Category: Stock Market

The ASX share market has been on a bit of a rollercoaster ride recently, with investors spooked by the prospect of central banks raising interest rates.

This retraction in sentiment has been especially pronounced among the tech sector, as investors become less willing to pay high multiples for future earnings.

Many companies grouped under the tech umbrella have suffered heavy selling. However, one fund manager believes one ASX share has been wrongly assigned to the ‘losing bucket’ in an elevated interest rate environment.

On the contrary, EML Payments Ltd (ASX: EML) is anticipated to benefit in a world with higher interest rates.

We sat down with TAMIM Asset Management’s head of Australian equity strategy, Ron Shamgar, to make sense of this.

How will this ASX share benefit from higher rates?

Yesterday, the payment solutions company released its results for the first half of FY22. Despite EML’s gross debit volume (GDV) growing 206% and revenue increasing 20% from the prior corresponding period, the market dumped the ASX share by 4%.

The EML Payments share price has performed in line with other battered tech names so far this year. Since the start of 2022, shares in the payment technology company have tumbled around 11%. Though, the market might be overlooking EML’s built-in rate hedge.

Shamgar highlighted a point in the company’s presentation, saying:

Every 1% interest rate rise across the UK, the European region, and the US adds an incremental $15 million of EBIT to EML. Now, they did break it down into more detail. But basically, there are a few more nuances to it, but because they use sponsoring banks in North America, they don’t really benefit until rates get to around 2%.

So, therefore, the 1% rate rise doesn’t apply to the $2.7 billion [in stored float], it applies to a smaller amount, which works out to be $15 million of EBIT, which is what they articulated.

Furthermore, the fund manager spotlighted EML Payments as “the biggest beneficiary in the small-cap space” from higher rates.

Ironically, with rates going higher — because we have inflation — investors have been selling off tech stocks. Yet a company like EML has been put in that tech bucket, but they’re actually going to make lots more profits if rates go up. So inflation and rates are actually meaning that their business is more valuable… It’s contrarian to what many investors think.

Could more acquisitions be on the cards?

EML Payments has significantly grown its business in the last couple of years through acquisition. This approach has come with positives and negatives. The major negative has been the Central Bank of Ireland taking issue with EML’s PFS Card Services (Ireland) Limited (PCSIL) operations.

The dust appears to be settling on the PCSIL ordeal, letting the company move forward with its next chapter. Could that entail more acquisitions on the horizon for this ASX share?

EML is building sort of a truly global payments business and they’re thinking three to four years ahead. They are seeing where payments are going and where the biggest growth areas are. Open banking is obviously a massive opportunity that’s got, sort of, unlimited upside.

Shamgar added:

To me, I don’t think they’ll do any other acquisitions this calendar year, I think they’ll focus on showing the market that the acquisitions that they have made are going well. And then maybe next year, they look to do maybe some other deals.

But again, it will have to be something that they don’t want to buy something for the sake of it. They’re going to buy something because it’s going to give them access to certain customers or other certain capabilities that they don’t currently have, or new geography, for example.

In afternoon trade, shares in ASX-listed EML Payments are fetching $2.86 apiece, down 1.38%.

The post Don’t fear the rise! One ASX share that’s ready for an interest rate hike appeared first on The Motley Fool Australia.

More reading

• EML (ASX:EML) share price sinks 9% despite record-breaking product demand
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• Down almost 20% in 2022, is the EML share price now too good to ignore?
• 2 fast-growing ASX shares rated as buys in this correction
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Motley Fool contributor Mitchell Lawler owns EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended EML Payments. The Motley Fool Australia owns and has recommended EML Payments. 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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Qantas Airways Limited (ASX: QAN) shares were badly hit when COVID-19 all but shut down domestic and international flights.

As borders have slowly been reopening, Qantas shares have also recovered. Though they remain down some 25% from the pre-pandemic levels in early 2020.

With international travel remaining tricky and subject to change on the whims of foreign governments, Qantas has seen its domestic numbers return faster than overseas travellers.

This has also seen the airline’s subsidiary, QantasLink expanding its domestic routes. And, as the Motley Fool reported earlier this month, that drew the ire of Regional Express Holdings Ltd (ASX: REX). But Rex isn’t sitting on its laurels.

Rex has big expansion plans

The smaller airline carved its niche in the industry with a fleet of propeller planes, servicing rural Australia where the major airlines have less of a presence.

But it’s got bigger plans in mind.

Last year the airline began competing more directly with Qantas when it began flying major routes, like Melbourne-Sydney and Melbourne-Adelaide, with a fleet of six Boeing 737s.

Now, as Bloomberg reports, Rex Chairman Lim Kim Hai says he intends to increase that fleet “to as many as 30 by adding a plane every two to three months”.

Speaking at the Singapore Airshow, Lim said: “That’s a very good medium-term objective. There’s a lot to be said for economies of scale”.

COVID-19 restrictions hit Rex hard as well, but the regional carrier has more than recovered. While Qantas shares remain down 25% from pre-pandemic levels, the Rex share price is up approximately 30%.

And Lim said an uptick in recent bookings indicate travel numbers may have hit bottom.

“I’m just starting to see in the last six or seven days a turnaround. Significant enough for me to believe that probably the bottom has been reached,” he said.

How have Qantas shares been tracking?

As domestic borders have reopened, save Western Australia, and international travel is scheduled to resume next Monday, 21 February, Qantas shares have benefitted.

So far in 2022, the Qantas share price is up 5.5%. The Rex share price is up by 2.1%. That compares to a 3.8% loss posted by the S&P/ASX 200 Index (ASX: XJO).

The post Own Qantas (ASX:QAN) shares? Here’s how Rex plans to turn up the heat appeared first on The Motley Fool Australia.

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• 3 ASX shares to buy before the market rockets up again
• Why are ASX travel shares taking flight today?
• Border drama: Qantas (ASX:QAN) faces continued challenges on ‘kangaroo route’
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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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Altium Limited (ASX: ALU) shares will be in focus next week when it releases its half year results.

Ahead of the release, let’s take a look to see what the market is expecting from the electronic design software company.

What is the market expecting from Altium?

According to a recent note out of Bell Potter, its analysts are anticipating a solid half year update from Altium.

The broker is forecasting strong revenue and operating earnings growth on a like for like basis. In fact, it suspects the company could be tracking slightly ahead of its FY 2022 revenue guidance range based on its usual 45%/55% split between the first and second halves.

Bell Potter explained: “We are expecting a strong 1HFY22 result for Altium with forecast revenue and EBITDA growth of 24% and 29% respectively. (Note these forecasts are on a like-for-like basis and exclude TASKING which was sold in 2HFY21.)”

“Our 1HFY22 revenue forecast of US$99.4m is c.45% of our FY22 forecast of US$218.4m – which is slightly ahead of the US$209-217m guidance range – so we are assuming a relatively normal 45%/55% split in 1H/2HFY22 revenue for the company,” it added.

As for earnings, the broker is being conservative and is forecasting an EBITDA margin of 35%, which leaves some upside risk.

It commented: “Our 1HFY22 EBITDA forecast of US$34.8m equates to an EBITDA margin of 35.0% which is below our FY22 forecast of 36.5% so there is some conservatism in our 1HFY22 margin forecast.”

Are Altium shares in the buy zone?

Bell Potter sees value in Altium shares at the current level. The note reveals that the broker has a buy rating and $40.00 price target on them at present.

This suggests that there is 14% upside for investors over the next 12 months based on its current share price of $35.05.

The post Own Altium (ASX:ALU) shares? Here’s what to expect from its half year results appeared first on The Motley Fool Australia.

More reading

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• How did ASX tech shares perform today?
• 2 quality ASX tech shares for investors after the selloff
• What are brokers expecting for ASX tech shares this earnings season?
• 3 buy-rated ASX 200 shares with plenty of upside potential

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 Altium. 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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On Wednesday, we looked at three ASX shares that brokers have given buy ratings to this week. Unfortunately, not all shares are in favour with brokers right now.

Three ASX shares that have just been given sell ratings by brokers are listed below. Here’s why they are bearish on them:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of Credit Suisse, its analysts have retained their underperform rating and $14.00 price target on this mining giant’s shares. Although Fortescue delivered a half year result in line with its expectations, it can’t find a way to justify its current valuation. Especially given its belief that robust demand for Fortescue’s low grade iron ore will be short lived. The Fortescue share price is trading at $20.70 on Thursday.

Pro Medicus Limited (ASX: PME)

A note out of Goldman Sachs reveals that its analysts have retained their sell rating and slashed their price target on this health imaging technology company’s shares to $44.80. Its analysts believe there is a risk that Pro Medicus’ growth could taper beyond FY 2022. If this happens, it feels the market will be unable to justify the sky high multiples that its shares trade on. The Pro Medicus share price has fallen heavily today and now trades at $45.64.

Seek Limited (ASX: SEK)

Another note out of Goldman Sachs reveals that its analysts have retained their sell rating but lifted their price target on this job listings company’s shares to $29.10. While Seek posted a half year result that was well ahead of the broker’s estimates and upgraded its guidance, it isn’t enough for a more positive rating. Goldman has concerns about how volume, depth, and pricing interplay through FY 2023 as the labour market starts to normalise. The Seek share price is now trading below this price target at $28.92.

The post Top brokers name 3 ASX shares to sell today appeared first on The Motley Fool Australia.

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• Broker warns that Fortescue (ASX:FMG) share price could fall 30%
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• Why has the Fortescue (ASX:FMG) dividend tumbled 40%?
• Pro Medicus (ASX:PME) share price surges 8% on historic results

Motley Fool contributor James Mickleboro owns SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Pro Medicus Ltd. The Motley Fool Australia owns and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended SEEK 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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It’s a good day for the S&P/ASX 200 Index (ASX: XJO) and these heavyweights are making the most of it.

Right now, the ASX 200 is up 0.55%, boosting back towards a recovery from its disastrous January performance.

But not all of the index’s constituents have suffered in 2022. In fact, these three shares are trading at their highest price in at least 12 months.

These ASX 200 giants are hitting new 12-month highs

Woodside Petroleum Limited (ASX: WPL)

The Woodside Petroleum share price surged 4.9% earlier today to trade at its new 52-week high of $27.95.

Its gains come after the oil producer reported its after-tax profits increased 262% over the first half of financial year 2022 to reach around US$1.6 billion.

In turn, the company’s interim dividend was boosted 255% higher than that of the previous first half, coming to US$1.05.

Woodside’s profits soared alongside its realised oil price, which came in at US$60.30 last half.

Computershare Limited (ASX: CPU)

There’s no such clear reason behind Computershare’s gains today.

The ASX 200 technology company’s shares gained 1.55% earlier today to reach a new 52-week high of $23.49.

Right now, the Computershare share price is 15% higher than it was at the start of 2022 despite January’s ASX tech sell-off.

Vicinity Centres (ASX: VCX)

Finally, the Vicinity Centres share price also hit a new 52-week high of $1.93 today, gaining 3.4% in the process.

While there’s been no word from the retail-focused real estate investment trust (REIT) today, it did release its half-year results yesterday to the market’s delight.

Its net profit after tax (NPAT) for the period came to $650 million – more than $1 billion higher than that of the prior comparable period.

That’s despite Vicinity CEO and managing director Grant Kelley saying the period was “challenging” for the REIT as COVID-19‘s Omicron variant impacted its retail partners.

The ASX 200 REIT’s share price gained 11% after releasing its earnings on Wednesday.

The post 3 ASX 200 shares hitting 52-week highs today appeared first on The Motley Fool Australia.

More reading

• ASX 200 energy shares to become ‘cash machines’: broker
• Why Challenger, CSL, NRW, and Woodside shares are pushing higher
• ASX 200 (ASX:XJO) midday update: Telstra, Wesfarmers, and Woodside report
• Woodside (ASX:WPL) share price hits 52-week high after tripling full year earnings
• 5 things to watch on the ASX 200 on Thursday

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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S&P/ASX 200 Index (ASX: XJO) energy shares have been off to a strong start in the new year.

While the broader ASX 200 is down 3.5% in 2022, the S&P/ASX 200 Energy Index (ASX: XEJ) has gained 8.9%.

That energy index is comprised of big name ASX 200 energy shares like Santos Ltd (ASX: STO), up 7.2% so far this year.

Then there’s competing ASX 200 energy share Woodside Petroleum Limited (ASX: WPL), which has gained 22.5% since the opening bell on 4 January.

And the Beach Energy Ltd (ASX: BPT) share price has leapt 13.1% higher in that same time, giving it a current market cap of $3.3 billion.

ASX 200 energy shares to become ‘cash machines’

Earlier today Woodside released its full year results. And they didn’t disappoint.

Among the highlights, the ASX 200 energy share reported a 262% increase in underlying net profit after tax (NPAT) to US$1.62 billion. The company also paid a fully franked final dividend of US$1.05 per share, up 255% year on year.

Shaw and Partners called the results a “watershed moment” for the Aussie energy sector, with expectations that fossil fuels will be part of the energy mix for a long time yet as the world transitions to renewable sources.

According to Shaw and Partners (quoted by The Australian):

Over the past several years, the chorus of investors demanding returns from the sector has grown louder. The US Shale sector has responded, the Super Major have responded, howver the Australian listed companies have been caught in no man’s land.

Woodside’s CY21 today is the first time I can remember since CY14 that an Australain Oil & Gas company has so comprehensively beaten consensus estimates and at the same time provided a return to shareholders.

The broker said that companies in the sector, like ASX 200 energy shares, “are going to become cash machines, in the same way cigarette companies did post advertising restrictions in the 1970s”.

Shaw and Partners expects this won’t be the last time Woodside reports a double-digit yield and beats earnings expectation.

US and European energy shares also undergoing ‘tectonic shift’

The same tide that’s lifting ASX 200 energy shares is at work across the globe, as energy prices continue to surge.

Travis Stice, CEO of US shale driller Diamondback Energy said (quoted by Bloomberg), “Eighteen months ago, we were in a global apocalypse for the energy sector, and now you’re talking about out-sized returns. We should all pause and recognize the tectonic shift.”

Shell CEO Ben van Beurden added, “We are struggling as an industry to keep up with supply. Partly, that is because of the fact that during the lean years, we’ve all been very disciplined in cash preservation and in our investment decisions.”

With the tectonic shift still underway and the energy industry struggling to meet demand, ASX 200 energy shares look set for some healthy tailwinds.

The post ASX 200 energy shares to become ‘cash machines’: broker appeared first on The Motley Fool Australia.

More reading

• 3 ASX 200 shares hitting 52-week highs today
• Why Challenger, CSL, NRW, and Woodside shares are pushing higher
• ASX 200 (ASX:XJO) midday update: Telstra, Wesfarmers, and Woodside report
• Woodside (ASX:WPL) share price hits 52-week high after tripling full year earnings
• 5 things to watch on the ASX 200 on Thursday

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 S&P/ASX 200 Index (ASX: XJO) has faded from its intraday highs but remains in positive territory. In afternoon trade, the benchmark index is up 0.15% to 7,295.8 points.

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

Block Inc (ASX: SQ2)

The Block share price is down 5% to $151.00. This follows a similarly sharp decline for the payments company’s US-listed shares overnight. Investors continue to sell down fintech and buy now pay later shares. This appears to be on valuation concerns amid the prospect of interest rate increases coming sooner than anticipated.

Domain Holdings Australia Ltd (ASX: DHG)

The Domain share price is down 7% to $4.33. Investors have been selling this property listings company’s shares following the release of its half year results. This is despite Domain delivering a 27.9% increase in revenue to $175.3 million and a 34.2% jump in net profit to $26.1 million. However, an increase to its full year costs expectations could be weighing on its shares.

Telstra Corporation Ltd (ASX: TLS)

The Telstra share price is down 4% to $3.90. This is despite the telco giant delivering underlying earnings growth during the first half. Telstra posted a 4.4% decline in revenue to $10.5 billion but a 5.1% increase in underlying EBITDA to $3.5 billion. These earnings came in ahead of what analysts at Goldman Sachs were expecting. Some investors appear to have been expecting even better.

Wesfarmers Ltd (ASX: WES)

The Wesfarmers share price is down over 7% to $50.89 following the release of a disappointing half year result. The conglomerate reported broadly flat revenue but a 14.2% decline in net profit after tax to $1.2 billion. This was driven largely by the loss of ~34,000 store trading days due to COVID related closures. Investors may also have concerns with management’s plan to support customers in a more inflationary environment, rather than pass costs on.

The post Why Block, Domain, Telstra, and Wesfarmers shares are dropping appeared first on The Motley Fool Australia.

More reading

• Wesfarmers (ASX:WES) share price plunges 6% as Omicron takes its toll
• Telstra (ASX:TLS) share price slides 3% despite ‘strong mobile beat’
• ASX 200 (ASX:XJO) midday update: Telstra, Wesfarmers, and Woodside report
• Wesfarmers (ASX:WES) share price on watch after ‘most disrupted period’ since COVID onset
• Hold the phone! Telstra (ASX:TLS) delivers solid underlying growth and declares 8cps 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. owns and has recommended Block, Inc. The Motley Fool Australia owns and has recommended Telstra Corporation Limited and Wesfarmers 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 Lark Distilling Co Ltd (ASX: LRK) share price is climbing back from a 21% nosedive yesterday after the company announced the shock departure of its CEO.

At the time of writing, the Lark share price has rebounded 6.94% to $3.85.

Need to be brought up to speed? Here’s what is happening…

Why has the Lark CEO quit?

In a rather sudden announcement, Lark CEO Geoff Bainbridge has handed in his resignation in order to attend to a “personal matter” made known to the Board the day before.

It turns out that the personal matter involves a case of extortion. The Australian newspaper reported yesterday that it had obtained a video in which Bainbridge appears to be engaging in drug use.

Lawyers representing Bainbridge were quoted by the paper saying he is “the subject of a continuing, sophisticated and recently intensified extortion attempt by persons overseas using manipulated unverified images”. 

Further, the lawyers said: “The attempted extortion of Mr Banbridge commenced years before he had any involvement in Lark Distillery…”

In the meantime, non-executive director Laura McBain has taken the reins as interim managing director.

And seeing as Lark had been hunting for a CEO successor since December as part of its long term planning, the process has been kicked into overdrive.

Lark share price snapshot

The Lark share price opened yesterday at $4.10 and dropped as low as $3.48 throughout the day. By market close, Lark shares were sitting at $3.60 each — a decrease of just under 21%.

Today, Lark began trading at $3.99 but dropped back to $3.84 around lunchtime trade.

Over the last 12 months, the Lark share price has increased by 127%. In March last year, the shares were trading at a 52-week low of $1.63.

The shares hit a 52-week high of $5.61 in October, not long after the distiller completed the first stage of a capital raising, collecting $45.5 million from newly issued shares.

The company has a market capitalisation of $271 million.

The post Lark (ASX:LRK) share price rebounds 7% following sell-off appeared first on The Motley Fool Australia.

More reading

• Here’s why the Lark (ASX:LRK) share price is nosediving 21% today

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The Newcrest Mining Ltd (ASX: NCM) share price is holding up despite the company reporting a fall in revenue, profit, and production.

Newcrest shares are currently swapping hands for $23.80 apiece, a 1.26% gain. In comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.66%.

Let’s take a look at what the gold miner reported today.

Newcrest share price gains on financial results

Highlights of the company’s half-year (H1 FY22) results include:

• Statutory profit of US$298 million (A$414 million), down 46% on previous corresponding period (PCP) of H1 FY21
• Revenue of US$1,715 million, a 21% fall on PCP
• Earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $740 million, a 35% drop on PCP
• Gold production down 20% on PCP
• Copper production down 27% on PCP
• All-in sustaining cost of US$1,194 per ounce, up 23%
• All-in sustaining cost margin of US$502 per ounce, down 40%

What else happened in the half?

Newcrest declared a fully franked interim dividend of 7.5 US cents (10.4 AU cents), to be paid on Thursday, 31 March 2022.

The company reported major growth in its mineral resources and ore reserves, including a 10% rise in gold ore reserves to 54 million ounces.

The underlying profit was lower due to a planned upgrade of the Cadia SAG mill motor, which was completed in November. Production was also lower at the Lihir gold mine due to an expected fall in the grade of the ore.

The results reflected falling gold and copper sales due to less production at the mine, the company said. This wasn’t helped by a lower realised gold price, higher freight costs, and a strengthening Australian dollar against the US dollar impacting operating costs. Supply issues and rising demand also put pressure on the operating costs.

On a positive note, a higher realised copper price and less income tax expense partially offset these concerns. Overall, operating costs were lower due to lower sale volumes, a decreasing gold price, and other volume-linked costs.

Additionally, the company highlighted it is creating a brighter future via its safe and responsible mining. There has not been a fatality at the mine for six years.

Management commentary

Investors are pushing the Newcrest share price higher on the back of the results. This positive sentiment was echoed by CEO Sandeep Biswas, who said:

We have taken a big step forward in our profitable growth agenda during the first half of FY22. The depth and quality of our global organic growth portfolio was demonstrated through the announcement of the findings of the Cadia PC1-2, Red Chris Block Cave, Havieron Stage 1, and Lihir Phase 14A Pre-Feasibility Studies.

The outlook for the commodities that we mine is strong, and we have additional opportunities to further enhance our gold and copper production profile. Our team continues to pursue the potential for further open pit and underground opportunities to extend the life of Telfer, the development of Wafi-Golpu and potentially Namosi, all of which represent upside opportunity to our current base case projections.

What’s next for Newcrest?

Newcrest is on track to deliver its FY22 production guidance on the back of it completing major maintenance in September and the Cadia SAG mill motor upgrade.

The miner expects performance at the Lihir mine will improve in the second half of the financial year due to higher-grade ore.

Its all-in sustaining cost guidance also remains unchanged. However, the costs of managing COVID-19 are expected to be around $50-$60 million, up from the $35-$45 million estimated at the start of the financial year. This is due to government restrictions on travel, staff absences, logistic challenges, and isolation.

Newcrest believes the outlook for the commodities it mines is strong. The company will continue to improve its gold and copper production profile.

Commenting on the future outlook, Biswas added:

Following a solid start to the financial year, Newcrest is well placed to deliver a strong second half, to continue to pursue profitable growth, and to progress our Forging an Even Stronger Newcrest plan.

Newcrest share price summary

The Newcrest share price has fallen 3% in the past year, while it is up 3% in the past week.

For perspective, the benchmark ASX 200 has returned around 6.5% over the past year.

Newcrest has a market capitalisation of roughly $19.2 billion based on today’s share price.

The post Newcrest (ASX:NCM) share price lifts despite 46% profit drop appeared first on The Motley Fool Australia.

More reading

• Record exploration: Are ASX 200 shares gearing up for the next mining boom?
• Why Bendigo and Adelaide Bank, Crown, JB Hi-Fi, and Newcrest are pushing higher
• Is Newcrest Mining (ASX:NCM) set to start a share buyback in 2022?
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday

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 NRW Holdings Limited (ASX: NWH) share price is soaring after the company released its half-year results for the FY22 period before the market open.

At the time of writing, the diversified service provider’s shares are fetching $1.98 apiece, up 14.9%.

Let’s take a closer look at NRW’s performance in the first half.

NRW share price advances following growth across key metrics

The NRW share price is well into the green on the back of the company’s robust results for the six months ending 31 December 2021. Here are some of the key highlights:

• Revenue of $1,160 million, down 0.7% on the prior corresponding period (pcp) (H1 FY21 $1,168 million)
• Earnings before interest and tax (EBIT) of $74.6 million, up 26.4% (H1 FY21 $59 million)
• Profit before income tax of $64.2 million, up 59.3% (H1 FY21 $40.3 million)
• Cash balance of $195.9 million, up 33.7% on the prior period ($146.5 million)
• Fully franked interim dividend of 5.5 cents per share, up 37.5% (H1 FY21 4 cents per share).

What happened in H1 FY22 for NRW?

Investors are bidding up the NRW share price today as the company announced upgraded earnings for the FY22 period.

NRW is comprised of three divisions, which are civil, mining, and minerals, energy and technologies (MET).

In the civil business, revenue was lower than the pcp as major Pilbara-based projects were completed in FY21.

NRW noted that the high activity level in FY21 meant they had to hire more staff at unprecedented levels. Projects cost more because staff availability was severely impacted by COVID-19 measures including border closures. 

Lower activity in the first half of FY22 meant not as many staff were needed, which in turn has contributed to improved margins.

Across to the mining segment, activity levels increased by around 10% excluding the impact of lower revenue (and depreciation) on the Boggabri project.

Revenue increased to $611.3 million from $585.4 million in H1 FY21.

Lastly, revenue in the minerals, energy and technologies business increased to $359.2 million compared to $118.3 million in H1 FY21. This was mostly due to the inclusion of Primero, which was acquired by NRW in February 2021.

Over the six months to 31 December, the NRW share price rose by 20.4%.

What did NRW management say?

NRW managing director and CEO, Jules Pemberton, touched on the result, saying:

The results reflect what we said we would do. Activity levels are as we expected despite a series of challenges related to the COVID-19 pandemic. Earnings have recovered and delivered to the high end of guidance. We have also made progress in resolving claims and that is reflected in significantly improved cashflows in the half.

What’s the outlook for NRW for the remainder of FY22?

NRW advised that pandemic restrictions have continued for longer than previously anticipated. This has led to some challenges around recruiting staff for specific trades on future projects.

Nonetheless, the business is seeking to capture growth opportunities across the resources, infrastructure and renewables sectors.

The pipeline of opportunities currently stands at $19.5 billion. The order book has increased to $4 billion compared to $3.4 billion in June 2021. This is likely to continue growing following the completion of contract extension negotiations with Coronado Coal.

Revenue guidance for the full year remains between $2.4 billion to $2.5 billion. NRW noted that it has secured work in hand for the remaining six months of FY22 that supports the revenue forecast at the low end of the range.

In addition, earnings guidance (EBITA) for the full year has been updated to a range of $150 million to $155 million, reflecting the strong first-half results.

The post NRW (ASX:NWH) share price leaps 14% on ‘high end’ earnings and upgraded guidance appeared first on The Motley Fool Australia.

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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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