Author: therawinformant

The book Killing Fairfax is a great insight into the launch of online classifieds. The far reaching impact of the growth of online classifieds has been the decline in newspaper profitability, as well as the ultimate purchase of Fairfax Media Ltd by Nine Entertainment Co Holdings Ltd (ASX: NEC). As an interested bystander, this has been like watching a slow motion car crash. 

Today, 3 major S&P/ASX 200 Index (INDEXASX: XJO) companies dominate online classified sales. While there remain unlisted competitors, the market giants have a clear lead.

Equipment for sale

Carsales.Com Ltd (ASX: CAR) does exactly what it says – sells cars. This is an area that, by itself, supports a large percentage of classified-style sales. However, the company has also branched into motorbikes, trucks, farm machinery, construction machinery and a range of other areas. The Carsales.com share price remains about 13% down, year to date. At the time of writing it is trading at a price-to-earnings (P/E) ratio of ~25. This is approximately 1 point above the 10-year average.

The 10-year compound annual growth rates (CAGR) for sales, earnings per share, dividend and equity are all over 10%. As a growth company, the return on capital expended has been well above 20% for the past 5 years.

Housing sales

REA Group Ltd (ASX: REA) is the largest of the newspaper-killing online classifieds companies. With a market cap of just over $11 billion it is one of the flagship companies on the ASX 200 and our largest IT company. It is also approximately 10 times larger by market cap than its closest direct competitor Domain Holdings Australia Ltd (ASX: DHG).

Like Carsales.com, REA also benefits from word-of-mouth marketing, and it too has diversified into other online classified areas such as commercial properties. Unlike other classified companies, houses are considered an investment. As such, REA also draws revenues from media and data sources. 

Many real estate related shares were down this week, including REA, due largely to the Q3 results from the Commonwealth Bank of Australia (ASX: CBA). Commonwealth Bank forecast a reduction in housing prices of between 11% and a worst case of 30%. However, I do not think it will impact REA like the 2008 GFC did. The company is paid predominantly for listings, so I believe it is likely to see revenues remain the same or rise as developers look to offload inventory.

Jobs, jobs, jobs

Of all the online classifieds SEEK Limited (ASX: SEK) is likely to see sustained reduction in revenues from the economic downturn. Our present 6.2% unemployment is masked by the role being played by the JobSeeker payments. And while the Australian economy is well placed to rebound from the current crisis. The same cannot be said for the rest of the world. Trade tensions aside, the impact of COVID-19 on the US, Japan, the UK and many other trading partners is likely to manifest in employment figures. 

The Seek share price is down ~23% year to date. Nonetheless it is still trading at a P/E of 39.8. This is a growth expectation that may not reflect the short-term reality.

Foolish takeaway

Of all of the online classifieds companies I like Carsales.com best at present. Its broad diversification in similar sectors will help sustain revenues regardless of economic factors. People sell equipment in both good and bad economies – albeit for vastly different reasons.

The company has been well managed over the long term. It shows solid evidence of continued growth and is currently trading at a reasonable P/E for a definite growth opportunity.

More reading

• 4 ASX 200 shares exposed to a fall in house prices
• Forget term deposits and buy these top ASX dividend shares
• Will these ASX car dealers bounce back after COVID-19?
• Why all ASX investors should avoid this easy mistake in 2020
• The importance of diversifying your ASX portfolio and how you can do it

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited, Nine Entertainment Co. Holdings Limited, REA Group Limited, and SEEK 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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National Australia Bank Ltd (ASX: NAB) is going to check in on borrowers which have loan holidays.

According to reporting by The Australian, NAB is going to start contacting the 80,000 borrowers who applied for a mortgage holiday to check if they can begin making repayments.

Initially these checks were meant to only come in at the three month mark, which is what Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) have agreed to.

What is the bank actually going to check?

Apparently NAB will discuss the current status of the borrower’s loan, what the repayment pause will mean for the plan and what the borrower’s plans are for the next few months during the coronavirus period.

There is a lot of economic pain out there. There’s a reason why huge numbers of people are on jobseeker or jobkeeper.

According to the stats, over the past week banks have approved another 60,000 requests for loan deferrals from customers. That brings the total to 703,000 loans to $211 billion, including business loans.

It would be a good thing for NAB if it can start those loan repayments again in these uncertain times. 

Is the NAB share price a buy?

The NAB share price is down 45% since 21 February 2020. In a few years’ time this price may prove to be cheap. But at this stage it’s very hard to know how much damage NAB is facing over the next 12 months. It was the only bank to pay a dividend out of the big four ASX banks which recently reported. But it is the only bank to do a capital raising so far, at a dilutive discount. It might have been better to defer the dividend like ANZ and Westpac did. 

I don’t like to invest with that much uncertainty when there is a large potential downside. I prefer less ‘risky’ bets, though that’s obviously why NAB shares are down so much to begin with.

More reading

• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• Are rental yields better than dividend yields?
• Leading broker names CBA shares as a sell
• What happens to ASX shares if Australian house prices do fall 30%?
• This is the best ASX big bank stock you can buy right now

Motley Fool contributor Tristan Harrison 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 (ASX: XJO) looks set to continue its positive run on Tuesday after very promising coronavirus vaccine news.

At the time of writing, SPI futures are pointing to 2% or 199 points gain for the benchmark index at the open.

This follows a strong night in Europe and on Wall Street which saw the FTSE jump 4.3%, the DAX rise 5.7%, the Dow Jones gain 3.85%, the S&P 500 climb 3.15%, and the Nasdaq index storm 2.45% higher.

What is the vaccine news?

Investors were piling into the share market on Monday night after American biotechnology company Moderna released phase one trial results for its coronavirus vaccine candidate, mRNA-1273.

Moderna’s 45 person trial included three dose groups of 15 receiving either a 25, 100 or 250 microgram dose. The participants received two doses of the potential vaccine through an intramuscular injection in the upper arm. These were made approximately 28 days apart.

Today’s results revealed that its vaccine produced COVID-19 antibodies in all 45 participants.

Moderna’s Chief Medical Officer, Tal Zaks, M.D., Ph.D., was very pleased with the results.

He said: “These interim Phase 1 data, while early, demonstrate that vaccination with mRNA-1273 elicits an immune response of the magnitude caused by natural infection starting with a dose as low as 25 µg.”

“When combined with the success in preventing viral replication in the lungs of a pre-clinical challenge model at a dose that elicited similar levels of neutralizing antibodies, these data substantiate our belief that mRNA-1273 has the potential to prevent COVID-19 disease and advance our ability to select a dose for pivotal trials.”

Moderna is now aiming to get a phase 3 trial underway in July. If this is successful it could mean a vaccine will be ready much sooner than anyone expected.

The company’s chief executive officer, Stéphane Bancel, said: “With today’s positive interim Phase 1 data and the positive data in the mouse challenge model, the Moderna team continues to focus on moving as fast as safely possible to start our pivotal Phase 3 study in July and, if successful, file a BLA.”

“We are investing to scale up manufacturing so we can maximize the number of doses we can produce to help protect as many people as we can from SARS-CoV-2,” he concluded.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 climbs 1% in positive start to the week
• Why this overlooked ASX 200 stock just got upgraded by 3 leading brokers to “buy”
• Why ASX iron ore miners like BHP aren’t afraid of the China trade war
• 3 top Warren Buffett quotes to start off your week

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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There has been a bit of talk recently of negative interest rates in Australia because of the pandemic.

While I don’t expect the Reserve Bank to go as far as this, it is of course a real possibility. But whatever happens, interest rates are likely to be at ultra low levels for a long time to come.

In light of this, I would suggest investors skip term deposits and savings accounts and look to the share market for income.

Three top dividend shares I would buy today are as follows:

BWP Trust (ASX: BWP)

The first dividend share to consider buying is BWP. It is a real estate investment trust with a focus on warehouses. Most of BWP’s warehouses are leased to hardware giant Bunnings, which is owned by Wesfarmers Ltd (ASX: WES). While relying heavily on a single customer can be risky, it is worth noting that Wesfarmers is also a major shareholder with a ~23.6% stake in BWP. As a result, it is unlikely it will do anything that would negatively impact BWP’s performance and share price. At present I estimate that it offers investors a forward 5.2% yield.

Coles Group Ltd (ASX: COL)

Another dividend share to consider buying is this supermarket giant. I’m a big fan of Coles due to its ability to grow whatever economic conditions it is facing. This has been demonstrated during the pandemic. In addition to this, with Coles aiming to cut costs materially and leverage new technologies, I expect its margins to improve over the next decade and support solid earnings and dividend growth. In FY 2021 I estimate that its shares will provide investors with a fully franked dividend yield of 4.1%.

Commonwealth Bank of Australia (ASX: CBA)

A final dividend share to consider buying is Commonwealth Bank. Its shares have been hammered this year and are down significantly from their 52-week high. While a decline is not unwarranted due to the negative impact of the pandemic, I think the selling has been overdone. In light of this, I think now could be a good time to consider a patient investment in its shares. I expect Commonwealth Bank to cut its dividend down to ~$3.70 per share in FY 2021. Based on this, its shares offer an estimated forward fully franked yield of 6.3%.

More reading

• Latest ABS data reveals how Australians are responding to COVID-19
• The importance of diversifying your ASX portfolio and how you can do it
• 3 ASX 200 shares to watch this week
• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher
• 5 ASX 200 winners and 5 losers of the week

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

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