Author: therawinformant

I think that some exchange-traded funds (ETFs) can be good investments for any portfolio.

There are some ETFs focused on ASX shares like Vanguard Australian Shares Index ETF (ASX: VAS) which are decent options for income but many of them aren’t demonstrating the ability to generate capital growth.

An ETF’s returns is dictated by the underlying investments. Many of the ASX’s biggest companies like National Australia Bank Ltd (ASX: NAB) haven’t done much over the past decade.

I think it’s important that investors focus on total returns, of which capital growth (and earnings growth) is a very important part.

Betashares Asia Technology Tigers ETF (ASX: ASIA)

As I mentioned, growth is important. This ETF is very growth focused – it’s invested in 50 of the best Asian technology companies outside of Japan.

Which businesses? Well, its largest holdings are: Taiwan Semiconductor Manufacturing, Meituan Dianping, Alibaba, Tencent, Samsung, JD.com, Infosys, Netease, Pinduoduo and Sea.

There is a high level of technology adoption in Asia and that’s partly why many of this ETF’s holdings are doing so well. COVID-19 impacts have also caused a shift to digital services, which businesses like Alibaba and Tencent provide.

The performance of this ETF has been very impressive. At the end of August 2020 it showed a net return, after the management fees of 0.67% per annum, of 58.65% over the prior 12 months and 28% per annum since inception in September 2018.

One of the main risks of this ETF is that 57.4% is invested in Chinese businesses. Aussies may feel nervous about getting exposure there. Yes, there are risks with China, but remember that the rest of the ETF isn’t invested in China businesses.

I think this Betashares Asia Technology Tigers ETF is worth an allocation, you don’t need to make it a large position.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

Some Aussie investors may want to invest ethically, or at least not own businesses that don’t align with their viewpoints.

This ETF from BetaShares excludes many categories of businesses that people not agree with.

It’s invested in 200 large global shares from developed market countries, excluding Australia, that have been identified as climate leaders and excludes fossil fuel industries.

The ETF also avoids investing in businesses materially involved with: gambling, tobacco, armaments, uranium and nuclear energy, alcohol, junk foods, pornography, mandatory detention of asylum seekers, destruction of valuable environments, human rights and supply chain concerns and lack of board diversity.  

You might be wondering which businesses pass this stringent test. Its top holdings include: Apple, Nvidia, Mastercard, Visa, Home Depot, Adobe, PayPal, Tesla, Toyota and Netflix. I think this is a high quality list.

It has actually performed really well. The ETF’s inception date was 5 January 2017. Over the past three years the ETF has delivered an average annual net return of 23.5% per annum. Remember, that’s after the yearly fees of 0.59% per annum.

In terms of sector diversification, there is a large allocation to IT. It made up 38.9% of the ETF’s holdings at the end of last month. I think it’s good to best invested strongly in this sector because this is where the growth is coming from.

Other double-digit allocations include a 15% exposure to consumer discretionary shares, a 14.7% exposure to healthcare and a 14.1% exposure to financials.

I like the global diversification offered by the ETF. It’s not a US-only ETF, though 72.2% of the ETF’s holdings are listed in the US. Remember that many large US shares have global earnings, they aren’t solely American earners. Other countries are represented including Japan, Switzerland, the Netherlands, Hong Kong, France, the UK and so on.

Foolish takeaway

Both of these investment options give quality diversification that you just don’t get with ASX shares. They have generated good returns and they could keep doing well over the long-term. I’d be happy to buy a starting position in both of them today.

More reading

• Here are 2 of the best ETFs you can buy today
• The BIG problem with ASX ethical investing
• Where to invest $10,000 into ASX shares right now
• 3 ASX growth ETFs to add to your portfolio
• 2 ETFs for easy investing and strong returns

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. 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 NRW Holdings Limited (ASX: NWH) share price was down 4.98% at the time of writing to $2.00 following a trading halt put in place yesterday. The share price fall came after the company announced the outcome of legal proceedings related to Gascoyne Resources.

What was in the announcement?

Attempts by Habrock to place Gascoyne Resources into liquidation failed in the Federal Court. Gascoyne is currently under voluntary administration and NRW Holdings is involved in the recapitalisation of the company. NRW was a creditor to Gascoyne before it entered administration and had previously made impairments for trading debts owed for work performed. However, through an agreement with Gascoyne and its administrators, NRW has claimed that it can potentially recover 100% of its losses. 

Gascoyne Resources owes NRW $32.7 million.

According to an announcement by NRW on 25 June 2020, NRW will receive an up front payment equivalent to 8.75% of an equity raising conducted by Gascoyne, to a maximum of $7 million. The total amount of the equity raising will be $80-$90 million. However, NRW has also previously stated that it may participate in a debt for equity swap with Gascoyne which will see it receive shares in the company rather than cash. NRW may also take payment in the future as a proportion of Gascoyne’s production, which will be determined by ounces produced and the gold price. 

NRW has continued working with Gascoyne on its Dalgaranga project over the past 12 months.

About the NRW Holdings share price

NRW Holdings is a contractor that provides services to the mining and infrastructure sectors. It has been listed on the ASX since 2007.

In the year to 30 June 2020, NRW Holdings had record revenue of $2.062 million, an increase of 83% on the prior corresponding period. Earnings before interest, tax, depreciation and amortisation (EBITDA) in the year to 30 June 2020 were $250 million, an increase of 74% compared to the 2019 financial year. NRW had cash at 30 June 2020 of $170.2 million, an increase of $105.2 million.

The NRW Holdings share price has increased 101% since its 52-week low of $1.00. However, it is down 34.52% since the beginning of the year. The NRW Holdings share price is down 13.36% since this time last year. 

More reading

• 5 things to watch on the ASX 200 next week

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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Exchange traded funds (ETFs) certainly are becoming increasingly popular with Australian investors.

Last year the total funds invested into ETFs in Australia reached $50 billion. Incredibly, this number is expected to double to $100 billion by 2022.

I don’t find this overly surprising considering the advantages that they offer investors.

Investing globally or into certain themes has been a very challenging endeavour for investors in the past. But now, thanks to ETFs, it is as simple as opening up a brokerage account.

Given the growing popularity of ETFs, you won’t be surprised to learn that there is an increasing collection of funds for investors to choose from.

But with so much choice, it can be hard to decide which ones to buy. To help readers narrow things down, I have picked out two ETFs which I think are among the best on offer today.

They are as follows:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

I think the BetaShares Asia Technology Tigers ETF would be a great option for investors. This ETF tracks the performance of the 50 largest technology and ecommerce companies that have their main area of business in Asia, excluding Japan. This includes giants such as Alibaba, Samsung, and Tencent Holdings. As these and the other companies in the ETF are among the fastest growing in the region and revolutionising the lives of billions of people, I believe it could provide strong returns over the 2020s.

iShares Global Healthcare ETF (ASX: IXJ)

Another ETF to consider buying is the iShares Global Healthcare ETF. This exchange traded fund gives investors access to many of the biggest and brightest healthcare companies in the world. This includes CSL Ltd (ASX: CSL), Johnson & Johnson, Novartis, and Ramsay Health Care Limited (ASX: RHC). Due to the positive outlook for the healthcare sector over the next couple of decades due to ageing populations and increased chronic disease, I believe it could provide strong returns for investors.

More reading

• 2 top ETFs that would be good investments in any portfolio
• Where to invest $10,000 into ASX shares right now
• 3 ASX growth ETFs to add to your portfolio
• Buy BetaShares NASDAQ 100 ETF (ASX:NDQ) and these outstanding ETFs today
• 2 ETFs for easy investing and strong returns

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 CSL Ltd. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The market may be dropping lower on Wednesday, but that hasn’t stopped the Recce Pharmaceuticals Ltd (ASX: RCE) share price from jumping higher.

In afternoon trade the pharmaceutical company’s shares are up almost 10% to $1.21.

This latest gain means the Recce share price is now up a massive 255% since the start of the year.

Why is the Recce share price jumping higher today?

Investors have been buying Recce shares on Wednesday after it announced an agreement with the Murdoch Children’s Research Institute (MCRI) to conduct pre-clinical studies. The MCRI is the largest child health research institute in Australia and one of the top three worldwide for research quality and impact.

According to the release, these studies will assess the potential of RECCE 435 (R435) for the treatment of Helicobacter pylori (H. pylori) infections.

Management notes that there is a global unmet medical need for the treatment of H. pylori with no first-line therapy curative in all patients. In fact, the most commonly used treatment is triple therapy.

This includes the use of a Protein Pump Inhibitor in combination with multiple antibiotics. However, due to the increasing prevalence of antibiotic resistant strains worldwide, the eradication rate of standard triple therapy has fallen below 80%.

The company’s Non-Executive Chairman, Dr. John Prendergast, commented: “Antibiotic-resistant forms of H. pylori are on the rise. This is worrisome because more than four billion worldwide are infected with H. pylori, which is the leading cause of peptic ulcers and stomach cancer.”

“We are excited to collaborate with Professor Sutton and MCRI in investigating the potential of our oral anbitiotic RECCE 435 as what could be the first non-combination treatment for H. pylori infection, including those caused by drug resistant forms of the pathogen,” he concluded.

Management expects to complete the trial in approximately 12 months, after which it will pursue a human clinical trial. It notes that it is well funded to support the study program following its recent successful capital raise.

More reading

• Why Corp Travel Management, EOS, Evolution, & Recce shares are charging higher
• Why the Recce Pharmaceuticals (ASX:RCE) share price crashed 15% lower today
• Why Kathmandu, New Hope, Recce, & Ramelius shares are dropping lower today
• These 4 ASX shares have grown more than 100% this year
• Turn $6k into $60k, a guide to growth investing

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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One technology company that has benefitted from the COVID-19 trend of working from home and the rollout of the NBN is about to go public.

Aussie Broadband Limited (ASX: ABB) shares are scheduled to start trading on the ASX from 27 October.

The internet service provider (ISP) will float with a market capitalisation between $180.5 million and $190.5 million.

Aussie Broadband managing director Phillip Britt told The Motley Fool that the timing was right to raise funds publicly.

“We’ve got some fairly lofty ambitions. The capital markets was the obvious way to raise cash to do what we want to do.”

Britt co-founded Wideband Networks in 2003 then became the boss of Aussie after a 2008 merger with Westvic Broadband.

There are still 7 founding shareholders and some of them may seek to exit upon listing.

“They are all at different stages of their lives. I’m certainly here for the long run but different people want to get out at different times. [The float] provides optionality on that.” 

What’s Aussie Broadband’s moat?

Aussie Broadband has developed a loyal following during the rollout of the NBN the last few years. 

The ISP targets the premium residential and small business market, with monthly plans that are not the cheapest but promising plentiful bandwidth.

Aussie Broadband also loves pointing out in its marketing spiel that its call centre staff are based entirely in Australia.

“Our primary (moat) is customer service. It’s the thing we win all the awards for,” said Britt.

“The other part is that what’s on the box – what the product says, what speed it says it will do in the evenings – is exactly what it does.” 

The company saw $190.5 million of revenue for the 2020 financial year losing $5.1 million after tax. It forecasts $338.1 million revenue and a $529,000 profit for the current financial year.

What will Aussie Broadband do with the money raised?

The initial public offer (IPO) sees $30 million to $40 million raised through the issue of $1 shares.

The big push for raising the funds is the company’s vision to build a dark fibre network.

Aussie Broadband, like most ISPs, leases from Telstra Corporation Ltd (ASX: TLS) the pipes that go between all 121 NBN points-of-interconnect (POI) to its own network.

But its own dark fibre would allow it to bypass that arrangement in a majority of cases.

“We’re going to build our own fibre to 76 of those POIs, which are the metropolitan and outer-metro ones,” Britt said.

“It does two things. Obviously it reduces the amount of money we pay to Telstra in the long term, but it also means we can connect businesses directly to our own fibre. So we’re not paying the NBN or someone else for those services.”

While capital outlay for such a project is immense, Britt expects the dark fibre to “make a significant difference” to earnings by the 2023 financial year.

Customers went crazy for shares

The company decided to reward its loyal customer base by offering shares for purchase during the IPO.

The response was overwhelming. The IPO share offer was opened 9am last Tuesday, but by 8am the pre-queue saw 9,000 customers already lined up.

“Overall a bit over 14,000 in the queue. Only 5,000 can get it because that part was $10 million (with $2,000 of shares allocated per customer),” Britt told The Motley Fool.

“Our institutional offer was also heavily oversubscribed.”

Britt said advisors tried to talk him out of the customer offer due to the complexity in implementing such a scheme. But he feels justified after the allocation sold out in just over an hour.

“It was a testament to our customers and the product they want to invest in.”

More reading

• Telstra (ASX:TLS) launches new 5G NBN alternative
• Is the TPG (ASX:TPG) share price a buy today?
• Are these high yield ASX dividend shares worth buying?
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher
• 2 high yield ASX blue chip dividend shares to buy next week

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

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ASX tech shares are hot property right now but I think it pays to be selective. Much of the focus has been on the ‘WAAAX’ shares like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO).

However, there are more tech companies that are doing well in the current climate with further growth on the cards. Here are a couple of my favourite picks in the S&P/ASX 300 Index (ASX: XKO) right now.

Data#3 Limited (ASX: DTL)

Momentum has been propelling the Data#3 share price higher in recent months. Data#3 is a leading cloud computing and ICT solutions provider that is fast becoming a market leader.

The ASX tech share is up 75.3% in 2020 and 475.7% in the last 5 years. The group now boasts a market capitalisation of more than $1 billion with a 2.1% dividend yield.

I think finding ASX tech shares with a combination of dividends and growth is a tough proposition right now. The price to earnings (P/E) ratio of 43.3x is a little pricey but I believe the growth could be there to justify it.

If we continue to see more customer growth and strong revenue generation, I could see the Data#3 share price continuing to climb in 2021.

Megaport Ltd (ASX: MP1)

Megaport was founded in 2013 by entrepreneur and Nextdc Ltd (ASX: NXT) founder, Bevan Slattery. The company has grown quickly to become a leading Australian internet service provider.

Megaport offers scalable bandwidth for public and private cloud connections, metro ethernet, and Data Centre backhaul as well as Internet Exchange Services.

The Megaport share price has jumped 57.0% higher this year alone and 649.5% in the last 5 years. The company now boasts a market capitalisation of $2.5 billion and could be headed higher.

I like the fundamentals underpinning its growth including an accelerated move towards cloud technology. The group has strong monthly recurring revenue numbers and is aiming for earnings before interest, tax, depreciation and amortisation (EBITDA) breakeven in FY2021.

More reading

• 3 ASX shares making all-time highs today
• 2 ASX tech shares I’d buy with $10,000 
• 3 top ASX ETFs to buy for long-term growth
• 3 mid cap ASX shares to buy for strong potential returns
• Why the Data#3 (ASX:DTL) share price just stormed to a record high

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 and recommends MEGAPORT FPO. 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 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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Many of Australia’s top brokers have been busy adjusting their financial models again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of the Macquarie equities desk, its analysts have retained their outperform rating but cut the price target on this infant formula company’s shares to $17.95. The broker notes that the pandemic’s impact on the daigou channel has been much more severe than expected. While this is disappointing, the broker appears to believe it is a short term headwind and remains positive on its long term growth potential. I would agree that a2 Milk Company’s shares are a buy at the current level.

Corporate Travel Management Ltd (ASX: CTD)

Another note out of Macquarie reveals that its analysts have upgraded this corporate travel specialist’s shares to an outperform rating with an improved price target of $16.40. This follows the company’s announcement of an equity raising to fund the acquisition of Travel & Transport. Macquarie believes this is a good acquisition and notes that it will increase its scale in the lucrative United States market. I think Macquarie is spot on and Corporate Travel Management could be worth considering.

Moneyme Ltd (ASX: MME)

Analysts at Ord Minnett have retained their buy rating and $1.92 price target on this digital consumer credit company’s shares. This follows the announcement of a new $167 million warehouse funding facility. Ord Minnett notes that this has reduced its funding costs materially and expects the company to leverage this to grow its market share in new and existing verticals. I think Ord Minnett makes some good points and it could be worth a closer look.

More reading

• Why Corp Travel Management, EOS, Evolution, & Recce shares are charging higher
• ASX 200 down 1.1%: Corp Travel Management surges higher, gold miners rise, Santos given approval
• Why a2 Milk, BrainChip, Oil Search, & Starpharma shares are dropping lower
• Could the Bubs (ASX:BUB) share price be an A2 Milk (ASX:A2M) contender? 
• Why you need to watch the Corporate Travel (ASX:CTD) share price today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia owns shares of 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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Marley Spoon AG (ASX: MMM) shares have been surging higher this year. The Marley Spoon share price has rocketed more than 900% higher since the start of the year to $2.84 per share.

Incredibly, Marley Spoon’s market capitalisation has jumped from $58.7 million to around $540 million at the time of writing.

That’s great for existing shareholders, but what about those of us that aren’t already in? Does the Marley Spoon share price have further to run?

Why the Marley Spoon share price has surged

The big one here is the coronavirus pandemic. COVID-19 has impacted many sectors negatively including travel, leisure, hospitality, retail and the arts.

However, the food delivery business has been soaring. More people across the globe are looking at alternative ways to access food. Door-to-door delivery services, like those offered by Marley Spoon, have provided a ready-made solution.

Demand for Marley Spoon’s services has been skyrocketing and that has seen the Marley Spoon share price follow suit.

The group’s results underline just how impressive FY20 has been for the German company.

Marley Spoon upgraded its full-year guidance to at least 70% revenue growth in 2020, up from an expected 30% previously. Quarterly revenue for its Australian arm rocketed 103% higher to 24 million euros (A$39.4 million).

Is there more growth ahead in 2021?

It’s hard to bet against an ASX share that has rocketed more than 900% higher in 9 months. I personally think we’ll see the company’s shares continue to climb into 2021.

That’s especially the case given surging COVID-19 case numbers across core markets in Europe and the United States. I do foresee slowing revenue growth in Australia though, as we settle into the ‘new normal’.

However, momentum is a powerful tool. That could propel the Marley Spoon share price to a new record high before the year is out.

Foolish takeaway

I think the problem is that I don’t see the long-term value play in the Marley Spoon share price. The company is perhaps a good short to medium-term hedge against the coronavirus pandemic impacts.

But longer term, there is a saturated market and perhaps a big drop-off in customer demand.

I won’t be buying in at $2.84 per share but I wouldn’t bet against it hitting the $3 mark in the near term either.

More reading

• The Marley Spoon (ASX:MMM) share price is down 29% in a month
• The Future Fund is stockpiling cash. Should ASX investors take the hint?
• Is the Domino’s share price too expensive?
• Why Splitit and these ASX shares just hit new highs

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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It has not been a positive day so far for investors, with the ASX market down following Wall Street’s losses overnight. The All Ordinaries Index (ASX: XAO) has dropped 1.3% to 6,059 points.

The Starpharma Holdings Limited (ASX: SPL) share price is no different, falling 5.3% to $1.52 at the time of writing. This is despite the company announcing an oversubscribed institutional placement today.

Oversubscribed placement details

Starpharma advised it had successfully raised $45 million via a placement to domestic and international institutional investors. The placement received strong demand from existing institutional shareholders. In addition, the company noted that it also saw new large domestic and international funds on the register.

A share purchase plan (SSP) will follow for eligible shareholders at the same offer price of $1.50 per share. It is expected the SSP will raise approximately $5 million.

The placement will result in the issue of 30 million new shares, bringing the company’s total issued capital to 402.8 million shares.

The new injection of funds will allow the company to advance its plans to fast-track the commercialisation and launch of its COVID-19 nasal spray. Starpharma will also seek to develop its Dendrimer Enhanced Product (DEP) candidates for future clinical trials.

Starpharma CEO, Dr Jackie Fairley was pleased with the result. She said:

The oversubscribed placement saw a high level of demand from offshore funds including large global and US-based funds. We appreciate the strong support from our current shareholders and are delighted to welcome several leading new institutional investors to the register.

Dr Fairley said the funds would enable Starpharma to expedite programs, including the novel SPL7013 COVID-19 nasal spray.

They will also allow the company to capitalise on value adding clinical combinations in our DEP portfolio and to advance development of a number of exciting DEP candidates across radiopharmaceuticals, ADCs and other therapeutic areas. Recent transactions, such as the Immunomedics acquisition by Gilead, illustrate the significant potential value of these areas.

About the Starpharma share price

The Starpharma share price moved higher since reporting its full-year results to the market in late August. The company is trading at 22% lower than its 52-week high of $1.95 achieved this month. With a market capitalisation of $559 million, Starpharma is in a strong position to rapidly grow its earnings if it can deliver on its targets.

More reading

• Why a2 Milk, BrainChip, Oil Search, & Starpharma shares are dropping lower
• Why Corp Travel Management (ASX:CTD) and Starpharma (ASX:SPL) shares are in trading halts
• Why the Paradigm (ASX:PAR) share price has rocketed 8% higher today
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher
• Village (ASX:VRL) share price edges lower after BGH takeover update

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Starpharma Holdings Limited. The Motley Fool Australia has recommended Starpharma Holdings 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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Telstra Corporation Ltd (ASX: TLS) shares have come under pressure in recent weeks. Ever since the company posted its full-year results for the 2020 financial year last month, investors have been hitting the sell button on the Telstra share price. On current pricing, Telstra shares are now down more than 19% since 4 August.

But perhaps a new 5G product offering could change investors’ minds on Australia’s largest telco.

5G comes online

According to the Australian Financial Review (AFR), Telstra is set to launch a new ‘fixed wireless’ 5G internet offering, using the new generation technology to offer an alternative to the national broadband network (nbn). 

The ‘5G home Internet’ package is set to offer users a wireless modem similar to conventional fixed-line internet services. But rather than a physical fixed nbn connection, the connectivity is delivered over Telstra’s mobile network.

The AFR said the service would “offer download speeds of between 50 and 300 megabits per second for $85 a month, with a monthly data allowance of 500GB… the pricing and speeds mean it will offer similar value to the NBN’s 50 and 100 Mbps plans.”

Apparently, the new product will initially be ‘invitation only’. It will only be offered to customers living in areas where 5G network coverage is strong and there are only inferior fixed-line alternatives.

This is important because, under the agreement that Telstra made with the nbn, Telstra is not permitted to offer any service that directly competes with the nbn network. This was done so that Telstra would receive payments for each customer it lost to the nbn.

The AFR quotes Federal Communications Minister Paul Fletcher as stating that he was ‘confident’ the announced product wouldn’t violate this agreement.

Is Telstra a 5G buy today?

As an existing Telstra shareholder, I think this new product offering is a good development for the company. Existing nbn connection services are notoriously unprofitable for the retail on-sellers like Telstra. There’s barely any profit margin in them at all. If Telstra can attract customers with this 5G alternative (which would presumably carry far higher margins), it will be good news for its bottom line. Assuming Mr Fletcher is correct and it doesn’t violate the Telstra/nbn agreement of course.

Thus, I think Telstra shares are looking attractive today near the company’s 52-week low. At these prices, Telstra’s hefty 16 cents per share annual dividend also offers a yield of 5.69% (or 8.13% grossed-up with Telstra’s full franking credits).

More reading

• Is the TPG (ASX:TPG) share price a buy today?
• Are these high yield ASX dividend shares worth buying?
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher
• 2 high yield ASX blue chip dividend shares to buy next week
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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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