Author: therawinformant

We were expecting some big moves from the Tesla Inc (NASDAQ: TSLA) share price overnight (our time), and Elon Musk’s baby certainly did not disappoint.

The Tesla share price has risen by 8.21% to US$441.61 a share. Tesla closed at US$408.09 on Monday (US time), but opened at US$460.17 on Tuesday (up 12.8%) before sliding over the course of the trading day to US$441.61. On this price, Tesla shares are up 413% year to date.

So why were we expecting a big move from this electric vehicle and battery manufacturer?

Well, yesterday investors received the news that Tesla is finally set to join the S&P 500 Index on 21 December, after months of speculation.

Why is the S&P 500 so important?

The S&P 500 is one of the most tracked indexes in the world (if not the most tracked). It represents 500 of the largest public companies in the US.

But you might be wondering why Tesla isn’t already a part of the S&P 500 – especially given its market capitalisation is currently more than US$400 billion, and has been above US$300 billion for months now.

Well, in contrast to other indexes like the S&P/ASX 200 Index (ASX: XJO), entry to the S&P 500 is not based on market cap alone. According to our Fool colleagues in the US, entrants are required to be approved by a committee run by S&P Global Inc (NYSE: SPGI), the company behind the index (as well as the ASX 200). That’s why Tesla has been present in exchange-traded funds (ETFs) tracking non-S&P 500 indices, like the Vanguard US Total Markets Shares Index ETF (ASX: VTS), but not in S&P 500 ETFs like the iShares S&P 500 ETF (ASX: IVV).

Additionally, approval for S&P 500 entry is also subject to meeting certain criteria, such as a trading volume threshold and 4 consecutive quarters of profitability. Tesla achieved this last milestone back in July, and as a result was expected to be admitted into the S&P 500 back in September, which did not eventuate.

Why does index inclusion result in a higher Tesla share price?

If a stock is added to an index, it means that all ETFs, managed funds and other investment vehicles that track the index are compelled to buy it. And because the S&P 500 is one of the most-tracked indexes in the world, any new entrants will have an army of investors and funds clamouring to buy the stock.

What’s more, Tesla is a massive company, and will thus be commanding a large presence in the index from the start (unlike most new S&P 500 entrants that get slotted in at the back end). Assuming Tesla’s current share price, it looks as though it will be approximately the 11th stock in the index by market capitalisation and be given a weighting of roughly 1.19%. If a stock joined the index from the back end, it would be looking at a weighting of something like 0.01%.

That’s a lot of buying pressure that’s going to be flowing into the Tesla share price when the company is admitted into the index on 21 December. Last night’s share price appreciation is likely the result of some investors jumping the gun with excitement and anticipation.

More reading

• ASX 200 up 0.35%: Aristocrat FY 2020 results, big four banks higher, a2 Milk update
• Why the Downer (ASX:DOW) share price is outperforming today
• 5 things to watch on the ASX 200 on Wednesday
• Average Aussie needs 22 weeks to earn what Elon Musk does in 5 minutes
• Here are the US shares that CommSec customers are buying

Sebastian Bowen owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. 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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US buy now, pay later (BNPL) giant Affirm plans to enter the Australian market, according to rumours reported by the Australian Financial Review. This comes as market leader Afterpay Ltd (ASX: APT) reveals strategies to return more value to merchants.  The Afterpay share price is already down by 6.68% since Monday after a report from the Australian Securities and Investments Commission (ASIC).

Affirm is a privately owned US BNPL company. Its CEO and co-founder is Max Levchin, who also co-founded Paypal Holdings Inc (NASDAQ: PYPL). At present, Affirm is the largest BNPL company in the United States by monthly active users. Where Afterpay leads in total US users, and Sezzle Inc (ASX: SZL) leads in total US merchants, the US giant operates a different business model with payments scheduled over longer terms. 

What’s weighing on the Afterpay share price?

The ASIC report highlighted a range of issues in the BNPL sector, focusing on consumer impacts. In particular, it pointed to the number of people missing payments. As well as those who are forced to cut back on essentials like meals to pay for BNPL purchases. 

Nonetheless, Afterpay was quick to respond, pointing out that consumers benefitted from more choice as competition expands. As opposed to a previously narrow, bank-dominated payments industry. The Australian market leader went on to laud its built-in consumer protections, juxtaposing it to other BNPL providers. This includes never selling or enforcing debt.

Afterpay also revealed some of its own research that reached different conclusions. For example, that there was no causal link between spending on Afterpay and changes in spending on essentials. Also, that there was no statistical relationship between merchant growth in Afterpay and how much their prices changed.

Swimming with sharks

Affirm is only the latest giant to enter the BNPL sector, and it comes at an interesting time given the sabre-rattling by ASIC. On 1 September, payments giant Paypal announced it would be entering the market. It boasts an 82% better conversion rate than other forms of payment and it already has 237 million shoppers globally. After zooming up the charts in previous months, the Afterpay share price has slowed since close of trading on 31 August, rising by just 3.5%.

Furthermore, Commonwealth Bank of Australia (ASX: CBA) has already entered the BNPL market locally via its partnership with Swedish private bank, Klarna. In addition, there have been a raft of recent IPOs, into an already crowded marketplace, by companies with new twists on the business model. For example, an interesting twist is the approach by unlisted BNPL challenger, Limepay. 

The Limepay technology allows companies to build their own BNPL capability. Thus preserving the relationship with customers, rather than having a third party sell them competitor products. 

Moves to defend the Afterpay share price

The threat to BNPL companies is to merchant margins. Particularly as new market entrants try to gain rapid merchant coverage. In order to counter this, Afterpay has announced several initiatives in its AGM designed to add value to merchant partners. For example, its Cross Border Trade also builds on our global expansion by enabling all merchants to open their e-commerce sites to Australian, British, Canadian and New Zealand shoppers.

Moreover, the company has also premiered the Next Gen index. An economic series focussing on consumer spending and the role of BNPL. This has highlighted that Gen Z and the millennials have been the first to increase spending during COVID-19. 

More reading

• ASX 200 up 0.35%: Aristocrat FY 2020 results, big four banks higher, a2 Milk update
• Is the Sezzle (ASX:SZL) share price a buy?
• Here are the US shares that CommSec customers are buying
• ASX 200 rises again on Tuesday
• Leading broker warns that US dollar could face bear market crash in 2021

Daryl Mather 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 PayPal Holdings. 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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Is the Pushpay Holdings Ltd (ASX: PPH) share price a buy after falling 22% in just three weeks?

Pushpay is an electronic donation business that facilitates digital giving, mainly for clients like large and medium US churches.

Why has the Pushpay share price fallen?

Pushpay saw its shares rise by 235% between 16 March 2020 and 28 October 2020. The company is involved in helping US churches remain connected with their congregations. Not only does Pushpay’s technology help churches receive donations in a socially distanced world, but it also provides livestreaming capabilities.

The Pushpay share price dropped after the US election and it has dropped 13% since the news of the 90% effectiveness of the BioNTech – Pfizer vaccine.

Indeed, many of the ASX tech shares focused on digital services have seen falls. Other examples include Temple & Webster Group Ltd (ASX: TPW) and Kogan.com Ltd (ASX: KGN).

The Motley Fool’s Pro service speculated that the market may not have appreciated the company saying that its strong cash and cashflow position may help consider other acquisition opportunities. Another reason for the selloff could have been because of board changes and share sales.

What growth has Pushpay been reporting recently?

Pushpay recently released its FY21 half-year result. It reported that its operating revenue increased by 53% to US$85.6 million. This was driven by total processing volume growth of 48% to US$3.2 billion. Pushpay said it expects continued revenue growth as it executes on its strategy, improves efficiencies and increases its market share.

It said that its gross profit margin rose from 65% to 68%. Not only that, but as a percentage of operative revenue, total operating expenses improved by 12 percentage points from 50% to 38%.

The combination of fast revenue growth and slower expense growth saw earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) rose by 177% to US$26.7 million. The EBITDAF margin increased by 14 percentage points, up from 17% at 30 September 2019 to 31% at 30 September 2020.

Pushpay’s net profit after tax (NPAT) grew by 107% to US$13.4 million and operating cash flow improved by 203% to US$27 million.

The ASX share recently increased its EBITDAF profit guidance to between US$54 million to US$58 million. This was an increase from guidance of US$50 million to US$54 million. The business is still aiming to reach US$1 billion of revenue in the future.

Is the Pushpay share price a buy?

Ben Griffiths from fund manager Eley Griffiths recently wrote:

“Over the last 12 months it has become clear PPH is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, PPH has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress). We believe the next few years for PPH will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash.”

The Pro service still rates the Pushpay share price as a buy. Pro likes the cross-selling opportunity for new and existing customers. It also likes the US faith sector opportunity whilst also having the ability to expand to other markets such as non-faith organisations, as well as smaller churches. International growth could also be an option.

Pro finished its review of the HY21 result with these comments: “The management situation is something we need to keep an eye on, with more turnover at the executive and board level than we like to see. But the business itself appears to be firing on all cylinders and has further capacity to continue increasing its operating leverage.”

More reading

• These ASX shares have been unstoppable in FY 2021
• 2 fast-growing ASX tech shares to buy
• Top brokers name 3 ASX shares to buy today
• 2 fast-growth ASX tech shares that are being sold off
• Pushpay (ASX:PPH) investor day presentation: any updates to recover its share price?

Tristan Harrison has no position in any of the stocks mentioned. 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 8common Ltd (ASX: 8CO) share price is up this morning on the news that the Department of the Prime Minister and Cabinet (PMC) has extended a key contract for an additional year.

8common shares have pushed 3% higher to 16 cents at the time of writing. 

About 8common 

8common’s core product ‘expense8’ delivers travel and expense management (TEM), card application and management to large Australian enterprises including Woolworths Ltd (ASX: WOW), Broadcast Australia, Amcor Plc (ASX: AMC) and state and federal government agencies. 

Perform8 offers a suite of innovative online surveying solutions that are designed to assist business leaders at all levels to drive action and improvement in their teams. Perform8 is currently being used in 7 countries, globally. 

Payhero enables one-time and subscription customer billing to be managed in one place, helping business owners easily generate new revenue streams, spend less time chasing outstanding accounts and get paid faster with payment automation. 

Contract extension

The PMC contract extension represents the second one-year extension after a successful initial 3-year period and first one-year option period.

This extension includes new implementations for the National Drought and North Queensland Flood Response and Recovery Agency and the National Indigenous Australians Agency, which are serviced by PMC.

The contract is worth an estimated $236,000 in revenue, which brings 8common’s total FY21 contract wins to date to $1.1 million. 

8common CEO Andrew Bond commented:

The extension, along with the addition of six new Federal Government entities announced in August 2020 highlight the continued growth opportunities within the Federal government. We continue to see a strong pipeline of growth during the FY21 from our core Expense8 and the roll out of our CardHero product.

How has the 8common share price performed recently?

The 8common share price has more than doubled in recent months following a strong FY20 result, a 3-year agreement with EML Payments Ltd (ASX: EML) to issue prepaid Mastercards through its platform, and $2.25 million capital raising to fund its growth. 

More reading

• ASX 200 up 0.35%: Aristocrat FY 2020 results, big four banks higher, a2 Milk update
• Why the Downer (ASX:DOW) share price is outperforming today
• Why the United Malt (ASX:UMG) share price has lifted 4% higher today
• 3 reasons why I’d start preparing for the next stock market crash today
• Why did the Southern Cross (ASX:SXE) share price shoot up 7% this morning?

Motley Fool contributor Lina Lim 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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At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) has continued its positive run and pushed higher again. The benchmark index is currently up 0.35% to 6,522.5 points.

Here’s what has been happening on the market today:

Aristocrat Leisure full year result.

The Aristocrat Leisure Limited (ASX: ALL) share price is pushing higher on Wednesday after the release of its FY 2020 results. The gaming technology company reported a 5.9% decline in operating revenue to $4,139.1 million and a 31.8% reduction in earnings before interest, tax, depreciation and amortisation (EBITDA) to $1,089.4 million. This was driven by headwinds from the COVID-19 pandemic. While no guidance has been given for the year ahead, management appears cautiously optimistic on its prospects.

A2 Milk Company AGM update.

The A2 Milk Company Ltd (ASX: A2M) share price has dropped lower today after the release of its annual general meeting update. The infant formula and fresh milk company has reaffirmed the guidance it provided in September. It continues to expect first half revenue of NZ$725 million to NZ$775 million and full year revenue of NZ$1.80 billion to NZ$1.90 billion. An EBITDA margin of ~31% is also expected. However, it has warned that its full year guidance is dependent on an improvement in the daigou channel and continued growth in its China label business.

Bank shares push higher.

The big four banks are all pushing higher today and are playing a key role in driving the ASX 200 higher. The best performer in the group has been the Commonwealth Bank of Australia (ASX: CBA) share price with a gain of almost 2%. Positive commentary on the housing market at the Australian Financial Review Banking & Wealth Summit appears to have given bank shares a lift.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Wednesday has been the Whitehaven Coal Ltd (ASX: WHC) share price with a 5.5% gain. This morning Goldman Sachs suggested that China will be buying Australian coal again in January/February. The worst performer has been the a2 Milk Company share price with a 3.5% decline following its AGM update.

More reading

• Why the Downer (ASX:DOW) share price is outperforming today
• Aristocrat Leisure (ASX:ALL) share price in focus after FY 2020 results
• a2 Milk (ASX:A2M) share price on watch after AGM update
• 5 things to watch on the ASX 200 on Wednesday
• Here are the US shares that CommSec customers are buying

Motley Fool contributor James Mickleboro 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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The Downer EDI Limited (ASX: DOW) share price rallied this morning after it announced the sale of its blasting business for $62 million.

Shares in the engineering group jumped 2.1% to $5.31 at the time of writing when S&P/ASX 200 Index (Index:^AXJO) gained 0.4%.

In case you didn’t notice, ASX stocks have been on a bit of a divesting spree as they look for creative ways to unlock value during these uncertain times.

Downer share price jumps on divestment news

Downer’s latest move seems to have worked. Its peers are lagging behind today with the NRW Holdings Limited (ASX: NWH) share price inching up 0.4% to $2.57 and Seven Group Holdings Ltd (ASX: SVW) share price gaining 1.2% to $22.32.

Downer is streamlining its business to focus on infrastructure construction work and to move away from mining. The sale of Downer Blasting Services to a subsidiary of Chilean company Sigdo Koppers Group is aligned to its strategic vision.

“The sale of Downer Blasting Services follows the sale of the Snowden consulting business and also our share in the RTL Mining and Earthworks joint venture,” said Downer’s chief executive Grant Fenn.

“We are in active discussions with a number of interested parties in relation to the rest of the Mining portfolio.”

Other ASX stocks looking to divest assets

The latest divestment comes at a time when state and federal governments are pumping billions into building infrastructure as a way to stimulate our COVID‐19-stricken economy.

Downer isn’t the only one divesting or spinning off underperforming businesses. The Boral Limited (ASX: BLD) share price also bounced on expectations that its new chief will be taking a broom to the group’s problematic US assets.

The Link Administration Holdings Ltd (ASX: LNK) share price is also another recent example, while Lendlease Group (ASX: LLC) is also getting out of mining services.

Other ASX divestment candidates

It’s also worth noting that the Incitec Pivot Ltd (ASX: IPL) share price is outperforming this morning too with an over 2% gain to $2.27. The explosives and fertiliser group is also believed to be exploring divestment options.

Other stocks that may be looking to shed assets include the Suncorp Group Ltd (ASX: SUN) share price and Perpetual Limited (ASX: PPT) share price.

I would add the AMP Limited (ASX: AMP) share price to the list if not for the fact that there’s a takeover offer for the entire group hanging over the embattled wealth manager.

Divestments and spin-offs are a surer way of creating shareholder value as opposed to mergers and acquisitions (M&As). For this reason, it may be worthwhile keeping an eye out for such transactions.

More reading

• The Perpetual (ASX:PPT) share price is moving after strategic acquisition
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises again on Tuesday
• Why the Austal (ASX:ASB) share price is edging higher today
• Dow Jones hits new record highs. Are ASX 200 shares next?

Brendon Lau owns shares of AMP Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd. The Motley Fool Australia has recommended Link Administration Holdings Ltd. 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 United Malt Group Ltd (ASX: UMG) share price is surging higher today following the release of its FY20 results. At the time of writing, shares in the group are up 4.35% higher to $4.80. Let’s take a closer look at how United Malt performed over the past financial year.

What’s driving the United Malt share price?

For the period ending 30 September, United Malt reported a 2% revenue decrease to $1.3 billion over the prior corresponding period. The company blamed COVID-19-related volume declines in the second-half of the year for the drop.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) shed 19% to $156.1 million. Earnings were hit hard with a perfect storm of a drop in sales and a change in the product mix. In addition, corporate costs and insurance premiums rose as the business demerged from Graincorp Ltd (ASX: GNC) in March.

Underlying net profit after tax (NPAT) stood at $57.4 million, down 3% on the prior year.

Net debt reduced to $261.7 million compared with the $584.1 million reached at the end of March (H1 FY20). A recent $170.6 million equity raise was used to fund growth opportunities and repay debt.

United Malt said that it maintained a comfortable headroom within its repayment obligations. The group has no substantial near-term refinancing commitments with long-term debt facilities not maturing until November 2022.

The board declared a final dividend of 3.9 cents to be paid to shareholders on 30 December. This represents a pay-out ratio of 40% of underlying NPAT for the second-half. The company noted that its future dividend will seek to distribute roughly 60% of NPAT, subject to trading conditions.

Management commentary

Commenting on the results, United Malt managing director and CEO Mark Palmquist said:

Following a solid first half, our financial performance was impacted in the second half by COVID restrictions which adversely impacted on-premise alcohol consumption, particularly for small craft beer brands. While off-premise consumption increased, this was not sufficient to mitigate the decline in on-premise consumption.

We have implemented necessary changes to how we operate our production and warehouse facilities to align costs with demand, including staff redeployment, some curtailment of capacity and managing more frequent ordering patterns.

Mr Palmquist went on to say United Malt remained well positioned to manage through the current market uncertainty which was expected to continue throughout FY21.

We have entered into an in-principle agreement with our existing Mexican distribution partner for an expanded partnership to further grow United Malt’s penetration into the Mexican market. The new agreement will provide on the ground access to the growing craft market in Mexico, enhanced customer experience, and more efficient logistics.

While some signs of recovery have emerged in our markets, we remain prepared for the evolving impact of COVID and the potential for second and third waves, which could continue to disrupt demand, supply chains and operations, including further lock downs in the UK.

About the United Malt share price

The United Malt share price has gone on a mini-rally this month, up almost 15%. Although this can be attributed to positive market sentiment, shares a just a touch below its all-time high reached in April.

United Malt has a market capitalisation of $1.3 billion and a price-to-earnings (P/E) ratio of 16.6.

More reading

• Why Althea, BWX, Damstra, & GrainCorp shares are charging higher
• Graincorp (ASX:GNC) share price is trading higher today on broker upgrade
• 5 things to watch on the ASX 200 on Monday
• ASX 200 down 0.35%: Ramsay Q1 update, NEXTDC’s international expansion, gold miners surge
• Here’s why the GrainCorp (ASX:GNC) share price jumped 8% higher today

Motley Fool contributor Aaron Teboneras 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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Determining when the next stock market crash will occur is an exceptionally difficult task. This year’s market downturn showed that they often appear without any forewarning.

However, the track record of the stock market shows that they occur fairly regularly. As such, it may be a good idea to start preparing for the next one today. This may help an investor to take advantage of temporarily low prices to generate high returns in the likely long-term recovery.

Another stock market crash

The 2020 stock market crash is not an isolated occurrence. In fact, equity investors are likely to experience a number of market downturns, corrections and bear markets during their lifetimes. The stock market is, by its very nature, dependent on cycles that can sometimes cause significant declines in its value over a short period of time.

Of course, the stock market has delivered high single-digit annual gains over the long run. However, its progress has been disrupted numerous times by periods of decline. Therefore, investors who can prepare themselves for periods where lower share prices are available may be able to capitalise on undervalued stocks. Buying a company when it trades at a discount to its intrinsic value may mean there is greater scope for capital growth over the long run, as investor sentiment and operating conditions can improve.

Short-lived market declines

This year’s stock market crash also showed how quickly downturns can take place. For example, the S&P 500 Index (SP: .INX) declined by over 30% in little over a month as investors became increasingly concerned about the prospects for the economy.

Furthermore, stock prices rebounded extremely quickly. In fact, within 11 weeks of reaching its lowest point in March 2020, the S&P 500 had gained over 40%. As such, investors who were not prepared for a market decline would have found it extremely difficult to respond. This may have meant that they missed out on low stock prices that ultimately were not available for very long.

Heightened risks

The potential for a stock market crash appears to be relatively high at the present time. Risks such as Brexit and the coronavirus pandemic may weigh on investor sentiment over the coming months.

As such, preparing today for the next market decline may be a good idea. Investors may wish to hold some cash within their portfolio so that they are in a position to react to temporary low prices. They may also wish to conduct due diligence into prospective purchases now so that they are ready to go ahead and buy them should their prices move to more attractive levels. And, it may also be a good idea for investors to check that their existing holdings continue to have investment appeal after what has been a challenging year.

By preparing for the next stock market crash, an investor can put themselves in a better position to capitalise on it. Over time, this may lead to higher returns as the market recovers.

More reading

• Why did the Southern Cross (ASX:SXE) share price shoot up 7% this morning?
• Why the Chalice Gold Mines (ASX:CHN) share price is rocketing 16% higher
• ASIC rips into ASX again as more systems go down
• Why the ALS (ASX:ALQ) share price sank 4% lower today
• The Perpetual (ASX:PPT) share price is moving after strategic acquisition

Motley Fool contributor Peter Stephens 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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Southern Cross Electrical Engineer Ltd (ASX: SXE) today announced it has acquired Trivantage for up to $53.5 million. The engineering company says the acquisition will bolster its service and maintenance capabilities, and enable it to enter new markets.

The announcement follows a trading halt on Southern Cross shares earlier this morning. Trade has since resumed and the Southern Cross share price is currently up 6.52% at 49 cents.

What’s the deal?

Trivantage is a Melbourne-based electrical solutions company that supplies and provided maintenance services on switchboards, CCTV, refrigeration, light and power. The company has a revenue base of low-risk maintenance and contracting work. It reported $116 million of revenue and a profit before tax of $8.2 million in the 2020 financial year. Its revenue guidance for the 2021 financial year is $130 million, with earnings before interest and tax of (EBIT) of $10.8 million.

Southern Cross will pay $25 million in cash on completion, and a further $10 million in cash and $5.5 million in Southern Cross’ shares after achievement and confirmation of Trivantage’s 2021 financial year targets. Further cash payments will be payable subject to performance hurdles in the 2022 and 2023 financial years.

About the Southern Cross share price in 2020

The Southern Cross share price has lost 15% on a year-to-date basis. The company paid a dividend yield of 6.12% in October, and it has paid a consistent dividend in 8 of the past 10 years. The company already has $330 million of secured project work in FY21, which accounts for 80% of the revenue target. At the current market price of 49 cents, it commands a market cap of $114 million. 

More reading

• Why the Chalice Gold Mines (ASX:CHN) share price is rocketing 16% higher
• ASIC rips into ASX again as more systems go down
• Why the ALS (ASX:ALQ) share price sank 4% lower today
• The Perpetual (ASX:PPT) share price is moving after strategic acquisition
• Plenti (ASX:PLT) share price soars 5% after solid first half results

Motley Fool contributor Eddy Sunarto 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 Chalice Gold Mines Limited (ASX: CHN) share price has been a very strong performer on Wednesday.

In morning trade the gold exploration company’s shares are up a sizeable 16% to $3.82.

Why is the Chalice Gold share price charging higher?

Investors have been buying the company’s shares this morning after it reported significant new results from ongoing exploration activities at its Julimar Nickel-Copper-Platinum Group Element (PGE) Project in Western Australia.

According to the release, five rigs are continuing a step-out and resource definition drill program at the Gonneville Intrusion, where Chalice recently made a major high-grade discovery.

A total of 27 diamond drill holes and 116 RC drill holes have been completed to date at the project, of which assay results for 18 diamond and 80 RC holes have now been reported. Assay results are pending for a further 45 completed drill holes.

What are the new results?

Chalice’s Managing Director, Alex Dorsch, revealed that its new results have been very strong and are pointing to significant growth opportunities.

He said: “The Gonneville PGE-Ni-Cu-Co-Au discovery continues to grow on multiple fronts, with another round of exceptional drill results extending the known high-grade zones, defining new zones and further reinforcing the numerous growth opportunities across the Project.”

“Given the width and grade of the drill results we are continuing to see over a very large area, the scale of the Gonneville Intrusion itself, and the significant growth potential beyond the limits of the current resource drilling, it is clear that Julimar is emerging as a globally significant deposit of critical metals in Western Australia,” he added.

What next?

With five rigs drilling, Chalice is on track to meet the mid-2021 guidance for a maiden Mineral Resource for Gonneville. It will also continue to prioritise the growth of the high-grade mineralised zones with step-out drilling.

Mr Dorsch commented: “Given that this very strong EM anomaly sits just 1.5km north of the very wide mineralised intercepts encountered in JD018, it’s not hard to see why we are so excited about the district-scale potential at Julimar. This is a large, multi-faceted mineralised complex which continues to surprise on the upside.”

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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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