Author: therawinformant

The ELMO Software Ltd (ASX: ELO) share price will be one to watch on Wednesday.

This follows the release of the growing software company’s fourth quarter and full year update this morning.

How did ELMO perform in FY 2020?

During the fourth quarter, the cloud-based HR and payroll software provider continued its growth trajectory despite the challenges associated with COVID-19.

ELMO reported cash collections of $16.4 million during the three months, which represented a 26.2% increase on the previous quarter and 8.4% on the prior corresponding period.

The company’s growth during the quarter was supported by the launch of ELMO Connect. This is a new communications module allowing businesses to instant message and initiate Zoom Conference calls from within its cloud-based platform.

This ultimately led to the company reporting record cash receipts of $57.5 million during the financial year, up 27.4% on FY 2019’s cash receipts.

At the end the financial year ELMO had a cash balance of $139.9 million with no debt. This cash balance was boosted by its successful $70 million placement institutional placement and $2.8 million share purchase plan.

Pleasingly, this strong balance sheet means ELMO remains well capitalised to continue investing in organic growth and executing strategic acquisitions.

In respect to the latter, ELMO’s CEO, Danny Lessem, revealed that the company has “an active acquisition pipeline.”

FY 2021 outlook.

Mr Lessem appears optimistic on the company’s prospects in FY 2021.

The chief executive commented: “ELMO’s focus remains on delivering organic growth supplemented with strategic acquisitions, continuing our growth trajectory into FY21 and beyond. We are well placed to benefit from the acceleration in the adoption of cloud-based business tools, including HR technology.”

Further details in respect to its earnings and its expectations for FY 2021 will be released with its full year results on 6 August.

More reading

• Are these small cap ASX shares future tech stars?
• Why the RPMGlobal share price could be a bargain buy right now
• The rise and rise of ASX SaaS shares
• 4 top small cap ASX shares to watch in FY 2021
• 5 exciting small cap ASX shares to watch

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 Elmo Software. The Motley Fool Australia has recommended Elmo Software. 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 ASX tech star ELMO Software delivers strong growth in FY 2020 despite the pandemic appeared first on Motley Fool Australia.

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The Afterpay Ltd (ASX: APT) share price has been one of the great gravity defying shares of FY20. Although not the first buy now, pay later (BNPL) company in the world, Afterpay has definitely done it very well. It is head and shoulders above any Australian rivals, and is already starting to see early success in foreign markets, particularly the US.

However, The Australian reported yesterday on an unlisted start up called Limepay, which is already seeking to disrupt the BNPL business model. Limepay allows merchants to integrate an online payments platform with their own branding, and to add their own BNPL functionality if they wish.

So, what does this mean for the future of the Afterpay share price?

The battle of the business models

The secret to the Afterpay share price miracle has been a business model where supposedly everybody wins. Consumers with limited discretionary funds can purchase items using no interest instalments, merchants see an increase in sales and pay a small 3–6% fee. Seems like a good thing all round, doesn’t it?

Limepay has a counter argument, and it may be right. First, vendors get it. The BNPL wave of short term credit has taught everyone that customers want instalment plans. So why should they allow another company to get in between them and their customers? Couldn’t they just do this themselves? That would enable them to maintain a long-term relationship with their customers.

Both the Afterpay website and the Zip Co Ltd (ASX: Z1P) website have an entire catalogue of merchants you can buy from. So they have taken customers as part of a sale in one store, and targeted them with competitors’ products. The longer I think about this, the more I think this could be a threat to the BNPL business model.

The Limepay model is to enable companies to do their own instalment plans, and works with businesses such as the Accor group, which uses the platform for its 40,000 loyalty members.

The Afterpay share price

The Afterpay share price rose by 178.3% over the past year. This is despite bushfires, a pandemic and a lockdown. At this price, the company has a market valuation greater than Santos Ltd (ASX: STO) and Crown Resorts Ltd (ASX: CWN) combined. Nevertheless, there is some justification for this.

Afterpay is the clear leader in Australia. In overseas expansion, its UK subsidiary, Clearpay, already has over 1 million active shoppers. Similarly, Afterpay announced it has 5 million active shoppers in the US, and a total consumer count of approximately 9 million. Across the entire business the company has reported 9.9 million active shoppers for FY20. 

Lastly, there was the recent stake purchased by Tencent Holdings Ltd, which holds at least 5%. Tencent is one of the world’s largest companies and operates China’s leading digital payments service, Weixin Pay. Although no specific plans have been disclosed to move into Asian markets, there is a lot of speculation.

So, what has all this growth delivered? In the company’s unaudited release it reported total sales of $11.1 billion in FY20. Sales represent the transactions that have passed through the Afterpay system through whatever means. The company is forecasting a net transaction margin of approximately 2%.

In contrast, Tyro Payments Ltd (ASX: TYR) recently announced the company’s total transactions for FY20, in just Australia, stood at $2o.131 billion. However, the transaction margin in this case is approximately 1%. Tyro is a payments processing company, not a BNPL company. The example is to illustrate the scale of the raw figures.

Foolish takeaway

In summary, I think the Limepay business model is likely to appeal to predominantly large companies that are well branded. For many small-to-medium companies the Afterpay association helps generate sales. However, this is only one of the areas where the Afterpay share price is likely to hit headwinds.

First, a raft of other competitors have already sprung up, such as the Commonwealth Bank of Australia (ASX: CBA)-backed BNPL product, Klarna. The appearance of the Limepay model, as well as the number of BNPL competitors, highlight the low barriers to entry in the space. Second, Afterpay already seems to have roused the ire of regulators in Australia. 

While Afterpay is growing very fast, I see its current share price as totally overvalued. It may reach $100 as forecast by analysts at Morgan Stanley, but I do not believe it is sustainable. For instance, in raw growth alone, it had to expand across 3 continents to achieve a level of transactions other companies have been able to achieve within Australia.

More reading

• ASX 200 drops 0.6% today, Afterpay share price down 7%
• Top brokers pick the latest ASX small cap stocks to buy today
• Which ASX shares will benefit from the second lockdown?
• Afterpay share price sinks 7.5%: Is this a buying opportunity?
• New investors could invest $1,000 into these top ASX shares

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia owns shares of AFTERPAY T 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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The Mirvac Group (ASX: MGR) share price could be trading cheaply right now, in my opinion.

Shares in the Aussie real estate investment trust (REIT) are down 32.3% in 2020, compared to an 11.2% loss for the S&P/ASX 200 Index (ASX: XJO).

So, let’s take a closer look at what’s driving the real estate share lower and why it could potentially be in the buy zone this year.

Why the Mirvac share price is a potential buy

Almost all the Aussie REITs have been hammered lower this year, but Mirvac is looking like a decent relative value buy. 

With a price-to-earnings (P/E) ratio of 8.4, the Mirvac share price is looking cheap compared to its sector peers. Rivals Scentre Group (ASX: SCG) and Stockland Corporation Ltd (ASX: SGP) trade at P/E ratios of 9.7 and 15.0, respectively.

There’s also the question of its market capitalisation versus its book value. Mirvac’s website claims the group manages $18 billion of real estate assets. However, the company’s market capitalisation is just $8.5 billion. That could mean the Aussie REIT is a strong buy given its extensive asset base in 2020.

To be fair, those asset values are probably heading lower thanks to the coronavirus pandemic and subsequent restrictions. However, that would have to be a significant (more than 50%) haircut to get back to $8.5 billion.

What is driving the Mirvac share price lower this year?

Unlike some REITs that have a specific niche, Mirvac is quite a diverse real estate investment group.

The group has built an impressive portfolio comprising its residential, office and industrial, retail and built to rent segments. According to Mirvac’s 1H20 Fact Sheet from 6 February 2020, its office ($7.1 billion) and retail ($3.5 billion) segments dominate the portfolio.

The group’s residential pipeline is strong, with 27,551 lots amounting to $13.9 billion worth of projects.

Clearly, office and retail real estate is not in high demand right now. Many Aussies are working from home and/or restricted from shopping, let alone in large numbers.

The Mirvac share price has been hammered in 2020 as investors have been spooked into selling. Mirvac did report a strong 99.1% occupancy in its February half-year results. While that’s likely to have materially changed thanks to the pandemic, I think it shows that Mirvac is a high-quality real estate manager.

There are certainly big headwinds facing both office and retail real estate right now. Lower foot traffic (retail) and more remote working (office) looks likely to slash demand from tenants in the coming years. However, Mirvac did report a 5.9-year weighted average lease expiry (WALE) in February. The long-term nature of those leases could mean the REIT’s earnings withstand the short-term impacts from the pandemic.

Are there other ASX REITs to buy?

While the Mirvac share price has fallen lower this year, there is still a lot of uncertainty ahead. It’s true that Mirvac and its peers like Scentre and Stockland are heavily invested in office and retail real estate. Most investors aren’t bullish on the sector right now but I do think it’s worth a look given the recent sell-off.

For another ASX REIT in a more in-demand sector, I’d check out National Storage REIT (ASX: NSR) in 2020.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops 0.6% today, Afterpay share price down 7%
• Is the Coles share price still attractive after it surged to a record high today?
• Investor in your 30s? Buy these cheap ASX shares
• Top brokers pick the latest ASX small cap stocks to buy today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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 Why the Mirvac share price is a good relative buy appeared first on Motley Fool Australia.

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The Fortescue Metals Group Limited (ASX: FMG) share price was on form on Tuesday and pushed higher again.

The iron ore producer’s shares climbed over 1% to reach a record high of $15.56.

This latest gain means the Fortescue share price is now up a massive 44% since the start of the year.

As a comparison, the S&P/ASX 200 Index (ASX: XJO) is down 11% over the same period.

Why did the Fortescue share price hit a record high?

Investors were buying Fortescue’s shares on Tuesday after the iron ore price jumped higher again.

The good news for shareholders is that the price of the steel making ingredient has continued its rise overnight. According to CommSec, the spot iron ore price rose a further 0.5% to a lofty US$112.40 a tonne.

The strong rise in the iron ore price this year has been driven by supply disruptions in Brazil and stronger than expected demand in China. The latter is been caused by the Chinese government’s efforts to boost economic growth after the pandemic.

How profitable is Fortescue?

With iron ore prices at these sky high levels, Fortescue’s Pilbara-based operations are now extremely profitable.

For example, during the third quarter, Fortescue shipped 42.3 million tonnes of iron ore at a cost of US$13.27 per wet metric tonne.

And while Fortescue’s iron ore doesn’t command the full spot price due to its lower (but improving) grades, it is still generating material free cash flows.

Is it too late to invest?

While I have a preference for BHP Group Ltd (ASX: BHP) due to its diversified operations and growth opportunities, I still feel Fortescue could be a good option even after its strong rise this year.

Especially if you’re an income investor. Given the strength of its balance sheet and the high level of free cash flow it is generating, I expect Fortescue to reward shareholders with bumper dividends this year and next.  

More reading

• 3 blue chip ASX 200 dividend shares to buy in the next market correction
• Macquarie picks ASX stocks that can deliver positive earnings surprises next month
• Is the gold price too high for investing in ASX gold shares?
• Why the Fortescue share price rallied over 40% to a record high in 2020
• 3 ASX shares with incredible cost moats

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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Woodside Petroleum Limited (ASX: WPL) has announced a multi-billion dollar hit to its asset base after trading on Tuesday. In summary, the company is expected to recognise non-cash, post-tax impairment losses of US$4.37 billion (~$6.2 billion AUD) across most of the company’s assets. Specifically, US$2.76 billion for oil and gas properties and an additional US$1.16 billion for exploration and evaluation assets. Lastly, it includes a post-tax onerous contract provision for the Corpus Christi LNG sale and purchase agreement of US$447 million.

This follows the A$570 million write down announced yesterday by Oil Search Limited (ASX: OSH). In addition, there have been revisions by numerous international oil and gas companies. BP in particular commented that it believed the coronavirus crisis would accelerate the shift away from fossil fuels. However, Woodside has stated that its balance sheet is “not materially impacted” by the impairment. 

Causes of the impairment

The company revealed low oil and natural gas prices caused 80% of the impairment losses. Oil prices have been conservatively assumed up to 2025. Additional contributors are long term demand uncertainty from Covid-19 and increased risk of higher carbon pricing.

Woodside insists that the fundamentals of its business remain strong. In particular, that LNG is part of a decarbonising world and a continuing strong outlook for its core product, natural gas to Asia. The company also spoke of its planned move into hydrogen and ammonia. 

Management commentary

Woodside CEO Peter Coleman said the company is in a strong position to take advantage of opportunities, which will inevitably arise.

“We’ve taken some tough decisions over recent months in response to the COVID-19 pandemic and oversupply in our key markets, but Woodside’s focus remains on cash preservation, capital discipline, and maintaining the strength of our balance sheet. This will ensure we can deliver appropriate returns to shareholders and maintain our investment grade credit rating over the long term.”

“…The unique confluence of events that has unfolded through 2020 will challenge all participants in the global energy sector and we expect to see adjustment of capital allocation priorities by other asset owners as the cycle plays out…”

The company’s forward oil price estimates are for US$44 in FY21 and US$55 in 2022. 

Woodside share price

The Woodside share price is currently trading at a price to earnings ratio of 40.69. This gives the company a valuation of $20.44 billion and a current trailing 12 month dividend yield of 6.37%.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops 0.6% today, Afterpay share price down 7%
• Macquarie picks ASX stocks that can deliver positive earnings surprises next month
• 5 things to watch on the ASX 200 on Tuesday
• 3 ASX shares with incredible cost moats

Motley Fool contributor Daryl Mather 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 Woodside announces a $6.2 billion hit appeared first on Motley Fool Australia.

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As the wealthiest fund manager in Australia, Magellan Financial Group Ltd‘s (ASX: MFG) Hamish Douglass is someone that a lot of investors have time for. And for good reasons too. Magellan has grown to be the largest fund manager in Australia with $95.5 billion in funds under management as of 30 June.

Magellan’s flagship Global Fund (unlisted) has delivered its investors an average of 15.77% per annum over the past 10 years (after fees), which is an exceptional result that most ASX fundies would find out of reach. The Magellan Global Fund has an ASX-listed quasi-equivalent in the Magellan Global Equities Fund (ASX: MGE).

What shares has Magellan been buying?

Magellan has recently disclosed the total holdings of its funds for the end of the financial year. It makes some interesting reading.

For its Global Fund and Global Equities fund, the top 10 shares held are as follows:

1. Microsoft Corporation
2. Tencent Holdings
3. Alibaba Group
4. Alphabet
5. Facebook
6. Reckitt Benckiser Group
7. Starbucks Corporation
8. Novartis AG
9. Crown Castle International Corporation
10. SAP SE

The portfolio’s cash position is sitting at 15% as of 30 June.

For Magellan’s High Conviction Trust, which is an unlisted fund that offers a high conviction, high concentration strategy with ‘8-12 of Magellan’s best ideas’, the holdings are as follows:

1. Microsoft Corporation
2. Alibaba Group
3. Tencent Holdings
4. Alphabet
5. Facebook
6. Starbucks Corporation
7. SAP SE
8. Visa
9. Estee Lauder

The portfolio’s cash position is sitting at 22% as of 30 June.

Magellan also offers an ASX-listed version of this fund as well – the Magellan High Conviction Trust (ASX: MHH).

How is Magellan investing in this uncertain world?

In an interview with the Australian Financial Review (AFR), Hamish Douglass also discusses his conflicting ‘visions for the future’. Douglass told the AFR that he can see 2 possible scenarios for the future of global markets. One is where the world “gets on top of the pandemic”, fiscal and monetary support continue and economies reopen.

The other (you might have guessed already) is a little direr. It involves an uncontained coronavirus with waves of infection and rolling shutdowns and lockdowns, which would, of course, be a terrible development for global markets. Douglass isn’t willing to bet one way or the other but sees both as definite possibilities.

It’s through this prism that we should analyse Magellan’s current portfolio holdings. Douglass tells the AFR that his management team has already removed companies that would be heavily affected by the second scenario. Even though he loves the business models of LVMH (owner of luxury brands like Luis Vitton), brewers Heineken and Anheuser-Busch InBev, and US-based private hospital operator HCA, Douglass sees too mich risk facing these companies to justify an investment in the current environment.

But longtime cornerstone shares like Tencent, Alphabet, and Microsoft remain as they look set to thrive in either scenario.

Foolish takeaway

Even though Douglass and Magellan don’t really invest in ASX-listed shares, I think all Aussie investors would benefit from taking a look at this reputable fund manager’s moves and market outlook. Douglass has got to the position he is in today by getting enough calls right, after all.

More reading

• My ASX share for the week
• 2 easy ASX shares for beginners
• The Afterpay share price among ASX stocks hit by a broker downgrade today
• Why Afterpay, Alumina, Magellan, & Webjet shares are dropping lower
• ASX 200 drops on return of lockdown in Melbourne

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Facebook, and Magellan High Conviction Trust. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Facebook. The Motley Fool Australia has recommended Alphabet (A shares) and Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Magellan’s Douglass names his top shares for an uncertain world appeared first on Motley Fool Australia.

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The second wave of coronavirus through Victoria is understandably weighing heavily on shares such as Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB).

After all, a second wave has the potential to derail Australia’s economic recovery and particularly the recovery of the travel market.

However, not all shares are under pressure because of second wave concerns. In fact, some ASX shares have been propelled to new highs by these concerns.

Here’s why these ASX shares are on a high right now:

Ansell Limited (ASX: ANN)

The Ansell share price hit a record high of $38.32 on Tuesday. Investors have been buying the health and safety products company’s shares this year due to the increasing demand it is experiencing it is during the pandemic. Judging by the rampant buying, investors appear to believe the pandemic will cause a sustained increase in demand for Ansell’s hand and body protection solutions.

Fisher & Paykel Healthcare Corp Ltd (ASX: FPH)

The Fisher & Paykel Healthcare share price has continued its incredible rise and hit a record high of $34.50 yesterday. This stretched the medical device company’s year to date gain to a sizeable 64%. Investors have been fighting to get hold of the company’s shares amid the increasing number of COVID-19 infections globally. Investors appear confident this will lead to growing demand for its ventilators over the coming months and drive further strong growth in FY 2021.

Marley Spoon AG (ASX: MMM)

The Marley Spoon share price hit a new record high of $2.25 on Tuesday. The meal kit delivery company’s shares have been exceptionally strong performers during the last few months after the pandemic led to a surge in demand. In fact, demand has been so strong that Marley Spoon’s first quarter revenue grew 46% on the prior corresponding period to 42.8 million euros. Given that this covered the three months to 31 March 2020, I suspect its second quarter result could be even stronger. Positively, this stronger than planned growth is expected to accelerate its path to profitability.

More reading

• Which ASX shares will benefit from the second lockdown?
• Is the Webjet share price a buy after falling 40% from its June high?
• Why I think the Polynovo share price is a buy right now
• A great ASX dividend share to buy this week
• ASX 200 Weekly Wrap: Rocketing BNPL shares fail to stop ASX 200 slide

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Ansell Ltd. and Flight Centre Travel Group 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.

The post COVID-19 second wave concerns just sent these ASX shares to record highs appeared first on Motley Fool Australia.

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