Category: Stock Market

Some ASX dividend shares have created a long-term record of consecutive annual dividend increases.

Businesses that keep growing their dividend may be attractive for investors looking for sources of income that may be able to keep up with inflation.

Here are two ASX dividend shares that could be interesting for income:

APA Group (ASX: APA)

APA is a large energy infrastructure business with a major gas pipeline network around Australia.

It also has assets relating to gas storage, gas energy generation, gas processing, solar farms, and wind farms.

The business has grown its distribution every year for more than the past decade and a half.

In FY22 it’s expecting to grow the annual distribution by another 3.9% to 53 cents per share. That would bring the distribution yield to 4.6% per security at the current APA share price of $11.56.

The business is steadily expanding its portfolio of projects. For example, it’s investing around $250 million of capital on the Kurri Kurri lateral pipeline to the Hunter power project with the ability to deliver blended hydrogen to the receipt station.

Another example is the $40 million of capital it’s investing in the Gruyere hybrid energy microgrid which is a combined gas, renewable energy, and battery storage solution.

It is steadily growing its cash flow. Nearly all of APA Group’s contracts have income linked to inflation, which is elevated right now.

APA’s cash flow is funding the rising distribution from the ASX dividend share. In the FY22 half-year result, APA’s free cash flow rose by 22.6% to $515.1 million.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL)

Soul Pattinson is a large investment house that has been operating for more than a century.

It has a portfolio of various ASX shares and private businesses.

Some of the largest positions in the portfolio include TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Pengana Capital Group Ltd (ASX: PCG), BHP Group Ltd (ASX: BHP), Macquarie Group Ltd (ASX: MQG), and Commonwealth Bank of Australia (ASX: CBA).

Some of the private businesses it’s invested in include Ampcontrol, swimming schools, financial services, agriculture, resources, and luxury retirement living.

The ASX dividend share pays out part of its annual cash flow each year, which comes from its portfolio’s dividends and distributions. The company said its dividend payout ratio in the first half of FY22 was 57.32% as a percentage of regular operating cash flows.

Soul Pattinson has grown its annual dividend every year since 2000. This is the longest dividend growth streak on the ASX.

At the current Soul Pattinson share price of $27.81, it has a grossed-up dividend yield of 3.3%.

The post 2 ASX dividend shares that keep giving investors pay rises appeared first on The Motley Fool Australia.

More reading

• Here’s why the APA share price is in the green today
• How big is the APA dividend yield going to be in 2022?
• Own the Vanguard Australian Shares High Yield ETF? Here’s what you’re invested in
• Soul Pattinson share price rises after electric deal for Ampcontrol
• 3 ASX companies that can raise prices whenever they want

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 Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended APA Group, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Macquarie Group Limited and TPG Telecom 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 Macquarie Group Ltd (ASX: MQG) share price will be one to watch this morning.

This follows the release of the investment bank’s full-year results.

Macquarie share price on watch amid strong second-half growth

• Total operating income up 36% to $17,324 million
• FY 2022 net profit up 56% to $4,706 million
• Second-half net profit up 31% $2,663 million
• International income is now 75% of total income
• Assets under management of $774.8 billion
• Final 40% franked dividend of $3.50 per share

What happened in FY 2022?

For the 12 months ended 31 March, Macquarie reported a 56% increase in net profit to $4,706 million. This reflects a 36% jump in net operating income to $17,324 million and a 22% lift in operating expenses to $10,785 million.

The star of the show for Macquarie was arguably the Macquarie Capital business. It delivered a net profit contribution of $2,400 million in FY 2022, up 269% from $651 million in FY 2021. This reflects significantly higher fee and commission income due to mergers and acquisitions and debt capital markets activities. Investment-related income was also up substantially due to material asset realisations in the green energy, technology, and business services sectors and an increase in the private credit portfolio.

Another star of FY 2022 was the Commodities and Global Markets (CGM) business. It delivered a 50% increase in its net profit contribution to $3,911 million. This was driven by increased revenue across Commodities with strong risk management revenue driven by increased client hedging activity and trading activity. Financial Markets continued to deliver a strong performance and Asset Finance benefited from the partial sale of the UK Meters portfolio.

The Banking and Financial Services (BFS) business had a strong year and delivered a net profit contribution of $1,001 million, up 30% year on year. This reflects strong growth in its loan portfolio, funds on platform and total BFS deposits. It also benefited from releases in net credit impairments. This was partially offset by increased technology investment and higher average headcount to support business growth and regulatory requirements.

Finally, the Macquarie Asset Management (MAM) business was the laggard in the group. It delivered a net profit contribution of $2,150 million, up 4% on FY 2021’s $2,074 million. This was driven by income related to the disposition of Macquarie Infrastructure Corporation assets as well as growth in base fees. However, this was partially offset by a gain on the sale of Macquarie European Rail in the prior year and lower performance fees.

All in all, this has allowed Macquarie to pay a final 40% franked dividend of $3.50 per share, which is up a modest 4.5% year on year and represents a 50% payout ratio.

For the full year, this means the bank is paying shareholders a total of $6.22 per share. Once again, this represents a 50% payout ratio, which is the very bottom of the bank’s 50% to 70% target range.

How does this compare to expectations?

According to a note out of Goldman Sachs, it was expecting Macquarie to report second half cash earnings of $2,800 million. This means Macquarie’s second-half profit of $2,663 million has missed by 4.9%.

In addition, the broker had pencilled in a $4.40 per share final dividend compared to Macquarie’s actual dividend of $3.50 per share.

This may not bode well for the Macquarie share price today, particularly given the market selloff on Wall Street overnight.

Management commentary

Macquarie Group Managing Director and Chief Executive Officer, Shemara Wikramanayake, said:

While many of the regions and markets in which Macquarie operates saw heightened levels of volatility this year, our longstanding strategy to address key areas of unmet need in the community is unchanged. Over time, this has seen us build deep and differentiated franchises in each of our areas of activity, all of which delivered sound outcomes and strong performance in FY22.

Looking ahead, Ms Wikramanayake remans confident on Macquarie’s medium term outlook. However, she stopped short of providing any short term guidance. She commented:

Macquarie remains well-positioned to deliver superior performance in the medium term. This is due to our deep expertise in major markets; strength in business and geographic diversity and ability to adapt the portfolio mix to changing market conditions; an ongoing program to identify cost saving initiatives and efficiency; a strong and conservative balance sheet; and a proven risk management framework and culture.

In the short term, the bank advised that it will continue to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that it believes positions it well to respond to the current environment.

The post Macquarie share price in focus amid FY22 profit surge appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• What is the outlook for the Macquarie share price in May?
• Here’s how some of the biggest ASX 200 shares are responding to the RBA’s rate rise
• Can ASX 200 banks live up to the $11 billion ‘big expectation’ when they report this month?
• Own Macquarie shares? Here’s what to watch when the bank reports this week

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 Macquarie Group 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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This month may be an opportune time to look for ASX growth shares amid all of the volatility that the ASX share market is seeing.

Businesses that are growing their revenue and profit margins may be candidates to consider.

Here are two that are growing quickly:

Adore Beauty Group Ltd (ASX: ABY)

Adore Beauty is an e-commerce platform that sells a wide array of beauty products.

Since the start of the 2022 calendar year, the Adore Beauty share price has fallen by around 60%.

That decline has happened despite the ongoing scaling of the ASX growth share.

The business recently announced its performance in the three months to 31 March 2022. It said that revenue increased 9% year on year to $42.7 million, while active customers rose 7% to 880,000. Returning customers rose by 47%.

The company has been focused on strategic initiatives that improve customer retention like its mobile app, growing its loyalty program, and its owned-marketing channels like podcasts.

Adore Beauty says the market it operates in is a large and growing $11 billion market. It’s planning to try to capture more of that with its own private label brand which it’s launching in the last quarter of FY22.

In the first half of FY22, the ASX growth share managed to grow its gross profit margin by 0.6 percentage points to 33.1%.

Idp Education Ltd (ASX: IEL)

IDP is an education and English language testing business.

In the first half of FY22, it generated $256.7 million of English language testing revenue, an increase of 62% year on year. It also generated student placement revenue of $106.2 million, an increase of 36%. HY22 total revenue increased 49% as the business recovered from the impacts of COVID-19.

It said that total India English language testing volumes were up 97% year on year and up 13% compared to the first half of FY20, which was before COVID-19. Management points to India which has “supportive long-term demographics, wealth and global mobility fundamentals”.

The company’s increasing profit margins helped its bottom line grow quicker than revenue. IDP Education’s net profit after tax (NPAT) rose 70% in the first six months of FY22.

Management said the ASX growth share is positioned strongly in the rebound from COVID-19. It said it delivered smarter and increasingly personalised ways to guide people in their study, career, and migration.

It said that in the first half of FY22, it “embedded transformative solutions” and its footprint is expanding in key markets. The company has invested for long-term growth, which management said is helping increase demand for its services.

The post 2 ASX growth shares that could be buys in May 2022 appeared first on The Motley Fool Australia.

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• Are these 2 growing ASX e-commerce shares buys?
• Adore Beauty share price glows following ‘strong quarterly performance’
• 2 great ASX growth shares to buy in May 2022: experts

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 positions in and has recommended Idp Education Pty Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Adore Beauty Group 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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Biotechnology ASX shares have been one of the biggest victims of persistent inflation and rising interest rate fears over the past 6 months. 

The S&P/ASX 300 Pharmaceuticals & Biotechnology (ASX: AXPBKD) has lost about 15% over that time, but that understates the damage done to many stocks.

With some of the larger names softening the index, many smaller players have seen their valuations halve or worse.

But Pengana High Conviction portfolio manager James McDonald is keeping the faith in two businesses that he suspects have very blue skies coming up:

‘A real revolution’ in radiotherapy

The Telix Pharmaceuticals Ltd (ASX: TLX) share price has halved since January.

But its prostate cancer tech rival Lantheus Holdings Inc (NASDAQ: LNTH) has seen its stock rise more than 128% this year. 

And McDonald can’t see why Telix can’t do the same.

“There’s a good chance that Telix is going to follow suit over the next 12 months,” he told a Pengana webinar.

“They have a very similar product competing in prostate cancer diagnosis, and Latheus got approval seven months ahead of Telix.”

The portfolio manager has been following the radiation oncology sector for the best part of two decades, and the technology has come a long way.

“There’s a real revolution going on in radiotherapy in recent years.”

At first, radiation was crudely pointed at the problematic part of the body, then the second generation saw a more targeted treatment using radioactive beads that were injected into the bloodstream.

This third iteration of radiotherapy is seeing companies like Telix and Lantheus take that targeting to the next level.

“These are actually radioisotopes that are targeted to molecules or antibodies that selectively seek out cancer in the body.”

Looking at Lantheus’ ramp up, McDonald reckons Telix could rake in $75 million revenue for this calendar year and then $195 million in 2023.

He added that the US market for prostate cancer is about US$1.1 billion, and that Lantheus implies it can take 35% of it this year.

“Still plenty of room for Telix to take an equivalent amount of the market over the next 12 to 18 months.”

McDonald also noted that Telix has solutions for kidney and brain cancers in the pipeline.

And with the halving of the price this year, the shares are trading at about 8 to 10 times price-to-earnings ratio on 2023 projections.

“I would highlight that CSL Limited (ASX: CSL) and Resmed CDI (ASX: RMD) trade on 30 times PE. Cochlear Limited (ASX: COH) trades on 50 times PE.”

If Telix hits the projections, McDonald thinks it will end up a $10 or $20 billion company, which would make it a 10-bagger from its current market cap of $1.33 billion.

Awaiting a billion-dollar deal

Another cancer tech player that McDonald holds is Immutep Ltd (ASX: IMM).

Its share price has halved since November, giving it a current market capitalisation of around $310 million.

With the company targeting a US$50 billion addressable market in breast, lung, head & neck cancer markets, McDonald is convinced Immutep is undervalued.

“Similar biotech deals, either licensing or takeover, would probably be in the US$2 to US$5 billion range. So very substantial upside.”

Immutep has been granted a “prestigious” oral presentation at the American Society of Clinical Oncology conference on 3 June.

“It’s the largest healthcare conference in the world,” said McDonald.

“We can only assume it’s very good news… We’re greatly looking forward to that.”

The post 10-baggers? Expert names 2 super-cheap biotech ASX shares appeared first on The Motley Fool Australia.

More reading

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• Telix share price slips on quarterly update
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Motley Fool contributor Tony Yoo has positions in CSL Ltd., Cochlear Ltd., and ResMed Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL Ltd. and Cochlear Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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 Block Inc (ASX: SQ2) share price will be one to watch on Friday.

This follows a market meltdown on Wall Street and the release of the payments giant’s first-quarter update.

Block share price on watch amid strong growth but big loss

• Gross payment volume (GPV) up 31% year on year to US$43.5 billion
• Net revenue down 22% to US$3.96 billion
• Net revenue excluding bitcoin revenue up 44% to US$2.23 billion
• Gross profit up 34% year on year to US$1.29 billion
• Net loss of US$204 million

What happened during the quarter?

For the three months ended 31 March, Block reported a 22% decline in revenue to US$3.96 billion. However, this was driven by softer cryptocurrency demand. Excluding bitcoin revenue, total net revenue in the first quarter was US$2.23 billion, up 44% year over year.

This was driven by a 72% increase in subscription and services-based revenue to US$960 million and a 28% lift in transaction-based revenue to US$1.23 billion. The latter reflects a 31% jump in GPV to US$43.5 billion.

As for earnings, Block generated gross profit of US$1.29 billion, up 34% year over year. This reflects a 26% increase in gross profit from Cash App to US$624 million and a 41% lift in Square gross profit to US$661 million.

The acquired Afterpay business contributed US$92 million of gross profit in the months of February and March, with US$46 million of gross profit recognised in each of Cash App and Square. Excluding Afterpay, gross profit was US$1.2 billion, up 25% year over year.

On the bottom line, Block record a net loss of US$204 million.

How does this compare to expectations?

According to consensus estimates, Block has missed on both its earnings and revenue for the period. The latter was US$180 million short of expectations.

However, the market appears to be looking beyond this. After falling 10.5% overnight on Wall Street because of the market selloff, the Block share price is rebounding in after-hours trade.

At the time of writing, the company’s NYSE-listed shares are up 8.5% after market. While this won’t claw back all of last night’s declines, it won’t be a bad as it was looking just an hour or two earlier.

Outlook

The catalyst for the Block share price recovery appears to have been the company’s outlook commentary. Block has started the second-quarter positively, with Square GPV growth accelerating in April.

It commented: “For the month of April, in aggregate, Square GPV is expected to be up 29% year over year. On a three-year CAGR basis, GPV growth is expected to be 24% in April, compared to 22% growth in the first quarter.”

“In April, we expect Cash App gross profit, excluding Afterpay, to grow on a year-over-year and three-year CAGR basis, driven by growth in monthly transacting actives, engagement across our ecosystem, and inflows into Cash App.”

The post Block share price on watch amid Q1 earnings miss appeared first on The Motley Fool Australia.

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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 positions in and has recommended Block, Inc. The Motley Fool Australia has positions in and has recommended Block, Inc. 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 is the dream of every investor to be able to see a positive coming for a particular company before other people have woken up to it.

The team at Wilsons pride themselves on doing exactly that.

“One way of looking for value is looking at the underlying assets of the business and identifying discrepancies between the cumulative value of the operating units versus the market value of the stock,” they said in a memo to clients.

“These hidden value stocks rely on management action to highlight value to the market, such as an asset sale or a demerger.”

Some past examples of how they benefited from this approach are Link Administration Holdings Ltd (ASX: LNK), Aventus, News Corporation (ASX: NWS) and Telstra Corporation Ltd (ASX: TLS).

“We find this subset of the portfolio can provide above-market returns that are less correlated to the rest of the market.”

But what we all want to know is: what’s the next “hidden value” ASX stock?

Massive catalyst coming this month

Wilsons analysts have identified Tabcorp Holdings Limited (ASX: TAH) as one with a current disconnect between its actual worth and share price.

The big catalyst will be that the lotteries and betting divisions will soon be demerged, to form two separated listed businesses over late this month to early June.

The Wilsons team thinks this will have multiple benefits:

• Allowing each business to adopt a more focused operating profile and capital structure more aligned to its core operations
• 2 executive teams that can focus on each business more effectively
• M&A opportunities

But the really exciting outcome could be a potential “market re-rating” of the lotteries business.

There is much to like about lotteries, which Wilsons considers “a defensive, infrastructure-like business with long-dated licences”.

“Lotteries is growing its online presence which could lead to margin expansion,” its memo read.

“Lotteries is highly cash generative and capital-light.”

This business has so much going for it during a period of potential economic slowdown that a private owner could come in with a Godfather acquisition offer after the demerger.

“We believe a bid could also be made for the lotteries business after the demerger. Private equity firms typically like annuity-like, defensive companies, just like the lotteries business.”

Professional investors gaga over Tabcorp 

Wilsons is far from the only mob who loves the look of Tabcorp.

“We estimate that Tabcorp’s lotteries division generates a return on invested capital north of 50%!” said Airlie investment analyst Will Granger.

“The market continues to undervalue the infrastructure-like qualities of this lotteries division.”

Investors Mutual analysts are also licking their lips at Tabcorp’s potential.

“We continue to see long-term value in the lotteries business and believe that post demerger, M&A interest in both the lotteries and wagering businesses could resurface,” their memo to clients read.

Shareholders will vote on the Tabcorp demerger on 12 May.

Tabcorp shares are up less than 0.5% for the year so far.

The post ‘Hidden value’: The ASX share with a major catalyst coming appeared first on The Motley Fool Australia.

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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 positions in and has recommended Link Administration Holdings Ltd. The Motley Fool Australia has positions in and has recommended Telstra Corporation 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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On Thursday, the S&P/ASX 200 Index (ASX: XJO) returned to form and pushed higher. The benchmark index rose 0.8% to 7,364.7 points.

Will the market be able to build on this on Friday and end the week on a high? Here are five things to watch:

ASX 200 expected to sink

The Australian share market looks set to end the week deep in the red following a selloff on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open the day 109 points or 1.5% lower this morning. In the US, the Dow Jones sank 3.1%, the S&P 500 dropped 3.55%, and the Nasdaq crashed 5%. The Dow had its worst day since 2000.

Oil prices rise

Energy producers including Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could have a good finish to the week after oil prices pushed higher. According to Bloomberg, the WTI crude oil price is up 0.7% to US$108.61 a barrel and the Brent crude oil price is up 1% to US$111.19 a barrel.

Macquarie full year results

The Macquarie Group Ltd (ASX: MQG) share price will be one to watch when the investment bank releases its full year results. According to a note out of Goldman Sachs, it is expecting the bank to report second half cash earnings of $2,800 million. This will be a 38% increase over the prior corresponding period. A $4.40 per share final dividend is also expected.

Gold price rises

Gold miners Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could have a decent finish to the week after the gold price pushed higher overnight. According to CNBC, the spot gold price is up 0.45% to US$1,877.2 an ounce. Investors were buying the safe haven asset amid the equities selloff.

NAB remains a buy

National Australia Bank (ASX: NAB) shares remain a buy according to Goldman Sachs. This morning the broker responded to the banking giant’s half year update by retaining its conviction buy rating and lifting its price target to $34.17. Goldman believes NAB is well-placed to continue its growth and remains the broker’s preferred sector exposure.

The post 5 things to watch on the ASX 200 on Friday appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX shares today
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• Why are ASX 200 energy shares leaping higher today?
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• Here’s all what you need to know about the latest NAB dividend

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 Macquarie Group 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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Leading ASX lithium shares have offered investors some of the best gains on the index over the past 12 months.

Now, not every lithium producer and explorer has shot the lights out amid fast-rising lithium prices. But plenty have.

Just have a look at these numbers.

While the All Ordinaries Index (ASX: XAO) has gained just under 4% since this time last year the Liontown Resources Limited (ASX: LTR) share price is up 257%; Core Lithium Ltd (ASX: CXO) shares have gained 402%; Pilbara Minerals Ltd (ASX: PLS) is up 139%; and shares in Lake Resources NL (ASX: LKE) have rocketed 606%.

We could go on.

With Australia currently ranked as the world’s fifth-biggest lithium producer, it’s little wonder investors are turning to ASX lithium shares as the price of the lightweight, conductive metal has been rocketing.

With that in mind, the Motley Fool asked Josh Gilbert, market analyst at multi-asset investment platform eToro, what’s been driving lithium demand and what the outlook is for prices heading forward.

Supply is still playing catch-up

“Lithium is the primary component of a lithium-ion battery,” Gilbert told us. “Demand for these batteries has skyrocketed in the last 15 months, resulting in its price rising over 400% in recent times.”

While lithium has other uses, most of the rocketing demand is coming from the rapid growth of electric vehicles (EVs), whose batteries rely on lithium to hold a charge.

“All electric vehicles available in the market – both now and for the foreseeable future – are based on lithium-ion batteries,” Gilbert said. “Their availability will affect EV prices and our progress in decarbonising transportation. Ultimately, lithium is the main element that the energy storage revolution depends on.”

As for why there’s a supply and demand imbalance driving lithium prices – and ASX lithium shares – skywards, Gilbert said:

Due to a lack of investment in the 2010s, lithium’s supply is still playing catch-up. It takes up to 5-7 years to establish a lithium mining operation from the ground up. We’re starting to see increased production in Australia and Argentina, but it’s still not enough.

Lithium is not rare. It can be found everywhere. However, extracting the raw material from the ground in commercial amounts for battery-grade use can be challenging. This means that for the immediate future, lithium is facing a significant supply and demand issue. With demand currently outweighing supply, investors should expect prices to continue on the upward trajectory and stay elevated.

What to consider before investing in ASX lithium shares

Now that we have a better understanding of the supply and demand dynamics facing the market, what should investors consider before buying ASX lithium shares?

The research can be tricky as many of these companies are smaller. And even some of the bigger names – like Core Lithium and Lake Resources – were only recently added to the ASX 300. Which can mean “there is very little information available publicly”, Jessica Amir, Australian market strategist at Saxo Markets said.

Amir recommends starting your research by answering five core questions.

First, visit the company’s website to find out where it’s mining.

Second, find out if there are any successful lithium mines in the area.

“Maybe the company is mining in Australia’s Pilbara Region, for instance, home to some of the world’s largest and most lucrative diversified mines. Or maybe it’s mining in the ‘lithium triangle’ in Argentina or Bolivia – home to the world’s largest lithium deposits,” she said.

“You can typically de-risk your investments, by backing a company operating in close proximity to a global major mining company – like BHP Group Ltd (ASX: BHP) or Ganfeng Lithium Co – as there is a higher probability of operational success,” Amir added.

Is the ASX lithium share exploring or producing?

The third question Amir recommends answering is whether the prospective ASX lithium share is close to businesses that need its product.

“An electric car manufacturer based in the United States would typically be more likely to buy lithium from a mine that’s in Argentina over Africa, for example. That’s because they’d only have to pay for 8,300 kilometres of haulage versus 14,000 kilometres from an African lithium miner,” she said.

Next, she recommends asking whether the prospective ASX lithium share is booking sales agreements for future production.

“If the company is not making money yet, look at the company outlook and determine when they will go into production,” she said.

Amir continued:

You want to be backing a company that will start to see money rolling in the door, as cashflow growth drives share price growth. So, ask if the company has signed an offtake deal. That’s a sales agreement where the miner sells a certain number of tonnes to another company.

Ideally the more of their future production that’s sold, the better, as that de-risks your investment. You always want the offtake agreement to be binding. This makes the sales contract agreement harder to tear up. If it’s not binding, there is more risk at hand, as the sales agreement offtake is usually subject to conditions being met.

Lastly, Amir recommends investors keen on ASX lithium shares find out whether their projects are located in a province likely to be supported by local government.

“For example, is it a critical mineral in the American regions that will likely be supported by [President Joe] Biden’s new potential stimulus?” she said. “Or, if it’s in Australia, will it be likely to receive Australian government support as paved out in the Federal Budget?”

The post Investing in ASX lithium shares? Here’s what you need to know appeared first on The Motley Fool Australia.

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If you’re interested in adding some S&P/ASX 200 Index (ASX: XJO) shares to your portfolio, then the two listed below could be top options.

These ASX 200 shares have been named as buys with material upside potential. Here’s what you need to know about them:

Aristocrat Leisure Limited (ASX: ALL)

The first ASX 200 share to look at is Aristocrat Leisure. It is a leading global gaming content and technology company and top-tier mobile games publisher.

Aristocrat has been growing at a strong rate over the last decade and looks well-placed for more of the same over the 2020s. This is thanks to its strong market position, the growing popularity of its games, and its real money gaming opportunity.

Morgans is a fan of the company. It has an add rating and $48.00 price target on its shares. The broker is forecasting strong top and bottom line growth over the coming years.

TechnologyOne Ltd (ASX: TNE)

Another ASX 200 share that has been rated as a buy is enterprise software provider TechnologyOne.

It is currently transforming from a traditional software company to a software-as-a-service (SaaS) focused business and with great success.

During the first half of FY 2022, the TechnologyOne Global SaaS ERP solution continued to grow rapidly, with SaaS annual recurring revenue (ARR) rising 43% to $192.3 million. Importantly, this growth was all organic and includes no acquisitions.

But it won’t be stopping there. Management is aiming to grow its high margin ARR to $500 million by FY 2026 and appears confident it will get there. As are analysts at Goldman Sachs, which believe the risks are to the upside for TechnologyOne’s ARR target.

It is partly for this reason that the broker recently initiated coverage on the company’s shares with a buy rating and $14.00 price target.

The post 2 ASX 200 shares that analysts say are buys appeared first on The Motley Fool Australia.

More reading

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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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Are you interested in adding some ASX growth shares to your portfolio this month? If you are, you may want to look at the two listed below that have recently been named as buys by Goldman Sachs.

Here’s what you need to know about these ASX growth shares:

IDP Education Ltd (ASX: IEL)

The first ASX growth share to look at is this leading provider of international student placement services and English language testing services. After a difficult couple of years, IDP has returned to form in FY 2022 with a 70% jump in first half net profit after tax to $52.9 million. Pleasingly, since then, trading conditions have continued to improve, setting IDP up for an equally strong second half. Looking further ahead, IDP appears well-placed to benefit from long-term structural growth in international student volumes and IELTS testing. Particularly given its major acquisition in India last year.

Goldman commented: “We forecast 68% 3yr EPS CAGR (FY21-FY24E). The stock looks relatively attractive as it’s currently trading at a 12-mth fwd PE premium of 144% vs the ASX200 Industrials, which is below its historical average of 170%.”

The broker currently has a buy rating and $35.50 price target on its shares.

Webjet Limited (ASX: WEB)

Another growth share that Goldman Sachs rates highly is online travel agent, Webjet. As with IDP Education, it has had a very tough couple of years because of the pandemic. However, Goldman Sachs expects Webjet to come out the other side in a stronger position.

The broker said: “WEB (Buy) remains our preferred call in this space due to the stronger outlook for the Bedbanks business in the longer term, favorable exposure to the growing online channel and the strong balance sheet offering the opportunity to explore bolt-on acquisitions as well as weather interim volatilities driven by COVID-19.”

Goldman currently has a buy rating and $6.90 price target on Webjet’s shares.

The post 2 top ASX growth shares Goldman Sachs rates as buys appeared first on The Motley Fool Australia.

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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 positions in and has recommended Idp Education Pty Ltd. The Motley Fool Australia has recommended Webjet Ltd. 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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