Jul.12 — Hong Kong Legislative Council Member and Civic Party Leader Alvin Yeung discusses the voter turnout for the opposition party primaries in Hong Kong amid the coronavirus pandemic and why the democratic candidates are concerned over the upcoming election in September. He speaks on “Bloomberg Daybreak: Asia.”
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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is following the lead of U.S. markets and pushing notably higher. At the time of writing the benchmark index is up 1% to 5,979.2 points.
Four shares that have failed to follow the market higher today are listed below. Here’s why they are tumbling lower:
The Domain Holdings Australia Ltd (ASX: DHG) share price has continued its slide and is down almost 4% to $3.03. Investors continue to sell the property listings company’s shares amid concerns its performance could be negatively impacted by the spike in coronavirus cases in Victoria. Domain is understood to have a strong presence in the Melbourne market.
The OceanaGold Corp (ASX: OGC) share price has crashed 7% lower to $3.25. The catalyst for this was an announcement by the gold miner which reveals that the Philippines Court of Appeals has denied its application for an injunction for its Didipio operation. OceanaGold was hoping for an injunction to allow its operations to continue while it challenges an order to restrain activities at the site.
The Praemium Ltd (ASX: PPS) share price is down 6% to 44.5 cents following the release of its fourth quarter update. According to the release, global platform funds under administration reached $8.9 billion at the end of the quarter. This was an increase of 8% and driven by net inflows of $459 million and positive market movements of $400 million.
The TechnologyOne Ltd (ASX: TNE) share price has dropped 5% to $8.31. Investors have been selling the enterprise software company’s shares after Hong Kong research firm GMT Research alleged that it is using accounting tricks to pull forward revenue and profits. TechnologyOne has responded by advising that the claims GMT Research has made are false and misleading. It intends to refer the matter to ASIC.
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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 Praemium Limited. The Motley Fool Australia has recommended Praemium Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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The Fortescue Metals Group Limited (ASX: FMG) share price has rocketed 38.15% higher in 2020 (at the time of writing). On paper, that’s a significant outperformance compared to the S&P/ASX 200 Index (ASX: XJO), which has fallen 12.09% lower this year.
But how does the Fortescue share price stack up against its fellow Aussie iron ore miners?
The first thing about relative valuation is defining an appropriate peer group. According to the Australian Department of Industry, Fortescue is part of the ‘Big 4’ producers alongside BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO) and Brazil-based Vale.
That means BHP and Rio are probably decent comparisons for the Fortescue share price. I’ve whipped up a quick table of some key metrics to compare the Aussie iron ore miners right now.
| Fortescue | BHP | Rio Tinto | |
| Market Capitalisation | A$46.09 billion | A$172.61 billion | A$36.71 billion |
| Net Assets (Feb 2020) | US$12.5 billion | US$52.4 billion | US$45.2 billion |
| YTD share price change | +38.15% | -7.56% | -3.3% |
| P/E ratio | 6.45 | 13.76 | 14.12 |
| Dividend yield | 6.68% p.a. | 5.81% p.a. | 5.75% p.a. |
Data source: Google Finance, Table: Author’s own
Based on the above table, it’s easy to see that Fortescue has a couple of things going for it.
While BHP and Rio shares have slumped in 2020, the Fortescue share price is up 38.15% to $14.95 per share at the time of writing.
That’s a remarkable recovery, given it was hammered 36.3% in the March bear market from its January 2020 all-time high.
One big factor was the Aussie iron ore miner’s strong quarterly result in April. That announcement was highlighted by record third-quarter iron ore shipments of 42.3 million tonnes, up 10% year on year.
However, Fortescue is still trading at a lower P/E ratio than both BHP and Rio. That could mean the Fortescue share price is a good buy right now, but where is it headed in 2020?
I think the technical environment remains quite strong for the Aussie iron ore miners. Global iron ore prices have surged in recent months, which bodes well for the August earnings season.
There’s also the potential for an Aussie infrastructure boom to boost demand for steel further in 2020.
There are certainly some potential headwinds looming. Frosty relations with China (a major iron ore importer) and a global economic slowdown are two of those.
The Fortescue share price is also approaching its all-time high of $15.25. That could mean it’s a risky buy near the top of its trading range.
Personally, I think for a P/E ratio of 6.4 it could be a steal. However, I’ll be waiting until the group’s August earnings result before buying in.
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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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This year has been a bit of a mixed bag for ASX healthcare companies. Many have seen their share prices surge higher as investors sought out the safety of defensive shares in the face of extreme economic uncertainty.
The share price of respiratory disease specialist Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) has skyrocketed almost 60% higher this year, while shares in US-based competitor ResMed Inc (ASX: RMD) are also up around 30%.
But other big-name companies have struggled to ignite the market. Despite massive swings in its share price over recent months, leading biotech company CSL Limited (ASX: CSL) has only managed gains of a little over 2% so far this year. And Australian healthcare giant Cochlear Limited (ASX: COH) was so adversely impacted by the coronavirus pandemic that it had to withdraw its FY20 earnings guidance back in March.
In a trading update to the market released in May, Cochlear reported that sales revenues for the month of April had declined by 60% versus April 2019. The massive decline was due mostly to many countries postponing elective surgeries as they increased hospital capacity for coronavirus patients.
Whether or not sales will bounce back in future months as countries control the spread of COVID-19 will remain to be seen, but the market doesn’t seem too confident. The Cochlear share price is down over 15% so far this year – and that’s despite it recovering 23% since bottoming out at a 52-week low price of $154.6 in late March.
In the face of such extreme volatility and uncertainty, it’s a surprise that more investors haven’t flocked to Polynovo Limited (ASX: PNV), in my opinion. Polynovo is a junior healthcare company with a focus on biodegradable medical devices that aid in skin tissue repair. Its flagship medical technology is called NovoSorb, a synthetic polymer matrix that clinicians can use to treat serious burn and skin trauma patients.
Polynovo had long stated that, despite the logistical difficulties faced by its sales team due to COVID-19 travel restrictions, it hadn’t seen any adverse financial impacts from the pandemic. In an update released to the market on Friday, Polynovo reported record high monthly sales in the US in June, plus the company’s first sales in the UK. Sales for the June quarter increased by 33% over the previous quarter, and the company reiterated its FY20 sales guidance for sales growth of at least 100% over FY19.
And yet, on the day of that announcement, Polynovo shares still slid 0.41% lower to $2.43. At today’s price of $2.39, the Polynovo share price is 27% lower than the 52-week high of $3.285 it reached in February, despite the business’ continued underlying sales growth.
The growth in its sales numbers mean that Polynovo is probably in a stronger financial position now than it was prior to the coronavirus crisis. Plus, it has proven that it can outperform bigger players in the healthcare sector, even in a crisis.
At these prices, I would suggest that Polynovo offers great value for new investors, and I think it is in a great position to deliver sustained growth over the longer-term.
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Rhys Brock owns shares of Cochlear Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., and POLYNOVO FPO. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed 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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The West African Resources Ltd (ASX: WAF) share price has soared 141.86% in 2020, going from $0.43 at the beginning of January to close last week at $1.04 per share.
West African Resources has reached a number of milestones during 2020 which have supported a rising share price.
In the March quarter, West African Resources completed construction of its Sanbrado gold project 10 weeks ahead of schedule and US$20 million under budget. Also during the March quarter, the company poured its first gold at the Sanbrado project.
In April, West Africa Resources acquired the 1.1 million ounce Toega gold deposit from B2Gold for US$45 million. The deposit is located within 14km of the Sanbrado project.
At its AGM in May, the company reported that it was on track to produce 300,000 ounces of gold in its first full year of production at the Sanbrado project at a cost of less than US$500 per ounce. It also announced that it had a production target of 217,000 ounces per year in its first 5 years of production at a cost of less than US$600 per ounce.
In the company’s production update for June, it announced that it had processed 937,108 tonnes at 1.46 grams per tonne gold in the year to June 30. It had recovered gold at 92% with 40,458 ounces recovered. It had cash and gold on hand of US$65.6 million compared to US$57.6 million at the end of the March quarter. Capital expenditure in the June quarter was US$19.3 million, down from US$25.2 million in the first quarter of the year.
The company is set to begin exploration at its Toega project in 2020.
West African Resources is a gold production and exploration company with projects in Burkina Faso, West Africa. It is currently producing gold at its Sanbrado project.
The company estimates that it has a total of 3,088,000 ounces of gold at the Sanbrado gold project and 1,130,o00 ounces of gold at its Toega project.
The West African Resources share price is up 209% from its 52-week low of $0.33 cents, and up 183% since this time last year.
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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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The Afterpay Ltd (ASX: APT) share price is pushing higher again on Monday.
At the time of writing the payments company’s shares are up 1.5% to $73.40.
While I don’t think the Afterpay share price run is over, one leading broker feels its shares may have now peaked.
According to a note out of Goldman Sachs, its analysts have retained their neutral rating and lifted the price target on Afterpay’s shares by 172% to $70.15. This price target implies potential downside of 4.4% for its shares.
The broker has lifted its estimates for Afterpay following its stronger than expected performance in the fourth quarter and FY 2020.
For FY 2020, Afterpay expects to report underlying sales of $11.1 billion from its 9.9 million active customers. This was materially more than Goldman Sachs was expecting.
In respect to its valuation, Goldman explained: “We move to a Fundamental valuation (70% weighting) driven by a DCF valuation of A$63.95 (WACC 8.9%, TGR 2.5%) while our M&A valuation remains a 30% weighting (A$84.75).”
“Our 12m target price moves to A$70.15 (from A$25.75). As the implied downside is 3% we make no change to our Neutral rating. Note our forecasts do not capture any further international markets or M&A, both of which were indicated to be a focus for APT.”
Although it feels its shares are fully valued now, it certainly does have a bullish view on Afterpay’s long term prospects.
The note reveals that Goldman Sachs is forecasting Afterpay to achieve $151 billion in underlying sales by FY 2030.
This is expected to be driven by structural tailwinds such as the acceleration in migration to ecommerce, the decline in the use of cash, and potential changes in consumer debt preferences.
All in all, it expects this to lead to Afterpay having 47.8 million active customers across its three key regions transacting 20x per annum by 2030. The latter compares to ~14.5x per annum by its ANZ customers in FY 2020, which is up 22% year-on-year.
While better entry points may present themselves in the coming months, I would still be a buyer of Afterpay’s shares today.
I think the company is well on its way to becoming a real force in the payments industry, which could make it a great buy and hold option. Though, given the premium its shares trade at, I would limit an investment to just a small part of your portfolio.
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As someone who prefers not to invest in banks, my options for good ASX dividend shares are somewhat limited. Personally, I feel the best way to get a good income portfolio is to buy great dividend paying companies when they are selling cheap.
For instance, I bought Fortescue Metals Group Limited (ASX: FMG) shares in early April when they had a ~9.7% trailing 12-month (TTM) dividend yield. Today, the same shares have a 6.73% TTM dividend yield. In fact, many large-cap ASX dividend shares have returned to pre-pandemic valuations or higher.
Speaking in broad terms, however, there are two sectors in which share prices are yet to bounce back to those seen prior to the coronavirus crisis. First, the travel sector. Travel shares like Flight Centre Travel Group Ltd (ASX: FLT) and Regional Express Holdings Ltd (ASX: REX), for example, offer great dividend yields due to their current low share prices. Nevertheless, the entire sector is far too risky for me at the moment.
The second sector in which share prices remain deflated is real estate. In this instance, I think there are plenty of bargains around. You just need to exercise a bit of caution.
Offices have been one of the more robust real estate asset classes during the pandemic, unlike housing or retail.
Residential housing depends on consumer confidence and, in recent months, this has begun to wane. In particular, a report from the Australian Bureau of Statistics (ABS) shows that new approvals for total dwellings was down by 16.4% compared to April.
Likewise, in my view, retail real estate investment trusts (REITs) also represent a little too much uncertainty in the current market. GPT Group (ASX: GPT), for example, had 8 of the company’s retail assets revalued during the pandemic. It resulted in a reduction in value of $476.7 million, or approximately 8.8% compared to the 31 December 2019 book value.
With ASX dividend shares that focus on office buildings, however, it is a little different. Offices are generally leased on a long-term basis, and often to large corporate clients. The important key performance indicator here is the weighted average lease expiry, or WALE. The WALE is a guide to the average contract duration.
On that note, let’s take a look at Centuria Office REIT. This is currently my top pick among ASX dividend shares and one I will most likely buy into over the next week or so. Centuria Office is Australia’s largest ASX-listed pure play office REIT. The company has an occupancy of 99.2%, which I find impressive, and a WALE of 5.1 years. In addition, it manages a portfolio of high quality office assets worth $2.1 billion.
At the time of writing, the market capitalisation of Centuria Office is $1.01 billion; just over half the value of its total office assets. In fact, the company’s net tangible asset (NTA) value per share is $2.57, which is ~31% higher than the share price at the time of writing. Most importantly, at its current price, the company has a TTM dividend yield of 9.06%.
As a mark of how resilient office real estate has been during the pandemic, Centuria had 57% of its portfolio (by value) externally valued, with the remainder evaluated by company directors. The result was a reduction in value of only 1.1%. In addition, from April 2020 to June 2020 rent collection has averaged 89% despite the fact the company continues to work with tenants adversely impacted by COVID-19.
I think Centuria Office is one of the most attractive, ASX dividend shares available today. It has shown robust performance during the pandemic, yet remains at a share price ~31% lower than the company’s NTA per share. Lastly, it has a great TTM dividend yield of 9.06%.
As such, I’m likely to buy into this company in the near term. I expect it to deliver solid capital growth and a decent income over the next 2 – 3 years.
We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.
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Motley Fool contributor Daryl Mather owns shares of Fortescue Metals Group Limited. The Motley Fool Australia has recommended 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.
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