Author: therawinformant

If you have space in your portfolio to add a few growth shares, then I think the two listed below could be great options.

I believe these growth shares can deliver above-average earnings growth over the next few years and potentially strong returns for investors.

Here’s why I would invest $2,000 across their shares:

Bubs Australia Ltd (ASX: BUB)

Bubs is a goat’s milk-focused infant formula and baby food company which I believe has enormous potential. This is due to the expansion of its footprint across supermarkets and pharmacies in Australia and its growing presence on Chinese ecommerce platforms. Another positive is its recent expansion into cow’s milk infant formula, which could be a big boost to its earnings growth in FY 2021. But perhaps the biggest positive of all is that after years of cash burn, Bubs now appears to have reached a scale that makes its operations profitable. This should mean the days of dilution from capital raisings are now over.

Pushpay Holdings Group Ltd (ASX: PPH)

Pushpay is a donor management platform provider for the faith sector. It has been growing at an explosive rate in recent years thanks to increasing demand for its platform in a church market that is rapidly embracing digital transformation. And although the Pushpay share price has been a very strong performer this year, I don’t believe it is too late to invest. After all, the company still has a very long runway for growth. Management is aiming to capture a 50% share of the medium to large church market in the future. This represents a US$1 billion revenue opportunity, which is many times FY 2020’s revenue of US$127.5 million. Given the quality of its offering, I believe there is a strong probability of the company achieving its target.

More reading

• Why the Pushpay share price soared 19% in June
• 3 ASX shares I’d invest $1,000 into right now
• Are these the best ASX tech shares to buy for market beating returns?
• How to beat the market with 2 kids and no time
• 3 ASX shares I’d buy with $6,000 today

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 PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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Australia and New Zealand Banking Group (ASX: ANZ) has said that there is going to be another wave of business collapses in Victoria.

ANZ head of retail and business banking Mark Hand thinks the new lockdown will cause more loan deferrals and business failures according to the Australian Financial Review.

Before COVID-19 came along Victoria was one of the most popular states for migration, which has currently stopped. Mr Hand said that Victoria’s outlook was already not as good as other states. He thinks Melbourne will have higher defaults than the rest of the country.

Is there hope for Victorian businesses?

APRA recently said that banks can give borrowers an extension for the loan payment holidays for another four months. This could be very important for the economy because the end of September was looming where both jobkeeper is scheduled to end and the payment holidays were due to stop.

However, Mr Hand said that some businesses may have to face reality and liquidate their asset or close the business rather than wait another four months. It seems that ANZ will only be lenient with businesses where it seems there is genuinely light at the end of the tunnel.

According to ANZ data, around two thirds of customers who have deferred their loan repayments should be able to make some form of repayment. However, he also said: “Some of that will be driven by customers who look at their circumstances and say it’s time to do something different. I would expect to see a rise in distressed loans and loan defaults at the back end of the year.”

He’s particularly worried about Melbourne’s restaurants, bars and cafes which won’t see the required level of earnings for some time yet.

The OECD has previously warned that Australia’s economy could fall by 6.3% in 2020 if there’s a second wave of COVID-19 and lockdowns. Hopefully the rest of the country can stay COVID-19 free until a healthcare solution is created.

What does this mean for ASX banks?

As the second biggest city in Australia, Melbourne is an important part of the economy. It’s understandable that investors may lower their expectations for earnings over the rest of 2020. The ANZ share price has dropped 5% since 2 July 2020. Over that same time period the National Australia Bank Ltd (ASX: NAB) share price is down 5%, the Commonwealth Bank of Australia (ASX: CBA) share price is down 0.5% and the Westpac Banking Corp (ASX: WBC) share price is down 5%.

With the rest of the country in a good COVID-19 position, national businesses like ASX banks don’t face the same level of impacts as the initial nationwide lockdown.

If COVID-19 has sneaked into NSW from Victoria over the past fortnight then that would be a different (and worse) situation.

I think the US situation could cause the biggest worry for markets over the next few weeks. There are rising COVID-19 numbers across a number of economically important American states, the country just set a new one-day record of over 60,000 cases.  

If ASX shares do sell off over the next few weeks due to domestic or international reasons then I plan to buy more shares. In hindsight, the March 2020 selloff was a clear, cheap buying opportunity. I think lower share prices would be another buy signal with how low interest rates are these days. The RBA interest rate is just 0.25% at the moment, and could be that low for years!

Some of the share ideas I’m interested in at the moment are: Brickworks Limited (ASX: BKW), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Bubs Australia Ltd (ASX: BUB), PM Capital Global Opportunities Fund Ltd (ASX: PGF) and MFF Capital Investments Ltd (ASX: MFF).

More reading

• Why one top fund manager likes NAB shares, despite preferring other sectors
• Why I would buy CBA and this high yield ASX dividend share
• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• The hidden risk to early superannuation withdrawal that no one told you about
• The embattled ASX 200 stocks that could deliver a dividend surprise

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund Ltd, PM Capital Global Opportunities Fund Ltd, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, BUBS AUST FPO, and Washington H. Soul Pattinson and Company 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 Openpay Group Ltd (ASX:OPY) share price has latched onto the momentum of the buy now, pay later (BNPL) sector and soared more than 10% higher in today’s trade. It has since pulled back to be up 3.93% to $2.91 at the time of writing.

How much higher can the Openpay share price go and is it too late to buy?

What is fuelling the Openpay share price?

Following today’s price action, the Openpay share price has surged more than 38% since the start of July. Considering the company has not released any price-sensitive news within that time, it’s fair to assume that investors and traders are jumping on Openpay shares as the BNPL sector soars.

Fuelled by the raging Afterpay Ltd (ASX:APT) share price, other companies in the BNPL sector have performed strongly over the past few weeks. Zip Co Ltd (ASX:Z1P) and Sezzle Inc (ASX:SZL) are also both trading at all-time highs after seeing monster share price gains recently.

What does Openpay do?

Openpay is yet another payment solutions company that services the fast-growing BNPL sector. In comparison with other operators, Openpay offers larger payment plans, financing purchases up to $20,000, and offers payment ranges between 2 and 24 months with no interest.

Openpay services a range of specialised industries such as automotive, healthcare and home improvements, boasting notable brands such as UltraTune, Total Tools and Bunnings. The company services customers in Australia, the UK and New Zealand.

How has Openpay performed during the pandemic?

In early March, Openpay released a response to the COVID-19 pandemic, assuring investors that the company remained in a strong financial position with $45.7 million cash on hand. The company also highlighted that its established online presence and strong technology will allow it to adapt to increased demands in online trading.

The company completed a $33.7 million capital raise in early June. According to Openpay’s management, proceeds from the placement will be used to support the company’s future growth strategies. These include growing the company’s presence in its core markets, investing in product development and facilitating strategic growth partnerships.

Is it too late to buy shares in Openpay?

Apart from surging in the past month, the Openpay share price has rocketed more than 800% since late March. In my opinion, the short-term trajectory of the price action is unsustainable. Therefore, I can’t advocate buying shares in Openpay after such a phenomenal rally.

I think a more prudent strategy would be to wait until the August reporting season to get a better idea of how companies in the BNPL have fared during the pandemic and how they’re positioned for the future.  

More reading

• Why Kogan, Netwealth, Silver Lake, & Zip Co shares are storming higher
• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• These ASX fintech shares are tackling COVID-19 head on
• Sezzle share price halted as it undertakes $86.3 million capital raising
• Zip share price surges 30% in a week. Are we calling bubble yet?

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended 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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In the mid cap side of the Australian share market, I believe there are a number of shares that have the potential to become much larger companies in the future.

Two mid cap shares that tick a lot of boxes for me are listed below. Here’s why I think they could grow significantly over the next decade:

Kogan.com Ltd (ASX: KGN)

I think that this ecommerce company could be a great long-term investment. Over the last few years it has been benefiting greatly from the structural change that is happening in the retail industry. Pleasingly for the company and its shareholders, this change has been accelerated by the pandemic. In fact, Adobe estimates that the pandemic has accelerated ecommerce growth by 4 to 6 years. This looks set to underpin exceptionally strong earnings growth for Kogan in FY 2020 and FY 2021. Which could yet be boosted further inorganically. Last month the company announced a $115 million capital raising (which was later revised to $120 million). It intends to use the funds to acquire businesses that will add value and drive further growth.

Megaport Ltd (ASX: MP1)

Another exciting tech share to look at is Megaport. It is a provider of elastic interconnection services across data centres globally. This service allows its users to increase and decrease their available bandwidth in response to their own demand requirements. The benefit of this is that it means they don’t need to be tied to fixed service levels on long-term and expensive contracts. Instead, they can just use what they need, when they need it. Thanks to the quality of its service and the cloud computing boom, demand for its services has been growing very strongly and has driven further strong revenue growth in FY 2020. Pleasingly, with the migration to the cloud expected to accelerate because of the pandemic, Megaport appears well-placed to continue its growth for many years to come.

More reading

• Why Kogan, Netwealth, Silver Lake, & Zip Co shares are storming higher
• A surprise ASX share that’s doubled since March
• Why the Kogan share price soared 38% in June
• Kogan share price hits record high after upsizing share purchase plan
• Why Coles, Kogan, Northern Star, & Splitit are charging higher

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 Kogan.com ltd and MEGAPORT FPO. The Motley Fool Australia has recommended Kogan.com ltd and MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you are looking to build on your share portfolio this month, I believe that Vocus Group Ltd (ASX: VOC) and Nearmap Ltd (ASX: NEA) are two ASX shares that are well worth considering.

Here’s why both these companies are in my buy zone right now:

Vocus

Local Australian telco, Vocus specialises in providing fibre and networking solutions. Its services also include fixed broadband, data centre services and Unified Communications. Vocus has a small presence in the residential sector for fixed broadband. However, it mainly targets the enterprise, government, wholesale and small business markets.

Vocus’ retail division has struggled in recent years due to the tight margins associated with wholesaling fixed broadband services under Australia’s National Broadband Network. However, I believe a three-year turnaround strategy is positioning Vocus well for solid, long-term growth. The telco is now beyond the mid-point of this growth strategy.

Last month, Vocus reiterated its FY 2020 guidance with EBITDA anticipated to be in the range of $359 million to $369 million. On another positive note, the company anticipates that its core Network Services business will see EBITDA growth of 10% during FY 2020.

Vocus is also well positioned to capitalise on the rollout of 5G services over the next few years. This is due to its market position as a specialist fibre and network services provider. This, I believe, will further strengthen Vocus’ growth potential over the next few years.

The Vocus share price has risen more than 60% from its March low and is currently trading at $2.96. This is still considerably less than its pre-pandemic high of $3.86.

Nearmap

Another company I think could make a good addition to your ASX share portfolio this month is Nearmap.

Nearmap is an Australian aerial imagery and specialist location data company. It provides geospatial map technology for enterprise and government customers across Australia, New Zealand, the United States, and Canada. It has been growing strongly over the past few years, especially in the US market.

Nearmap’s customer base, in particular, continues to climb higher. This ASX tech share is now anticipating closing FY 2020 with an actual cash value (ACV) portfolio of between $103 – $107 million, on a constant currency basis. Customer churn for Nearmap is now below 10% on a 12-month rolling basis. This is a pleasing reduction from the 11.5% that it reported at the end of 2019.

I believe there is strong growth potential for Nearmap over the next three to five years, especially in the massive US market.

This growth will be assisted by the recent launch its new artificial intelligence (AI) product, which targets a range of industries including insurance, utility and local government. The Nearmap share price is currently trading at $2.37 which is 175% up from its March low but well below the highs of over $3 seen last year. 

More reading

• Brokers name 3 ASX 200 shares to buy today
• 2 five-star ASX shares for strong long-term growth
• These were the 5 best performing ASX shares last week
• ASX 200 Weekly Wrap: Afterpay, Tech push ASX 200 back above 6,000
• These are 10 most shorted shares on the ASX

Phil Harpur owns shares of Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap 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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If you’re not happy with the interest rates on offer with savings accounts and term deposits, then you might want to consider buying one of the dividend shares listed below.

I estimate that these dividend shares offer FY 2021 yields that are among the most generous on the market. Here’s why I like them:

Commonwealth Bank of Australia (ASX: CBA)

If you don’t have meaningful exposure to the banking sector, then I think it would be well worth considering an investment in Commonwealth Bank. Especially given how the banking giant’s shares are trading 22% lower than their 52-week high. While a decline in the CBA share price is certainly not unwarranted, I believe the extent of its decline has been overdone and feel confident that the coronavirus provisions it has made are more than sufficient.

In light of this, while I expect a dividend cut in FY 2021, I don’t believe the cut will be as severe as some expect. I forecast a fully franked dividend in the region of $3.70 per share next year. This would be a generous 5.2% dividend yield based on the current Commonwealth Bank share price.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Another high yield ASX dividend share to consider buying is Sydney Airport. While I wouldn’t necessarily expect a final dividend from the airport operator in the second half of FY 2020, I’m optimistic that the domestic travel market will have recovered enough in 2021 to support a decent dividend payment. Just as long as the situation in Victoria doesn’t escalate and spread into other states.

At present, I estimate that Sydney Airport will pay a dividend in the region of 29 cents per unit next year. Which, based on the latest Sydney Airport share price, represents a 5.4% FY 2021 dividend yield.

More reading

• ASX 200 down 0.2%: Big four banks tumble, Afterpay surges higher again
• The hidden risk to early superannuation withdrawal that no one told you about
• The embattled ASX 200 stocks that could deliver a dividend surprise
• Why Sydney Airport and 2 other ASX shares could surprise this reporting season
• The CBA share price is up 30% since March

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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The Cimic Group Ltd (ASX: CIM) share price has seen little reaction to the announcement of a $2.5 billion mining services contract win, dipping 1.22% to $22.70 per share at the time of writing.

Cimic’s global mining services provider, Thiess, was awarded a 5-year contract extension to continue to provide mining services at the Lake Vermont Coal Mine in Queensland. This will generate $2.5 billion in revenue for Thiess and continues its full-service mining operations including mine planning, coal mining, topsoil and overburden removal, drill and blast, water management and rehabilitation of final landforms. 

What does Cimic do? 

Cimic is in the construction, mining, services, and public private partnerships industries. It works across the lifecycle of assets, infrastructure, and resources projects. The group includes a construction business and mining and mineral processing companies Thiess and Sedgman. It also includes the public private partnerships arm and services specialist, with all divisions supported by an in-house engineering consultancy. 

How has the Cimic share price been performing? 

The Cimic share price took a beating in the March downturn, falling nearly 60% from a February high of $30.93 to just $13. The price bounced back quickly however, and has traded in the range of $22–$28 since April. Last month, Moody’s affirmed the company’s strong investment grade credit rating of Baa2, with a stable outlook. 

Cimic reported a marginal decrease in revenue in the first quarter of 2020, with revenue of $3.3 billion compared to $3.4 billion in 1Q19. It earned net profits of $166 million and reported a gross cash position of $4.5 billion. Cimic was awarded $2.5 billion of new work during the quarter and had work in hand of $36.1 billion. This is equivalent to more than two years’ worth of work and provides strong visibility. 

What is Cimic’s outlook? 

Cimic’s outlook has remained positive in the face of COVID-19. In a market announcement in May, executive chair Marcelino Fernandez Verdes stated:

Our priorities at this time are the continued provision of essential services and critical infrastructure for the communities where we operate. We have kept our projects going and working productively to help support the economy at a time when it’s very much needed.

Looking ahead, governments have announced they will accelerate major social, transport, and infrastructure projects to create jobs and stimulate economic growth. Cimic is in a position to support this demand for critical infrastructure and create long-term value, which could have some impact the Cimic share price moving forward.

More reading

• The Openpay share price is surging today. Is it the next Afterpay?
• 2 exciting ASX tech shares with enormous potential
• Vocus and 1 other ASX share to buy in July
• Why I would buy CBA and this high yield ASX dividend share
• The Treasury Wine share price and this ASX 200 stock are the latest to be hit by broker downgrades today

Motley Fool contributor Kate O’Brien 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 S&P/ASX 200 Index (Index:^AXJO) lost ground in after lunch trade today but the Treasury Wine Estates Ltd (ASX: TWE) share price is hit harder.

The top 200 benchmark dipped 0.3% while shares in the alcoholic drink supplier slumped 4% to $10.52 after one of its biggest supporters downgraded the stock.

UBS cut its recommendation on Treasury Wines to “neutral” from “buy” on the back of management’s dismal trading update.

Downgrades come in threes

The company expects FY20 EBITS (earnings before interest, tax, the agricultural accounting standard SGARA and material items) to range between $530 million and $540 million. This is around 6% below consensus forecasts.

That doesn’t sound like much, but the broker believes there is a chance of a further profit warning for its Americas business.

The broker believes about 60% of the weakness in sales in that region is driven by the COVID-19 pandemic. But Treasury Wine is also losing market share and the industry is in oversupply.

While UBS still believes the stock represents a longer-term opportunity, it acknowledges the lack of near-term catalysts for the stock. The broker’s price target on TWE is cut to $11.80 from $14.80 a share.

Powering down

Meanwhile, the AGL Energy Limited (ASX: AGL) share price is trading flat even as Macquarie Group Ltd (ASX: MQG) downgraded it to “underperform” from “neutral”.

The fact that the electric utility isn’t falling harder may be due to the perceived defensiveness of its business during these highly volatile times.

But AGL may be proving a false sense of security as Macquarie believes its earnings are at risk of falling when customer contracts come up for renewal.

Earnings shocker

Spot electricity prices are significantly lower than the contracted price due to weakening demand from ongoing recession (short-term impact) and the growth of renewables and battery storage (longer-term).

AGL’s expiring contract with Alcoa only adds to its woes. The broker estimates that Alcoa is paying   around $55 to $60 per megawatt hour under the contract and this could drop to circa $40/MWh when it resigns.

That equates to an up to $80 million earnings hit for AGL in FY22 if AGL resigns the aluminium producer as a client.

Macquarie’s 12-month price target on the stock is $15.91 a share.

If you are looking for better priced ASX stocks to buy for FY21, the experts at the Motley Fool have picked some of the favorites for the year ahead.

Click on the link below to find out for free what these stocks are.

More reading

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Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Treasury Wine Estates 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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Looking to expand your ASX share portfolio with quality shares for the long term?

I believe that TPG Telecom Ltd (ASX: TPG), Ramsay Health Care Limited (ASX: RHC) and Bravura Solutions Ltd (ASX: BVS) are all good options.

All three ASX shares have a strong presence in their respective markets, and also have strong long term growth potential.

TPG Telecom

TPG is now Australia’s the second-largest fixed broadband provider after Telstra Corporation Ltd (ASX: TLS). This followed a series of acquisitions dating back to 2011.

TPG has struggled over the past few years from a financial perspective. This is mainly due to due to the lower retail margins it receives from wholesaling services on the National Broadband Network (NBN).

However on the back of TPG’s merger with Vodafone, the telco is now in a much stronger position to compete with its two largest competitors: Telstra and Optus. I believe that the newly merged TPG-Vodafone is well positioned to roll out a competitive 5G offering, on the back of Vodafone’s current network. It is is also well placed to offer a more competitive fixed broadband offering through the NBN.

Ramsay

Ramsay has evolved significantly over the past few decades. It has transitioned from a small Australian hospital operator to become Australia’s largest private healthcare provider. Ramsay now has operations spanning 11 countries globally. Ramsay’s size and market scale provides it with a distinct competitive advantage over its competitors in negotiations with health insurers.

Elective surgeries were significantly impacted during the early phases of the coronavirus pandemic, but are now starting to recommence in some markets. The healthcare provider also recently managed to close a number of important government deals in Australia and the United Kingdom.

I believe that Ramsay is well positioned for strong growth over the next decade, driven by the rising global demand for healthcare services.

Bravura

Bravura is an Australian-based fintech company. It provides mission-critical enterprise software solutions for the wealth management and funds administration industries.

In FY 2019, Bravura’s overall revenue increased strongly by 16% to $257.7 million and its earnings before interest, tax, depreciation and amortisation increased by 27%. This solid result followed on from strong revenue growth since it was founded in 2015.

More recently, Bravura confirmed it has not seen a significant decline in demand during the coronavirus pandemic. It also reaffirmed its earnings guidance for FY 2020 and expects to see growth in net profit after tax in the mid-teens.

I believe that Bravura is well placed for strong growth over the next 5 years, driven by an expanding market presence in its key markets: Australia, New Zealand, the United Kingdom, and South Africa.

More reading

• 3 of the best ASX 50 shares to buy right now
• 3 defensive ASX shares to add to your portfolio
• Why the Telstra share price could be set to soar
• Is the Telstra share price a buy?
• Why PolyNovo and this ASX mid cap share could be future large caps

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

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