Author: therawinformant

In late morning trade the S&P/ASX 200 Index (ASX: XJO) has bounced back from yesterday’s decline and is pushing higher. At the time of writing, the benchmark index is up 0.2% to 6,196.6 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

CIMIC Group Ltd (ASX: CIM)

The CIMIC share price is down 2% to $22.04. Investors have been selling the engineering company’s shares after it advised that it will write-off a further $1 billion after losing a court battle with Chevron. This relates to cost blowouts on a jetty for the Gorgon natural gas project in Western Australia.

Megaport Ltd (ASX: MP1)

The Megaport share price has sunk almost 8% lower to $15.48. This follows the release of its first quarter update this morning. Although the elastic interconnection services provider delivered further growth in customer and recurring revenues, it was slower than the market has become accustomed to. However, a strong rise in port numbers during the quarter means that management expects its growth to accelerate again in the second quarter.

Mesoblast limited (ASX: MSB)

The Mesoblast share price has fallen 3.5% to $3.28. The catalyst for this appears to news that the biotech company is being sued by shareholders in the United States. Bronstein, Gewirtz & Grossman has launched a class action alleging that Mesoblast made materially false and misleading statements. This includes comparative analyses between its Phase 3 trial and three historical studies that did not support the effectiveness of remestemcel-L for steroid refractory acute graft versus host disease (aGVHD).

Temple & Webster Group Ltd (ASX: TPW)

The Temple & Webster share price has crashed 15% lower to $11.94. Investors have been selling the online homewares and furniture retailer’s shares after the release of a trading update. Although that update revealed further explosive growth, it appears as though some investors were expecting even better. Though, it is worth noting that the company’s revenue and earnings growth were well ahead of Goldman Sachs’ estimates. It is forecasting first half revenue growth of 70.3% and EBITDA of $7.3 million. Temple & Webster’s financial year to date revenue growth is 138% and first quarter EBITDA is $8.6 million.

More reading

• Why the Temple & Webster (ASX:TPW) share price is tumbling lower today
• Why the Megaport (ASX:MP1) share price is dropping lower today
• CSL (ASX:CSL) share price and 2 other ASX stocks among latest broker “buy” ideas
• ASX 200 rises 1%, Cimic (ASX:CIM) up 8% on sale
• ASX 200 up 1%: Crown sinks on AUSTRAC news, South32 & CIMIC storm higher

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 MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended MEGAPORT FPO and Temple & Webster Group 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 Lynas Corporation Ltd (ASX: LYC) share price hit a 16-month high this week and is up more than 15% in October.

Lynas is regarded as the world’s second largest producer of rare earth materials and the only significant producer outside China. The geopolitical tensions about rare earth supply has positioned Lynas as a serious global player. 

Quarterly report

Following temporary shutdowns in both Malaysia and its flagship mine, Mt Weld in Western Australia, production has resumed at 75% production rates during the quarter. Total NdPr production during the quarter was 1,342 tonnes, up from 775 tonnes in the previous quarter.

Total rare earth oxide production was 4,110 tonnes, compared to 2,579 tonnes in the previous quarter. Sales revenue was A$87 million in the September quarter, up from A$38 million in the previous quarter. The company remained cash flow positive during the quarter. 

Growth initiatives for 2025

Lynas has outlined a number of key projects to secure the runway for future growth and to meet increasing rare earths demand. These initiatives include ramping up production to meet forecast demand growth at Mt Weld and building a new rare earths processing facility in Kalgoorlie. Lynas will also invest in increasing downstream processes at its Malaysia plant and is progressing the planning and design work for its heavy rare earths separation facility in the US. 

The company has signed a sub-lease with the City of Kalgoorlie Boulder for the industrial zoned site selected for its Kalgoorlie facility and obtained a general purpose lease under the mining act. 

The Phase 1 work on the US-based heavy rare earths separation facility is expected to be completed in the 2021 financial year. Lynas signed a contract for the work on 27 July with the US Department of Defense. 

Heighted political focus on rare earths supply

Late in the quarter, US President Donald Trump announced an executive order to build reliable and resilient critical minerals supply chains for the US economy. The European Union also identified the need for a diversified and sustainable supply chain, launching a new strategy to secure access to rare earths and other critical minerals.

In addition, the Australian Government released its Modern Manufacturing Strategy, with resources technology and critical minerals processing identified as one of the six national manufacturing priorities. 

Looking ahead for the Lynas share price

The average selling price for NdPr for Q1 FY21 was A$19.4/kg, down from A$20.2/kg in Q4FY20 and A$23.7/kg in Q1FY20. During the September quarter, rare earth prices were volatile. Global demand for magnets appear to still be affected by the COVID-19 situation.

However, positive news continued to support the magnet market as the EU decided to accelerate the decarbonisation of its economy, now targeting a 60% reduction of emissions by 2030, instead of the 40% previously targeted. The acceleration of renewables and electric and hybrid vehicles is likely to increase rare earths demand in the medium to long term. 

The Lynas share price is up 2.44% at $2.94 in opening trade today.

More reading

• ASX 200 up 1%: Crown sinks on AUSTRAC news, South32 & CIMIC storm higher
• Why rare earth miners could be the next ASX shares to boom 
• ASX 200 rises 1%, Reliance Worldwide (ASX:RWC) climbs 11%
• Lynas (ASX: LYC) share price boosted 5% by PM’s budget plan
• Potential ASX winners from government’s $1.5bn manufacturing blueprint

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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The Praemium Ltd (ASX: PPS) share price is storming higher on Wednesday following the release of its first quarter update.

At the time of writing, the investment platform provider’s shares are up a sizeable 9% to 61 cents.

How did Praemium perform in the first quarter?

It was a busy first quarter for Praemium, with the company not only delivering strong growth, but undertaking an off-market takeover of Powerwrap Limited (ASX: PWL).

And while the Powerwrap takeover didn’t complete until after the end of the quarter, its funds under administration (FUA) have been included in Praemium’s numbers today.

According to the release, at the end of the first quarter, Praemium’s Global FUA reached $31.2 billion. This was a 54% increase on the end of FY 2020 and driven predominantly by the inclusion of Powerwrap’s FUA.

However, it was supported also by $733 million in net inflows and $377 million in positive market movements, offset slightly by outflows from an ongoing client transition of $269 million.

Praemium’s Global FUA comprises Australia platform FUA of $15 billion, International platform FUA of $3.5 billion, and Virtual Managed Accounts and Administration Service (VMAAS) FUA of $12.8 billion. The latter two were up 7% and 12%, respectively, over the prior quarter.

Management commentary.

The company’s CEO, Michael Ohanessian, was pleased with the quarter and particularly the acquisition of Powerwrap.

He commented: “The addition of Powerwrap is Praemium’s most important acquisition in our 20-year history. We are delighted to welcome the Powerwrap team to Praemium and to work together to further enhance our market-leading solutions for all segments of the advice market and their clients. Leveraging the strengths of both groups will allow Praemium to be one of the few platforms to deliver a holistic wealth management solution on a single platform.”

“We are well advanced in the planning phase for the integration of both businesses. Given a common underlying technology, we see considerable opportunities for a more efficient operating environment as well as a better client experience,” he added.

No guidance has been given for the remainder of the financial year, but the CEO appears confident in the company’s trajectory.

He explained: “This quarter has seen good underlying growth for our global managed account platforms, as key industry themes continue to drive advisers to seek more efficient ways to meet client needs. We continue to see growth across the global markets in which operate and a solid pipeline for both platform and software services.”

More reading

• The Lynas (ASX:LYC) share price hits 16-month high
• Tesla (NASDAQ:TSLA) earnings: What to watch
• Why the Temple & Webster (ASX:TPW) share price is tumbling lower today
• Why the Megaport (ASX:MP1) share price is dropping lower today
• 3 ASX shares I’d buy for summer 2021

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 Praemium Limited. The Motley Fool Australia has recommended Praemium 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It’s been a wild year for Tesla Inc (NASDAQ: TSLA) shareholders. The stock is up more than 400% year to date. Over the past year, shares are up nearly 800%.

While the growth stock’s big gain recently is great for shareholders, it means expectations are high going into the electric-car company’s third-quarter earnings report this week. Ahead of the quarterly update on Oct. 21, here’s a preview of some of the key areas investors may want to check on. 

Profitability

Sharp revenue growth for Q3 is pretty much already in the bag. A few days after the quarter ended, Tesla said it delivered record quarterly deliveries during the period, with total deliveries rising 43% year over year.

The bigger question about Tesla’s financials during the quarter is regarding the company’s profitability. Analyst estimates for the automaker’s earnings per share (EPS) for the period span a wide range, with the lowest estimate calling for $0.23 per share and the highest for $0.98. The average estimate is notably $0.56, which translates to a 51% jump compared to the year-ago quarter. 

Factory construction progress

Investors will also look to Tesla’s quarterly shareholder presentation to get a progress update on the company’s ongoing expansion efforts. In Q2, Tesla said it had an annual production capacity at its factory in Fremont, California of 400,000 units for Model 3 and Model Y combined. But management said that this installed capacity would extend to 500,000 units at some point in 2020. Did Tesla achieve this before Q4 started?

Further, Tesla said it was building Model Y production capacity at its factories in Shanghai and Berlin. Look to see whether the automaker completed construction on these important production lines. 

Guidance for vehicle deliveries

Finally, investors will want to see whether Tesla is maintaining its guidance for 500,000 deliveries this year. To deliver 500,000 vehicles in 2020, Tesla would need to deliver more than 181,000 vehicles in Q4 alone. This would imply huge growth both year over year and sequentially, as Tesla delivered about 112,000 and 139,000 vehicles in the fourth quarter of 2019 and the third quarter of 2020, respectively.

Regarding vehicle delivery guidance, investors should also look to see if Tesla provides any commentary on demand for its vehicles. Did Tesla exit Q3 with a record backlog of vehicle orders? Without record orders, Tesla may not maintain full confidence from investors in the company’s growth story.

Tesla reports its third-quarter results after market close on Wednesday.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 2 big challenges as Tesla (NASDAQ:TSLA) aims for a $25,000 car
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• Billionaire investor says Tesla (NASDAQ:TSLA) is a $2 trillion stock
• Short-sellers are stepping up their attack on these ASX stocks

Daniel Sparks 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 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Temple & Webster Group Ltd (ASX: TPW) share price is dropping lower on the day of its annual general meeting.

At the time of writing the online homewares and furniture retailer’s shares are down 2.5% to $13.70.

Why is the Temple & Webster share price dropping lower?

Investors have been selling the company’s shares this morning despite its annual general meeting presentation including a trading update which reveals that its exceptionally strong growth has continued in October.

According to the release, as of 19 October 2020, financial year to date, Temple & Webster’s revenue was up 138% on the prior corresponding period. Revenue growth so far in October is up over 100% year on year.

This strong top line growth led to its earnings before interest, tax, depreciation and amortisation (EBITDA) coming in at $8.6 million for the first quarter. While no figure was provided for the prior corresponding period, management notes that this is more than the entire EBITDA it generated in FY 2020.

A key driver of this strong earnings growth was Temple & Webster’s contribution margin. This is its margin after all variable costs including advertising and customer service costs. Management advised that its contribution margins continue to run ahead of its 15% target.

Finally, another positive is its customer satisfaction, which remains at record levels. The release shows that its Net Promoter Score is ~70%.

What now?

No guidance has been given for the remainder of the half or full year.

Management has reiterated that Temple & Webster is committed to a high growth strategy to take advantage of the structural shift towards online and capitalise on both organic and inorganic opportunities.

It also notes that its core furniture and homewares category is a ~$15 billion market, with accelerating online adoption.

The company’s CEO, Mark Coulter, commented: “Lock-downs and forced offline retail closures have no doubt accelerated the adoption of online shopping in our category, however we believe these trends were already at play as the oldest millennials enter their prime furniture buying years (35-65 years). This generation of shopper has already adopted online shopping to a high degree in other categories such as fashion and appliances, and we believe the furniture and homewares category is next.”

More reading

• New $259 million ASX tech player listing Thursday
• Should you stay invested in an ASX share after a strong run?
• The Redbubble (ASX:RBL) share price is up 320% in 2020: Can it go higher?
• Why the Temple & Webster (ASX:TPW) share price is sinking lower
• 2 hot e-commerce ASX shares to buy today

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 Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group 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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In morning trade the Megaport Ltd (ASX: MP1) share price is dropping lower following the release of its first quarter update.

At the time of writing the leading elastic interconnection services provider’s shares are down 4% to $16.07.

How did Megaport perform in the first quarter?

Megaport continued its positive form in the first quarter, delivering further growth in recurring revenues, albeit at a slower than normal rate.

For the three months ended 30 September, Megaport recorded revenue of $17.3 million, up 2% since the end of the previous quarter. This led to its monthly recurring revenues (MRR) also increasing 2% quarter on quarter to $5.8 million.

This revenue growth would have been stronger if the Australian dollar hadn’t appreciated during the three months. Management notes that this adversely impacted its MRR by $0.2 million and its total revenue by $0.3 million. Also weighing on its revenue growth was slower net customer and port additions in the fourth quarter.

Growing at a stronger rate was its customer base. At the end of the quarter, Megaport’s customer numbers reached 1,980. This was up 7% since the end of the last quarter. It was a similar story for its Total Enabled Data Centres, which grew 5% quarter on quarter to 702.

Finally, a key highlight was a 10% quarter on quarter increase in Total Ports to 6,333. This is a leading indicator for growth, which is likely to bode well for the second quarter.

At the end of September, the company’s cash position was $152.8 million.

How did Megaport perform in different markets?

Management notes that its growth was strongest in the North American and APAC regions. North American MRR grew 11% in local currency and Asia Pacific MRR lifted 4%.

In Europe, MRR declined quarter on quarter due to a one-time change in Internet Exchange contract pricing. This was undertaken to secure long term strategic customers which will be competitive and stable going forward.

MRR growth from the second quarter onwards is expected to benefit from the record increases in Ports and customers this quarter.

Outlook.

Vincent English commented: “Megaport remains committed to driving value for our customers, partners, and shareholders. We are constantly evolving our platform so our customers can more easily connect with the services they need to power their business. MVE [Megaport Virtual Edge] will play a fundamental part in our success by allowing our customers to access Megaport’s elastic interconnection platform from locations beyond traditional data centres — including branch offices, corporate campuses, and point-of-sale locations.”

Mr English also revealed that the company is focused on becoming breakeven on an operating profit basis this year.

The CEO explained: “Profitability remains a company-wide priority. We are focused on achieving EBITDA breakeven on an exit run-rate basis by the close of Fiscal Year 2021 by driving further customer growth across all regions.”

“With our SDN reaching over 700 enabled data centres across 24 countries, we are well positioned to capture the demand for elastic interconnection to support the ever-increasing surge of data powered by the digital economy,” he concluded.

More reading

• Should you stay invested in an ASX share after a strong run?
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• These were the worst performing shares on the ASX 200 last week
• 3 ASX growth shares to buy with $3,000 in October
• 2 ASX tech shares I’d like to buy today

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 MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT 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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Investing in ASX shares is a long-term game, but that doesn’t mean you can’t make tactical decisions along the way.

We’re past mid-October now and the S&P/ASX 200 Index (ASX: XJO) is steaming higher as we near summer 2021. That means I’ve got my eye on a few ASX shares I think have the potential to shine over the next 3 to 6 months.

3 ASX shares to I’d buy for summer 2021

For me, the first cab off the rank is Sydney Airport Holdings Pty Ltd (ASX: SYD). With restrictions easing across the country, and a New Zealand travel bubble possibly coming into play, I think Sydney Airport shares are worth a look.

It’s been a tough year for investors with the Sydney Airport share price slumping 28.5% lower in 2020 (at the time of writing). However, things could be turning a corner and I like the infrastructure group’s prospects over summer.

Pointsbet Holdings Ltd (ASX: PBH) is also on my summer watchlist. The ASX wagering share is up 142.1% this year thanks to the surge in online gambling during the coronavirus pandemic.

Pointsbet is set to announce its first quarter results next Tuesday and I’ll be watching closely for signs of further growth. The wagering group continues to sign lucrative partnerships across the United States which is supportive of future growth.

Add to that a summer of sports and Australia’s spring racing carnival, and I think the Pointsbet share price is worth a look.

Finally, Woolworths Group Ltd (ASX: WOW) is on my potential buy list. I think eased restrictions and summer conditions could be good for Woolworths’ liquor businesses.

The Woolworths share price lagged behind ASX supermarket peers like Coles Group Ltd (ASX: COL) in March due to its pubs business. COVID-19 restrictions hampered trade and reduced the conglomerate’s profitability.

However, with the hospitality sector starting to hum back to life and social engagements back on the agenda, I think the liquor businesses could do a decent trade.

Foolish takeaway

These are just a few ASX shares that I like the look of this summer. There are plenty of bargains I’ll be keeping my eye on in the choppy market we’re seeing right now.

More reading

• Warning: Here’s why keeping your savings in the bank is hurting your financial future
• 3 ‘opening up’ recovery ASX shares
• 5 ASX 200 events to watch for this week
• 5 things to watch on the ASX 200 on Wednesday
• CSL (ASX:CSL) share price and 2 other ASX stocks among latest broker “buy” ideas

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended Pointsbet 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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Ava Risk Group Ltd (ASX: AVA) announced on Monday a record breaking first quarter of FY21. The news has sent the Ava Risk Group share price up by 40.91% so far this week. Let’s take a closer look at what the company reported.

What’s moving the Ava share price?

Investors having been driving up the Ava Risk Group share price this week after the company reported a massive 73% surge in revenue compared to this time last year.

In a statement issued by the company on Monday this week, Ava CEO, Rob Broomfield, said: 

Our strong Q1 FY2021 results have demonstrated that our streamlined and highly scalable cost structure, along with our diverse customer base and revenue streams, are able to show continued growth even in times as disruptive as the current COVID-19 period.

High level results 

It’s important to note that these results are currently ‘unaudited’, however some highlights from the reporting included:

• Sales revenue increased by 73%, compared to the same period last year, to $17 million.
• Earnings before interest, tax, depreciation and amortisation (EBITDA) improved by 522% compared to the same period last year and is sitting at $7.7 million.
• Cash as at the end of Q1 2020 increased by 50% from the previous quarter, with balances sitting at $11.6 million.

Both the company’s services and technology divisions contributed to these results.

Services division

Ava’s services division recorded revenue of $8.1 million and EBITDA of $1.6 million.

The company noted that the revenue had begun to normalise due to reduced restriction on air travel leading out of COVID-19. However, it also reported that this didn’t overshadow the strong underlying revenue trend in general. Essentially, the company is saying that a global recovery is certainly helping but it shouldn’t detract from Ava’s overall success as a business.

Further news in the services division saw the announcement of a new general manager for Asia, who will be based in Singapore. The company also hinted that further key appointments could be expected to be announced in Q2 FY2021. On the topic of key roles, Ava also stated that its management incentive scheme, which was due to expire in February 2021, had now been extended to the end of FY2021.

Technology division

The technology division recorded revenue of $8.9 million and EBITDA of $6.1 million.

Ava reported that the technology division had continued to operate amidst the coronavirus crisis. Although general restrictions were in place, the tech division was able to continue delivering services to both current and new customers, including some deliveries for major defence programs. 

One major project highlighted in this latest report was the large-scale data network protection program for the Indian Ministry of Defence. This alone resulted in a contribution of $3.6 million in revenue for the quarter.

Some other highlights from the technology division included:

• Strong commercial interest in a new conveyor health monitoring solution called ‘Aura IQ’.
• Increasing activity with the assurance sensing solutions. This relates to terrestrial and sub-sea power cables and roads infrastructure.
• First shipment of Ava’s latest FOSS (free and open-source software) platform with machine learning software.

The FOSS platform is the completion of the first step in Ava’s ‘roadmap of innovative solutions’ with the goal being to move to a software-as-a-service (SaaS) revenue mode. 

About Ava Risk Group

Ava Risk Group is a leading provider of risk management services and technologies. It services clients in the commercial, industrial, military and government sectors.

This company delivers solutions that are high tech and complex. It helps clients tackle risk management threats to perimeters, pipelines and data networks. Using bio metrics, card access control and locking, as well as secure international logistics, storage of high value assets and risk consultancy services, Ava delivers a diverse range of solutions. 

The Ava share price has increased 287.5% in year-to-date trading and has soared more than 416% since this time last year.

More reading

• Why the Infratil (ASX:IFT) share price is on watch today
• Warning: Here’s why keeping your savings in the bank is hurting your financial future
• EML Payments (ASX:EML) share price on watch after Q1 update
• 3 ‘opening up’ recovery ASX shares
• 5 ASX 200 events to watch for this week

Motley Fool contributor glennleese 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 Infratil Ltd (ASX: IFT) share price is one to watch this morning after the company’s latest investor day updates.

What does Infratil do?

Infratil is a New Zealand-based infrastructure group that has investments in a number of industries including data centres, airports and renewable energy.

The ASX-listed entity boasts a $3.7 billion market capitalisation and is a majority owner of Kiwi renewables group, Tilt Renewables Ltd (ASX: TLT).

Why is the Infratil share price on watch?

Infratil provided its latest update in its 2020 Auckland Investor Day presentation with some juicy information for investors.

Its been a tough year in 2020 for asset owners and investors like Infratil. The Infratil share price has managed to edge 2.4% higher this year, despite the many challenges.

The group’s CDC Data Centres business has had to adapt to changing coronavirus restrictions but achieved earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 50% from FY19 to FY20.

The CDC business is continuing to explore expansion opportunities in New Zealand with the construction of two 10 megawatt data centres in Auckland.

There is also a concerted push to grow its National Critical Infrastructure client base and secure additional land for further growth.

If the success of data centre rival NextDC Ltd (ASX: NXT) is anything to go by, there could be some serious growth in store for Infratil in FY21.

The Infratil share price will be worth watching as investors take in the latest updates from across Infratil’s portfolio. In its Vodafone business, Infratil is forecasting an EBITDA impact of $60 million to $75 million in FY21.

That comes as COVID-19 has hit roaming, prepaid and retail revenue despite opportunities for rapid change and more cloud-based products.

Infratil sees 5G leadership as the key to future margin growth as it looks to capitalise on shifting dynamics in the New Zealand mobile industry.

Foolish takeaway

Today’s update provides investors with some food for thought heading towards the end of the year.

There are growth opportunities on offer for both its CDC Data Centres and Vodafone businesses, let alone in the renewables space with Tilt.

More reading

• 5 ASX shares hitting record all-time highs this week
• Invest like Warren Buffett and buy and hold these fantastic ASX shares
• Should you stay invested in an ASX share after a strong run?
• 3 exciting ASX growth shares to buy for stellar long term returns
• How top ASX tech shares like Afterpay (ASX:APT) have performed in 2020

Motley Fool contributor Ken Hall 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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Bank accounts are something we all have and need these days. Traditionally, there are two primary types of bank accounts: chequing and savings.

Chequing accounts normally don’t come with a substantial interest rate and are primarily used for transactions and the like — which is why they typically come with an EFTPOS card.

However, savings accounts are usually classed as ‘wealth-building tools’ or even ‘investments’. You place your surplus cash in a savings account, where you were traditionally rewarded with a reasonable interest rate — compensation for technically lending your money to the bank. That capital is still liquid (you can withdraw it whenever you want), but you used to expect that the bank would pay an interest rate that would handily cover the effects of inflation each year, and then some.

But that paradigm has long departed from the financial landscape we see today.

See, banks charge interest on loans and pay interest on savings using the official cash rate that is determined by the Reserve Bank of Australia (RBA) each month. So say if the cash rate was 5%, you used to expect a mortgage interest rate of say around 6%, and a savings account interest rate of 4%, for argument’s sake.

But today, the Australian cash rate sits at just 0.25% — a record low. There is some speculation that the RBA will again lower the cash rate this year to a new record low of 0.1%.

So if you’re wondering why your mortgage has never been cheaper to service, that’s why.

Savers are losers

But what’s good for the goose is apparently good for the gander. And if you’ve looked at the interest rate your savings account offers recently, I’m sure you would have choked into your morning coffee.

As an example, Commonwealth Bank of Australia (ASX: CBA) is currently offering a maximum interest rate for a standard savings account of just 0.85% per annum.

That is absolutely pathetic from the perspective of wealth building. I’m not having a go at CBA here, all of the banks’ offerings are pretty similar. It’s purely a consequence of the RBA’s current cash rate.

So what does this mean? Well, even if inflation averages a low-by-historical-standards 1% per annum over the next year or two, your savings will be losing value in real terms.

But here’s the real kicker. Our friends over at the Australian Taxation Office (ATO) don’t take inflation into account when assessing your taxable income for the year. And interest received from a savings account is taxable income. So not only is your money going backwards, you have to pay tax on the interest that slows this decay. You’re almost no better off than keeping your cash under the mattress.

So what’s the solution? I believe you need to invest. No one ever really saves their way to significant wealth. And in 2020, you’re swimming upstream.

A solution?

In contrast, ASX shares have consistently given investors inflation-smashing returns (albeit amidst the odd market crash).

Take a plain-jane S&P/ASX 200 Index (ASX: XJO) fund like the SPDR S&P/ASX 200 Fund (ASX: STW). This exchange-traded fund (ETF) has returned an average of 7.31% per annum since its inception in 2001. And, being an ETF, it’s one of the easiest investments on the ASX you can own.

So when I encounter people who still have all their cash in the bank, I usually recommend them to take most of it out and, instead, put it into shares. I also suggest keeping an adequate amount in the bank for emergencies and savings, of course. You never want to be in the awful position of having to sell shares to fix your car or go to hospital. But if you think you’re getting a good deal having your life savings in a bank account, I respectfully believe you are mistaken. As the old saying goes, the best time to plant a tree was yesterday, and the second-best time is today.

More reading

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• 5 things to watch on the ASX 200 on Wednesday
• CSL (ASX:CSL) share price and 2 other ASX stocks among latest broker “buy” ideas
• The ASX 200 slid 0.72% lower today
• Is the ASX 200 trading too high right now?

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.

The post Warning: Here’s why keeping your savings in the bank is hurting your financial future appeared first on Motley Fool Australia.

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