentre Group (ASX: SCG). 

More reading

• ASX 200 down 0.2%: Zip’s November update, Mesoblast jumps, Westpac’s asset sale
• Meet the most unpopular ASX large cap stock according to analysts
• Banks rejoice: House prices to return to 2019 levels
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises on Tuesday

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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