Author: therawinformant

The REA Group Limited (ASX: REA) share price fell heavily during the early phase of the coronavirus pandemic. However it has rebounded strongly since late March, rising from a low of $65.02 on 23 March to be trading at $105.21 at the time of writing. That’s an impressive gain of 61.8%.

The Australian housing sector has held up surprising well during the coronavirus pandemic, and REA Group has also performed relatively well from a financial perspective, despite challenging market conditions.

So, with that being said, is the REA Group share price in the buy zone right now?

Early signs of recovery in the residential property sector

Australian national housing market indicators have shown signs of improvement since April, according to recent research by Corelogic. The easing of COVID-19 restrictions has seen the reintroduction of open for property inspections and on-site property auctions, which has helped drive property listing volumes back towards pre-COVID-19 levels.

However, Victoria’s second coronavirus lockdown now throws a spanner in the works. Its impact on the national recovery is yet to be factored in, as open for inspections and auctions now appear to be on hold for at least 6 weeks in that state

Solid recent financial performance 

REA Group managed to achieve a solid 1% increase in overall revenues for Q3 FY2020 to $199.8 million, despite all the challenges posed by the coronavirus pandemic.

It also posted earnings before interest, tax, depreciation and amortisation growth of 8%, which I believe is a very strong result considering the challenging environment.

It will be interesting to see how REA Group performed during the fourth quarter. Although market conditions did improve during May and June, the fourth quarter was exposed to the impact of the pandemic for the full 3-month period, unlike the third quarter.

Is the REA Group share price a buy right now?

There’s no doubt that REA Group still has strong headwinds to face over the short-term. While the improvement in the residential housing market during May and June is encouraging, the second lockdown in Victoria will definitely slow down the national housing recovery.

However despite its short-term challenges, I believe that the long-term growth potential for REA Group remains strong, and therefore REA Group is in my buy zone right now. Although the REA Group share price has seen a strong rally since late March, it is still below its pre-COVID-19 level.

While growth in Australia has slowed in a maturing market in recent years, local growth potential remains reasonably strong due to a growing population. I also remain confident that overseas growth potential still remains very strong for REA Group, particularly in Asia. I believe this is likely to drive above average shareholder returns over the next 5 years.

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Motley Fool contributor Phil Harpur owns shares of REA Group Limited. The Motley Fool Australia has recommended REA 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.

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The Catapult Group International Ltd (ASX: CAT) share price will be one to watch on Tuesday after a late announcement on Monday.

What did Catapult announce?

After the market close on Monday, Catapult announced that it has commenced the lifting of its COVID-19 operating cost mitigation measures.

The sports analytics and wearables company revealed that it is able to make the move sooner than planned because the negative impact to its business from the pandemic was less than anticipated.

According to the release, management has been closely monitoring its performance, controlling costs, and managing working capital to ensure it maintained a strong cash position while minimising disruption to the business during a period where sport around the world was put on hold.

These cost measures included implementing furlough leave for staff in some regions, and reducing salaries for others. But as of 13 July 2020, Catapult has begun ending these measures.

The company’s CEO, Will Lopes, commented: “Entering the COVID-19 crisis we took preventative measures anticipating a worst-case scenario impact to our global business. I am glad such impact was less than anticipated and we are able to remove such measures earlier than expected.”

What now?

This news could give the Catapult share price a much-needed lift.

Although its shares have rebounded strongly from their March low, they are still down materially from their 52-week high. Based on Monday’s close price, Catapult’s shares are down 45.5% from their high.

I suspect that investors were expecting the suspension of professional and amateur sports globally to weigh heavily on its performance during the second half. But given its update today, things don’t appear to have been anywhere near as bad as they could have been.

It is also worth noting that approximately 75% of Catapult’s revenue is subscriptions-based, supported by long term contracts and customer relationships. This could arguably mean the Catapult share price weakness in 2020 has been severely overdone.

More reading

• De Grey Mining share price plunges another 13% lower today
• ASX 200 goes up 1%, big 4 ASX banks rise
• Is the REA Group share price in the buy zone?
• 2 ASX shares I would buy for growth and income
• Bubs and 1 other exciting small cap ASX share to buy

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 Catapult Group International Ltd. The Motley Fool Australia has recommended Catapult Group International 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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Over in the United States (US), the distinction between growth shares and dividend income shares is far starker than on our own ASX. Perhaps because they don’t have the same dividend franking system that we enjoy, US shares tend to only start paying a dividend when their growth opportunities begin to narrow.

Apple, for example, only started paying a dividend in 2012 (5 years after the iPhone debuted). Other massive tech companies like Amazon.com, Alphabet (also known as Google) and Facebook still offer no income to their shareholders to this day.

But perhaps fortunately for Aussie investors, no such canyon exists between ‘growth’ shares and ‘dividend’ shares down under. The lure of fully franked dividends is too much for many ASX companies (and their shareholders) to ignore.

So here are 2 ASX share that I believe offer a healthy mix between growth prospects and dividend income potential.

Cleanaway Waste Management Ltd (ASX: CWY) 

On the surface, Cleanaway seems like a pretty boring company. It operates within the rather unappealing waste management sector and basically cleans up our waste and garbage for a crust. But it’s this ‘boring’ nature that makes Cleanaway such an attractive investment opportunity, in my view. No matter our level of societal and commercial sophistication, we’re always going to produce waste of various kinds, through thick and thin, boom and bust.

Waste management used to be a fractured and decentralised market, but Cleanaway has done a phenomenal job of accumulating market share and scale through contracts with local governments all around the country. This has resulted in its share price rising from 70 cents in 2015 to $2.17 at the time of writing.

But Cleanaway has also been quietly growing its dividend payouts as well. Right now, this dividend will net you a yield of 1.80%. Considering Cleanaway has been growing this dividend by an average of 12.13% per annum since 2015, I think it’s a good future dividend bet to make.

WAM Global Ltd (ASX: WGB)

WAM Global is a listed investment company (LIC) that aims to hold a portfolio of undervalued growth shares from around the world (hence the name). It is modelled after WAM Capital Ltd (ASX: WAM), an ASX-focused LIC that has returned an average of 15.7% per annum (after fees and taxes) since its inception in 1999.

Some of the names WAM Global is currently investing in include Tencent Holdings, Costco, Activision Blizzard and HelloFresh. It only started life back in 2018, but since then, WAM Global has already built up a strong track record of dividend payments, the last of which came in at 6 cents per share (annualised).

On current prices, WAM Global shares are offering a dividend yield of 2.58%. Since the last dividend increase came in at 50%, I have high expectations for WAM Global in becoming a dividend heavyweight in the years to come, with plenty of capital growth thrown in.

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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 WAMGLOBAL FPO. 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.

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The ASX offers investors the opportunity to purchase a growing number of exciting small cap shares with strong growth potential.

Here we examine 2 of my top small cap ASX share picks right now: Bubs Australia Ltd (ASX: BUB) and Bigtincan Holdings Ltd (ASX: BTH).

It’s important to keep in mind that small cap ASX shares can experience high share price volatility over the short term. It is therefore advisable only to purchase them as part of a diversified share portfolio.

Bubs

Goat milk producer Bubs has established a very strong position in the Australian market. It has become Australia’s only vertically integrated producer of goat milk formula, and has been a star performer in terms of revenue growth throughout the coronavirus pandemic.

Bubs delivered a massive 67% increase in revenue to $19.7 million during Q3 FY20 to 31 March 2020, compared to the prior corresponding period. In addition, sales have now pleasingly risen to a point where Bubs is generating positive operating cashflow. This is a significant milestone for a small cap ASX share.

Bubs has now shifted its focus to the massive Asian market – a strategy that is already starting to see results. The company’s Chinese revenues soared 104% higher in the third quarter of FY 2020. Infant formula scandals in China have seen a preference for Australian made products, due to the perception of higher safety and higher quality. In addition, the rising demand for Chinese e-commerce platforms such as JD.com and Alibaba’s TMall is enabling a large and growing number of buyers and sellers to connect with each other.

I believe that Bubs’ Asian growth strategy positions the company well for strong growth over the next 2 to 3 years.

Bigtincan

Small cap technology ASX share Bigtincan operates in an IT software niche commonly referred to as ‘sales enablement’.

Bigtincan’s financial performance continues to be strong. It posted annualised recurring revenue (ARR) of $32.4 million for the first half of FY20, which was a massive 55% increase on the prior corresponding period. Bigtincan also reported a 2% increase in its customer retention rate to 89%.

The Bigtincan share price was hit hard in the early phase of the coronavirus pandemic, up until late March. It fell by more than 70% during that time. Since then, Bigtincan has regained over two-thirds of those share price losses, and is currently trading at $0.83.

Bigtincan continues to win new deals in its quest for further expansion of its customer base. Earlier this month, Bigtincan announced the signing of a major new customer contract with global beverage giant Red Bull.

Despite not yet becoming cash flow positive, I am optimistic about Bigtincan’s long-term future, driven by the fast-growing sales enablement market.

More reading

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Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia has recommended BIGTINCAN 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 Star Entertainment Group Ltd (ASX: SGR) share price rallied 7.8% in early trade today. This was after the company announced the Queensland Government has ended negotiations surrounding the licensing of a second Gold Coast casino. This came before another announcement surrounding COVID-19 that caused the share price to give back its earlier gains.  

Star is an Australian gambling and entertainment company. It owns The Star Sydney and Gold Coast as well as the Treasury Brisbane. It also acquired the Sheraton Grand Mirage in a joint venture and manages the Convention and Exhibition Centre for the Queensland government. It was formerly known as Echo Entertainment Group. 

End of negotiations

Star Entertainment made an announcement to the ASX prior to this morning’s market open. It advised that the company and the Queensland Government have mutually agreed to end negotiations regarding a second Gold Coast casino licence. Naturally, the company welcomed the decision made by the government. 

The state Tourism Minister, Kate Jones said: “Global market conditions are clearly impacting investment at present and I can confirm that this government has no intention of reviving the market process for a new integrated resort – including a second casino – on the Gold Coast”. The Star Entertainment share price climbed as high as $2.91 before the second announcement came around lunch time.

COVID-19 update

Star Entertainment’s second announcement of the day reported that a patron who visited The Star Sydney on Saturday 4 July has returned a positive test for coronavirus. As a result, the group is working with the relevant authorities and conducting contact tracing which includes staff members. The infection happened soon after the next stage of re-opening at the start of this month. 

With the recent easing of restrictions, attendances at the group’s casinos have increased and trading performance has understandably improved. However, the re-openings are under strict government controls regarding social distancing and the number of patrons. Although the rally in the Star Entertainment share price had already peaked by the time of the second announcement, the bad news accelerated the downward trend.

Foolish takeaway

The Queensland Government’s decision to end negotiations is definitely positive news for The Star Entertainment Group. However, the recent coronavirus case in its Sydney casino has had a negative impact overall on its share price today. The Star Entertainment share price closed at $2.68 which represents a 0.74% fall for the day. 

Additionally, the group’s share price has been hit hard by coronavirus restrictions, falling nearly 35% over the past 12 months. 

With the risks of a second wave of the pandemic and tougher restrictions still looming large, it might not be the end of the rollercoaster ride just yet for the Star Entertainment share price. 

More reading

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Motley Fool contributor Matthew Donald 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 Why the Star Entertainment share price has been on a rollercoaster today appeared first on Motley Fool Australia.

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They might be multi-billion companies now, but that wasn’t always the case for Afterpay Ltd (ASX: APT) and Appen Ltd (ASX: APX).

Just a few years ago they were small cap ASX shares flying under the radar of most investors. Anyone that invested in their shares at that point and held onto them today, will have made a small fortune.

With that in mind, I thought I would pick out two small cap ASX shares which I feel could be future stars. Here’s why I think they should be on your watchlists right now:

ELMO Software Ltd (ASX: ELO)

The first small cap ASX tech share to watch is this cloud-based human resources and payroll software company. ELMO provides users with a unified platform that streamlines processes such as recruitment, on-boarding, learning, and payroll.

It has a $2.4 billion market opportunity in the ANZ region and the potential to expand globally in the future thanks to its platform being jurisdiction agnostic. One market the company has its eyes on is the UK, which it estimates to be worth ~$6.8 billion.

Whispir (ASX: WSP)

Another small cap ASX share to add to your watchlist is Whispir. It is a software-as-a-service communications company which provides an industry-leading software platform. This platform allows users to deliver actionable two-way interactions (SMS, voice messages, email) at scale using automated multi-channel communication workflows.

During the first half of FY 2020, Whispir’s annualised recurring revenue grew by an impressive 22% to $36.7 million. The good news is that since then, the pandemic has accelerated demand for its platform due to the work from home initiative. This looks likely to lead to Whispir delivering an even stronger full year result in August.

More reading

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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’s parent company Motley Fool Holdings Inc. owns shares of Whispir Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended Elmo Software and Whispir 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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