Author: therawinformant

The MyFiziq Ltd (ASX: MYQ) share price is today soaring higher on news the company had signed a binding term sheet with WellteQ for first CompleteScan integration. The MyFiziq share price closed 29.79% higher for the day, finishing at 61 cents.

What does MyFiziq do?

MyFiziq has developed and patented a proprietary dimensioning technology that enables its users to accurately check, track, and assess dimension using only a smartphone.

Its goal is to help its partners by empowering their consumers with this capability. This in return gives partners the ability to assess, assist, and communicate outcomes with their consumers when navigating day to day life.

Whether this is a personal journey to better health, understanding the risk associated with a physical condition or tracking changes experienced through training, dieting. It also has uses under medical regimes or simply for users wanting to be correctly sized for a garment when shopping online. The MyFiziq technology delivers this privately in less than a minute.

MyFiziq has developed this capability by leveraging the power of computer vision, machine learning, and patented algorithms. The company simplifies the collection of measurements and removes the human error present in traditional methods.

What’s happened?

MyFiziq announced that it had signed its first binding term sheet to expand the newly developed CompleteScan platform capabilities with Asia Pacific corporate wellness platform WellteQ. The platform will soon be released to the $10 trillion dollar global telehealth, corporate wellness and insurance market.

Under the commercial terms, CompleteScan will be integrated into WellteQ’s personalised digital wellness and analytics platform in readiness for January 2021. The integrated offering will be first offered to existing corporate customers including Bupa Australia, Toll Logistics, Credit Suisse and DBS Bank before a wider reach into prospective clients and markets outside of APAC.

Foolish Takeaway

In light of the COVID-19 pandemic, digital health platforms such as WellteQ are becoming a highly sought-after engagement, triage and monitoring tool for the public healthcare, corporate and insurance sectors. These sectors are looking for new and innovative ways to engage, screen and manage people remotely with more personalised and timely health interventions. MyFiziq has filled this void with its platform that stands to benefit both parties.

The MyFiziq share price is up 29.79% on the news.

More reading

• 3 ways Aussies can buy Tesla (NASDAQ:TSLA) shares
• The ASX 200 is still stuck in a rut
• ASX 200 drops 0.8%, Nearmap (ASX:NEA) sinks
• Why the Change (ASX:CCA) share price rocketed 43% today
• Insiders have been buying Cochlear (ASX:COH) and this ASX share

Motley Fool contributor Daniel Ewing 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 Change Financial Ltd (ASX: CCA) share price is today surging higher after it announced a strategic acquisition.  The Change share price rose an astounding 43% to 16.5 cents on the news. It is currently trading at 16 cents, up a hefty 39.13%.

What is Change Financial?

Change Financial, formerly ChimpChange, is a US-focused fin-tech company developing innovative and scalable payments technology to provide solutions for businesses and financial institutions.

Change Financial is currently building a Mastercard-registered enterprise payments and card processor.

Acquisition news

The Change share price shot higher after the company announced a binding agreement to buy Wirecard NZ & Australia assets for A$7.8 million. The acquisition represents an EV/Revenue multiple of 0.5x based on FY20 revenue of approximately US$11.1 million.

Impressively, the acquisition brings significant scale and growth through the addition of 120 customers and capability in more than 35 countries. Moreover, Wirecard had a blue chip client base including the big 4 Australian banks, major Australian supermarkets, Asian and South American banks and fintechs.

In June, Wirecard was placed into voluntary administration. Following an extensive due diligence and highly competitive sale process, Change Financial was selected as the preferred bidder for the assets. Wirecard provides innovative payment management and platform solutions.

Cash consideration and costs are proposed to be funded via a placement raising $6.4 million and an entitlement offer to existing shareholders raising approximately $4.9 million.

Capital raising

The company has received unconditional binding commitments for a placement to institutions, sophisticated and professional investors. The placement price is 9.5 cents per share. This represents a 17.4% discount to the last Change share price close.

This will be swiftly followed by an entitlement offer to eligible shareholders. Eligible shareholders will be able to receive 2 new shares for every 11 shares currently held at the price of 9.5 cents as above.

Foolish takeaway

In completing the acquisition, Wirecard will provide Change with a huge amount of potential clients across the globe. Furthermore, the company was earnings before interest, taxes, depreciation and amortisation (EBITDA) positive and generated strong revenue before it fell into administration. This deal also represents impressive value for money as Change is only paying 0.5x revenue.

The Change share price is currently trading 43% higher after the news.

More reading

• Insiders have been buying Cochlear (ASX:COH) and this ASX share
• Why retirees should add these solid ASX dividend shares to their portfolios
• The SkyCity (ASX:SKC) share price is up 20% in September. Here’s why…
• Insiders have been selling Goodman (ASX:GMG) and this ASX share this month
• 3 exotic ASX tech ETFs you might want to add to your portfolio today

Motley Fool contributor Daniel Ewing 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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Earlier today I looked at a couple of shares that have experienced a spot of insider selling this month. Now, I’m going to turn my focus to insider buying.

I like to regularly take a look to see which shares have experienced meaningful insider buying.

This is because it is often regarded as a bullish indicator, as few people know a company and its intrinsic value better than its own directors.

A number of shares have reported meaningful insider buying this week. Here are a couple which have caught my eye:

Cochlear Limited (ASX: COH)

A change of director’s interest notice reveals that one of this hearing solutions company’s non-executive directors has been topping up his position. According to the notice, Prof Bruce Robinson, AC picked up 75 shares through an on-market trade on 3 September. Professor Robinson paid an average of $194.68 per share, which equates to a total consideration of $14,601. This lifts the director’s holding to a total of 1,083 shares.

With the Cochlear share price down 24% from its 52-week high, it appears as though this director sees value in them at the current level. One broker that agrees is Morgan Stanley. Last week it put an overweight rating and $229.00 price target on Cochlear shares.

TPG Telecom Ltd (ASX: TPG)

According to a change of director’s interest notice, one of this telco giant’s non-executive directors has made a large purchase of shares this month. The notice reveals that Arlene Tansey picked up 10,000 shares through an on-market trade on 7 September. Ms Tansey paid a total of $76,376.30 for the parcel of shares, which equates to an average of ~$7.64 per share. This purchase doubled the director’s holding to 20,000 shares.

The TPG share price has been on a downward trajectory since its merger with Vodafone Australia. Today it is trading 17.5% lower than the price it was commanding on 30 June following its completion. It appears as though this director believes this has brought its shares down to an attractive level. Morgan Stanley would agree with this as well. Late last month it put an overweight rating and $10.00 price target on TPG’s shares.

More reading

• 2 ASX shares I would buy again and one I regret
• 3 outstanding ASX shares to buy and hold for decades
• 3 ASX shares that are trading at bargain prices
• Leading brokers name 3 ASX shares to sell today
• Brokers name 3 ASX shares to buy right now

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 Cochlear Ltd. The Motley Fool Australia has recommended Cochlear 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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With term deposits offering paltry interest rates, I believe the share market remains the best place for retirees to invest their hard-earned money.

Whilst there are a good number of quality options for income investors to choose from, two ASX dividend shares that I believe are among the best on offer are listed below. Here’s why I would buy them:

BWP Trust (ASX: BWP)

The first ASX dividend share that I think retirees ought to consider buying is BWP. It is a real estate investment trust with a focus on commercial properties. These assets tend to be large format retail properties which are predominantly leased to home improvement giant, Bunnings Warehouse. At the end of FY 2020, its weighted average lease expiry (WALE) stood at 4 years, with 98% of its portfolio leased.

Despite the pandemic, BWP recorded like-for-like rental growth of 2.4% in FY 2020. This supported a 1% increase in regular profit and a 1% lift in its distribution to 18.29 cents per share. The good news is that due to the strength of the Bunnings business, particularly during these challenging times, I expect a similarly positive performance in FY 2021 and the years that follow. Based on this and the current BWP share price, I estimate that it offers investors a forward 4.65% distribution yield.

Wesfarmers Ltd (ASX: WES)

Another option for retirees to consider buying right now is Wesfarmers. I think the conglomerate is a great option due to its positive long term growth potential. This is thanks to the aforementioned Bunnings business which has been performing particularly strongly during the pandemic.

This is a big positive for Wesfarmers as this business now accounts for almost two-thirds of its earnings following the Coles Group Ltd (ASX: COL) spin-off. In addition to this, I’m confident the rest of its businesses are well-positioned for growth over the next decade. And given its strong balance sheet and hefty cash balance, I suspect that Wesfarmers may bolster its growth with earnings accretive acquisitions. For now, I estimate that Wesfarmers shares offer a forward fully franked ~3.5% dividend yield.

More reading

• 2 reliable and high quality ASX dividend shares to buy today
• Is the Wesfarmers (ASX:WES) share price a quality buy for ASX dividends?
• What is good about the Wesfarmers (ASX:WES) share price in 2020?
• Smash low interest rates with these high yield ASX dividend shares
• New to investing? Here are 5 ASX dividend shares to buy now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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 SKYCITY Entertainment Group Limited (ASX: SKC) share price is on a roll this month, up more than 20% so far in September.

By comparison the S&P/ASX 300 Index (ASX: XKO) is down 3.2% over that same time.

Like most shares, particularly those involved in the entertainment business, SkyCity’s share price was pummeled during the COVID-19 market rout, falling 66% from February 21 through March 23.

Since that low, SkyCity’s share price is up a whopping 122%. Although that hasn’t been enough to recoup all of its viral-induced losses, with the share price still down 25% year-to-date.

What does SkyCity do?

SkyCity owns and operates tourism, leisure and entertainment facilities with a focus on casino gambling. SkyCity shares are listed on the Australian and New Zealand exchanges.

In New Zealand, SkyCity operates casinos in Auckland, Queenstown and Hamilton. Its Australian casino is located in Adelaide. The Adelaide site is undergoing a $330 million expansion, with major works expected to be completed later this year. The company also provides conference facilities and restaurant services, along with hotel accommodations at its Auckland location.

The company has more than 5,000 employees. SkyCity shares began trading on the ASX in 1999. Today the company has a market cap of $2.1 billion.

Why is the Skycity share price smashing the ASX 300 in September?

While the broader market has been selling off, SkyCity share price has been rocketing higher.

Part of the renewed investor interest came following the release of its full year 2020 financial results on September 3. Although SkyCity suffered a 24% fall in normalised revenue, the company forecast that its FY21 normalised earnings before interest, tax, depreciation and amortisation (EBITDA) would be above its FY20 results.

Investors are also likely eyeing a two-fold potential revenue increase from SkyCity. One from the completion of its Adelaide expansion and the completion of its New Zealand International Convention Centre and Horizon Hotel projects. The second from investors with a longer-term horizon who expect SkyCity should see a huge ramp up in its business once the coronavirus is defeated or contained.

Until that happens, the company cautioned it didn’t expect to return to pre-COVID or FY19 EBITDA levels because of “negligible international business and international tourism activity due to ongoing international border closures”.

Still, it’s worth remembering that as recently as 24 January, SkyCity’s share price was 34% higher than it is today.

More reading

• Top brokers name 3 ASX shares to sell today
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points
• These were the best performing ASX 200 shares last week
• ASX 200 down 2.75%: Afterpay & Appen sink lower, SKYCITY pushes higher
• Why Brainchip, De Grey, Mesoblast, & SKYCITY shares are pushing higher

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sky City Entertainment 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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Insider buying is often regarded as a bullish indicator, as few people should know a company better than its own directors.

The theory is that if they have the confidence to buy shares, it could be a sign that things are going well and they expect them to appreciate in value.

Conversely, when directors sell shares it is often regarded as a bearish indicator as you’d be unlikely to sell shares if you felt they were about to increase in value.

With that in mind, here are two ASX shares which have recently experienced notable insider selling:

Goodman Group (ASX: GMG)

According to a change of director’s interest notice, the Deputy Group Chief Executive Officer and Chief Executive Officer North America of this integrated commercial and industrial property company has been selling shares this month. The notice reveals that Anthony Rozic sold a total of 278,333 Goodman shares through a series of on-market trades between 1 September and 3 September.  

Mr Rozic received a total consideration of approximately $5.1 million, which equates to an average of ~$18.28 per share. Despite this sale, the executive still has a meaningful interest in the company. He’s left with ~1.82 million Goodman shares and ~1.6 million performance rights. The Goodman share price is up over 35% since the start of the year. This is thanks to its strong performance during the pandemic, due partly to its exposure to ecommerce markets.

Nitro Software Ltd (ASX: NTO)

A change of director’s interest notice reveals that this software company’s non-executive director has been selling a large number of shares in September. According to the notice, John Dyson has sold 8,683,462 shares through an off-market trade on 9 September.

These shares were sold for a total of ~$19.1 million, which equates to an average of $2.20 per share. With the Nitro share price up 34% year to date on the sale date, it appears as though the director wanted to lock in some gains. Mr Dyson still has a considerable interest in the growing company of approximately 17.5 million shares.

More reading

• Could these exciting small cap tech shares be the next Afterpay (ASX:APT) and Altium (ASX:ALU)?
• Why I would buy Telstra (ASX:TLS) and this outstanding ASX 50 share
• Why Brainchip (ASX:BRN) shares are topping the ASX today
• 2 fantastic ASX 50 shares I would buy today
• Why a recession shouldn’t matter for the ASX share market

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nitro Software 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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I think exchange-traded funds (ETFs) are one of the best ways to capture some broad exposure to the technology space. Tech shares have made a name for themselves recently as being some of the best growth shares money can buy. But some ASX tech shares are more equal than others.

In September 2020, tech is a space defined by potential overvaluations and even the dreaded ‘bubble’ speculation, both on the ASX and over in the United States. We have some tech shares like Afterpay Ltd (ASX: APT), Tesla Inc (NASDAQ: TSLA) and Sezzle Inc (ASX: SZL) that have given investors triple-digit returns many times over in just the past few months. So rather than trying to pick winners and losers in this crowded space, a better solution for many ASX investors might be to use ETFs for a more balanced and diversified approach. So here are 3 ETFs you can do just that with today.

3 ASX tech ETFs

BetaShares Nasdaq 100 ETF (ASX: NDQ)

This ETF is a US-focused one and holds 100 of the largest companies within the Nasdaq exchange. The Nasdaq is renown for its tech exposure and houses most of the companies we would think of when ‘US tech’ is mentioned. Its top holdings include Apple Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT) and Amazon.com, Inc. (NASDAQ: AMZN). I think the Nasdaq will continue to outperform both the US S&P 500 and our own S&P/ASX 200 Index (ASX: XJO) over the coming decade or two. As such, I think it’s a perfect ETF to buy for American tech exposure today.

VanEck Vectors MSCI World ex Australia Quality ETF (ASX: QUAL)

Another ETF to consider today is this offering from VanEck. QUAL is a fund with more than 300 holdings from around the world. These are selected on a ‘quality’ criteria basis, which includes screeners on low leverage, high earnings growth rates and high returns on equity. You’ll find many tech companies which fit these criteria in QUAL, such as Apple, Microsoft, Alphabet Inc. (NASDAQ: GOOG)(NASDAQ: GOOGL) and NVIDIA Corporation (NASDAQ: NVDA), but also companies like healthcare giant Jonson & Johnson (NYSE: JNJ) and shoe-maker Nike Inc (NYSE: NKE) as well.

For a more balanced and diversified fund than NDQ, I think QUAL is another top choice for investors today.

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

Finally, we have this Asian-focused fund. ASIA is something of an answer to NDQ from the side of the globe closer to home. It houses all of the top tech shares from Asia, including from China, Hong Kong, Taiwan, India and Korea (the south side). This includes Tencent Holdings, Alibaba Group, JD.com and Samsung Electronics.

Although there have been some geopolitical tensions between China and the US (as well as Australia) in recent times, I don’t think this should exclude us from investing in some of the highest-growth markets in the world. If you’re interested in tech names outside the US titans, I think this ETF is another great choice.

More reading

• Why the Afterpay (ASX:APT) and Sezzle (ASX:SZL) share prices are falling again today
• Could these exciting small cap tech shares be the next Afterpay (ASX:APT) and Altium (ASX:ALU)?
• Afterpay (ASX:APT) share price facing new competitive pressure
• ASX 200 down 0.95%: Rio Tinto (ASX:RIO) CEO exits, Nearmap (ASX:NEA) sinks lower
• Why Tesla stock jumped again on Thursday

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Johnson & Johnson, Nike, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Amazon, Apple, Microsoft, Nike, NVIDIA, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Johnson & Johnson and Sezzle Inc and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Alphabet (A shares), Amazon, Apple, BETANASDAQ ETF UNITS, Nike, NVIDIA, and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Suncorp Group Ltd (ASX: SUN) is about to fire 550 employees, blaming customer behaviour changes due to COVID-19.

The bank earlier this week announced it would close 19 stores and one business centre across Queensland, NSW and Victoria. But at the time the company stated impacted staff would be provided opportunities for redeployment.

Then the news came on Friday that 550 jobs would be cut, which is 4% of the current headcount of 13,500.

In its annual results last month, Suncorp reported a 33% decline in cash earnings.

The Financial Sector Union (FSU) called the job losses “short-sighted” at a company that reported a statutory net profit of $913 million.

“Suncorp is a large financial services company and should have the capacity to maintain its business operations through the global pandemic,” said FSU Queensland local executive secretary Wendy Streets.

“This is the worst time to be unemployed and we know how difficult it will be for some of these Suncorp workers to find new jobs.”

The Motley Fool has contacted Suncorp for comment.

No one uses branches anymore, apparently

Suncorp executive general manager Chris Fleming said earlier in the week that a 24-hour cycle was now the reality for the industry.

“More and more customers have switched to digital banking in 2020, and we expect they will still want to bank digitally beyond COVID-19 and face-to-face transactions will fall further,” he said.

“Suncorp must make changes to our business so we can keep up with our customers’ demands and remain a strong alternative to the major banks.”

Fleming added digital transactions had risen 10% this year and in-person transactions had decreased nearly 60% since June 2016.

Despite a tough year, Suncorp did announce last month that it would still pay a dividend of 10 cents per share.

Its share price was down 1.32% at 2.45pm AEST Friday, to trade at $9. It was as high as $13.54 in mid-January.

More reading

• ASX 200 plunges 3.1%, Afterpay suffers
• Quarterly rebalance: Coles and Fortescue added to ASX 20, Zip joins the ASX 200
• UBS picks the best and worst ASX stocks from the reporting season
• Are ASX banks or miners buys for dividends?
• 2 ASX 200 bargains to buy this week

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

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Magnis Energy Technologies Ltd (ASX: MNS) shares are today charging higher as the company saw major success in its battery fast charging program. At the time of writing, the Magnis share price is up 5.26% to 20 cents after moving as high as 21 cents in intraday trading.

What does Magnis do?

Magnis Energy, formerly Magnis Resources, is an Australian-based company focused on lithium-ion battery manufacturing in Australia and the United States. The company also has an interest in pre-mine development of its Nachu Graphite project in Tanzania.

This activity is supplemented by involvement in the development and ultimately mining of natural flake graphite for use in various industries. Including, in particular, batteries for storing electrical energy.

What was announced?

The Magnis share price has shot up as the company announced it has had major success in its extra fast charging (EFC) battery program. The company will now advance to testing for optimised commercial cells.

Cycling results from the unoptimised cell, using C4V technology, produced very exciting results. For the batteries, over 1000 charges were conducted, with capacity maintaining strength above 80%. The EFC allows 85% charge in just six minutes. It is because of the exceptional results that Magnis has decided to commence testing of EFC on optimised cells.

Furthermore, a demonstration program in New York has commenced for a public transit technology and innovation program. The technology is planned to be developed in Binghamton, with testing taking place at BAE Systems before being installed on some New York City bus routes. The plan of the project is to remove 500,000 metric tonnes of carbon dioxide annually from the New York City metro area, whilst also increasing energy efficiency and lowering upfront costs.

Commenting on the update, Magnis Chairman, Frank Poullas, said, “The response from our fast charging announcement has been amazing with a number of major original equipment manufacturers contacting Magnis with discussions having kicked off.”

Foolish takeaway

Back in early 2018, Magnis was one of the most tipped small caps by Australian fund managers. Unfortunately for shareholders, the Magnis share price has failed to live up to the hype as it has slumped 58% since 2018. However, recently the company has seen a strong turnaround with the Magnis share price gaining 300% since its March lows.

More reading

• Suncorp cuts 550 jobs
• The latest ASX stocks upgraded by brokers to “buy” today
• Why the Eagers (ASX:APE) share price could boom post-pandemic
• Why the Afterpay (ASX:APT) and Sezzle (ASX:SZL) share prices are falling again today
• A definitive guide to September ASX share trends

Motley Fool contributor Daniel Ewing 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 market is poised to end the week on a backfoot. But the pullback is giving brokers the opportunity to upgrade some ASX stocks to “buy”.

The S&P/ASX 200 Index (Index:^AXJO) slumped 0.7% in after lunch trade and will finish the week with a 1% loss if it closes at current levels.

While experts are divided on whether the burst in volatility marks the start of a highly anticipated market correction, top brokers are seeing value in two stocks.

Floating to the top

The Santos Ltd (ASX: STO) share price is one with UBS upgrading its recommendation on the stock to “buy” from “neutral”.

The news isn’t helping the stock today though as the slump in the overnight oil price dragged on the sector.

But Santos can still be a profitable play even as the Brent crude price dropped under US$40 a barrel. UBS believes management can achieve its target of being free cash flow (FCF) breakeven at under US$25 a barrel this calendar year.

This will help Santos lower gearing to 27% from 34% by FY22 – just in time for its next major growth phase.

Underappreciated assets

But this isn’t the only reason to buy the stock. The broker believes the market is underappreciating a number of its assets.

The 1.7 million tonnes a year (mtpa) Moomba Carbon Capture and Storage (CCS) project is one. Moomba could benefit Santos in two ways.

“We anticipate [the] federal govenment will likely legislate a process for CCS to be eligible for Australian Carbon Credit Units (ACCUs) offsetting >50% of the lifecycle cost,” said UBS.

“Our analysis expects that reinjecting 1.7mtpa of CO2 into depleted Cooper basin reservoirs could lift oil production by 2.7mmbbl pa.”

The broker’s price target on Santos is $6.50 a share.

Spoonful of sugar

Meanwhile, Credit Suisse upped its rating today on the Sigma Healthcare Ltd (ASX: SIG) share price to “outperform” from “neutral”.

The broker turned bullish on the drug supplier and pharmacy retail chain as it believes the stock is cheap and can deliver double-digit earnings growth.

“We forecast SIG achieving EBITDA CAGR of 21% between FY20-FY23F driven by cost outs, full ramp-up of Chemist Warehouse FMCG contract and continued above market growth in retail,” said Credit Suisse.

“The stock trades on 17x 12-mth forward CS EPS, below its two- and 5-year averages.”

Cash conversion set to improve

Sigma reported its first half results this week, which was inline with the broker’s expectations, although its cash conversion of 49% may have disappointed investors.

But Credit Suisse believes this will improve once the volatility from the COVID-19 impact subsides.

The broker’s 12-month price target on the stock is $0.70 a share.

More reading

• Afterpay (ASX:APT) share price facing new competitive pressure
• What I’ve learned writing for The Motley Fool
• ASX 200 down 0.95%: Rio Tinto (ASX:RIO) CEO exits, Nearmap (ASX:NEA) sinks lower
• IGO share price surges on potential sale of Tropicana
• Up 9.2% in 1 day, is the Clinuvel Pharmaceuticals (ASX:CUV) share price a buy?

Motley Fool contributor Brendon Lau 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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