Category: Stock Market

Key points

• Nufarm shares on the rise following partnership agreement
• BP to purchase Nuseed Carinata over the next 10 years
• Commercial production progressing in several countries

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The Nufarm Ltd (ASX: NUF) share price is heading north on Tuesday morning. This comes after the agricultural chemicals company announced a strategic partnership with BP.

At the time of writing, Nufarm shares are up 3.15% to $4.59. It’s worth noting that despite today’s rise, the company’s shares have lost almost 6% in value over the past month.

Nufarm advances on growth plans for Nuseed Carinata

The Nufarm share price is rising amid hopes the company’s latest news will see penetration into new markets.

In its release, Nufarm advised it has entered into a long-term strategic offtake and market development agreement with BP.

This will see BP purchase Nuseed Carinata oil that it plans to process or sell into growing markets to supply sustainable biofuels.

Nuseed Limited is a wholly-owned subsidiary of Nufarm. Nuseed Carinata is a non-food cover crop, which can be used to produce low-carbon biofuel feedstock. It protects and improves soil between the main crop harvest and the next season’s planting. Replacing fossil fuels with oil reduces emissions, and removes atmospheric carbon while restoring soil carbon.

Nufarm noted that increased global demand for biofuels is being driven to achieve global greenhouse gas (GHG) reduction targets.

Under the 10-year deal, BP will compensate Nufarm an agreed sum, along with further payments if certain milestones are met.

Nuseed is currently increasing commercial production in Argentina and planning expansion programs in South America and the United States. Initial research and market development initiatives are also underway in Europe and Australia.

Commenting on the deal possibly fuelling the Nufarm share price today, CEO Greg Hunt said:

Nuseed Carinata is a great example of Nufarm’s approach to developing innovative solutions to support sustainable agriculture. This agreement between Nuseed and bp is validation of Nuseed Carinata’s potential as an advanced, non-food agricultural feedstock for biofuel production.

As a leading global inputs provider to agriculture, Nufarm is well positioned to help drive and support the expansion of Nuseed’s Carinata platform.

About the Nufarm share price

Over the last 12 months, the company’s shares have lost around 6%. The Nufarm share price reached a 52-week high of $5.60 in April, before treading lower.

Nufarm has a market capitalisation of roughly $1.69 billion, with approximately 379.96 million shares on its books.

The post Nufarm (ASX:NUF) share price climbs higher on BP low-carbon fuel deal appeared first on The Motley Fool Australia.

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• What are brokers saying about the Bubs (ASX:BUB) share price?
• 2 small-cap ASX shares we’ve bet big on: fund manager
• ‘We see CBA (ASX:CBA) underperforming’: Why this broker is avoiding Commonwealth Bank in 2022
• Treasury Wine (ASX:TWE) share price lifts amid latest tariff battle
• Novonix (ASX:NVX) share price surges 5% on finalised US investment and supply agreement

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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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Forager Funds Management senior analyst Gaston Amoros tells why now is the time to buy up small-cap ASX shares.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Gaston Amros: My name is Gaston Amoros; I’m a senior analyst at Forager Funds Management. Forager Funds Management is a value-oriented funds manager. It’s been around since 2009. 

Our historical return, or at least the number that I have in my head, is 16% compounded per annum over the last 10 years. And I think that’s around 500 points, so 5% of alpha versus our benchmark. Our benchmark is the All Ordinaries Index (ASX: XAO) and the fund is a listed investment trust in the ASX under the ticker Forager Australian Shares Fund (ASX: FOR).

In terms of investment philosophy, we typically invest in stocks that are unloved and undervalued. On any given year, the market will present you opportunities, and for some time the opportunities have been typically what people describe as value stocks. These are stocks that have actually rewarded us with the performance that we’ve been harvesting for the past 18 months or last couple of years, I would say.

We typically go wherever the opportunity is and wherever we see value emerging. That value has worked very well over the last couple of years. We think that now we are starting to see an opening up of opportunities in small-cap growth in particular.

The other sector that could be interesting is, what people normally describe as COVID beneficiaries that are being thrown out with the proverbial wash water. But I think the one that is more interesting, and that probably I’m hoping that the one that would actually build our returns in the second, over the next couple of years, will be small-cap growth that is now suffering the same fate as some value stocks a few years ago. 

Biggest convictions

MF: What are your two biggest holdings?

GA: Given that we’re talking about that [small-cap] bucket and given that I think it’s where the opportunity is for your readers and where we see the opportunity emerging these days, I think Whispir Ltd (ASX: WSP) would be one of them.

Whispir is a service platform that helps automate communications workflows with customers or employees via SMS, email, social media posts, etc. They have around 1,000 customers. And they count names that people will be familiar with — like Telstra Corporation Ltd (ASX: TLS), Foxtel, Chemist Warehouse, Australia Post, Qantas Airways Limited (ASX: QAN) and a bunch of others. 

So someone like Chemist Warehouse, if I remember correctly, they started in 2016 with one use case — particularly it was they were using the Whispir platform for click and collect notifications. I think today there are around 6 use cases, which include COVID vaccinations, e-prescriptions, click and collect, and a few other things. 

Another customer, for example, [is] the City of Christchurch Council in New Zealand. They use the Whispir platform to coordinate emergency response in the case of earthquakes or in the case of tsunamis. 

This is time-sensitive, mission-critical communications, either among an employee base, or customers.

MF: The share price is down more than 40% over the past 12 months, but your team still has plenty of faith in the future?

GA: We have plenty of faith in the future. It’s one of our largest positions in this sleeve of high-growth companies. We started buying Whispir, I think it was around the middle of the year… entry price was around $2.50. So I think we’re slightly underwater at the moment, but we have a 3-5 year investment horizon, and we’re very confident that we will make more than our fair share over that period of time. 

Whispir has grown 20%, 30% per annum, historically. They upgraded their FY22 guidance at the time of their AGM. They just reported fiscal Q2. So this is December and they were growing 27% year-on-year. And they added a record number of customers.

Also, very importantly, in December they announced that transformational deal. They signed Singapore Telecommunications, or Singtel, as a partner in the Asia-Pacific region. So Telstra does the same job for the Whispir here in Australia and New Zealand. 

Telstra gave them 80% of the revenue that they have in Australia and New Zealand. So if Singtel does anything remotely similar to what Telstra has done for Whispir in Australia, this deal is very transformational. And there isn’t much in people’s numbers for this deal. This is a deal that will start contributing in size from FY23. So what it actually does is de-risks the growth profile. 

Last but not least, Whispir is traded at around 3 times EV [enterprise value] to revenue. This compares to Xero Limited (ASX: XRO), WiseTech Global Ltd (ASX: WTC), and Altium Limited (ASX: ALU) that are trading between 15 and 20 times EV revenue for a similar growth profile. That gives you an idea of the potential risk-reward here.

MF: And your other big holding?

GA: The other one that’s worth mentioning, which is big for us, is Bigtincan Holdings Ltd (ASX: BTH). 

Bigtincan is a leader in sales enablement software. What sales enablement means is essentially a software platform that you deploy either in mobiles or in tablets or in laptops to your salesforce. It does basically 4 things: sales content management, sales training and coaching, document automation, and internal communications. So it’s a bundle. And it integrates to your salesforce.com or to like your SAP or to whatever other ERP or CRM solution people are using. 

But the important thing to understand is, not all software is created equally. There are software products that insert themselves at the front-end where the revenue is generated for the company, where you get the incremental dollars. And you get software solutions that go in the backend, which are nice to have and they fulfil an important role, but they’re not mission-critical. It’s hard to measure the utility of the backend products, whereas the front end, it’s very clear. Either they’re helping to make more revenue, or they’re not. 

Bigtincan is one of those that is at the point of vision where the salesforce is actually generating the revenue. You get all that for $7 a pop — basically $7 per user per month. So it’s actually a small investment across a large workforce and the customers are pretty happy. 

The proof of that is in the fact that it’s been growing ARR [annual recurring revenue] at more than 30% organically over the last few years. The total number is 50% compounded because they’ve been buying and rolling up companies — but their organic growth is north of 30% over the last few years. It’s 97% recurrent revenue. It has pretty interesting unit economics.

We are very excited — but again, we are a 3-5 year investor. We are very excited about what the future looks like. 

The post 2 small-cap ASX shares we’ve bet big on: fund manager appeared first on The Motley Fool Australia.

More reading

• 4 small cap ASX shares for your watchlist
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• Earnings preview: What to expect from Bigtincan (ASX:BTH) this reporting season

Motley Fool contributor Tony Yoo owns Whispir Ltd and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Altium, BIGTINCAN FPO, Whispir Ltd, WiseTech Global, and Xero. The Motley Fool Australia owns and has recommended Telstra Corporation Limited, WiseTech Global, and Xero. The Motley Fool Australia has recommended BIGTINCAN FPO and Whispir Ltd. 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 Commonwealth Bank of Australia (ASX: CBA) share price opened the session down on Tuesday. At the time of writing, CBA shares are $93.66 each, less than 0.1% below yesterday’s closing price of $93.74.

The CBA share price has been on a fairly bumpy ride these past few months, having collapsed from a closing high of $110.13 back in November.

Since then, the bank’s shares hit a bottom of $93 in December and made an attempt at recovery. They peaked at $103 before tumbling once more. As of today, the CBA share price is now trading at 6-month lows.

Certainly, the team at JP Morgan are cautious about the CBA share price. Its analysts prefer other names in the ASX banking universe.

The broker is bearish on its outlook for CBA. In a recent note, it urges its clients to sell CBA shares or at least remain underweight in their portfolio allocations. Let’s take a look.

Why is JP Morgan underweight on CBA?

Analysts at the investment bank are bearish on CBA given its outlook relative to the other major banks. The broker reckons whilst revenue will be strong, variable costs could offset the carry-through to profit.

“We forecast revenue growth to be towards the top end of peers in FY23/24; however ongoing cost investment will likely cap pre-provision profit growth to similar levels to the other majors,” the broker said.

JP Morgan estimates a net interest income of $19.1 billion in FY22 and $19.55 billion in FY23, representing a 2.35% year on year growth.

At the same time, however, the broker sees this carrying through to just $9.11 billion in cash net profit after tax (NPAT) in FY22, then decreasing to $9 billion cash NPAT in FY23. That’s a decrease of 1.2% over the year.

The broker also reckons that CBA’s net interest margin (NIM) will contract over the coming years – in line with other banks – decreasing from 2.03% in FY21 to 1.87% In FY22. It also expects a further drop to 1.8% in FY23.

Not only that, the bank’s capital position, a smaller size than its peers, is also a risk to the company’s earnings outlook in 2022.

“Further capital management is likely in FY23, supported by its residual franking balance,” the broker said. “However, the surplus capital position is smaller than peers on a market-cap adjusted basis.”

As such, JP Morgan reckons CBA will touch $90 per share by December. Its valuation reflects the present value of dividends paid to shareholders through to FY24 and the present value of “a multiple of FY24E tangible book value”.

At the time of writing, this implies a downside potential of around 3% or approximately $3.50 per share.

“Given these factors, we see CBA underperforming our coverage universe,” the broker said.

CBA share price summary

In the last 12 months, the CBA share price has held gains and climbed more than 10% in that time.

This year to date, things aren’t so rosy with the CBA share price slipping into the red. It’s down almost 8% since January 1 after tanking 4% this past week.

The chart below shows CBA’s performance against the other Australian majors in the last 12 months.

The post ‘We see CBA (ASX:CBA) underperforming’: Why this broker is avoiding Commonwealth Bank in 2022 appeared first on The Motley Fool Australia.

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• ASX share market on watch: Is the RBA going to increase interest rates in 2022?
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Motley Fool contributor Zach Bristow 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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Key points

• The Novonix share price is currently soaring 5%, trading at $7.87
• The gain follows news of a completed supply agreement with US battery cell developer, KORE Power
• Novonix has also taken a 5% stake in KORE Power

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The Novonix Ltd (ASX: NVX) share price is taking off after the company announced that its signed and sealed a supply agreement with, and investment in, battery cell developer KORE Power.

Under the agreement, Novonix will be KORE Power’s only graphite anode material supplier. It has also taken a 5% stake in the company.

At the time of writing, the Novonix share price is $7.87, 4.93% higher than its previous close.

Though, that’s lower than its intraday high of $8.14, which represented an 8.5% gain.

Let’s take a closer look at today’s news from the battery technology company.

What’s boosting the Novonix share price?

Tuesday is proving to be a good day for the Novonix share price. That’s despite the market reacting poorly to the company’s initial announcement of its deal with KORE Power.

This time last week, the company’s stock was tumbling – eventually closing 7.5% lower – after it announced its intent to undergo the agreement that was finalised today.

Novonix will initially supply KORE Power with 3,000 tonnes of graphite anode material each year for 5 years, beginning in 2024.

That supply has the potential to increase to 12,000 tonnes of anode material each year by 2027, subject to demand.

It’s the first significant offtake agreement Novonix has entered as it expanded its production capacity at the new Riverside facility.  

Additionally, Novonix has taken a 5% stake in KORE Power – paying US$7.50 apiece for around 3.33 million shares in the battery cell developer.

That brings its total investment to US$25 million. Half of the holding was paid for in cash while the other half was paid via script.

Speaking on the supply agreement and investment, Novonix co-founder and CEO, Dr Chris Burns commented:

More than ever, the United States and its neighbours are realising the importance of building a sustainable and energy secure future. Our partnership with KORE Power is a testament to our commitment on executing on our phased growth plan and bringing large-scale production of high-performance battery synthetic graphite to the United States.

The post Novonix (ASX:NVX) share price surges 5% on finalised US investment and supply agreement appeared first on The Motley Fool Australia.

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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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The Treasury Wine Estates Ltd (ASX: TWE) share price is up 1.79% in early trade to $10.79 per share.

This comes as the company lobbies the United Kingdom to rethink the nation’s proposed new tax system impacting wine imports.

Why is the UK’s new import tax regime of concern?

The Treasury Wine share price could come under renewed pressure if the UK doesn’t amend its new tax regime on imported alcoholic drinks.

Treasury Wine, which supplies the lion’s share of imported Aussie wine to the UK market, has warned that the new tax system will negate any hoped-for benefits achieved by the free trade agreement.

As The Australian reports, Treasury Wine’s CEO Tim Ford has written a submission to the UK government saying he supports their efforts to simplify the nation’s complex alcohol import taxes. But he notes that the current regime will unfairly hit Australian wines.

That’s because the import taxes will rise on wine (and other drinks) with an alcohol content of more than 11.5%. And more than half of Treasury Wine’s products have alcohol contents in the range of 12-15%. Most European wines, on the other hand, fall below the 11.5% threshold.

The UK’s import duties will also rise with each 0.5% increase in alcohol content. Ford says this narrow range should be expanded to 1.0% as Australian wines tend to have a significant alcohol content variance depending on environmental conditions.

In Ford’s submission he writes (quoted by The Australian):

Environmental conditions largely determine alcohol content in wine and are not readily modified after grapes are harvested. Hence, unlike some other beverage types that can innovate towards lower alcohol content, an increased duty burden placed on higher alcohol still wines [is] inherently a tax unavoidably borne by Australian producers…

TWE believes that further work needs to be done to modify the proposed new duty tax system to ensure that non-tariff, ‘behind the border’ measures do not distort the impact from the reduction in tariffs and retail prices that would result from A-UKFTA’s introduction.

The UK is the biggest importer of Aussie wines.

Treasury Wine share price snapshot

The Treasury Wine share price is down around 14% so far in 2022. This trails the 8% year-to-date loss posted by the S&P/ASX 200 Index (ASX: XJO).

Over the past 12 months, Treasury Wine shares are up 9%.

The post Treasury Wine (ASX:TWE) share price lifts amid latest tariff battle appeared first on The Motley Fool Australia.

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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 recommended Treasury Wine Estates 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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Key points

• CSL’s shares have fallen heavily in 2022
• Citi sees this as a buying opportunity
• The broker expects the acquisition to boost more than just CSL’s near term earnings

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The CSL Limited (ASX: CSL) share price is edging lower on Tuesday morning.

At the time of writing, the biotherapeutics giant’s shares are down slightly to $259.86.

This means the CSL share price is now down over 12% since the start of the year.

Is the CSL share price in the buy zone?

According to a note out of Citi from last week, its analysts see a lot of value in the CSL share price at the current level.

The note reveals that its analysts have retained their buy rating and $340.00 price target on the company’s shares.

Based on the current CSL share price, this implies potential upside of 31% over the next 12 months.

What is the broker saying?

Citi has been running the rule over the $7 billion Vifor Pharma acquisition and likes what it sees.

While the acquisition is expected to be accretive to earnings, the broker isn’t as focused on that as others. Instead, Citi sees Vifor Pharma’s complementary research and development (R&D) pipeline as something to get excited about.

In respect to earnings, Citi said: “Because of the large difference in the earnings multiples of both companies and the low cost of debt, we expect the transaction to be double digit NPATA accretive (although ROIC dilutive).”

As for its R&D pipeline, the broker commented: “The key positive from the transaction is that it expands the CSL late stage R&D pipeline, which we have noted for some time was limited for a company the size of CSL.”

And while Citi has a few concerns over “whether this new renal division adds or detracts from the overall CSL strategy,” it isn’t enough to put it off recommending the CSL share price as a buy.

The post Top broker says latest CSL (ASX:CSL) acquisition will boost more than its bottom line. Here’s why appeared first on The Motley Fool Australia.

More reading

• 3 ‘champion stocks’ for ASX investors in 2022
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• Own CSL (ASX:CSL) shares? Here’s why the company is moving on from COVID research
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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. owns and has recommended CSL Ltd. 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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Key points

• The Boral share price is charging higher on Tuesday following the announcement of its capital return
• Shareholders can expect to receive a $2.65 per share capital reduction and an unfranked 7 cents per share dividend
• Investors will need to be on the Boral share register by 7 February to receive the payments

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The Boral Limited (ASX: BLD) share price is galloping ahead this morning following its announcement of a multibillion-dollar capital return for shareholders.

In early morning trade, shares in the materials company are up 6.8% from their previous close to $6.27. Investors are jumping on the Boral bandwagon as it readies to return $3 billion to its shareholders.

Let’s take a closer look at the details announced today.

Three billion reasons why the Boral share price is higher today

The Boral share price is pushing higher today amid its decision to shower its shareholders in a massive capital return.

According to the company’s announcement, the company will return $3 billion of surplus capital to shareholders. This will be comprised of a $2.65 per share capital reduction and an unfranked 7 cents per share dividend.

Notably, this follows the 2021 annual general meeting where shareholders approved the share capital reduction.

Additionally, the company has worked with the Australian Taxation Office (ATO) to establish the tax implications. It has been confirmed that no part of the capital reduction will be treated as a dividend.

The ATO is expected to issue a class ruling regarding Boral’s capital reduction. This should contain details on how shareholders will need to treat the return.

Moreover, the capital return is a product of Boral’s divestment and sale of its North American building products business. In addition, the capital reduction is on top of a previously announced on-market share buy-back program.

Management commentary

A flurry of various forms of capital return has pushed the Boral share price higher in the past year with the company selling off parts of its business. Boral CEO and managing director Zlatko Todorcevski commented:

In the 12 months following the sale of USG Boral and culminating with the announced sale of Boral’s North American Fly Ash business, we have completed an extensive portfolio realignment, unlocking significant value for our shareholders. Our reshaped portfolio allows us to focus on strengthening the performance and profitability of our core Australian construction materials business.

What’s next?

Lastly, it is worth highlighting the key dates for the capital return to take place.

Tomorrow, 2 February 2022, will be the effective date for which the share capital reduction is carried out. Following that, 4 February will see the first day of trading for shares ‘ex return of capital’.

Importantly, Monday 7 February will be the record date for eligibility of the capital return. Shareholders will need to be on the share register by this date to be a part of the $3 billion bonanza.

Finally, Monday 14 February is the date shareholders will receive the return of capital and dividend.

The Boral share price is up more than 25% in the past 12-months.

The post Boral (ASX:BLD) share price takes off amid $3b return of capital appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

The stock of Tesla (NASDAQ: TSLA) raced out of the gate Monday morning after the world’s most famous electric vehicle (EV) stock won an endorsement from Barron’s magazine over the weekend, followed by a second endorsement from Credit Suisse this morning.

The Tesla share price finished Monday’s session up 10.68% to $936.72 .

So what

On Saturday, Barron’s called Tesla stock a better buy than either General Motors (NYSE: GM) or Ford (NYSE: F).

Tesla just finished reporting strong fourth-quarter profits, Barron’s said, yet its stock suffered its third-worst post-earnings sell-off in history as investors fretted over the lack of new Tesla models being brought to market in 2022.

But this week, investors will get a chance to compare the EV maker’s results to those of Ford and GM, and Barron’s believes this will make it very clear how much faster Tesla is growing than its rivals — and why the stock may be worth its forward earnings multiple of 83.

Seconding that emotion this morning, investment bank Credit Suisse Group upgraded shares of Tesla to outperform, with a $1,025 price target, StreetInsider.com reports.

Now what

Credit Suisse said it expects “further volume growth and sustained margin strength for Tesla” and “positive EPS revisions,” noting that its predictions for the EV maker’s 2022 profits are a good 25% ahead of what the rest of Wall Street is expecting.

“Tesla remains the leader of the multi-decade secular transition to EVs,” the bank said, with a product lead over its rivals and no problems with demand. The only question is whether Tesla can produce cars fast enough to keep up with that demand. This gives it incredible pricing power, which is reflected in its profit margins: 50% better than what General Motors produces, and five times better than Ford.

Credit Suisse thinks this makes Tesla the car company — and the car stock — to beat. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla stock was on fire today appeared first on The Motley Fool Australia.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and recommends Tesla. 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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Key points

• Credit Corp has delivered revenue and profit growth during the first half
• The company’s profit has beaten the market’s expectations
• Guidance for FY 2022 has been reaffirmed

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The Credit Corp Group Limited (ASX: CCP) share price is storming higher following the release of its first half results.

At the time of writing, the debt collection company’s shares are up 5% to $35.68.

Credit Corp share price higher after solid first half growth

• First half revenue up 8% to $203.9 million
• Net profit after tax up 8% to $45.7 million
• Earnings per share of 67.7 cents
• Fully franked interim dividend of 38 cents per share
• FY 2022 profit guidance reaffirmed

What happened during the first half?

For the six months ended 31 December, Credit Corp delivered an 8% increase in revenue to $203.9 million. This was driven by solid revenue growth across both its ANZ and US debt buying businesses and its ANZ lending business.

The company advised that while market volume remains subdued, organic purchasing continues to recover. In fact, it reached its highest level since the start of the pandemic during the half.

On the bottom line, steady margins led to the company’s net profit after tax growing 8% to $45.7 million. The star of the show here was its US debt buying business which reported a 31% increase in profit to $8 million. This was supported by a 5% lift in ANZ debt buying profit, which offset a 7% reduction in ANZ lending profits.

According to CommSec, the market was expecting a first half profit of $42.7 million, which the company has easily outperformed. This may explain why the Credit Corp share price is charging higher today.

In light of this positive form, the Credit Corp board elected to increase its interim dividend by 6% to a fully franked 38 cents per share. This represents a payout ratio of approximately 56%.

Management commentary

Credit Corp’s CEO, Thomas Beregi, was pleased with the half and notes that the company is well-placed for the future thanks to recent acquisitions.

He said: “Credit Corp enjoys strong purchasing relationships and is well-positioned as unsecured credit balances recover and charge-offs normalise.”

“Acquisition of the Radio Rentals business assets has accelerated our plans to enter the sale of goods by instalment market and adds to the suite of lending pilots already underway. All pilots utilise Credit Corp’s leading technology platform including fast online decisioning and superior collections,” he added.

Outlook

Credit Corp has reaffirmed its profit and net lending guidance for FY 2022. It continues to expect a net profit of $92 million to $97 million and net lending volumes of $45 million to $55 million.

Management has, however, upgraded its purchase debt ledger (PDL) acquisitions guidance by $20 million to the range of $300 million to $320 million.

The post Credit Corp (ASX:CCP) share price up 5% after smashing first half profit expectations appeared first on The Motley Fool Australia.

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Key points

• Aussie Broadband delivered strong revenue growth during the first half
• Operating earnings margins crunched by its investment in promotions and increased usage costs during lockdowns
• Margins expected to improve in second half

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The Aussie Broadband Ltd (ASX: ABB) share price is on the move following the release of its first half trading update.

In morning trade, the telco’s shares are up 2.5% to $4.33.

Aussie Broadband share price higher on strong first half growth

• Total broadband subscribers up 45% year on year to 494,803
• Total services (broadband, voice, mobile, fetch, managed) up 41% to 636,446
• First half gross revenue growth of 49% to $237.3 million
• Marketing expenses up 69% to $16.4 million
• First half EBITDA (before transaction costs) up 7% to $9.1 million
• Guidance: Full year EBITDA expected to be $27 million to $30 million

What happened during the first half?

Aussie Broadband had another strong half for subscriber and revenue growth. For the six months ended 31 December, the company recorded a 45% year on year (11% quarter on quarter) jump in broadband subscribers to 494,803. This underpinned a 49% increase in gross revenue over the prior corresponding period to $237.3 million.

However, due to its investment in marketing to grow customer numbers, its operating earnings (EBITDA) was impacted. Management notes that promotions were used extensively to encourage customers already on the NBN to switch to Aussie Broadband. This led to its marketing expense as a percentage of revenue increasing to 12.6% from 11.9%. Combined with higher usage costs during lockdowns, this meant EBITDA grew only 7% to $9.1 million.

Positively, management expects its marketing spend as a percentage of revenue to ease in the second half, which should lead to stronger margins.

In light of this and the end of lockdowns, it is forecasting full year EBITDA in the range of $27 million to $30 million excluding acquisition costs and benefits. This will be up from $19.1 million in FY 2021.

Management commentary

Aussir Broadband’s Managing Director, Phillip Britt, commented: “We’re very pleased with how all segments have performed across the quarter, despite the Christmas period impacting residential sales slightly. The business segment remained strong. So far in 1H FY22 we have taken 15% of all NBN enterprise ethernet net service activation orders. We continue to be excited about our Carbon platform (our self-service platform for business), it now has more than 10,000 active services and over 400 MSPs (managed service providers) onboarded.”

“Whilst first half EBITDA has been impacted by increased promotional costs, and CVC expense due to lockdowns, we expect to see the benefits of operating leverage in 2H FY22 with employee, marketing and administration expenses expected to be lower as a percentage of revenue. The second half will also benefit from the organic connection growth achieved in the first half, additional white label migrations, and operating leverage to produce a full year EBITDA in the range $27m to $30m. This validates our strategy of continuing to invest in connection growth at the expense of short-term EBITDA gains,” he concluded.

The post Aussie Broadband (ASX:ABB) share price higher after delivering 49% revenue growth 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. owns and has recommended Aussie Broadband Limited. The Motley Fool Australia has recommended Aussie Broadband 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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