Category: Stock Market

The A2 Milk Company Ltd (ASX: A2M) share price is having another positive session.

The infant formula company’s shares have risen a further 2% to a new 52-week high of $6.22.

This latest gain means that its shares are now up an incredible 46% since the start of the year.

To put that gain into context, $20,000 invested in A2 Milk shares on 29 December would now be worth $29,200.

Why is the A2 Milk share price on fire?

Investors have been bidding the company’s shares higher for a couple of reasons.

One of those was in January, when the company was given a boost from better than expected Chinese birth rate numbers. This bodes well for infant formula demand in the key market.

But the main driver of this gain was the release of its half-year results in February, which impressed the market.

As a reminder, A2 Milk reported a 3.7% lift in revenue to NZ$812.1 million thanks largely to strong growth in the China & Other Asia segment. Its revenue was up 16.5% over the prior corresponding period, which offset a 24.1% decrease in the ANZ segment. The latter was driven by a major change in its distribution strategy.

And with the company’s gross margin increasing modestly despite higher input costs, A2 Milk’s EBITDA increased by 5% to NZ$113.2 million.

But getting investors excited the most was arguably its outlook statement which accompanied its results. Management revealed that its revenue growth expectations for FY 2024 have improved since its prior outlook statement.

It now expects low to mid single-digit revenue growth for the year compared to just low single digit growth. It also expects its margins to be largely in line with what was recorded in FY 2023.

Ahead of expectations

All the above came in ahead of expectations, which helps explain the rise in the A2 Milk share price.

Commenting on the results, Bell Potter said:

Revenue of NZ$812m was up +4% YOY (vs. BPe NZ$774m). EBITDA of NZ$113.2m was up +5% YOY (vs BPe of NZ$110.2m). EBITDA ex-MVM was NZ$128.5m (vs. BPe of NZ$121.3m). Underlying NPAT of NZ$85.3m was up +16% YOY (vs. BPe of $82.5m).

Is it too late to invest?

As things stand, most brokers believe that the A2 Milk share price is fully valued now.

However, analysts at Ord Minnett still see scope for big returns. They currently have an accumulate rating and $7.40 price target. This implies potential upside of approximately 19%.

The post Why is the A2 Milk share price up 46% year to date and at a 52-week high? appeared first on The Motley Fool Australia.

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More reading

• This new catalyst could make A2 Milk shares a buy
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. 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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I’ve long expressed interest in buying Coles Group Ltd (ASX: COL) shares. I think Coles is a high-quality company with a defensive, moat-protected earnings base and an impressive dividend track record. Sounds like a no-brainer, right?

Well, I wouldn’t mind accepting some Coles shares for free right now. But I won’t be buying them today with my own money. There are two reasons why.

2 things I’m waiting for before buying Coles shares

I want to see the momentum continue

Investors were delighted with Coles’ latest earnings report that we got a good look at last month. Coles reported a 3.7% increase in sales revenue to $22.22 billion. Underlying earnings were up 4.1% to $1.9 billion, whilst underlying profit after tax from continuing operations was down 0.3% to $626 million.

Investors were buoyed by this report, especially in the context of Coles’ arch-rival Woolworths Group Ltd (ASX: WOW) reporting food sales growth of just 1.5% over the same period. Coles has long played second fiddle to Woolworths in the Australian grocery and supermarket space. So to see the company apparently gain some ground was evidently very exciting for investors.

Since Coles’ earnings report was released, the Coles share price has gained around 4%. Conversely, since Woolworths’ report came out, Woolies shares have shed just over 11%.

This is great news, but I would like to see further progress at Coles over the rest of 2024 before I make an investment. If the company can keep clawing market share away from Woolworths, it would give me a strong incentive to add Coles to my share portfolio.

I’d like to see Coles shares cheaper

Whilst the rise in the Coles share price has no doubt been pleasant for shareholders, I would like to see a dip before I buy into the company. Today, Coles is trading at $16.50 a share at the time of writing, down 0.12% for the day thus far.

However, it was only a few months ago that those same shares were under $15 each. Since the end of October, Coles has gained more than 10%.

This has pushed up Coles’ price-to-earnings (P/E) ratio to around 21.95 but pulled the company’s dividend yield down to 4%.

I’d consider this fair value for Coles, but not a screaming bargain. If we saw Coles back under the $15 mark, that’s when I’d start loading the boat.

I may have missed my chance last year. But if the company can continue to show growth whilst dropping to a more attractive share price, I’d find it very hard not to add Coles to my ASX share portfolio.

The post 2 things I’m waiting for before buying Coles shares appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $20k to target $1,400 a year from ASX dividend shares
• Top brokers name 3 ASX shares to buy today
• Why you should buy cheap Woolworths shares before it’s too late
• Why these excellent ASX dividend shares have been named as buys
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group. 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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Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) just reported its FY24 first-half result, which included another Soul Patts dividend increase.

A dividend isn’t guaranteed, it’s decided by the board of directors, with reference to how much profit the company has made.

Another payout increase

The company decided to increase its interim dividend by 11.1% to 40 cents per share.

That means the ordinary interim and final dividend have increased for 24 consecutive years at a compound annual growth rate (CAGR) of 9.6%.

The board of directors considers net cash flow from its investments when setting dividends. In HY24, the business saw net cash flow from investments grow by 6.9% to $263.4 million.

In per-share terms, the company made 73 cents of net cash flow from investments. This translates to a dividend payout ratio of cash flow of 54.8%. It is keeping a large percentage of the money within the business, which can help make future investments and generate more cash flow.

The leadership team of Soul Pattinson said:

Soul Patts has an exceptional track record of paying dividends to shareholders, supported by a diversified mix of investments and our long-term focus on cash generation.

Soul Patts dividend details

The company’s 40 cents per share fully franked dividend is going to be paid on 10 May 2024.

To be eligible to receive this dividend, investors need to own Soul Patts shares before the ex-dividend date, which is 17 April 2024 – that’s less than a month away.

At the current Soul Pattinson share price, the upcoming dividend represents a cash dividend yield of 1.1% and a grossed-up dividend yield of 1.6%.

What next for the company?

The investment house gave some encouraging comments about the future direction of the Soul Patts dividend payments:

We are focused on delivering long-term capital and income growth directly to shareholders through sustainable growth in dividends and our share price. Long-term total shareholder returns generated by Soul Patts over 10, 15 and 20-year periods have outperformed the All Ordinaries Accumulation Index (ASX: XAOA) by 3.1%, 2.9%, and 3.5% per annum, respectively.

Soul Patts remains well positioned with a diversified and uncorrelated portfolio of assets designed to produce cash flows over the long-term. Our unconstrained mandate to invest in any sized business, any industry, using any type of capital means we can aim to respond to market conditions and reduce the volatility of earnings longer-term.

The last two declared dividends amount to 91 cents per share, which is a cash yield of 2.6% and a grossed-up dividend yield of 3.7%.

The post Soul Patts dividend creates new 24-year record! appeared first on The Motley Fool Australia.

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More reading

• Soul Patts share price struggles on falling profits
• Selling your investment property due to land tax hikes? 5 ASX shares I’d buy with the proceeds
• Own Soul Patts shares? Here’s the ASX 200 stock’s result preview
• Are you investing or gambling?
• Is it too late to buy Soul Patts stock?

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. 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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S&P/ASX 200 Index (ASX: XJO) gold stocks are shining bright again today.

During the Thursday lunch hour, the ASX 200 is up a healthy 0.5%.

But the S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller gold shares outside of the ASX 200 – is leaving those gains in the dust, surging 3.3% at this same time.

Here’s how these leading ASX 200 gold stocks are tracking in intraday trade:

• Northern Star Resources Ltd (ASX: NST) shares are up 3.1%
• Newmont Corp (ASX: NEM) shares are up 3.3%
• De Grey Mining Ltd (ASX: DEG) shares are up 5.0%
• Ramelius Resources Ltd(ASX: RMS) shares are up 5.6%
• Gold Road Resources Ltd (ASX: GOR) shares are up 1.1%
• Evolution Mining Ltd (ASX: EVN) shares are up 5.2%
• Bellevue Gold Ltd (ASX: BGL) shares are up 5.8%

So, what’s driving today’s big gains?

ASX 200 gold stocks surge on US Fed meeting

ASX 200 gold stocks, including Northern Star and Newmont, look to have gotten a big boost following yesterday’s US Federal Reserve meeting (overnight Aussie time).

This saw Fed chair Jerome Powell indicate the world’s top central bank still was waiting for more evidence that inflation is returning to its 2% target range before cutting interest rates.

While the US benchmark rate was left unchanged in the range of 5.25% to 5.50%, Powell spurred investor exuberance by flagging that interest rate reductions were looking likely in 2024.

“It is still likely in most people’s view that we will achieve that confidence and there will be rate cuts,” he said.

Atop sending the S&P 500 Index (INDEXSP: .INX) up 0.9% to close at another record high, the gold price soared 1.4% to US$2,197.29 per ounce. And earlier today, bullion broke into new record territory of US$2,220.89 per ounce, according to data from Bloomberg.

Gold, which pays no yield itself, tends to perform better in lower or falling rate environments.

With bullion resetting new all-time highs, investors are piling into ASX 200 gold stocks today.

Income investors may be hoping that 2024’s 7% increase in the gold price could usher in boosted dividends from the big Aussie gold producers in the second half of the year.

The post Why are ASX 200 gold stocks surging again on Thursday? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• Why Baby Bunting, Bellevue Gold, Cettire, and New Hope shares are rising today
• 1 Australian dividend stock quietly crushing the ASX today

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 All Ordinaries Index (ASX: XAO), aka the ASX All Ords, is on the ascent today. Heading into lunch, the popular Australian share market index is up 0.7% to 8,000 points. However, one company in its ranks is stuck at $2.08.

Electro Optic Systems Holdings Ltd (ASX: EOS) is stationary at the $2.08 price point today after requesting a trading halt.

Considering its track record so far this year, the uneventful trading session is almost out of character for this defence technology company. The Electro Optic Systems share price has darted 102% higher in less than four months — a return that would appease the most demanding investors.

Today, shares in this company have powered down. So what’s the reason for this intermission?

This ASX All Ords share is tapping the market

What we know for sure is that EOS plans to launch a capital raise. According to the trading halt request, it will take shape as an institutional placement and a share purchase plan.

Those are the official details — straight from the horse’s mouth.

Now for what is rumoured.

As reported by The Australian Financial Review (AFR), it is believed that this ASX All Ords stock is on the hunt for $40 million from investors. The AFR’s sources say the proceeds will be used as working capital to ‘fulfil customer orders’.

Over the past few years, EOS has used debt to help fund its operations. Last month two loans were still on its books: a $15 million working capital facility at 19% interest and a term loan facility of $35 million at an interest rate of 26%.

That is some costly capital. So it makes sense for the company to seek funds that don’t come with the baggage of interest.

Why now?

Electro Optic Systems has pulled itself out of a massive hole. Now back to winning contracts and pumping out weapon systems, the ship appears to have escaped the choppiest waters.

Record full-year revenue of $219.3 million was reported last month, lifting 59%. The haemorrhaging losses were also patched, with losses reducing to $34.1 million from $53.6 million.

All these positives have fed into the EOS share price doubling this year. Investors are beginning to take down their guard on this formerly bloodied defence company.

The return of enthusiasm presents a prime opportunity to capture investors’ appetite and put the company in better financial shape.

The post Up 102% in 2024, here’s why this ASX All Ords stock is now frozen appeared first on The Motley Fool Australia.

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More reading

• Why this ASX defence stock soared 16% on Wednesday
• Why APM, DroneShield, EOS, and NextDC shares are charging higher

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. 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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It’s been a wild and woolly month for the Aussie Broadband Ltd (ASX: ABB) share price. Over the past four weeks, this ASX All Ords telco has traded as high as $4.80 a share and as low as $3.41.

The company began March on a high after the earnings report Aussie Broadband delivered in February got rave reviews from investors. Those same investors were also evidently feeling upbeat about the freshly announced plans for Aussie Broadband to purchase its telco rival Superloop Ltd (ASX: SLC).

However, investors were subsequently given a cold shower this month. On 14 March, it was revealed that Aussie Broadband had its white label agreement to provide telco services to Origin Energy Ltd (ASX: ORG) customers terminated, effective 12 April. Origin will be instead using none other than Superloop for its telco offerings from that date.

When this announcement was released, it saw Superloop shares gain 34%. But Aussie Broadband saw its shares slump 25%.

This complicates Aussie Broadband’s Superloop takeover offer. That’s because investors were initially offered 0.21 Ausse Broadband shares for every Superloop share owned in an all-scrip deal.

Trouble for the Aussie Broadband share price

But even more trouble was brewing for Aussie Broadband. At the time of the offer, Aussie Broadband had amassed a 19.9% stake in Superloop. However, on Monday, Superloop threatened legal action against Aussie Broadband if it didn’t reduce this stake to a maximum of 12%, citing its corporate constitution.

Aussie Broadband will be appealing this order at the Federal Court.

But that’s not where the drama ends for Aussie Broadband. Today, the company has released another announcement, this time responding to “market speculation”.

Here’s some of what that said:

Aussie Broadband… has become aware of market speculation and questions raised directly with us, that, at the time ABB purchased a 19.9% stake in Superloop Limited on 26 February 2024, it was aware that it had lost, or would shortly lose, its White Label Agreement… with Origin Energy…

ABB categorically denies this speculation. As ABB stated in its previous announcement on 14 March 2024 relating to the termination of the Agreement, the notice received from Origin was unexpected.

In fact, ABB was engaged in negotiations with Origin towards the renewal of the Agreement right up to the time the termination notice was received by ABB.

How are investors responding?

Investors initially appeared unsure of how to respond to this news today. The Aussie Broadband share price bounced between $3.66 and $3.79 a share in early trading this morning. At present, the market seems to have settled on a positive outlook, with Aussie Broadband shares currently up 0.27% at $3.71 each.

That puts the All Ords telco down 2.3% over the past month and down 3.24% in 2024 to date. The company is also down more than 19% since 5 March.

The post Aussie Broadband share price whipsaws as company denies rumours appeared first on The Motley Fool Australia.

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More reading

• Why Aussie Broadband, Liontown, Metals Acquisition, and Seek shares are falling
• Aussie Broadband share price falls as legal proceedings commence against Superloop
• 3 ASX All Ords shares that brokers tip will grow 30% to 40% this year
• Why Arafura Rare Earths, Core Lithium, Goodman, and Superloop shares are falling today
• Aussie Broadband share price tumbles after telco told to sell $47 million stake in a competitor

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband. The Motley Fool Australia has recommended Aussie Broadband. 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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When a company’s shares drop 80% in space of a year, it’s easy to think that they must be in bargain territory now.

Well, that is exactly what has happened to Core Lithium Ltd (ASX: CXO) shares over the last 12 months.

So, is this lithium miner a bargain buy? Or could its shares still be overvalued at current levels? Let’s find out.

Why are Core Lithium shares down 80% in a year?

Investors have been rushing to the exits since this time last year for a number of reasons.

This includes softer-than-expected production guidance, the suspension of its underground development, the curtailing of production, and crashing lithium prices.

Unfortunately, with lithium prices showing no signs of improving materially in the near term, it seems quite likely that mining operations at the Finniss Operation will not be resuming any time soon.

Goldman Sachs recently commented:

While CXO is restructuring its business in response to the decrease in the spodumene price, we note that with the mining contract terminated and notice given on the processing contract, we expect that a near-term restart of the Finniss operation is increasingly unlikely.

It is for this reason that Goldman Sachs is forecasting revenue of $177.7 million in FY 2024 and then just a paltry $17.8 million in FY 2025.

Is it time to buy?

In light of the bleak revenue forecasts above, it will come as no surprise to learn that Goldman Sachs believes Core Lithium’s shares are still overvalued despite their fall from grace.

The broker currently has a sell rating and 13 cents price target on them, which implies potential downside of 21% for investors.

But Goldman isn’t alone in believing that its shares are still expensive. Earlier this week, Macquarie reaffirmed its neutral rating and cut its price target to 15 cents. Whereas, last week, Citi reiterated its sell rating and cut its price target down to just 11 cents. The latter would mean further downside of 33%.

Overall, investors may want to keep their powder dry and wait for a meaningful improvement in lithium prices before considering an investment. Until then, the risks appear firmly stacked against buyers and big capital losses seem to be a real possibility.

The post Are Core Lithium shares a bargain buy or overvalued? appeared first on The Motley Fool Australia.

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More reading

• Why Core Lithium, Deep Yellow, Iperionx, and Tuas shares are racing higher today
• Why Arafura Rare Earths, Core Lithium, Goodman, and Superloop shares are falling today
• These are the 10 most shorted ASX shares
• Why are ASX lithium shares being annihilated on Friday?
• Could Core Lithium shares really fall another 40%?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. 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) is leaping higher on Thursday, up 0.9% in late morning trade.

The Aussie benchmark index is joining in the overnight US stock market rally.

Spurred by hopes of three coming interest rate cuts from the US Federal Reserve, the S&P 500 Index (SP: .INX) closed up 0.9%, marking yet another new all-time high.

Tech stocks continued their bull run as well, with the Nasdaq Composite Index (NASDAQ: .IXIC) gaining 1.3% overnight.

We’re seeing a similar moment here in Australia, with the S&P/ASX All Technology Index (ASX: XTX) up 1.1%, outpacing the ASX 200.

This comes on the heels of the US Federal Open Market Committee (FOMC) meeting.

Here’s what we know.

ASX 200 investors buoyed by US interest rate cut hopes

As widely expected, there was no interest rate cut from the Fed. The US benchmark rate remained unchanged in the range of 5.25% to 5.50%.

And Fed chair Jerome Powell may have held back an even stronger rally in US stocks and the ASX 200 by stressing that the central bank is still awaiting concrete evidence that inflation in the world’s biggest economy is retracing to its 2% target.

But speaking to the media after the Fed’s interest rate decision was announced, Powell said it was likely the bank would cut rates “at some point this year”.

Addressing the confidence the central bank needs that inflation is on its way back to 2%, Powell said (quoted by Bloomberg), “It is still likely in most people’s view that we will achieve that confidence and there will be rate cuts.”

Commenting on the outlook for Fed interest rate cuts that could offer further tailwinds for the ASX 200, the economics team at Commonwealth Bank of Australia (ASX: CBA) said (courtesy of The Australian Financial Review):

Resilient economic conditions mean we now expect the FOMC to start its rate cut cycle in July rather than in May. We now expect the FOMC to cut the funds rate by only 75 basis points (ie. three 25 basis point cuts) to 4.75% by the end of 2024.

However, we expect an extended rate cut cycle in 2025 until the funds rate reaches 3%. At 3%, the funds rate would be at the top end of the range of estimates of the ‘neutral interest rate’.

With the Reserve Bank of Australia (RBA) also having given the ASX 200 a boost this week amid signs that interest rates have likely topped out, it’s looking like more of a question of ‘when’ rather than ‘if’ the central banks will begin their easing cycle in 2024.

The post ASX 200 off to the races amid 2024 Fed rate cut hopes appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX 200 shares today
• ASX 200 lifts as RBA keeps interest rates steady

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Washington H Soul Pattinson & Company Ltd (ASX: SOL), or Soul Patts, share price is edging lower today.

Shares in the S&P/ASX 200 Index (ASX: XJO) diversified investment house closed yesterday trading for $35.04. In morning trade on Thursday, shares are swapping hands for $34.76, down 0.8%

For some context, the ASX 200 is up 0.7% at this same time.

This comes following the release of Soul Patts’ half-year results for the six months ending 31 December (1H FY2024)

Read on for the highlights.

Soul Patts share price edges higher on dividend boost

• Portfolio (pre-tax net asset value) of $11.5 billion, up 10% year on year
• Net cash flow from investments of $263.4 million, up 6.9% from 1H FY2023
• Fully franked interim dividend of 40 cents per share, up from 36 cents per share last year
• Statutory profit of $302.5 million, down 33.2% from 1H FY2023
• Cash balance at 31 January of $394.2 million

What else happened with the ASX 200 investment house over the half year?

The Soul Patts share price is in the red in early trade with the investment house increasing its portfolio by 10% to $11.5 billion. After adding dividends back in this delivered a total return of 8.3%, outperforming the All Ordinaries Accumulation Index by 2.4% (excluding the benefits of any franking credits).

The fully franked interim dividend of 40 cents per share will be paid out on 10 May. This represents the 24th consecutive year the company has increased its dividend payout.

Management attributed the 6.9% year on year increase in net cash flow from investments to ongoing growth of its credit portfolio and income from its strategic portfolio. These contributed an increase of $33.1 million and $12.9 million respectively.

On the negative side of the ledger, these gains were offset by a $14.9 million year on year decline from the company’s large caps portfolio due to its reduced size. The investment house also reported $13.2 million in lower realised trading gains from its emerging companies portfolio.

Also likely throwing up headwinds for the Soul Patts share price is the steep half-year decline in profits.

Statutory profit attributable to shareholders came in at $302.5 million, down 33.2% year on year. And regular profit after tax of $241.3 million was down 49.3%.

The company attributed the decline to a lower share of profit contributions from Brickworks Ltd (ASX: BKW) and New Hope Corp Ltd (ASX: NHC).

Soul Patts noted:

As an investment house, Soul Patts does not consider profit to be an accurate reflection of investment performance. The key drivers of success are growth in the capital value of the portfolio and a growing yield as measured by net cash flow from investments.

What did management say?

Commenting on the half-year results that are seeing the Soul Patts share price nudge up today, CEO Todd Barlow, said:

Our investment team transacted $2.4 billion in value during the six-month period, which is equivalent to two-thirds of the transaction volumes in the prior 12 months. The market environment has provided many opportunities, as reflected in our $1.6 billion of capital allocated across listed equities and private investments.

We are increasingly active in how we manage the portfolio mix and our investment appetite continues with over $500 million in undrawn but committed funds.

Soul Patts share price snapshot

Over the past 12 months, the Soul Patts share price has surged 25%. And that’s not including dividends.

The post Soul Patts share price struggles on falling profits appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. 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 market may be charging higher today, but the same cannot be said for the Sigma Healthcare Ltd (ASX: SIG) share price.

The shares of the pharmacy chain distributor and operator, which is planning to merge with Chemist Warehouse, are down slightly to 1.5% to $1.20.

This follows the release of the company’s full-year results this morning.

Sigma share price falls on results

• Net revenue down 9.2% to $3.3 billion
• EBITDA up 3.9% to $51.5 million
• Net profit after tax up 149% to $4.5 million
• Partially franked final dividend of 0.5 cents per share.

What happened in FY 2024?

For the 12 months ended 31 December, Sigma posted a 9.2% decline in net revenue to $3.3 billion. This reflects its decision to dispose of its hospital distribution business during the year and elevated sales of Rapid Antigen Tests in FY 2023 that have not repeated.

Nevertheless, the company’s EBIT came in 20.4% higher year on year at $23.2 million, with reported net profit after tax increasing 149% to $4.5 million. This includes initial costs of $8.2 million relating to its proposed merger with Chemist Warehouse.

Excluding merger transaction costs, EBIT was $31.4 million and net profit after tax was $12.7 million for the year.

Management advised that it was able to deliver strong earnings growth despite its revenue decline thanks to efficiencies. Sigma’s CEO and Managing Director, Vikesh Ramsunder, said:

With our operating performance strong, we have been able to drive efficiencies across our business, reducing total operating costs by 10.7% after absorbing merger proposal costs, providing a catalyst for our current and future financial performance. The company-wide simplification program and divestment of non-core assets has delivered a leaner operating model.

Outlook

The company has re-affirmed its medium-term EBIT target of 1.5% to 2.5% on a standalone basis.

This compares to its EBIT margin (before Chemist Warehouse merger costs) of 0.95% for FY 2024.

Chemist Warehouse merger update

Ramsunder spoke briefly about the proposed merger with Chemist Warehouse, once again reiterating the benefits of the move. He said:

This merger proposal is truly transformational for Sigma. It will diversify our earnings and growth profile whilst also creating opportunities for Sigma to enhance the support provided to pharmacy owners, helping them to profitably grow their business and better support their communities.

Sigma submitted its submission to the ACCC in February, and on 8 March the competition regulator commenced a public consultation process. Mr Ramsunder is hopeful that a decision on the merger could be made in the second half of 2024. He adds:

This is a significant and complex transaction which will require a detailed review by the regulator. There will be community interest and a wide consultation process which adds to the complexity of predicting timeframes. We are hopeful of a decision from the ACCC in the second half of the calendar year, which will precede a number of other steps required to reach completion.

The post Chemist Warehouse merger target Sigma reports 149% FY24 profit jump appeared first on The Motley Fool Australia.

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More reading

• Soul Patts share price struggles on falling profits
• Why is the Webjet share price racing to a 52-week high today?
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• Guess which ASX mining stock is rocketing 39% on $920m US govt funding news
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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