Author: therawinformant

Leading ASX 200 technology shares are again charging higher. It’s the same pattern we’re seeing with the share price gains among the international tech giants.

All of the so-called FAANG stocks are up more than 8% so far this week.

The Alphabet Inc Class C (NASDAQ: GOOG) share price is up 8.8% since Friday’s closing bell. And the Facebook, Inc. Common Stock (NASDAQ: FB) share price has soared 11.7%.

Here in Australia, the S&P/ASX All Technology Index (ASX: XTX) – which contains 50 of Australia’s leading and emerging technology companies – is up 7.1% for the week so far.

Buy now, pay later giant, Afterpay Ltd (ASX: APT)’s shares have gained 7.8%. And business and accounting software provider Xero Limited (ASX: XRO)’s share price has rocketed 9.9% higher.

Both tech shares are currently trading at new all-time highs. And they’ve far outpaced the gains on the S&P/ASX 200 Index (ASX: XJO), which itself is up an impressive 4.2% this week.

So why is the broader share market posting strong gains, and why are tech shares again leading the way up?

It comes down to 2 opposing sides of Adam Smith’s invisible hand working together.

You may be familiar with Smith’s economic theory, one he first wrote about way back in 1759.

In a nutshell, Smith said that if people follow their own self-interests, without government or other interventions, free market forces tend to bring about the best outcome for society as a whole. Such as rising share prices.

What we’re seeing with the booming tech shares this week, however, is partly the market embracing new hopes for that invisible hand… and partly markets banking on the continuation of a very visible hand.

Confused?

Let me explain.

Fading, if not invisible, regulatory and tax hand

Early results from the US elections indicate Joe Biden as the likely next president, while Republicans look like they’ll hold a slim majority in the Senate.

That’s important because without control of both congressional houses the Democrats are unlikely to be able to raise corporate and capital gains taxes. They’ll also find it harder to push through tough new regulations on the big tech companies.

As Bloomberg reported this morning, “Investors bought into technology and health-care firms on bets the U.S. election results mean no major tax hikes or regulatory changes that could derail those sectors.”

The article quotes Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute, who says:

We’re seeing a resumption in leadership from technology. It appears markets really like the combination they think is most likely in terms of leadership going forward and that would be a Biden presidency with a Republican Senate.

Without strict new regulations and higher tax burdens, Gary Bradshaw, a portfolio manager at Hodges Capital Management in Dallas, is also bullish on the bigger technology shares (quoted by Bloomberg):

In a very low interest environment, you want to own companies that are growing. Those companies have put up the best growth, the best free cash flow on the market and, in my opinion, they’re going to keep growing. If you don’t have a government that’s going to be riding them and breaking them up and taxing them into oblivion or taxing shareholders that own them, megacap tech’s going to keep rolling.

And according to Victoria Fernandez, chief market strategist for Crossmark Global Investments, tech shares could well continue their run higher. Fernandez says the removal of pre-election uncertainty should offer some ongoing tailwinds for leading tech shares:

As we hopefully get past that over the next couple of days, we can see tech settle in and continue to have that climb higher. It’s difficult to not have any tech in your portfolio.

So that gives us a good idea of how an invisible – or at least far less visible – hand is helping drive share markets, and tech shares in particular, higher.

But in today’s pandemic hobbled world, shares aren’t ready to stand entirely on their own free market feet.

The very visible stimulus hand

With much of the world entering new lockdowns to combat the spread of COVID-19, and Australia only just emerging from its own economic hibernation, businesses and households alike continue to depend on fiscal (government) and monetary (central bank) stimulus to keep from sinking.

Without record government spending packages, near zero interest rates, and unprecedented quantitative easing (QE) programs from global central banks, share prices would almost certainly still be dwelling near the March lows… or lower.

And just as the pandemic is entering its second or even third wave, we can expect fresh waves of stimulus from the developed nations to support their economies.

In Europe, for example, as the Australian Financial Review reports:

European Commission Vice-President Valdis Dombrovskis called on EU leaders to quickly sign off the €750 billion ($1.2 trillion) recovery fund agreed in the middle of the year, to help the punch-drunk Continent get back on its feet.

“I call again on the European Parliament and Council to wrap up negotiations quickly for money to start flowing in 2021 so that we can invest, reform and rebuild together…”

The European Central Bank (ECB) has already joined the globe’s other leading central banks in dialling up its QE, buying some 1.4 trillion euros of bonds from the eurozone nations. The ECB is widely expected to continue, or even increase its bond purchases next month.

Earlier this week the Reserve Bank of Australia (RBA) not only cut the cash rate from 0.25% to 0.10%, it also announced its intent to buy $100 billion of government bonds over the next 6 months.

Yesterday (overnight Aussie time) the US Federal Reserve left its official rate at 0.25%. And it signalled it will continue to buy US$120 billion (AU$167 billion) of US bonds and mortgage-backed securities ever month.

That’s over AU$2 trillion per year.

And the Fed could always do more.

More reading

• Why share markets are shrugging off this uncertainty, and what to expect next
• Has your online ASX trading account been hacked?
• PayPal’s buy now, pay later service is surging
• Afterpay (ASX:APT) share price still higher than these big broker targets
• Zip and Credit Clear were among the most traded shares on the ASX last week

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Bernd Struben 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 Alphabet (C shares) and Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (C shares) and Facebook. 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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This week, the Reserve Bank of Australia (RBA) gave Australians yet another interest rate cut, slashing 15 basis points from the cash rate, which now stands at yet another record low of 0.1%. This unprecedented action from the RBA highlights both the growing impotence of cash and fixed-interest investments (if they can be called that these days), as well as the importance of owning dividend-producing shares in an income-focused portfolio. So to aid in this endeavour, here are 2 ASX dividend shares offering fully franked yields of more than 8% today.

2 ASX dividend shares with yields of more than 8% today

Fortescue Metals Group Limited (ASX: FMG)

Fortescue has had a phenomenal 2020 so far if share prices are anything to go by. The Fortescue share price has spent most of the year rocketing to new all-time highs. It started out in January at $10.78 and climbed as high as $19.56 in late August, before settling down at the current share price of $16.80, at the time of writing.

But let’s talk dividends, seeing as that’s why we’re here. In 2020, Fortescue has paid 2 dividends, one interim payment of 76 cents a share in April, and one final payment of $1 a share in October. $1.76 in dividends for 2020 gives Fortescue shares a trailing yield of a whopping 10.55%, or 15.07% grossed-up with full franking. Keep in mind that since Fortescue is an iron ore miner subject to the whims of the iron ore price at any time, these dividends are not gurenteed to continue at these levels going forward. Especially if the iron ore price collapses for some reason in the future.

Telstra Corporation Ltd (ASX: TLS)

Telstra — the ASX’s largest telco — is a second ASX dividend shares offering a yield of more than 8% today. Telstra’s share price has been struggling in recent weeks. It’s currently very close to its all-time low of $2.66, and is trading for just $2.79 at the time of writing. However, lower share prices normally translate into higher starting dividend yields for new investors.

Telstra’s 2 most recent dividends came in at 8 cents per share each (including in both cases a 3 cents per share special dividend), which the company has recently indicated it wishes to pay again in FY2021. That’s despite headwinds from the ongoing nbn rollout and the coronavirus pandemic that the company has been dealing with. A 16 cents per share annual dividend gives Telstra a trailing (and forward, if the company is to be believed) dividend yield of 5.76%, or 8.23% grossed-up.

More reading

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• ASX copper miners brush off latest Chinese tariff threat
• 3 ASX 200 shares that received broker upgrades last week
• Why the Novatti (ASX:NOV) share price jumped 10% on open today
• 5 best performing large caps in 2020

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. 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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Most of us watching the US election result no doubt have a mixed range of emotions. Regardless of political affiliation, most commentators have been lamenting the lack of a more decisive outcome either way.

But one ASX fundie is happy, (one could say almost ecstatic) over what the election has produced. Hamish Douglass is among the most successful fund managers on the ASX. He heads up Magellan Financial Group Ltd (ASX: MFG), one of Australia’s largest asset managers. Magellan has several popular investment vehicles that have been delivering impressive results over the past decade. The flagship (and unlisted) Magellan Global Fund, for instance, has returned an average of 15.91% per annum over the past 10 years, and 12% per annum since its inception in 2007.

In short, this is someone who many investors would pay attention to.

So what does Mr Douglass have to say on the US election result? Well, according to reporting in the Australian Financial Review (AFR), he is happy with what he sees as the ‘checks and balances’ that the election has delivered.

“Even though we don’t know precisely who the president’s going to be, the outcome is the nirvana,” Mr Douglass was quoted as stating. “Almost the perfect outcome from an investment perspective has been the outcome of this election.”

Does the US election equal nirvana for investors?

Why does Mr Douglass draw this conclusion? Well, it’s the way the halls of power in the US are shaping up. See, the elections we just witnessed weren’t just for the presidency. The American Houses of Congress were also up for re-election on Wednesday (our time). And from the results, it looks as though the Democratic Party has retained control of the US House of Representatives, whilst the Republican Party has retained control of the Senate.

This, to Mr Douglass, translates into divided government and gridlock. And that, he believes, is very good news for investors:

If the Republicans keep the Senate, which I think they will, there will be no tax rises, there will be no massive regulatory reform, there will be no big left agenda. So the check and balance is going to be in…

And if Biden gets in, I suspect we’re going to have a more moderate discussion globally. We’re going to have a more normal discussion about foreign policy and global institutions and markets will like to hear that.

As for other risks, Mr Douglass doesn’t see inflation as a pressing concern for investors, stating that he believes “we won’t have any true pressures on inflation in the next 5 years”.

However, he does note that we’re also in a “massive experiment” when it comes to qantatative easing and other unprecedented and unconventional tools that the US Federal Reserve and other central banks around the world (including own Reserve Bank of Australia) are employing as counter-measures to the massive global recession the coronavirus pandemic has initiated.

As for coronavirus? Mr Douglass finishes with this note:

The outcomes of these vaccine trials are really going to tell us the way forward. I think we’re quickly going to move past US politics as being the major driver here and now back to the pandemic as the big issue for global markets.

More reading

• 3 ASX dividend shares with yields above 5%
• AMP (ASX:AMP) share price up another 7% on top of last week’s record rally
• 3 ASX blue chip shares to buy for dividends
• Investors rejoice as AMP (ASX:AMP) share price rockets 20% on takeover
• Why the AMP (ASX:AMP) share price could be set to rocket higher today

Motley Fool contributor Sebastian Bowen 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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Today, a suspension on trading of Buddy Technologies Ltd (ASX: BUD) shares was lifted. In early trade, the Buddy share price fell as much as 16.67% to 5 cents before making a partial recovery. At the time of writing, the Buddy share price is trading at 5.4 cents, representing a 10% fall from its last closing price of 6 cents.

Why were Buddy shares suspended?

Shares in Buddy Technologies entered a trading halt on 28 October 2020 before being suspended on 30 October 2020. Buddy Technologies requested a voluntary suspension of trading in its securities prior to the announcement of legal proceedings concerning an equity financing agreement. An announcement was released today about the legal dispute.

What is the legal claim?

According to Buddy Technologies, it previously entered into an equity financing agreement with CST Capital which was terminated prior to being drawn upon. CST Capital later brought legal action against Buddy Technologies with a notice of the action sent to Buddy’s registered office, however, due to COVID-19 lockdowns, Buddy Technologies did not receive the notice. As Buddy Technologies did not defend the claim made by CST Capital, the court issued a default notice in favour of CST Capital which required Buddy to pay unspecified damages.

Buddy Technologies stated that its legal team was now working to have the judgement set aside and to defend the claim. According to Buddy Technologies, the claim by CST Capital is misconceived and it does not believe that any damages are owed. 

According to Buddy, its business has continued as normal with existing financing partnerships unaffected by the legal issue outstanding. 

About the Buddy share price

Buddy Technologies provides internet of things (IoT) solutions to its clients. It has been listed on the ASX since 2015. 

Earlier in November, Buddy Technologies announced that the final maturity date on the debt associated with its acquisition of LIFX in 2019 had been extended from 30 October 2020 to 31 December 2020.

In the quarter to 30 September 2020, Buddy Technologies had revenue from customers of $7.7 million, up 43% on the prior quarter. Earnings before interest, tax, depreciation and amortisation (EBITDA) were $32,000 in the September quarter, the company’s first quarter of positive EBITDA. Cash on hand at 30 September 2020 was $2.6 million. 

The Buddy share price is up 800% since its 52-week low of 0.6 cents and is up 35% since the beginning of the year. The Buddy share price is up 170% since this time last year.

More reading

• What’s pushing the Buddy Technologies (ASX:BUD) share price up today?
• Why the Buddy (ASX:BUD) share price is up today

Motley Fool contributor Chris Chitty 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 embattled Treasury Wine Estates Ltd (ASX: TWE) share price is finally catching a break!

The TWE share price surged 8% to $8.60 during lunch time trade to become the third best performer on the S&P/ASX 200 Index (Index:^AXJO).

Only the Tabcorp Holdings Limited (ASX: TAH) share price and News Corporation Class B Voting CDI (ASX: NWS) share price are doing better. The former due to takeover rumours while the latter just posted its quarterly result.

TWE share price jumps on broker upgrade

In TWE’s case though, the stock’s big bounce coincides with Citigroup upgrading the alcoholic beverages company to “buy” from “neutral”.

However, the broker also slapped a “high risk” warning on the stock as China’s import ban looms large.

The Asian giant is ratcheting up its punishment on Australia by imposing import restrictions on a wide range of Australian goods. The not only includes Aussie wine but also beef, barley, timber and copper.

Turning wine to water

Chinese authorities have launched an investigation on alleged wine dumping by Aussie vineyards, and is using this as a reason to impose import restrictions.

The news caused the Treasury Wine share price to collapse to a near five-year low of $7.96 yesterday.

“Given the recent share price fall, the upside risk is now appealing,” said Citi.

“While the situation is political, we believe there is no evidence of dumping in China of premium wines.

“Treasury may be in a better position than most if tariffs are targeted towards lower priced wines.”

Don’t depend on logic

But evidence is an optional ingredient to a conviction in the Chinese enforcement machinery. The next few weeks will be a nail-biter for TWE shareholders.

The country may halt imports of all Aussie wine for up to six weeks as its Commerce Ministry collates the questionnaires that Aussie wine makers have to fill in as part of the investigation.

What is TWE worth without China?

However, even with the loss of the Chinese market, the TWE share price may still look good value. Citi estimates a 30 to 38 cents a share hit to group earnings if TWE was locked out of China.

“With this EPS range and a P/E ratio of 22x, the share price would be between $6.70 and $8.40,” added Citi.

“The share price is mostly factoring in the loss of China already in our view.”

Valuation support for TWE share price growing

Citi isn’t alone in coming to that view. Morgan Stanley reiterated its “overweight” recommendation on the TWE share price as it believes too much China bad news is priced into the stock.

Citi’s 12-month price target on the TWE share price is $10.40 a share, while Morgan Stanley’s target stands at $11 a share.

More reading

• Tabcorp (ASX:TAH) share price rallies 16% on takeover rumours
• OFX (ASX:OFX) and WiseTech (ASX:WTC) share prices rally on new partnership
• Why the News Corp (ASX:NWS) share price has jumped 8%
• 5 things to watch on the ASX 200 on Friday
• ASX 200 shoots 1.3% higher on Thursday

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates 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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There are rumours that a private equity firm is running the ruler over Tabcorp Holdings Limited (ASX: TAH). As a result, the Tabcorp share price has rocketed up by 16.43% so far in today’s trading. The Australian reports that private equity firms are positioning for a deal that would see digital betting pioneer, Matthew Tripp, emerge as the boss of the TAB wagering arm.

What’s moving the Tabcorp share price?

Mr Tripp achieved renown after building up SportsBet from a fledgling $250,000 operation to a $388 million company upon its sale in 2011.

The rumoured approach to Mathew Tripp has been by two private equity consortiums in recent weeks. One of them is reportedly keen to purchase Tabcorp in its entirety for a price tag, according to The Australian, close to $9 billion. The other is purely interested in Tabcorp’s betting arm, valuing it at approximately $3 billion. 

At the time of writing, the firm looking at the entire company is said to be in the advanced stages of planning. It is reported to have been working at this for months, including informal discussions with Tabcorp executives or representatives. However, in a release just before midday AEST, Tabcorp has denied any knowledge of involvement.

Tabcorp’s lotteries business has been the target of takeover interest in the past when it was under the control of the Tatts Group. In 2017, a consortium made an unsuccessful $6 billion bid for it before it merged with Tabcorp.

The year so far

Tabcorp has seen a continuing downward trend in company revenue in 2020, along with the Tabcorp share price. In particular, the company reported a 6.9% reduction in lotteries revenue versus the prior corresponding period (pcp) in the first quarter of FY21, and a 55.2% reduction in gaming services revenue on the pcp.

Overall group revenue was down by 5.7% on the pcp. In lotteries, this was partly due to a series of strong jackpot sequences occurring during the prior corresponding period. For instance, Powerball saw jackpots of $110 million and $150 million on offer during the pcp which boosted lottery ticket sales. In the gaming vertical, the fall in revenue was predominantly due to the closure of venues, particularly in Victoria. However, in the wagering vertical, Tabcorp has seen increases due to major sports completing suspended seasons.

Tabcorp’s FY21 first quarter metrics reflect the continuation of poor performance seen for FY20 due largely to the impacts of COVID-19. In particular, Tabcorp’s FY20 results included gaming business revenue falls of 42.5%, and wagering revenue declines of 19.5% after major sports cancelled seasons. 

The Tabcorp share price has had a lacklustre year. Even with today’s jump in value, it is still down approximately 9.1% in year-to-date trading. Tabcorp is currently selling at a price-to-earnings (P/E) ratio of 24.

More reading

• Broker updates are mixed on these 6 high profile ASX 200 shares
• Why Lynas, Orora, Praemium, & Tabcorp shares are racing higher today
• Tabcorp (ASX:TAH) releases Q1 results ahead of AGM

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Qantas Airways Limited (ASX: QAN) will be permanently closing its sales desks at airports and reducing the opening hours of lost luggage desks.

This means customers will have to self-service any cancellations and 11th-hour changes through an electronic kiosk, online or on the telephone.

Manned check-in desks will be retained.

The airline confirmed the changes to The Motley Fool on Friday.

“We can’t ignore the efficiencies that come with removing the traditional sales desks, particularly in the current environment,” said Qantas executive manager Phil Capps.

“The main driver is an increasing shift towards people using our app to check in and manage their own bookings, particularly as we expand what the app can do. This was happening before COVID-19 but it has accelerated significantly since.” 

He said “most” employees would be redeployed and about 100 job cuts would come through voluntary redundancies.

The Motley Fool understands the changes will come in the first half of next year. Qantas will be rolling out new functionality in its app and website in January that will contribute to the transition.

Impact on Qantas customers and workers

The Australian Services Union (ASU) expects the changes to result in “hundreds” of job losses.

The union’s assistant national secretary Emeline Gaske said removal of in-person services would impact the most vulnerable customers the most.

“This is a huge problem for all passengers but especially for those needing a little extra help such as infrequent travellers, older Australians and people with a disability,” she said.

“They’re abolishing the sales desk and the service desk including for premium and frequent flyers, meaning everything will be self service and if you have a problem – you’re on your own.”

Gaske claimed Qantas had already trialled – then aborted – technology to replace service desks back in February.

“They’re reheating this proposal at the worst possible time – during a pandemic, in a busy holiday season, as borders are starting to re-open. It’s a recipe for disaster,” she said.

“Whatever can be put online without massive disruption to passengers has already been done. What they’re removing now is the ‘last resort’ customer service people need when all else fails.”

This latest cost-cutting measure comes on top of a September announcement that Qantas would cut more than 2,400 ground crew jobs. The airline just this week added 48,000 seats and 282 flights to its weekly schedule after the Victoria-NSW border was reopened.

More reading

• Qantas (ASX:QAN) and Jetstar add 48,000 seats, 282 flights a week
• 4 top ASX share picks to buy
• Travel shares are flying higher today. Here’s why.
• Are ASX retail investors ‘dumb money’?
• Why these 7 ASX 200 shares received broker upgrades this week

Motley Fool contributor Tony Yoo owns shares of Qantas Airways Limited. 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 Dubber Corp Ltd (ASX: DUB) share price is soaring today following the release of a positive market announcement.

At the time of writing, shares in the cloud-based software-as-a-service (SaaS) company are up by 8.46% to $1.41 per share, after jumping by nearly 12% earlier this morning. The All Ordinaries Index (ASX: XAO) is also rising, up 0.74% to 6,391 points.

Let’s take a look at why investors are fighting to get a hold of Dubber shares today.

New win

Dubber advised that it has been selected as the recording and data capture platform for IBM‘s newly launched IBM Cloud for Telecommunication Services platform.

The milestone win will see Dubber’s ‘best of breed’ solutions become a critical element in IBM’s ecosystem. The company’s voice intelligence cloud will enable IBM to deliver unified call recording and voice artificial intelligence services on a cloud platform.

According to today’s announcement, the unified call recording solution integrated with IBM Cloud for Telecommunication Services enables a range of advancements. This includes the ability to address compliance issues, improve sales and service performance, and unlocking opportunities listening onto voice data.

Dubber said that revenue from the partnership will depend on take-up of the services.

Why is call recording intelligence important?

In the announcement, Dubber highlighted that data analytics and artificial intelligence play a crucial role in generating new business value, lowering costs and improving customer experience. It pointed to the fact that 5G network adoption will see a bigger increase in categories of where and how calls are dispersed, and that capturing such data requires a unified platform that can think and automate workflow.

Dubber now services more than 140 services providers globally. 

Management commentary

Dubber co-founder Mr James Slaney commented on the achievement:

IBM has assembled world-class ‘best of breed’ services to form a compelling Cloud offering for Service Providers with Dubber as a core component and the only Australian based company involved in the global offering.

He added:

In simple terms, IBM and Dubber enable service providers to differentiate and create value from the conversations occurring on the network by making call recording and voice data as a service ubiquitous and open. All conversations can be captured in the Cloud, and converted to AI-enriched data.

More reading

• Why the Encounter Resources (ASX:ENR) share price is up today
• Baby Bunting (ASX:BBN) share price stays flat on update
• The Atomo (ASX:AT1) share price is up today. Here’s why.
• Why the Atomos (ASX:AMS) share price is up 8% today
• The Austal (ASX:ASB) share price has dipped despite positive news

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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The Amcor CDI (ASX: AMC) share price is up this morning after the global packaging company posted a solid earnings report for the first quarter of FY21.

In particular highlights, the company’s adjusted earnings per share (EPS) is up 20% in constant currency terms. Moreover, the company expects to deliver EPS growth to 7-12% in constant currency terms, up from 5-10%. 

The Amcor share price has lifted 3.98% to a price of $16.06 at the time of writing.  Let’s take a closer look.

What’s moving the Amcor share price?

Performance

During the first quarter, the Bemis acquisition delivered synergies of $20 million. Thus far, it has delivered $100 million on a transaction-to-date basis. The company expects total cost synergies of $180 million (pre-tax) by the end of fiscal 2022. 

Net sales for the Amcor Group of $3,097 million were 2% higher than last year. In addition, overall volumes sold were 2% higher than the prior corresponding period (pcp).

In the flexible packaging segment, volumes were 2% higher than pcp, with volume growth in North America, Asia Pacific and Latin America offset by lower volumes in Europe. 

Specifically, in North America, volumes grew in the mid-single digit range, mainly driven by strength in the meat, cheese, condiments, pet food and home and personal care end markets as well as specialty folding cartons. However, volumes were higher across the Asian emerging markets. Specifically, mid-single digit and double digit growth in China and India respectively.

For rigid packaging, overall segment volumes were 4% higher than the prior year, with volume growth in North America offset by lower volumes in Latin America. 

In North America, beverage volumes were 7% higher than the prior period with hot fill container volumes up 12%. Nonetheless, In Latin America, volumes were 3% lower compared with the prior period.

Dividend

The Amcor board have determined ASX shareholders will receive an unfranked dividend of 16.55 cents per share. The ex-dividend date is 23 November, 2020, the record date is 24 November, 2020 and the payment will be on 15 December, 2020. 

Share buy back

The Amcor board of directors has approved a $150 million buy-back of ordinary shares and CDIs. This will be funded by divestment proceeds received during the current period. 

Management comments

Amcor CEO Ron Delia said Amcor’s 2021 fiscal year was “off to a strong start with outstanding first quarter financial results ahead of our expectations”.

Demand for our products remains resilient and our teams continue to stay focused and to deliver excellent operational performance. Both segments delivered strong growth with Adjusted EBIT increasing 11% in Flexibles and 7% in Rigid Packaging, in constant currency terms. The outperformance in the first quarter gives us the confidence to raise our outlook for fiscal 2021 adjusted EPS growth to 7-12%, increase the dividend and use divestment proceeds to buy back shares.

Mr Delia went on to say the Amcor investment case had never been stronger:

In addition to further acquisition synergies and an attractive dividend currently yielding more than 4%, organic growth from our consumer and healthcare exposure should remain resilient and will be enhanced over time from innovations delivering more sustainable packaging. With a strong balance sheet and annual free cash flow of over $1 billion, we also have substantial capacity to reinvest in the business and to pursue acquisitions.

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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Amcor 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 big four banks in Australia have had a rough few years.

The financial industry Royal Commission rightly shamed them for unscrupulous practices, historic low interest rates were cut further to almost zero due to COVID-19, and share prices have plummeted as the banks slashed dividends.

Some experts have even declared the banks’ best days are behind them.

Now Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) face even more bad news.

Their own customers are distrusting of them.

The JD Power 2020 Australia Retail Banking Satisfaction Study found that clients of the major four banks are more likely than others to think their institution was profit-driven rather than customer-driven.

Many big four customers — 29% of them — also thought their bank was not transparent about fees. Only 17% of midsize bank customers thought the same about their institution.

It seems despite generous COVID-19 allowances like loan repayment deferrals, the big four still have some major image problems.

JD Power Australia head of banking and payments intelligence, Bronwyn Gill, said Australians are seeking trust in a devastating year of bushfires and pandemics.

“Bank brand authenticity has been crucial, with customers looking for genuine support during their time of need,” she said.

“The Big 4 banks have made progress repairing customer trust. However, a sustained customer-first culture will be needed to avoid losing customers to midsize banks who offer their customers a more authentic experience that corresponds with higher satisfaction.”

The study gave each big and midsize bank a score out of 700 to measure brand authenticity.

Bank	Perceived brand authenticity (out of 700)
Heritage Bank	626
Bendigo and Adelaide Bank Ltd (ASX: BEN)	590
People’s Choice Credit Union	580
CUA	564
BankSA	547
HSBC Holdings plc (LON: HSBA)	539
ING	538
Suncorp Group Ltd (ASX: SUN)	538
Citigroup Inc (NYSE: C)	534
St George	531
Bank of Queensland Limited (ASX: BOQ)	529
Bankwest	520
Bank of Melbourne	519
Commonwealth Bank	514
ANZ	512
NAB	505
Westpac	495
ME Bank	492
Source: JD Power, table created by author

Heritage Bank was the highest ranked organisation for the second consecutive year with a score of 626.

Customer-owned banks dominated once again, with three of the top four from that category — Heritage, People’s Choice Credit Union and CUA.

Commonwealth, which this week announced a ban on home loan foreclosures, had the highest score among the big four, with 514.

The only midsize bank that did worse than the big four was ME Bank, which suffered a home loan redraw scandal earlier this year. 

The study measured customer satisfaction in six areas: channel activities, convenience, product and fees, communication and advice, account opening, and problem resolution. 

The 2020 edition surveyed 5,584 bank customers over May and June.

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• NAB (ASX:NAB) share price higher despite reporting 36.6% decline in cash earnings
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• Analysts divided over future of Westpac (ASX:WBC) share price

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends HSBC Holdings. 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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