Author: therawinformant

The Vocus Group Ltd (ASX: VOC) share price has dropped lower on Thursday following the release of a major announcement.

At the time of writing, the telco provider’s shares are down slightly to $4.22.

What did Vocus announce?

When Vocus released its full year results in August, management mentioned that it would soon consider its capital allocation and longer-term corporate structure.

It commented: “The accelerating momentum of the core VNS business, together with the strong performance of New Zealand and well-progressed turnaround of Retail Consumer, means we are now in a strong position to strategically consider our options regarding capital allocation and longer-term corporate structure.”

This morning Vocus revealed that it has decided to take these considerations further and has appointed financial advisers to execute an Initial Public Offering (IPO) of its Vocus New Zealand business.

According to the release, the IPO is expected to be undertaken before the end of FY 2021, subject to prevailing market conditions.

The Vocus board believes that a successful IPO of Vocus New Zealand will provide greater balance sheet flexibility and allow the Vocus Network Services business to invest in core long-term strategic fibre opportunities to extend its network reach, build on its product capabilities, and cement its position as Australia’s specialist fibre and network solutions provider.

It will also provide the board with the ability to review its long-term dividend policy.

What is Vocus New Zealand?

Vocus New Zealand is a fully integrated telco and energy provider that owns a significant national fibre infrastructure network.

It is led by an experienced management team and is an established challenger that is very strongly positioned within the New Zealand market.

The business has delivered consistent revenue and EBITDA growth over the past five years. It has also developed a core competency on the acquisition and integration of businesses that add both customer scale and capability to the existing operation.

The Vocus board believes there are now significant opportunities for organic growth and market consolidation across all market segments that will be better realised if Vocus New Zealand is an independent entity.

No details were provided on how much Vocus expects to raise from the IPO. However, with its FY 2020 results, it revealed that the carrying value of its intangible assets were $298 million.

More reading

• Why these ASX shares just stormed to 52-week highs
• Vocus (ASX:VOC) share price drops lower despite positive AGM update
• 5 things to watch on the ASX 200 next week

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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The FlexiGroup Limited (ASX: FXL) share price has been a strong performer on Thursday.

In morning trade the financial services and buy now pay later company’s shares are up 10% to $1.18.

Why is the FlexiGroup share price surging higher?

Ahead of its annual general meeting this morning, FlexiGroup announced a partnership with payments giant Mastercard to expand the application and distribution of its bundll product.

Bundll is the world’s first buy now pay anywhere platform built by humm.

The bundll product, which is already live in Australia, allows customers to buy now pay later everywhere Mastercard is accepted and bundle their purchases into easy to manage instalments with inbuilt budgeting services.

According to the release, under the agreement, Mastercard will work with its partners to drive adoption and will support the development of the open-loop, work anywhere, pilot. Management notes that the platform is able to support different integration and commercial models to achieve scale in different markets.

The agreement is for five years and is expected to deliver a sustainable growth path for its humm business and expand the services that schemes can provide to customers.

FlexiGroup’s CEO, Rebecca James, commented: “The bundll platform is unique as it offers a turnkey but flexible solution to banks and other card issuers around the world. You don’t need to sign up merchants or integrate into legacy bank systems, and it will work in any regulatory environment.”

“Bundll’s proprietary affiliate programme also creates revenue sources globally, and creates a curated and unique shopping experience that is based on customer preference, not which retailer is paying for the click. Discussions are already well progressed with a number of banks under the strategic agreement,” she added.

Mastercard Australasia’s Division President, Richard Wormald, spoke positively about the agreement with FlexiGroup.

He said: “While there are lots of BNPL platforms around the world, this latest development for bundll is differentiated in the way it is able to partner with existing banking systems and provide BNPL technology and products without needing to sign up local retailers, while still generating a sustainable revenue stream. With the growth of BNPL, Mastercard understands that many issuers around the world are looking to solve for this increasing consumer preference.”

Trading update.

FlexiGroup took this opportunity to provide the market with an update on its performance so far in FY 2021.

It revealed that its portfolio continues to perform strongly with a downward trend in the 30+ days arrears performance for all segments during the first quarter. This was the result of a prudent approach to credit risk and approvals.

In light of this improved credit performance and cost management, the company expects its first half cash net profit after tax to be ahead of the $34.5 million it achieved in the prior corresponding period.

More reading

• Afterpay (ASX:APT) share price underperforming after ASIC finds more BNPL customers falling behind

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended FlexiGroup 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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The Altium Limited (ASX: ALU) share price is on the move on Thursday following the release of its annual general meeting update.

At the time of writing, the electronic software design platform provider’s shares are up 2.5% to $37.03.

What happened at the annual general meeting?

At the event, the company’s CEO and Chair spoke about its performance in FY 2020, its plans for the future, and trading so far in FY 2021.

In respect to the future, the company’s CEO, Aram Mirkazemi, spoke about the shift to the cloud through its Altium 365 platform. He believes this shift is all positive with no negatives thanks to its unique strategy of transformation through dominance.

He commented: “This strategy de-risks Altium’s move to the Cloud by extending our current value proposition to our customers and, at the same time, this strategy raises the bar and reinforces Altium’s position of absolute market dominance in PCB design. This combination will set a resonance that has the potential to bring about industry transformation.”

“While dominance and transformation are part of one journey, this strategy sets up two engines of growth for value creation. Our strong software business drives our dominance engine, and our new cloud platform Altium 365, is the basis of our transformation engine. From a business perspective, these two engines provide independent drive, and at the same time are complementary and reinforce each other,” he added.

The chief executive expects the shift to significantly increase renewal rates for maintenance subscription and reduce churn. He feels this should have the most dramatic impact on its revenue and its climb to 100,000 subscribers by 2025.

What about FY 2021?

Altium revealed that it is continuing to be impacted by COVID-19. However, it has been seeing positive signs in the last two months and is gaining confidence about the strength of its second half performance.

In light of this and based on its historic 45/55 revenue split between the halves, management has reaffirmed its guidance for FY 2021.

FY 2021 revenue is expected in the range of $US200 million to US$212 million (6% to 12% growth) and earnings before interest tax, depreciation and amortisation (EBITDA) is forecast to be US$76 million to US$89 million (38% to 42% growth).

Mr Mirkazemi commented: “Traditionally, our first half EBITDA margin is always lower than our second half as a stronger second half revenue positively impacts our EBITDA. I expect this to be exaggerated this year by COVID but confident that full year EBITDA margin will remain well within the range.”

More reading

• 2 ASX growth shares predicting big growth this decade
• 5 things to watch on the ASX 200 on Thursday
• 2 ASX shares targeting huge growth during the 2020s
• 2 great ASX growth shares to buy
• 5 things to watch on the ASX 200 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 and recommends Altium. 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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There are some ASX growth shares that have big growth goals for this decade.

Here are two examples:

Pushpay Holdings Ltd (ASX: PPH)

The Pushpay share price has fallen 22% since the US election. However, the digital donation business still has its main goal.

The ASX growth share is aiming for annual revenue of US$1 billion. This is a multiple of its recent revenue numbers. In FY20 it generated a total of US$129.8 million, which was up 32%. Pushpay’s total processing volume in FY20 was US$5 billion, up 39%. Pushpay made progress in its FY21 half-year result, with processing volume rose by 48% to US$2.2 billion and operating revenue going up 53% to US$85.6 million.

Pushpay said that it expects to see continued revenue growth as the business executes on its strategy, achieves increased efficiencies and gains further market share in the US faith sector.

The ASX growth share continues to report growing profit margins. In the half-year result it saw its gross profit margin increase from 65% to 68%. Although the gross margin is typically weaker over the second half of the year, management expects the gross margin to stabilise around the current levels over the remainder of the current financial year.

Pushpay also reported in the HY21 result that its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin increased from 17% to 31%. This partly occurred because total operating expenses, as a percentage of operating revenue, improved from 50% to 38%.

Management said it expects significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.  

It’s targeting a 50% market share of the medium and large church segment in the US, which is key for achieving its US$1 billion revenue goal.

According to Commsec, it’s trading at 24x FY23’s estimated earnings.

Altium Limited (ASX: ALU)

Altium is an electronics PCB software business that counts businesses like Space X, Tesla, Apple, Amazon, Google, Microsoft, Disney, Broadcom and Qualcomm as clients.

The Altium share price has fallen around 10% over the past four weeks. COVID-19 has affected its revenue growth over the past six months, which is why management think it may take a little longer – an extra six to twelve months – to reach its US$500 million revenue goal. But that’s still the goal.

The ASX growth share is aiming to reaching global market leadership of the electronic PCB software space by reaching 100,000 Altium Designer subscribers by 2025.

In FY20 the company saw its EBITDA margin climb from 38.9% to 40%, its profit before income tax increased by 12%, its cash balance rose by 16% to US$93 million and its dividend per share increased by 15% to AU$0.39 per share.

Altium recently announced that it was pivoting its organisational structure toward the cloud. It said that the successful launch and strong early adoption of its cloud product, Altium 365, led to its decision to split its cloud operations from its software business.

The company explained that it will allow the cloud business to develop in a different way, and to form a software-as-a-service-like organisational structure. One strategic benefit from this change is that is that it will allow the separation of high-volume sales from high-touch sales to support Altium’s journey to 100,000 subscribers. Executive director Sergey Kostinsky will be in charge of driving the rapid development and adoption of Altium 365.

According to Commsec, Altium is currently trading at 47x FY23’s estimated earnings.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Down 22% in 3 weeks, is the Pushpay (ASX:PPH) share price a buy?
• 2 ASX shares targeting huge growth during the 2020s
• These ASX shares have been unstoppable in FY 2021
• 2 fast-growing ASX tech shares to buy

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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 S&P/ASX 200 Index (ASX: XJO) has been in fine form recently thanks to optimism over the development of potentially effective COVID-19 vaccines.

While this leaves the ASX 200 trading at its highest levels in nine months, some shares are doing even better.

Two ASX shares that have just hit new 52-week highs are listed below. Here’s why they are on fire:

Costa Group Holdings Ltd (ASX: CGC)

The Costa share price hit a 52-week high of $4.16 on Wednesday. When the horticulture company’s shares hit that level, it meant they had gained an impressive 66% since the start of the year. Investors have been fighting to get hold of its shares this year after it finally turned around its performance after a very disappointing 18 months filled with underperformance and countless earnings guidance downgrades.

During the first half of FY 2020, Costa posted a 6.8% increase in revenue to $612.4 million and a 12% lift in net profit after tax to $45.8 million. This was driven by a very strong performance from its international business. In addition to this, improving trading conditions in the domestic market appear to indicate that the worst is now behind the company.

Vocus Group Ltd (ASX: VOC)

The Vocus share price continued its positive run and climbed to a 52-week high of $4.32 yesterday. This stretched its year to date gain to a sizeable 49%. The catalyst for this strong share price performance was a solid result in FY 2020 despite the pandemic and its positive guidance for the year ahead.

In FY 2020, Vocus recorded earnings before interest, taxes, depreciation and amortisation (EBITDA) of $360.5 million, which was up slightly year on year. Pleasingly, management recently confirmed at its AGM that the company is on track to achieve its guidance of EBITDA in the range of $382 million to $397 million in FY 2021. The high end of its guidance range represents 10% growth year on year.

More reading

• Why the Primewest (ASX:PWG) share price is soaring 6% higher today
• Costa (ASX:CGC) share price lower despite appointing new CEO
• 3 small cap ASX shares with large dividends
• Leading brokers name 3 ASX shares to buy today
• Vocus (ASX:VOC) share price drops lower despite positive AGM update

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. 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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There are some ASX dividend shares that have growing dividends with a large dividend yield.

The RBA recently decided to reduce the official interest rate to just 0.10% recently.

Here are three businesses with large dividend yields and growing payouts:

Pacific Current Group Ltd (ASX: PAC)

Pacific describes itself as a global multi-boutique asset management business committed to partnering with exceptional investment managers. It combines its capital with strategic business development to help businesses grow.

The ASX dividend share increased its dividend by 40% to $0.35 per share, supported by the underlying earnings per share (EPS) increasing by 18% to $0.44.

Its profit growth was driven by an increase of the funds under management (FUM) to $93.3 million. When excluding boutiques sold or acquired during the year, FUM rose 52%. GQG grew FUM from US$25.1 billion to US$44.6 billion.

The FUM growth continued into the first quarter of FY21. FUM went up 14% to $106.4 million. However, in native currencies, US dollar orientated fund managers saw FUM rose by 19.3% – FUM growth in Australian dollar dollars was reduced by the appreciation of the Australian dollar.

It currently offers a grossed-up dividend yield of 8.3%.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is also in the funds management sector. It runs different portfolios, with some focused on international equities, some focused on infrastructure equities and there is also Australian equity strategies.

FY20 saw Magellan’s average FUM grow by 26% to $95.5 million which helped adjusted EPS rise by 17%. Actual EPS was 218.3 cents, whilst total dividends went up 16% to 214.9 cents per share.

It recently invested in a new investment bank called Barrenjoey which Magellan hopes will make a material contribution to profit in the coming years. Barrenjoey will provide corporate and strategic advisory, equity and debt capital market underwriting, cash equities, research, prime brokerage as well as traditional fixed income services to Australian and international clients.

Whilst the average FUM in FY20 was $95.5 million, Magellan’s latest monthly FUM update showed $103.48 billion – an increase of 8% since the end of FY20.

The ASX dividend share is also going to launch a new series of funds with lower costs and more diversified portfolios of high quality companies. The management fee will be 0.5% per annum. It’s launching a sustainable fund as part of this launch.

It’s also getting closer to the launch of a retirement product.

Magellan currently has a grossed-up dividend yield of 5%.

Nick Scali Limited (ASX: NCK)

Nick Scali is one of the biggest furniture businesses in Australia. It imports over 5,000 of containers of living room and dining room furniture, as well as occasional furniture.

In FY20 the company’s net profit after tax and EPS were flat, in a year affected by COVID-19. The earnings before interest and tax (EBIT) margin improved by 90 basis points to 23.2%. The operating cashflow (before interest and tax) increased by 22.6% to $75.4 million.

The Nick Scali board decided to increase the FY20 final dividend per share to 22.5 cents per share. That brought the grossed-up dividend to 8.1%.

Nick Scali recently gave a trading update for the first quarter of FY21 showing that written sale orders continue to be “materially up” on last year despite the closure of stores since August in Melbourne. Total sales orders for the first quarter were up 45% on the previous year and this trend has continued through October. Online orders were also up 47% compared to the last quarter of FY20.

The ASX dividend share previously guided that profit growth would be 50% to 60% higher than last year. It’s now expecting first half profit will be up 70% to 80%.

More reading

• Leading broker warns that US dollar could face bear market crash in 2021
• Here are the shares Magellan has been buying recently
• 2 ASX dividend shares with yields over 5% today
• The 5 best-performing ASX 200 shares so far this year
• ASX 200 hits 8-month high. Here’s why we could go higher from here

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 Afterpay Ltd (ASX: APT) share price is never far from the spotlight these days, at least that’s what it seems. Afterpay shares rallied close to 150% in 2019. In 2020, investors have enjoyed another 200% on top of that, give or take. And anyone who was lucky enough to buy Afterpay shares on 23 March for around $8 per share (read it and weep) is sitting on a handy 1,000% gain.

These dizzying gains have come thanks to a rising Afterpay share price (naturally). Afterpay made a new all-time high of $105.80 earlier this month, but the Afterpay share price has since cooled somewhat. It closed at $94.69 yesterday. So is Afterpay a buy today? Let’s see what’s been happening lately with this buy now, pay later (BNPL) pioneer.

What’s the latest from Afterpay?

As we canvassed above, the Afterpay share price has been under pressure over the past week or so. In fact, Afterpay is down around 10% since reaching the new all-time high on 9 November.

The catalyst for this move? Well, it’s likely that investors are getting nervous about the increasing competitive pressure Afterpay is facing. For one, there is a large (and growing) bevvy of ASX-listed would-be Afterpay killers. Companies like Zip Co Ltd (ASX: Z1P), Splitit Ltd (ASX: SPT) and Sezzle Inc (ASX: SZL) are snapping at Afterpay’s heels. But some larger, offshore giants are also smelling the roses. We reported back in September on payments titan PayPal Holdings Inc (NASDAQ: PYPL) entering the BNPL space.

Is BNPL competition heating up?

Last year, I even wrote a piece on credit card kingpin American Express Company‘s (NYSE: AXP) potential plans for the BNPL sector. But just yesterday, we also covered how another United States giant – the private company Affirm – is set to enter the Australian market. As my Fool colleague, Daryl Mather, told us yesterday, Affirm is currently the largest BNPL company in the US today in terms of monthly active users.

Perhaps adding to investors’ negative sentiment around Afterpay was a report released by the government watchdog ASIC recently (which we also covered this week). This report found that as many as 1 in 5 consumers are missing BNPL payments, almost half of which were under 30 years old.

Despite all of these seemingly negative developments, the company is still growing at a very healthy clip. Afterpay held its annual general meeting this week. During the meeting, the company told investors that its active customers reached 11.2 million as of 30 September, which gave Afterpay $4.1 billion of sales in the quarter ending 30 September. That was up 115% from the $1.9 billion in sales the company did in the same quarter of 2019.

Is the Afterpay share price a buy today?

The Motley Fool’s Pro Investing service currently rates the Afterpay share price as a ‘buy’. The team at Pro likes how Afterpay is gaining traction, its growth rates and the company’s massive total addressable market.

More reading

• Top brokers name 3 ASX shares to buy today
• Afterpay (ASX:APT) share price under pressure by US BNPL giant
• ASX 200 rises again on Tuesday
• Leading broker warns that US dollar could face bear market crash in 2021
• Flight Centre and Webjet were among the most traded shares on the ASX last week

Sebastian Bowen owns shares of American Express. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings and Sezzle Inc. 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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A bit like bombastic US president Donald Trump, oysters are polarising.

People either love them or hate them. Something about the texture.

That’s why the latest company to float on the ASX might not be to everyone’s taste.

For 4 years, East 33 Limited (ASX: E33) has been bringing together independent farms and distributors in the supply chain of Sydney Rock Oysters under a single company for the first time in that industry.

Now with a large tranche of acquisitions currently in progress to complete the picture, its shares will become publicly available on 3 December.

East 33 executive chair James Garton told The Motley Fool that the Sydney Rock Oyster scene had traditionally been a cottage industry. Fewer than 5 farmers had been producing more than a million dozen oysters each year.

“This is an enterprise literally centuries in the making,” he said.

“What we did was bring together a whole set of corporate nous – marketing, management, access to capital – to realise the vision of the farmers.”

The initial public offering (IPO) will raise $32 million, which will help the company complete a second round of acquisitions to bring more of the supply chain under its roof.

East 33 will start its life on the ASX with an IPO share price of 20 cents and a market capitalisation of $83 million.

Bullish growth for Sydney Rock Oysters

Massive growth projections had pumped up demand for the initial public offer, according to Garton.

“We’ve got such strong institutional interest fundamentally because we’re talking 300% growth a year. That’s (like) a tech stock,” he said.

“But you’ve got the backing of solid historic earnings. And that’s underscored by National Australia Bank Ltd (ASX: NAB) giving us $10 million of senior debt as acquisition finance.”

After 3 years as an ASX-listed company, Garton said East 33 expects to have a share price of $1, earnings before interest, tax, depreciation and amortisation (EBITDA) of $20 million and revenue of $50 million.

Garton said the industry has so much potential because of the scarcity of product.

“There has never been a Sydney Rock Oyster produced that hasn’t been sold. It just doesn’t exist. This is a supply constraint, not a demand problem.”

He also said that the business would have low ongoing capital costs.

“You have an infinite water life. The assets we put into the water to carry the oysters have a 25-year productive life.”

Similar to what Coca-Cola Co (NYSE: KO) has been doing for more than 130 years, East 33 will market Sydney Rock Oysters as a lifestyle consumable.

As well as supplying caterers, restaurants and seafood retailers, East 33’s direct sales to the public have exploded in the year of COVID-19.

“From a zero start in April, we’re up to a million oysters annually selling online.”

Garton said the oyster industry was a maturing one in which many farmers were looking at succession planning. But the short-term strategy for East 33 would be simple.

“Increase volume, reduce the unit cost and sell more into higher value channels,” he said.

“The existing waterway that we have has technical capacity to take us from 6 million oysters to 39 million oysters.”

More reading

• Here’s what you need to know from today’s banking summit
• Morgan Stanley updates its share price targets for the big 4 banks
• Here’s the ASX bank share rated as a conviction buy
• Leading brokers name 3 ASX shares to sell today
• What COVID-19? World’s 5 most valuable brands are up 54%

Motley Fool contributor Tony Yoo 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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If you’re looking to take advantage of recent weakness in the tech sector then the two ASX tech shares listed below might be the ones to consider.

Here’s why they are rated as buys:

Appen Ltd (ASX: APX)

Appen has a global team of over a million crowd-sourced experts that prepare the data that goes into artificial intelligence (AI) and machine learning models. It has worked with tech giants such as Microsoft, Facebook, Google, and Apple. In respect to the latter, Appen played a role in the development of its virtual assistant, Siri.

The good news is that AI is still at a relatively early stage and the market is expected to grow strongly in the future. At its half year results, management noted that AI spending is growing at 28% and could accelerate as AI adoption increases in a post-crisis environment. This is particularly the case in the government sector, with AI budgets increasing rapidly into the billions.

Analysts at UBS are confident in Appen’s long term growth prospects. Following its half year update, the broker slapped an outperform rating and $44.00 price target on its shares.

ELMO Software Ltd (ASX: ELO)

ELMO is a cloud-based human resources and payroll software company. It provides businesses with the ability to streamline a wide range of processes through a single unified platform.

ELMO has been growing at a strong rate over the last few years and has continued this positive form in FY 2021. This is being driven by the rapid adoption of cloud-based solutions, the quality of its platform, and its growth through acquisition strategy. The latter saw the company recently announce the acquisition of UK-based Breathe. This gives the company access to the SME market and plenty of cross-selling opportunities in the $6.8 billion UK market. 

Analysts at Morgan Stanley responded to the news by reaffirming their overweight rating and lifting the price target on ELMO’s shares to $9.30. This compares to the current ELMO share price of $6.42.

More reading

• 3 fantastic ASX shares to buy next week
• Why are ASX tech shares all over the place today?
• 2 ASX tech shares growing strongly in 2020
• Why the CBA (ASX:CBA) share price and these ASX stocks could get a $100bn boost
• Here are 2 rapidly growing ASX growth shares

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 and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia has recommended Elmo Software. 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 A2 Milk Company Ltd (ASX: A2M) share price dropped around 5% yesterday in response to its annual general meeting (AGM) update.

What did A2 Milk say about the current operating conditions?

Regarding the Asia Pacific region, A2 Milk said that the first half of FY21 is challenging for the Australia and New Zealand segment with the daigou and reseller channel impacted by COVID-19 related issues. A2 Milk is expecting the current impact will moderate over the course of the year.

The company revealed that a new incentive program has been launched in the corporate daigou channel to re-energise the channel with early signs of improvement.

A2 Milk commented that its multi-channel approach is strategically important with each channel playing a role. Despite short term challenges, A2 Milk still thinks the daigou channel is a good way to reach consumers in China and build brand awareness which may stimulate demand across multiple sales channels.

The infant formula business said that there has been a strong performance in the financial year to date with mother and baby stores sales growth, through a combination of growth in sales and expanded store distribution.

The company revealed that in its most recent 11/11 online sales event, it achieved 24% volume growth of its English label product, which was consistent with its plan. It also saw strong brand and product rankings.

Finally, in regard to Asia Pacific, the company said it grew its fresh milk market share in Australia to 11.6% in October, up from 11.3% at June.

In North America the impact of COVID-19 has seen some consumers become more value conscious. So the company is shifting from broadcast advertising to ‘in-store activation, account specific pricing and promotional activity’ – these tactics are showing “promising” results. This change is delivering gross revenue growth, but net revenue will be flat compared to FY20, though earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to increase in FY21.

Management still believe that the USA is a very important market. It’s the largest global milk market, with a significant and growing premium segment. A2 Milk believes significant growth in brand awareness will create a platform for future product launches. It’s still aiming for US$100 million of annualised sales.

The company also reminded investors that it launched in Canada through a licensing agreement with Agrifoods in July FY21.

Outlook and FY21 guidance

The ASX 200 business is maintaining its guidance for the FY21 half year and full year results. It’s still expecting total revenue for the first half of FY21 to be between NZ$725 million to NZ$775 million. FY21 total revenue is expected to be between NZ$1.8 billion to NZ$1.9 billion. The FY21 EBITDA margin is expected to be in the order of 31%.

A2 Milk said that due to the volatility arising from COVID-19 and the difficulties this presents with forecasting, naturally there is uncertainty to this forecast.

The business said that this outlook includes a significant increase in revenue in the second half, which is dependent on a number of key assumptions, including an improvement in the daigou channel and continued growth of the China label business.

But A2 Milk commented that it has observed strong underlying brand health metrics, in particular in China, including market share expansion, and growth of brand awareness and loyalty measures. A2 Milk said that this gives management confidence that, notwithstanding the current headwinds, the fundamentals of the business over the medium term remain sound.

Is the A2 Milk share price a buy?

The Motley Fool Share Advisor service rate the A2 Milk share price as a buy. The SA service likes the growing geographical footprint and capital light business model that A2 Milk offers investors, saying that it still has a strong future ahead of it.

More reading

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• Why a2 Milk, ALS, Centuria Industrial, & Serko shares are dropping lower
• ASX 200 up 0.35%: Aristocrat FY 2020 results, big four banks higher, a2 Milk update
• a2 Milk (ASX:A2M) share price on watch after AGM update
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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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