Category: Stock Market

The Core Lithium Ltd (ASX: CXO) share price has run out of steam on Tuesday.

At the time of writing, the lithium developer’s shares are down 4% to $1.18.

Why is the Core Lithium share price falling?

There appears to be a couple of catalysts for the weakness in the Core Lithium share price today.

One is broad selling in the lithium space this morning, which has seen the likes of Allkem Ltd (ASX: AKE) and Pilbara Minerals Ltd (ASX: PLS) also drop into the red.

The other reason could be a broker note out of Goldman Sachs today.

According to the note, the broker has reiterated its sell rating and 95 cents price target on the company’s shares. Based on where Core Lithium shares currently trade, this implies potential downside of 20% for investors over the next 12 months.

Why is Goldman bearish?

While Goldman Sachs was pleased with the progress the company is making with its Finniss project, it isn’t enough for a more positive view. Particularly given the wet weather the company has been facing.

In response to the wet weather, the broker has lowered its “expectations for additional DSO cargos.”

But the main reason it is bearish is the Core Lithium share price, which Goldman believes is significantly overvalued. The broker explained:

Our FY23 EPS is down -9% on minor adjustments to our FY23E production ramp up profile, where we also lower our expectations for additional DSO cargos, with our NAV down ~4% to A$0.80/sh and our 12m PT unchanged at A$0.95/sh. We rate CXO a Sell on: 1) Valuation at 1.5x NAV (peer average ~1.2x; on GSe LT US$1,000/t spodumene), pricing in ~US$2,250/t (peer average ~US$1,300/t) or implying current pricing persists for ~2 years (peer average ~1 year), while also having the lowest average operating FCF/t LCE, 2) Large resource upside required, and 3) Production risk.

The post Is this why investors are selling down the Core Lithium share price today? appeared first on The Motley Fool Australia.

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More reading

• Forget lithium! I’m using the Warren Buffett method to help find winning ASX shares in 2023
• Core Lithium shares led the charge on this trading platform in 2022. Can you guess the other top stocks?
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Monday

Motley Fool contributor James Mickleboro has positions in Allkem. 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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I think that ASX dividend shares could be an excellent way for people to grow their passive income. Investing just $200 a month could eventually turn into $20,000 of annual income.

Now, don’t get me wrong. Investing $2,400 in the first 12 months isn’t suddenly going to unlock $20,000 of annual dividends. It will take some time, but I believe that it’s possible.

Compounding is a very powerful financial force, which can enable smaller amounts to grow into much larger amounts. Albert Einstein once supposedly said:

Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it.

For example, using a compound interest calculator, investing $200 a month for 40 years, returning an average of 10% per annum, turns into $1.06 million. That only requires $96,000 of money from the investor – the rest (in this example) comes from compounding returns.

But, I don’t think someone needs $1 million to make $20,000 of annual income. A portfolio with a yield of 4% would only need to be half the size ($500,000) to make $20,000, while a 6% yield would only need to be $333,334 in size to make $20,000.

How I’d invest in ASX shares

There are a few principles that I’d take into this investing plan.

First, I’d take a brave attitude when it comes to market crashes. Volatility regularly happens. If I’m invested in good businesses, a temporary dip (even a big one) won’t bother me. In fact, I would see lower prices as an opportunity to buy, rather than panic and sell. It’s during those times that the best prices can be found.

Second, I would want to consistently invest, through the ups and downs into the best opportunities I could see with a dollar cost averaging (DCA) strategy. While share prices are always changing, I think there’ll always be at least one idea that could be a good opportunity.

Third, I’d only invest in businesses that seem as though they have a good potential to grow earnings and dividends. I think it’s the businesses that are growing their underlying value that have the best chance of achieving share price growth and good dividends over time.

For example, several years ago I invested in Altium Limited (ASX: ALU) shares when the dividend yield was more than 3%. Since then, the dividend (and profit) has grown enormously and my yield-on-coast is much higher. In 2014 it paid an annual dividend of 12 cents per share and in FY22 it paid an annual dividend of 47 cents per share.

Some of the names I believe can provide a good combination of dividends and growth in the coming years include Adairs Ltd (ASX: ADH), Premier Investments Limited (ASX: PMV), Beacon Lighting Group Ltd (ASX: BLX), Lovisa Holdings Ltd (ASX: LOV), Healthia Ltd (ASX: HLA), Bailador Technology Investments Ltd (ASX: BTI) and Propel Funeral Partners Ltd (ASX: PFP).

The post How I’d invest $200 a month in ASX shares to make a $20,000 passive income for life appeared first on The Motley Fool Australia.

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More reading

• Forget lithium! I’m using the Warren Buffett method to help find winning ASX shares in 2023
• Morgans names 8 ASX retail shares to buy
• Why this ASX 200 retail share is ‘best positioned’ for 2023: Morgan Stanley
• Could this ASX 200 share be a dividend gem hiding in plain sight?
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tristan Harrison has positions in Altium and Bailador Technology Investments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs, Altium, Bailador Technology Investments, Healthia, and Lovisa. The Motley Fool Australia has positions in and has recommended Adairs. The Motley Fool Australia has recommended Bailador Technology Investments, Healthia, Lovisa, Premier Investments, and Propel Funeral Partners. 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 Bubs Australia Ltd (ASX: BUB) share price is crashing on Tuesday morning following the release of the company’s quarterly update.

At the time of writing, the junior infant formula company’s shares are down almost 13% to 31 cents.

Bubs share price crashes on disappointing update

• Quarterly revenue down 28% year over year to $14.3 million
• Half year revenue down 1% to $37.9 million
• Operating cash outflow of $13.5 million

What happened during the quarter?

For the three months ended 31 December, Bubs reported a disappointing 28% decline in revenue to $14.3 million. This reflects a massive 66% decline in China revenue, which offset a 28% lift in Australia revenue and a 26% increase in International revenue.

Management blamed this poor performance on slower than expected consumer offtake in key markets and lockdowns in China causing a delay to its transition to a new manufacturer to consumer operating model in the country.

This ultimately led to first half revenue falling 1% on the prior corresponding period to $37.9 million.

While no earnings data was provided, Bubs’ cash flow statement doesn’t paint a pretty picture.

For the second quarter, Bubs recorded cash receipts of $14 million and a cash outflow of $13.5 million. This means for every dollar the company received, it spent approximately two dollars to generate it.

Unsurprisingly, this has led to Bubs recording an unspecified underlying EBITDA loss during the first half. It has also reduced the company’s cash balance from $64.6 million to $51.4 million at the end of December.

Management commentary

Bubs’ under-fire CEO, Kristy Carr, commented:

As foreshadowed at the Company’s Annual General Meeting in November, group gross revenues for the first two quarters are largely consistent with the first half of last year, arising from strong year-on-year growth in Australia and the United States being offset by the impacts of China’s now abandoned COVID-zero policy on channel dynamics and consumer purchasing activity.

China’s prolonged lockdowns during the quarter delayed our transition to Bubs’ new ‘Manufacturer to Consumer‘ (M2C) model in partnership with AZ Global, as we continue to sell through initial pipe-fill orders from previous quarters, leading to a 66 percent fall in gross revenues compared to the prior corresponding period.

Nonetheless, the impact on group gross revenues from infant formula was limited to 10 percent for the quarter compared to the prior corresponding period, and strong pricing discipline was maintained across all markets. Group gross revenue for branded products in the first half of FY23 (excluding B2B and low margin bulk powder sales) was up 16 percent compared to the prior corresponding period.

The Bubs share price is now down by approximately a third over the last 12 months and is trading within sight of a multi-year low.

The post Why is the Bubs share price crashing 13% today? appeared first on The Motley Fool Australia.

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• I think these 2 ASX shares are steals

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 Bubs Australia. 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) lithium share IGO Ltd (ASX: IGO) is down 2.42% in early trade.

Shares in the leading lithium stock closed yesterday trading for $15.68 and are currently changing hands for $15.30 apiece.

This comes following the release of the company’s half-year results for the six months ending 31 December (H1FY23).

Read on for the highlights.

IGO share price slips despite profits hitting all-time highs

The IGO share price is in the red despite the ASX 200 lithium share reporting a series of new financial records.

Those included a record half-year of underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of $834 million. That’s up 269% from the $226 million reported in the first half of the 2022 financial year.

Net profit after taxes (NPAT) was also a new half-year record, coming in at $591 million, up from $91 million in H1FY22. That was driven by record production and earnings at the company’s Greenbushes project.

Meanwhile, IGO’s revenue was up 43% year on year to $542 million. IGO reported its first revenue contribution from the Forrestania project during the half year.

The ASX 200 lithium share held cash on its balance sheet of $590 million as at 31 December with net debt of $175 million.

And investors will be pleased with the 14 cents per share, fully franked interim dividend that management declared. That’s also a new record.

The period was marred by the death of former CEO Peter Bradford on 15 October, which IGO’s acting CEO Matt Dusci said was “a devastating shock to the IGO family”.

What did management say?

Commenting on the results, Dusci said:

Strong lithium prices combined with a growing production profile at Greenbushes, generating outstanding financial returns for shareholders, while the team continues to focus on expanding the mine and processing capacity to deliver on future production growth.

At Kwinana, the declaration of commercial production from Train 1 was a key milestone for the half-year and we remain focused on progressing the ramp up of Train 1 and Financial Investment Decision on Train 2 over CY23.

As for IGO’s nickel segment, Dusci added:

Our group nickel business result was impacted by a fire at the Nova Operation in December, offset by improved nickel prices during the period. At Cosmos, we delivered a revised development plan in September and project development activity is progressing well.

IGO share price snapshot

The IGO share price has been a strong performer over the past 12 months, up 30% despite today’s dip.

And investors who bought into the ASX 200 lithium share five years ago will be sitting on gains of 215%.

The post ASX 200 lithium share IGO slips despite record half-year profits and dividends appeared first on The Motley Fool Australia.

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More reading

• Why lithium prices could be ‘higher for longer’: Macquarie
• Guess which four ASX 200 lithium shares charged higher today
• Here are the top 10 ASX 200 shares today
• Top ASX growth shares to buy in 2023
• Here are the top 10 ASX 200 shares 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 Novonix Ltd (ASX: NVX) share price is in the red this morning following the release of the company’s latest quarterly update.

The S&P/ASX 200 Index (ASX: XJO) tech stock is currently down 5.94%, trading at $1.82.

Novonix share price plummets on US$18m burn

Here are the key takeaways from the company’s December quarter:

• Customer receipts reached US$2.17 million
• Novonix burned through US$18 million last quarter
• Ended the period with US$99 million of cash
• Announced US$150 million grant from the US Department of Energy

Novonix operated in the red last quarter as it worked to expand its businesses in anode materials, battery technology solutions, and cathode activities.

The major news from the tech favourite during the period was of a US$150 million government grant expected to go towards the expansion of its anode materials division.

Novonix also progressed engagements with tier 1 cell and automotive manufacturers through material sampling and qualification and formally applied for a loan under the DOE Loan Programs Office.

What else happened last quarter?

Last quarter wasn’t so great for the stock. The Novonix share price tumbled 16.5% over the period.

Meanwhile, the company continued work at its Riverside facility ahead of the start of production. It also officially opened its cathode pilot facility.

At its battery tech business, it increased its cell prototyping capacity and launched a new proprietary cell testing and analytics software service for battery research and development efforts.

What’s next?

Its activities don’t appear to be slowing down.

Novonix plans to increase Riverside’s production output targets from 10,000 tonnes per annum in 2023 to meet its supply agreement with KORE. That’s expected to begin at around 3,000 tonnes annually next year and ramp to around 12,000 tonnes annually in 2028.

It also expects its new analytics software could be launched in beta for customers in the second quarter of 2023.

Finally, all pilot equipment has been received at the company’s new facility. It’s now being commissioned for internal testing of cathode material using the company’s all-dry cathode synthesis technology in the first half.

Novonix share price snapshot

The Novonix share price has been on the up and up this year, gaining 30% year to date. For comparison, the ASX 200 has risen 8% in 2023 so far.

However, the stock is still 75% lower than it was this time last year. Meanwhile, the index has jumped 7% over the last 12 months.

The post Novonix share price plummets 6% as losses continue appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• If I invest $1,000 in Novonix shares now, what could my return be this year?
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Brooke Cooper 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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With travel markets bouncing back strongly from the pandemic, investors may be wondering which ASX 200 travel shares are worth buying right now.

The good news is that Goldman Sachs has been looking at the sector and recently named three of the best travel shares to buy now.

According to notes, the broker believes that Corporate Travel Management Ltd (ASX: CTD), Qantas Airways Limited (ASX: QAN), and Webjet Limited (ASX: WEB) are the ASX 200 travel shares to buy right now.

In fact, Goldman is so positive on these three shares that it has put them on its coveted conviction list.

Here’s what the broker is saying about them:

Corporate Travel Management

This morning, Goldman has reiterated its conviction buy rating with a $20.30 price target on this corporate travel specialist’s shares. Ahead of its half year results, the broker commented:

For CTD, we view the recent trends in market multiples and consensus momentum as being unwarranted. We expect reiteration of FY23 guidance, recovery in North America and cash flow as three key factors to watch for which could assist re-rating of the stock this earnings season.

Qantas

Goldman recently stated its belief that the Qantas share price was undervalued at the current level given its positive outlook. It has a conviction buy rating and $8.20 price target on its shares. The broker commented:

With the market capitalization 10% above pre-COVID levels and EV (based on last reported net debt) 8% below pre-COVID, we believe the stock is not appropriately pricing QAN’s improved earnings capacity. Specifically, our FY23e EPS forecast is 58% above FY19a levels with group capacity still 21% below pro-COVID levels. Even as the yields moderate (with capacity restoration) our FY24e EPS (100% of FY19 capacity) is 46% above FY19 levels.

Webjet

Finally, the broker has a conviction buy rating and $7.20 price target on Webjet’s shares. While the company won’t be releasing results in February, Goldman sees scope for a re-rating. It said:

WEB is an off-cycle earnings stock with the earliest company disclosed catalyst only expected in May 2023. However, we note that WEB continues to be a preferred pick for us in the travel space heading into the February results season as we expect the industry momentum and relative performance for Webjet’s OTA business vs. FLT will drive continued re-rating of the stock.

The post 3 of the very best ASX 200 travel shares to buy according to Goldman Sachs appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Up 8% in 2023, is it too late to buy Qantas shares now?
• 5 ASX 200 shares rocketing to new 52-week highs on Tuesday
• Up 30% in six months: Can the Webjet share price fly even higher?
• Qantas share price struggles amid second incident in 2 days

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 Corporate Travel Management. 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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Buckle up, investors! ASX shares are going to leave foreign stocks in the dust.

That’s the analysis from AMP Ltd (ASX: AMP) chief economist Dr Shane Oliver, who forecasts Australian equities will go gangbusters over the next decade.

“The period of underperformance in Australian shares compared to global shares since 2009 is likely to be over,” Oliver said on the AMP blog.

“Expect a five to 10-year period of trend outperformance, albeit there will be bumps along the way.”

Why ASX shares have struggled the past 13 years

Australian shares have not gone as well as their international peers in the period since 2009, in the aftermath of the global financial crisis.

Oliver reckons there was some mean reversion going on after ASX stocks rocketed up in the 2000s from the commodities boom.

“The slump in commodity prices from 2011 – this weighed heavily on Australian resources shares through much of last decade,” he said.

“Foreign investor fear of a crash in Australia’s expensive housing market has been a periodic theme over the last decade leading many foreign investors to be cautious of Australia.”

The deterioration in the western world’s relationship with China has suppressed Australian shares too.

“This started in 2018 with [former US] president Trump’s trade war but was accentuated through the pandemic,” said Oliver.

“It arguably resulted in foreign investors demanding a risk premium to invest in the Australian dollar and Australian shares.”

Towards the end of the period, the ASX’s lower exposure to COVID-19 pandemic winners — like technology — was also a drag on its performance.

Why ASX shares will rocket the next few years

But heading into 2023, Oliver feels like the tables have turned.

“The commodity price slump from their 2008-2011 highs looks to be over,” he said.

“Commodities [are] embarking on a new super cycle bull market driven by constrained supply after low levels of investment and low inventories for most commodities, decarbonisation driving increased demand for metals and increased defence spending on the back of increased geopolitical tensions which is metal intensive.”

The resources sector’s domination of the ASX will see the local bourse cash in from these new conditions. 

“The risk of a sharp deterioration in the trade relationship with China appears to be receding — at least for a while — helped by a change of government in Australia.”

Australian shares are also starting out cheaper, after a decade of underperformance.

“Australian shares are trading on a lower forward price-to-earnings multiple of 14.5 times than global shares on 15.3 times & US shares on 17.1 times,” said Oliver.

“Australian shares are due for a lengthy period of outperformance.”

Oliver added that the high dividends paid out by Aussie companies would drive higher returns over the coming years.

“Australian shares pay a higher dividend yield than traditional global shares: 4.4% versus 2.5%. This is important because dividend payments are a big chunk of the return an investor will get and so the higher the better,” he said.

“Franking credits add around 1.3% per annum to the post tax return for Australia-based investors.”

The post Why ASX shares will flog global stocks the next few years: economist appeared first on The Motley Fool Australia.

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More reading

• Will AMP shares regain their dividend sparkle in 2023?
• Why ASX shares could be much higher at the end of 2023
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Here are the top 10 ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

Motley Fool contributor Tony Yoo 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 Telstra Group Ltd (ASX: TLS) dividend is one of the most popular options on the Australian share market for income investors.

It isn’t hard to see why this is the case. Over the last couple of decades, the telco giant has returned billions of dollars of its earnings to shareholders.

And while the NBN rollout hit its dividend payments hard, this headwind is now over and growth is back on the agenda.

In fact, Telstra surprised everyone in FY 2022 by increasing its dividend for the first time in years to a fully franked 16.5 cents per share.

Where next for the Telstra dividend?

The good news is that analysts appear to believe that it is onwards and upwards from here for the Telstra dividend.

For example, according to a note out of Goldman Sachs, its analysts are expecting Telstra to declare an interim dividend of 8.5 cents per share in February with its interim results. This is up from 8 cents per share last year and ahead of the consensus estimate of 8.2 cents per share.

Goldman then expects the same again in August, bringing its full year dividend to 17 cents per share. Based on the current Telstra share price of $4.11, this will mean a 4.1% dividend yield.

In FY 2024, the broker is expecting Telstra to increase its payout by a further 5.9% to 18 cents per share. This will mean a dividend yield of 4.4% for investors that year.

Finally, Goldman expects the Telstra dividend to increase by 11.1% in FY 2025 to a fully franked 20 cents per share. This equates to a yield of almost 4.9%.

Should you invest?

It isn’t just the Telstra dividend that is expected to increase by Goldman Sachs. Its analysts see scope for the Telstra share price to rise meaningfully over the next 12 months.

According to the note, the broker has a buy rating and $4.60 price target on its shares. This implies potential upside of 12% for investors from current levels.

The post Here’s the Telstra dividend forecast through to 2025 appeared first on The Motley Fool Australia.

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More reading

• Buy Telstra shares for its defensive earnings and dividend growth: Goldman Sachs
• Generate passive income with these quality ASX 200 dividend shares: brokers
• 3 things that could super-charge your investment returns over the long term: Scott Phillips
• What could propel Telstra shares over the next year?
• Does Telstra sell bonds to ASX retail investors?

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 positions in and has recommended Telstra 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 dividend income that is expected to be paid by the S&P/ASX 300 Index (ASX: XKO) share Accent Group Ltd (ASX: AX1) is very appealing.

Interest rates have jumped over the last year, bumping up how much income investors can get from ASX shares. But, I think that there are ASX 300 dividend shares that have such strong dividend yields that their yield is still very attractive.

Accent Group is one of those businesses with the potential for growth and good dividends, in my opinion.

It acts as the Australian distributor for a number of brands, and also owns others. Some of the brands involved are Vans, Skechers, Dr Martens, Glue Store, Henleys, Hoka, and The Athlete’s Foot.

How much dividend income could Accent shares pay in 2023?

Accent is expected to pay an annual dividend per share of 11.5 cents in FY23, according to Commsec.

At the current Accent share price, this suggests the grossed-up dividend yield could be 7.5% over the next 12 months. But, that’s just an estimate.

The ASX 300 share is then expected to increase its annual dividend payment to 12 cents per share in FY24 and 13.7 cents per share in FY25.

That means the FY24 grossed-up dividend yield could be 7.8% and the FY25 grossed-up dividend yield 8.9%.

But, based on the earnings estimate for FY23, the company’s dividend payout ratio could be a healthy 78%. The business would still be keeping a fifth of its profit to reinvest back into more growth opportunities.

Recent progress

On 25 January 2023, the business revealed that total sales (including The Athlete’s Foot franchisees) for the 27 weeks to 1 January 2023 was $825 million, up 39%.

Earnings before interest and tax (EBIT) for the first half of FY23 is expected to be between $90 million and $92 million.

Management said trading conditions “continued to be very positive” in November and December, revealing that sales were higher than expected. There was also a year-over-year improvement in the gross profit margin.

Trading in January to the date of the announcement was in line with expectations.

Why I’d buy this ASX 300 dividend share

While the Accent share price has recovered some of the lost ground from 2022, it’s still down around 20% from its November 2021 high.

I think the company’s underlying profitability continues to improve as the business grows its store network and adds brands to its portfolio. The more it expands its reach to potential customers, the stronger position the shoe retailer is in.

At the current Accent share price, it’s valued at under 15x FY23’s estimated earnings and 14x FY24’s estimated earnings. While it would have been better to buy a few months ago, I think it still looks good value for long-term growth, while paying a very good dividend.

The post 7%+ dividend yield! I’d buy this ASX 300 share for passive income in 2023 appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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 Accent 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 Flight Centre Travel Group Ltd (ASX: FLT) share price won’t be going anywhere today. The stock has been placed in the freezer amid a $180 million capital raise, the proceeds of which will help fund a major acquisition.

The S&P/ASX 200 Index (ASX: XJO) travel giant has revealed it’s acquiring UK-based luxury travel brand Scott Dunn – providing an entry point into the UK and US markets.

It also dropped its unaudited results for the first half of financial year 2023.

The Flight Centre share price last traded at $15.83.

Let’s take a closer look at what’s going on – or not going on – with the $3 billion travel agency today.

Why is the Flight Centre share price frozen today

There’s been a deluge of news from Flight Centre today, but its share price probably won’t respond. It’s expected to remain frozen until the company’s $180 million placement is completed.

$211m acquisition of luxury travel brand Scott Dunn

That $180 million – as well as $40 million of cash – will go towards buying Scott Dunn for an enterprise value of $211 million.

According to Flight Centre, Scott Dunn is a high-margin leisure business in the luxury travel segment with large average booking values and strong repeat bookings. It brought in $199 million of total transaction value (TTV) and $51 million of revenue last year.

Flight Centre managing director Graham Turner commented on today’s news, saying:

Scott Dunn provides us with the opportunity to grow our leisure presence in the large UK and US luxury markets in an attractive and growing segment, while also fast-tracking our objective of developing a global luxury collection of travel brands.

High-net-worth, time poor customers highly value the services of Scott Dunn as shown by their customers’ loyalty.

The acquisition is also expected to generate supplier synergies, modest net corporate costs, and be mid-teens percentage earnings per share (EPS) accretive in the 12 months ending June 2023, on a pro forma basis before realising synergies and the transaction costs’ impact

Flight Centre shares to remain frozen amid placement

To fund the purchase, Flight Centre is undergoing a $180 million placement.

It will offer around 12.3 million new shares (6.2% of its existing shares) for $14.60 apiece under the raise – a 7.8% discount to its last traded price.

The company is also conducting a $40 million share purchase plan. That will see new shares on the table for the same price, or lower, than the placement.

The Flight Centre share price has been tipped to return to trade tomorrow on the completion of the placement.

ASX 200 company unveils first-half results

Finally, here are the key takeaways from Flight Centre’s unaudited first-half earnings in comparison to the prior comparable period (pcp):

• Corporate TTV rose 146% to $5 billion and leisure TTV lifted 441% to around $4.4 billion
• Group TTV more than tripled to reach approximately $9.9 billion
• Revenue surged 217% to $1 billion
• Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) beat guidance, jumping to $95 million – up from a $184 million loss
• Operating cash outflow of around $65 million, in line with normal seasonality

The company’s corporate segment is on track to post record TTV this financial year. Meanwhile, its leisure business is benefitting from the resumption of normal travel patterns.

At the end of the period, Flight Centre had a $489 million net cash position. Though, that doesn’t include $800 million of convertible bonds.

It’s now targeting between $250 million and $280 million of full-year underlying EBITDA before any acquisition benefits.

The post Flight Centre share price frozen amid $211m ‘luxury’ acquisition appeared first on The Motley Fool Australia.

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More reading

• These are the 10 most shorted ASX shares
• How much profit could Flight Centre shares make in 2023?
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• Is 2023 Flight Centre’s year to return to profit?
• The Flight Centre share price has made a flying start to 2023! Should I buy?

Motley Fool contributor Brooke Cooper 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 Flight Centre Travel 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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