Category: Stock Market

ASX shares have had a volatile start in 2022, whipsawed by the spectre of rising interest rates and simmering tensions on the Ukraine-Russia border. Tensions that have now boiled over into a Russian invasion of Ukrainian territory.

Despite ASX shares largely delivering strong earnings, those twin forces have seen the S&P/ASX 200 Index (ASX: XJO) slide 7.8% in the new year.

Of course, those are very short-term moves.

Longer-term the ASX 200 remains up 22.2% over 5 years. And that’s not including any company dividend payouts.

That should come as good news to the cohort of Australian female investors who intend to invest for a decade or longer.

And, according to a new global survey by online multi-asset investment platform eToro, fully 32% of women respondents plan to do just that.

ASX shares top Aussie women’s investments

While the survey was global, we’ll stick to the local results.

Atop the propensity for a longer-term horizon, ASX shares topped the list of investments for Aussie women at 48%.

Did you take a guess at what came second?

If you answered cryptocurrencies, give yourself a gold star.

Cryptos came in a close second to ASX shares at 45%. The safety of cash also holds allure at 26%. International shares, while popular, trailed ASX shares at 21%.

Asked whether they view investing as part of their household budget, 74% of Australian women answered yes.

Meanwhile 64% said they’d like to see more female role models who talk about investing; and 57% would like more education, both in schools and on the internet. 31% of Aussie women cited “know what to invest in” as the biggest hurdle about investing.

How are women planning to invest in 2022?

Asked where they believed are the best investment opportunities over the next 3 months, Australian women said:

• Technology – 39%
• Green energy and renewables – 39%
• Healthcare – 32%
• Real estate – 32%
• Financial services – 18%

As for why they invest in ASX shares, cryptos and other assets, 22% of Australian women said it’s for long-term security. 22% also want to achieve financial independence while 10% are looking to supplement their basic income.

Commenting on the survey results, eToro’s deputy CEO, Hedva Ber said:

Female investors are using investing as a powerful lever to secure their futures, boost income, and/or to build net wealth. It is clear from the research that female investors are carving out their own future, and building for the long-term, something which is to be celebrated.

The post Survey: ASX shares top Aussie women’s investments. Guess what came second appeared first on The Motley Fool Australia.

More reading

• High risk, high reward: Analysts tip 2 small cap ASX shares for big things
• Why is the Blackmores (ASX:BKL) share price tumbling another 10% today?
• Australian Strategic Materials (ASX:ASM) share price surges 9% on Hyundai deal
• Own Westpac (ASX:WBC) shares? Here’s the latest on the bank’s cost-cutting crusade
• Why did this ASX cannabis share burn 10% today?

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 Bruce Jackson.

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The Blackmores Limited (ASX: BKL) share price has plunged for the second day in a row.

At the time of writing, the Blackmores share price is down 10.23% trading at $75.90, after hitting an intraday low of $72.26 early this afternoon. The S&P/ASX 200 Consumer Staples (ASX: XSJ) is also ending the trading day among the worst-performing sectors on the ASX.

So, what’s going on with the natural health company?

What did Blackmores reveal?

Yesterday, the company announced its half-year results for FY22.

The company revealed a 14.3% increase in group revenue to $346 million, a 21.2% increase in underlying earnings before interest and taxes (EBIT) to $38.3 million, and an underlying net profit after tax (NPAT) increase of 9.6% year on year at $20.8 million.

Looking at its operations, Blackmores saw a 49.8% increase in revenue from a number of its international arms — including India, Indonesia and Thailand — totalling $116.2 million. Revenue in China increased by 8.5%.

However, the company noted that Australia and New Zealand did not perform as well, with revenue for the region falling 1.2% to $145.9 million.

What else happened?

Despite feeling the pinch of COVID-19, Blackmores said in its release the company did its best to avoid discounting:

Our strategy to price Blackmores at a premium position to the market was deemed a success in driving higher earnings relative to some of our competitors who use short term deep price discounting to buy market share.

The Blackmores share price dropped by 6% yesterday despite the largely positive results. The timing coincided with the wider S&P/ASX 200 Index (ASX: XJO) falling 3% yesterday to 6,990.6 points in the fallout of Russia’s invasion of Ukraine.

What next?

Looking ahead, Blackmores said in its half-yearly report:

Our investments in supply chain capabilities have made Blackmores more resilient and underpin our ability to meet customer demand.

Given the ongoing uncertainty due to COVID-19 across our markets and its impact on global supply chains, these improvements will help us manage what we believe will continue to be a challenging environment throughout the remainder of FY22.

The company also gave investors something to look forward to, — an upcoming dividend (fully franked) of 63 cents per share to be paid on 12 April.

Blackmores share price snapshot

In the last 12 months, the Blackmores share price has dropped 6.7%. Shares in the company fell as low as $63.17 in May last year and climbed as high as $103.97 in November.

The company has a market capitalisation of $1.8 billion and a price-to-earnings ratio (P/E) of 61.1, trailing 12 months.

The post Why is the Blackmores (ASX:BKL) share price tumbling another 10% today? appeared first on The Motley Fool Australia.

More reading

• Why Blackmores, BWX, Kogan, and Magellan shares are dropping
• ASX 200 (ASX:XJO) midday update: Block rockets, Blackmores sinks
• ‘Ongoing uncertainty’: Blackmores (ASX:BKL) share price falls 6% on cloudy future

Motley Fool contributor Alice de Bruin 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 Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Australian Strategic Materials Ltd (ASX: ASM) share price zoomed ahead today to finish the session at $7.89, up 9.58%.

This followed an announcement today that the critical metals producer is teaming up with a leading South Korean company, Hyundai Engineering Corporation Co Ltd (KRX: 000720).

The companies will work together on the Australian Strategic Materials’ Dubbo Project in NSW.

Australian Strategic Materials enters contract negotiations

ASX investors were bidding up the Australian Strategic Materials share price after digesting the company’s news today.

In its statement, the company advised that it has signed a Heads of Agreement (HoA) with Hyundai Engineering Corporation (HEC).

This will enable exclusive negotiations to take place for the delivery of a Front-End Engineering and Design (FEED) for the project.

Should all go as planned, this could also progress to HEC winning the Engineering Procurement and Construction (EPC) contract.

Australian Strategic Materials previously requested a proposal process for the FEED, where HEC was identified as a preferred candidate. This was based on Hyundai’s experience and capability in developing such projects.

Under the deal, both companies will have an exclusivity period for the award of FEED by 31 March 2022. If the delivery of FEED is successful, the award of EPC will be valid until 25 February 2023.

Australian Strategic Materials wants the FEED contract awarded in Q1 2022 and delivered in Q4 2022.

The terms of the FEED and EPC price, scope, and schedule are yet to be agreed upon.

Australian Strategic Materials managing director, David Woodall said:

The team at HEC are impressive being at the forefront of providing innovative and sustainable engineering solutions that will enable the successful delivery of our Dubbo Project, a key to our “mine to metal” strategy.

The desire of both HEC and ASM to work in partnership to deliver the Dubbo Project with significant benefits to both Korea and Australia put us in a great position as we continue discussions with Korean financial institutions to fund the development of Dubbo.

What is the Dubbo Project?

According to the Australian Strategic Materials website, the Dubbo Project is a wholly-owned “large in-ground polymetallic resource of rare earths, zirconium, niobium, hafnium, tantalum and yttrium”.

Australian Strategic Materials “intends to develop the Dubbo Project to supply globally significant quantities of zirconium and rare earth materials, as well as contribute to the niobium and emerging hafnium industries.

“These materials are in high demand for a range of existing and future technologies – in particular clean energy and transportation.”

About the Australian Strategic Materials share price

Over the past 12 months, the Australian Strategic Materials share price has rocketed by 50% in value. However, when looking at the year to date, its shares are down 30%.

Australian Strategic Materials commands a market capitalisation of roughly $1 billion.

The post Australian Strategic Materials (ASX:ASM) share price surges 9% on Hyundai deal appeared first on The Motley Fool Australia.

More reading

• What even are rare earths and why are ASX shares with exposure always in the spotlight?

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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The Westpac Banking Corp (ASX: WBC) share price fell today amid news the company plans to cut jobs within its marketing department.

At the close, Westpac shares were swapping hands at $22.83, down 1.3%. For perspective, the S&P/ASX 200 Index (ASX: XJO) finished up 0.1%.

Let’s take a look at what is happening at this major ASX bank share.

Job cuts at Westpac

Westpac is planning to cut 20% of roles in the company’s marketing department, The Australian reported.

Ninety jobs will reportedly be impacted, with 65 directly cut and 25 phased out gradually via natural attrition.

Earlier this month, Westpac announced a corporate shake-up of its structure and executive. This is a key part of a wider Westpac plan announced in 2021 to reduce the bank’s cost base to $8 billion by 2024.

Chief brand and marketing officer Annabel Fribence, who joined Westpac in November, told The Australian:

We are consulting with our people on these changes and will support affected employees throughout this process, including with redeployment opportunities.

The marketing department cuts are designed to lessen costs, while it will also reduce doubling up between Westpac and its regional brands.

Morgans recently rated the Westpac share price as a “buy”. As my Foolish colleague James reported, the analyst believes the Westpac shares are cheap at the current level, with the potential to provide a generous yield for investors.

Morgans is forecasting Westpac will return a fully franked dividend of $1.19 per share in FY22, with this increasing to $1.60 in FY23

Westpac share price snapshot

The Westpac share price has surged 10% in the past month, but it has descended almost 3% in the past week.

In the last 52 weeks, it has fallen 6%, while it is up almost 7% year to date. In contrast, the S&P/ASX 200 Index (ASX: XJO) has climbed 2.3% over the past 12 months.

Westpac has a market capitalisation of about $80 billion.

The post Own Westpac (ASX:WBC) shares? Here’s the latest on the bank’s cost-cutting crusade appeared first on The Motley Fool Australia.

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• Should you be buying ASX 200 bank shares in February?
• The Westpac (ASX:WBC) share price has gained less than $4 in 10 years. Have the dividends been worth it?
• The Bank of Queensland (ASX:BOQ) share price has leapt 10% in 3 weeks. How does this compare to the other big banks?
• Morgans names 2 ASX 200 dividend shares to buy now
• This expert says the Westpac (ASX:WBC) share price has 25% upside

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 Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Creso Pharma Ltd (ASX: CPH) share price was far from green on Friday after the ASX cannabis company broke a multi-day trading halt with news of a capital raise.

Creso Pharma is raising $5 million through a placement wherein it will offer new shares for 6.9 cents apiece.

At the close of trading, the Creso Pharma share price was 6.9 cents, having tumbled 10.39%.

Let’s take a look at what the ASX cannabis share plans to do with its raised cash.

What sent this ASX cannabis share plummeting?

ASX cannabis company Creso Pharma’s share price is falling after the company announced a placement to raise $5 million to help fund its expansion into the United States.

As part of the placement, involved investors will receive 1 free option for every share they purchase.

On top of that, the placement’s broker, EverBlu Capital, will also receive an option for every free option handed out.

The options will be exercisable at a price of 14 cents each on or before the 18-month anniversary of their issuing.

Creso Pharma non-executive director Adam Blumenthal has committed to purchasing around $318,250 worth of new shares as part of the placement. Blumenthal’s participation is subject to shareholder approval at a future general meeting.

The $5 million will be put towards the company’s expansion into the United States after it acquires Sierra Sage Herbs and Green Goo brand.

The cannabis company announced its acquisition to the ASX earlier this month, causing its share price to surge 5.8%.

Some of the funds raised through the placement will go towards product development and general working capital.

Speaking on the capital raise, Creso Pharma CEO and managing director, William Lay commented:

These funds will provide us with additional financial flexibility to advance our US-focused growth trajectory, progress a number of new product development initiatives, and explore new opportunities to unlock shareholder value.

The company remains very well positioned to capitalise on the global market for recreational cannabis, CBD products, and psychedelic treatments. We have a number of growth initiatives underway and look forward to providing additional updates as these materialise.

Creso Pharma share price snapshot

This year so far has been rough on the Creso Pharma share price.

It has fallen 15% since the start of the year. It’s also 60% lower than it was this time last year.

The post Why did this ASX cannabis share burn 10% today? appeared first on The Motley Fool Australia.

More reading

• Which ASX shares have exposure to NFTs?
• The Creso Pharma (ASX:CPH) share price jumped 6% today. Here’s why
• ASX cannabis shares in spotlight amid COVID prevention research

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 Bruce Jackson.

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It has been another busy week for Australia’s top brokers. This has led to the release of a large number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Lovisa Holdings Ltd (ASX: LOV)

According to a note out of Morgans, its analysts have retained their add rating and lifted their price target on this fashion jewellery retailer’s shares to $24.00. This follows the release of a half year result which impressed the broker. Morgans felt Lovisa’s 21.5% like for like sales growth was remarkable. Overall, it believes Lovisa could become a global force and one of the biggest success stories in Australian retail. The Lovisa share price is trading at $19.97 on Friday afternoon.

NextDC Ltd (ASX: NXT)

A note out of Macquarie reveals that its analysts have retained their outperform rating but trimmed their price target on this data centre operator’s shares to $13.90. Macquarie was pleased with NextDC’s half year results, which came in ahead of its estimates. It was also pleased to see management upgrade its FY 2022 guidance and appears confident in the company’s growth trajectory. The NextDC share price is fetching $10.65 on Friday.

Ramsay Health Care Limited (ASX: RHC)

Analysts at Citi have upgraded this private healthcare operator’s shares to a buy rating with a $64.00 price target. This follows the release of a half year result that was largely in line with expectations. Overall, the broker believes that Ramsay Health Care’s shares offer a lot of value for money following recent weakness and upgrades them to a buy rating. The Ramsay Health Care share price is trading at $64.38 on Friday.

The post Brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

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• The Lovisa (ASX:LOV) dividend jumped 85%. Here’s what you need to know
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• Ramsay (ASX:RHC) share price gains as earnings ‘severely impacted’ by COVID
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Motley Fool contributor James Mickleboro owns NEXTDC Limited. 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 Lovisa Holdings Ltd and Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) is having quite a choppy day today, and has been bouncing around for most of the trading session. At the time of writing, the ASX 200 is holding up by 0.12% at 6,999 points. 

But let’s dig deeper and take a glance at the ASX 200 shares that are currently topping the share market’s volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume so far on Friday

South32 Ltd (ASX: S32)

Resources share South32 is our first cab off the rank today. This diversified ASX 200 miner has had a hefty 15.27 million shares trade on the markets so far this Friday. There has been no major news or announcements out of the company today, save for a share buyback notice. 

However, the South32 share price has enjoyed a strong day of gains today. It’s presently up 2.2% at $4.64. It’s this move, plus the company’s buybacks, that are probably responsible for this elevated volume. 

Telstra Corporation Ltd (ASX: TLS)

Telstra is next up this Friday. So far, a sizeable 18.42 million of this ASX 200 telco’s shares have been bought and sold on the markets. Again, we have a very similar situation going on. No major news except for a share buyback notice.

Telstra shares have been bouncing around a little today, and are currently down by 0.13% at $3.94 each. With these buybacks going on amid this volatility, we can say that these are the likely causes of this high volume we see. 

Pilbara Minerals Ltd (ASX: PLS)

Our final and most traded ASX 200 share of the day goes to lithium producer Pilbara Minerals. Pilbara has had a whopping 26.55 million shares trade owners as it currently stands. This company always seems susceptible to big market moves. 

Yesterday we had a drop of more than 7%. But today, we see a healthy gain of 4.77% so far. It’s this notable jump that is probably behind Pilbara’s place at the top of the table today. 

The post These 3 ASX 200 shares are topping the volume charts this Friday appeared first on The Motley Fool Australia.

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• Brokers name 2 ASX 200 mining shares to buy
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Motley Fool contributor Sebastian Bowen owns Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns 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 Bruce Jackson.

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In late trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a small gain. At the time of writing, the benchmark index is up 0.15% to 7,000.8 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping:

Blackmores Limited (ASX: BKL)

The Blackmores share price is down 11% to $75.02. This appears to have been driven by a broker note out of Credit Suisse this morning. In response to the health supplements company’s half year results, the broker has downgraded its shares to a neutral rating and cut the price target on them by 10% to $90.00. Elsewhere, Citi has retained its sell rating with a $73.16 price target.

BWX Ltd (ASX: BWX)

The BWX share price has crashed 26% lower to $2.49. This follows the release of the personal care products half year results this morning. Despite posting strong top line growth, the Sukin owner reported a loss after tax of $2.3 million. Management blamed this loss on one-offs.

Kogan.com Ltd (ASX: KGN)

The Kogan share price is down 6% to $5.26. This is a big improvement from earlier in the day when the ecommerce company’s shares were down as much as 20% to a new 52-week low. Investors have been hitting the sell button today after Kogan swung to a loss during the first half of FY 2022. It also reported a 17% decline in core Kogan.com revenue for the period.

Magellan Financial Group Ltd (ASX: MFG)

The Magellan share price is down 9% to $17.97. This morning the embattled fund manager revealed that its funds under management (FUM) has declined meaningfully once again. Magellan reported that its total FUM now stands at $77.2 billion. That’s down 11.4% since its last update on 11 February when the company revealed FUM of $87.1 billion.

The post Why Blackmores, BWX, Kogan, and Magellan shares are dropping appeared first on The Motley Fool Australia.

More reading

• Why is the Kogan (ASX:KGN) share price is crashing 20% on Friday?
• Magellan (ASX:MFG) share price slips 6% as funds continue mass exodus
• ASX 200 (ASX:XJO) midday update: Block rockets, Blackmores sinks
• Kogan (ASX:KGN) share price in limbo amid $11.9m first half loss
• BWX (ASX:BWX) share price plunges 26% after posting after-tax loss in 1H FY22

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. owns and has recommended Kogan.com ltd. The Motley Fool Australia owns and has recommended Kogan.com ltd. The Motley Fool Australia has recommended BWX Limited and Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Medibank Private Ltd (ASX: MPL) share price is slipping on Friday afternoon. This comes after the private health insurer announced its first-half results for financial year 2022.

At the time of writing, Medibank shares are swapping hands for $3.065, down 3.31%.

Medibank share price slides on mixed H1 FY22 results

The Medibank share price is heading south today following a softened performance by the company. Here are the key financial numbers for the six months ending 31 December 2021:

• Group revenue from external customers of $3.58 billion, up 4% on the prior corresponding period (H1 FY21 $3,442.2 million);
• Group net profit after tax (NPAT) of $220.2 million, down 2.7% (H1 FY21 $226.4 million);
• Earnings per share (EPS) of 7.7 cents, up 4.4% (H1 FY21 7.4 cents); and
• Fully franked interim dividend of 6.1 cents per share (cps), up 5.2% (H1 FY21 5.8 cps).

How did Medibank perform in H1 FY22?

Medibank recorded a relatively resilient financial performance against the backdrop of the COVID-19 pandemic.

Resident policyholders lifted by 1.5% or 28,100 over the six-month period. Management noted that much of this growth continues to be driven by younger people and those who haven’t held private health insurance previously.

In addition, Medibank reported high levels of customer advocacy, with Service NPS up for both Medibank (+8.9) and ahm (+2.2) compared to 30 June 2021. NPS is the net promoter score, used to measure customer loyalty and satisfaction.

The group achieved operating profit growth in both its Health Insurance and Medibank Health businesses. These numbers surged to $26.3 million (up 10.3%), and $6.9 million (up 36.7%), respectively.

While group operating profit was up 12.3%, this had been offset by a $40.9 million or 57% decrease in net investment income. This dragged down Medibank’s bottom line, with NPAT decreasing 2.7% to $220.2 million.

What did management say?

CEO David Koczkar touched on the results possibly impacting the Medibank share price today, saying:

Today we have delivered a strong result showing that our focus on our customers and our strategy to grow as a health company is working.

Health remains the key issue that concerns people in Australia. This focus has seen a positive shift in attitudes towards private health insurance and has seen continued policyholder growth across both the Medibank and ahm brands.

Koczkar also said elective surgery restrictions during the pandemic had taken a toll.

Now is the right time for governments to minimise future use of restrictions to elective surgery. These restrictions for surgeries have impacted the quality of life for our customers and increased the pressure in the health system.

While some surgeries may be called elective, for our customers they are anything but. The recent easing of restrictions on some surgeries is welcome but we believe a plan is needed to avoid these restrictions for patients in the future.

What’s the outlook for Medibank?

For the current second half, Medibank will continue to assess claims activity. Any permanent net claims savings due to COVID-19 will be given back to customers through additional support programs.

In terms of policyholder numbers, the company is striving to reach 3.1% to 3.3% policyholder growth in FY22.

Underlying average net claims expense per policy unit is forecast to be around 2.3% among resident policyholders.

Medibank stated that it remains on track to deliver $15 million in productivity savings in FY22. In total, management expenses are predicted to come in at roughly $530 million for the full year.

Medibank share price snapshot

It’s been a tough start to 2022 for the Medibank share price. It’s down 8% year to date and 4.5% over the past month. However, it is up 11% over the past year.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has gained 2.5% over the past 12 months but is down 6% this year to date.

The post Medibank (ASX:MPL) share price backtracks as profit slips appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Block rockets, Blackmores sinks
• 5 things to watch on the ASX 200 on Friday
• Medibank (ASX:MPL) share price lifts despite rumours of failed hospital bid
• Sweet dreams: ASX 200 shares that have provided big returns without the worry
• Could this give Medibank (ASX:MPL) shares a boost during earnings season?

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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A shareholder of AGL Energy Ltd Ltd (ASX: AGL) has said the planned demerger would be “value destructive and environmentally disastrous”.

The ‘activist’ investor Snowcap based out of London published a letter to the leadership of AGL.

‘Value destructive’ demerger

Snowcap said that AGL shareholders are currently faced with two “suboptimal” options.

The current plan is the demerger, which Snapcap described as a value destructive and environmentally disastrous plan backed by management. It said that the takeover offer materially undervalued the AGL business.

The demerger plan is to split AGL into an energy retailing business and an energy generation business called Accel Energy. It’s Accel that will own the coal power plant assets.

Management believe that each business being able to decide on the best decisions for long-term value creation will be more effective.

Snowcap said that the demerger is flawed and is a “half-baked” attempt by management to financially engineer its way around AGL’s problems rather than address the root cause. The investor believes that the demerger wouldn’t address environmental concerns and it would make coal closure much harder.

However, it must be said that AGL has stated that each of its businesses would be aiming to reduce their carbon emissions by around half over the next decade or so.

Snowcap throws shade at management’s performance

The investor said that AGL needs to pursue a third option: abandon the demerger and takeover talks, instead it should aggressively transition away from coal by 2030.

Mike Cannon-Brookes and Brookfield also want to accelerate the transition away from coal energy generation, but Snowcap argues that doing so within a combined, ASX-listed AGL “has the potential to unlock substantial value” for AGL shareholders, whilst delivering “huge” environmental and social benefits.

Snowcap said that the AGL share price has underperformed its peers and the wider Australian market and now trades at a “substantial” discount to the intrinsic value.

The investor said that AGL hasn’t adapted to the changing energy markets and a shift of investor attitudes about climate. It was pointed out that over the last decade, AGL has acquired nearly 7GW of coal power but “severely under-investing” in renewables.

Snowcap says AGL is now of the most carbon-intensive utilities on the planet and has refused to “meaningfully” bringing forward the retirement dates of the two largest coal plants – Loy Yang A and Bayswater, which are currently 2045 and 2033 respectively.

That compares to Origin Energy Ltd (ASX: ORG) which is closing the large coal power plant Eraring seven years early.

Up to 60% upside for the AGL share price?

Snowcap believes that by making the changes it has suggested – abandoning the demerger and closing the coal power plants early – could lead to an upside of between 30% to 60% for investors and avoid 385 million tonnes of future greenhouse gas emissions.

The commitment of an early coal closure can address the “core reason” for the current AGL discount and deliver huge maintenance capex savings over the coming decade.

Regarding the takeover bid, Snowcap said that it recognises the flaws of the demerger proposal and the strategic merits of an early transition. It noted there are advantages to managing the transition under the transparency and accountability of public ownership.

The post Shareholder calls out AGL (ASX:AGL) planned demerger as ‘value destructive’ 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 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 Bruce Jackson.

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