Category: Stock Market

Motley Fool Australia Chief Investment Officer Scott Phillips joined Weekend Sunrise on Sunday to discuss the unexpected $27 billion budget boost (and how quickly that evaporated), plus a volatile S&P/ASX 200 Index (ASX: XJO) and the outlook for the economy.

The post A budget blowout and a volatile ASX 200. Scott Phillips on Weekend Sunrise appeared first on The Motley Fool Australia.

More reading

• Is the ASX open and trading today?
• If you invested $1,000 in Flight Centre (ASX:FLT) shares a decade ago, here’s what it would be worth now
• A 15% correction? One expert’s advice for a sinking ASX 200
• 5 things to watch on the ASX 200 on Monday
• These were the worst performing ASX 200 shares last week

Motley Fool contributor Scott Phillips 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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As we make our way through the first half of FY22, equity markets have begun to shake up somewhat in the last few weeks.

The benchmark S&P/ASX 200 Index (ASX: XJO) has slumped almost 4.5% into the red over the last month, back to its May 2021 levels.

Leading the way is the S&P/ASX 200 Health Care Index (XHJ), which has slipped around 6% lower in the last month.

Let’s zoom out and look at how ASX healthcare shares have performed in Q1 FY22.

How did ASX healthcare shares go in Q1 FY22?

As a whole, ASX healthcare shares were in the green for the first quarter, in a robust performance on the local exchanges.

The ASX 200 Health Care index has climbed 1.3% this past quarter, and now leads the benchmark index over this time.

Broad weakness across the ASX has stemmed a 3-month decline for the major indices, with the S&P/ASX 200 handing back just over 1% in Q1.

So as it stands, taking a broad view, ASX healthcare shares outperformed the market in the first quarter of FY22.

Impressive gains are observed on the individual share level for Q1 in this sub-group.

For instance immunotherapy company Imugene Limited‘s (ASX: IMU) share price has climbed from 35 cents to 47.5 cents in the last quarter, a 36% jump.

Not to mention, the Imugene share price came off lows of 28 cents on 9 August to reach its all-time high in Q1 FY22.

Medicinal cannabis company Incannex Healthcare Ltd (ASX: IHL) was also a winner, with shareholders clipping the ticket on a 35% bump in its share price last quarter.

Ramsay Health Care Limited (ASX: RHC) shares were also climbers in Q1, delivering an outsized return of 11% after a healthy $6.80 per share gain from July to 30 September.

However, it wasn’t all rainbows for the sector, with some names coming in well behind the benchmarks.

After some excitement earlier in the year, the Little Green Pharma Ltd (ASX: LGP) share price made a 26% march down south from highs of 93 cents.

In and around the small to large cap names, there are instances of both underperformance and outsized returns.

Foolish takeaway

In the last month, the ASX healthcare indices have led the market’s losses. Within this group, some shares are outperforming while others are lagging behind their key benchmarks.

Nonetheless, as a whole, ASX healthcare shares appear to have outperformed the broad index in the last quarter.

The post How did ASX healthcare shares perform in the FY22 first quarter? appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to sell next week
• Ramsay (ASX:RHC) share price on watch on Friday after update
• The Incannex (ASX:IHL) share price has lost 20% in 4 weeks. What’s happening?
• 5 things to watch on the ASX 200 on Thursday
• Little Green Pharma (ASX:LGP) share price lifts as bosses reflect on a big year

The author Zach Bristow has no positions 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 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 Boral Limited (ASX: BLD) share price is in the green today amid the official divestment of 2 businesses.

Boral has formally sold its North American building products business for US$2.15 billion. It has also offloaded its Australian timber business for $64.5 million.

The company also noted its ongoing divestment plan might result in it returning up to $3 billion of capital to shareholders.

While the news is marked as non-price sensitive, the market’s boosting Boral’s stock higher this morning.   

At the time of writing, the Boral share price is $6.085, 1.93% higher than its previous close.

Let’s take a closer look at today’s announcement from the building and construction products supplier.

Boral completes significant divestments

The Boral share price is gaining this morning despite no price sensitive news having been released by the company.

However, this morning it announced the completion of 2 significant divestments.

The company has officially sold its North American building products business to Westlake Chemical Corporation for a cool US$2.15 billion.

Additionally, the Pentarch Group has formally taken over Boral’s Australian timber business.

The Boral share price temporarily dipped when it announced its plan to sell the timber business in July.

The funds from the sales will be put towards reducing Boral’s debt. It is targeting a bottom end net debt range of between $900 million and $1.1 billion.

Boral also expects the cash, alongside an expected US$125 million from its planned divestment of Meridian Brick, to allow it to return as much as $3 billion of capital to shareholders.

It plans to do so through an equal capital reduction. Though, it will need approval from shareholders and the Australian Taxation Office before its plan can go ahead.

Commentary from management

Boral’s CEO and managing director Zlatko Todorcevski commented on the divestments:

Completion of these strategic divestments is unlocking significant value for Boral’s shareholders.

We have now reached an important milestone in re-positioning Boral as a focused construction materials company in Australia…

Fly Ash in North America is the final business in the portfolio that we intend to divest and we continue to progress divestment opportunities.

Boral share price snapshot

Boral’s stock has been performing well on the ASX lately.

It is currently trading for 22% more than it was at the start of 2021. Its value has also increased by 32% since this time last year.

The post Here’s why the Boral (ASX:BLD) share price is lifting today appeared first on The Motley Fool Australia.

More reading

• Why the Boral (ASX:BLD) share price has underperformed the ASX 200 in the last 3 months
• The Boral (ASX:BLD) share price has fallen 17% since Seven took control
• This year’s ASX 200 Santa Rally to get a whopping $84bn cash boost
• Boral (ASX:BLD) share price lifts amid latest business sale
• Why the Boral (ASX:BLD) share price is down 17% in a month

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 S&P/ASX 200 Index (ASX: XJO) began to roll over in September, marking its first monthly decline since September last year. As you’d expect, many ASX shares cratered amidst the volatile market.

Here are the 5 worst performing ASX shares (with a market capitalisation greater than $300 million) that wound up in the bargain bin last month.

5 worst performing ASX shares in September

1. Jindalee Resources Ltd (ASX: JRL)

The Jindalee Resources share price comes in as one of the worst performing ASX shares last month, tumbling 38% to $2.34.

The company’s preliminary scoping study for its McDermitt Lithium Project was a major catalyst behind its sharp declines.

The announcement, released on 16 September, struggled to provide investors with enough tangible metrics to determine the feasibility of its lithium project.

The preliminary scoping study cautioned that it was “based on an indicated and inferred mineral resource … there is a low level of geological confidence associated with inferred mineral resource”.

Jindalee shares tumbled 10.95% to $3.01 on the day of the announcement.

2. Marley Spoon AG (ASX: MMM) 

The Marley Spoon share price took a major hit in early September when Woolworths Group Ltd (ASX: WOW) decided to sell its stake in the company.

On 6 September, the supermarket giant offloaded 28,026,000 Chess Depository Interests (CDIs) or 9.87% of the company at $1.91 per CDI.

Marley Spoon shares plunged 10.34% on the day. They finished last month down 30.6% to a 15-month low of $1.47.

3. Fortescue Metals Group Ltd (ASX: FMG)

The Fortescue share price has wound up between underperforming small caps, tumbling 28% in September to a 15-month low of $14.96.

Unlike its peers, BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) that have diversified mining portfolios, Fortescue copped the brunt of the selling as iron ore prices hit as low as US$92 a tonne.

4. BlueBet Holdings Ltd (ASX: BBT)

Sports betting shares like BlueBet, Betmakers Technology Group Ltd (ASX: BET), and PointsBet Holdings Ltd (ASX: PBH) have fallen out of favour in recent months.

The BlueBet share price took a 21% dive on 6 September after the company withdrew its application for a Sports Betting Permit in the US State of Virginia.

The company advised that the decision “follows an exhaustive licence application process comprising 18 applications for only 5 available permits”.

The BlueBet share price tumbled 27% in September to a 2-month low of $1.83.

5. Mount Gibson Iron Ltd (ASX: MGX)

Mount Gibson is another iron ore name winding up in September’s worst performing ASX shares list.

Iron ore prices reversed so fast that Mount Gibson made the tough call to ramp down and suspend operations at its Shine project.

Mount Gibson said that “given recent significant adverse movements in iron ore prices, product discounting and shipping freight rates, the Company will implement a staged suspension of operations at the Shine mine site to reduce expenditure and preserve the value of the deposit, as well as to provide time to assess the outlook for the iron ore market”.

Its shares tumbled 24% in September, close to 2-year lows of 48 cents.

The post These were the 5 worst performing ASX shares in September appeared first on The Motley Fool Australia.

More reading

• Why is the BHP (ASX:BHP) share price trading at 10-month lows?
• Why did the Rio Tinto (ASX:RIO) share price have such a lousy month in September?
• Top brokers name 3 ASX shares to sell next week
• Why CBA, Mount Gibson, Pilbara Minerals, & Virgin Money shares are dropping
• Why the BHP (ASX:BHP) share price tanked 17% in September

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Marley Spoon AG. The Motley Fool Australia owns shares of and has recommended Marley Spoon AG. The Motley Fool Australia has recommended BlueBet Holdings 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 Wesfarmers Ltd (ASX: WES) share price has been struggling over the last week despite no news having been released by the company.

However, there is plenty of news involving Wesfarmers and its conquests have hit headlines since this time last week.

Australian Pharmaceutical Industries Ltd (ASX: API) – for which Wesfarmers is currently completing due diligence – was handed a rival bid from Sigma Healthcare Ltd (ASX: SIG).

Additionally, Wesfarmers-owned hardware and leisure retail giant Bunnings is going ahead with its acquisition of Beaumont Tiles. The acquisition was approved by the Australian Competition and Consumer Commission (ACCC) on Thursday.

Wesfarmers hasn’t officially addressed any of the above happenings, making it impossible to say if they’ve moved its stock’s value.

At the time of writing, the Wesfarmers share price is $55.25, 0.9% higher than Friday’s close but 3.6% lower than it was this time last week

Let’s take a closer look at the week that’s been for Wesfarmers on the ASX.

Wesfarmers share price slides

The Wesfarmers share price has been battling over the last 7 days amid a flurry of news regarding the company.

Last Monday, Sigma Healthcare posed its bid to acquire API for a scrip-heavy $1.57 per share.

That bested Wesfarmers’ previous $1.55 all-cash offer for the Priceline operator.

The Wesfarmers share price gained 0.2% on the day Sigma posed its offer, before falling 3.7% over the following 2 sessions.

Now both companies are undergoing due diligence before each respective takeover moved forward. Wesfarmers’ due diligence period ends on 16 October.

Making the bidding battle more exciting – API’s board has flagged Sigma’s offer as superior. Whereas Wesfarmers’ takeover previously gained the support of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). Soul Patts owns around 19% of API’s shares.

In less dramatic but still significant news, Bunnings’ acquisition of Beaumont Tiles got the green light from the ACCC last week.

The Wesfarmers share price gained 0.8% on Thursday amid the release of the competition watchdog’s approval. However, it fell another 1.8% on Friday.

The post Here’s why the Wesfarmers (ASX:WES) share price is down 4% in a week appeared first on The Motley Fool Australia.

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• 2 beaten-up ASX shares now ready to rally: expert
• Wesfarmers (ASX:WES) share price gains as ACCC approves Bunnings acquisition
• Wesfarmers (ASX:WES) share price in focus as investors await next move
• Here are 2 ASX dividend shares that could provide steady passive income
• Why Sigma, Smartgroup, St Barbara, & Touch Ventures are pushing higher

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 owns shares of and has recommended Washington H. Soul Pattinson and Company 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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In morning trade on Monday, the Nick Scali Limited (ASX: NCK) share price is charging higher.

At the time of writing, the furniture retailer’s shares are up 12% to $12.28.

Why is the Nick Scali share price rising?

Investors have been bidding the Nick Scali share price higher today after it announced a major acquisition.

According to the release, the company has entered into a binding agreement to acquire Plush Think-Sofas for a total cash consideration of $103 million. Though, this consideration remains subject to certain purchase price adjustments at completion.

The release explains that the acquisition will be funded through a combination of cash on hand and new debt facilities. It remains subject to closing conditions but is expected to complete in the fourth quarter of 2021.

What is Plush?

The company advises that Plush is a specialist Australian sofa retailer, operating a network of 46 showrooms across six Australian states and territories.

It was founded in 1999 and is a mid-market, made to order sofa retailer with a focus on the aspirational customer demographic. Over its 20-year history Plush has sold sofas, modular lounges, recliners, occasional chairs, ottomans, and sofa beds to over 250,000 customers.

Management notes that the acquisition will increase Nick Scali’s current footprint to a total combined 108 stores in Australia and New Zealand. In addition, it will enhance the company’s growth platform through the opportunity to open new Plush stores in currently underrepresented catchment areas and with greater floorplan flexibility.

The company believes there is potential for Plush to achieve a long-term store network target of 90-100 stores. This is in addition to Nick Scali’s previously communicated long term network target of at least 85 stores.

Nick Scali’s CEO, Anthony Scali, commented: “Plush is a high-quality Australian sofa retailer with a strong track record of profitability and performance over a long period of time. The acquisition is a strategic opportunity for Nick Scali and will allow us to leverage the increased scale of the combined group whilst providing a platform to significantly grow the store network.”

Material synergies are expected from the combined business after a two-year integration period, excluding one-off implementation costs. These synergies are expected to be generated from a combination of buying synergies, logistics and supply chain efficiencies, procurement synergies and support function efficiencies.

The acquisition is expected to be earnings per share accretive in the first full year of ownership, excluding realisation of estimated synergies which will flow post integration.

The post Nick Scali (ASX:NCK) share price jumps 12% on $103m Plush acquisition appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has 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 BHP Group Ltd (ASX: BHP) share price has plunged 30% in the last two months, weighed down by iron ore prices and weak Chinese economic data.

Iron ore was trading comfortably above US$200 a tonne around mid-July before prices would stage a rapid descent to lows of around US$92 a tonne by late September.

The BHP share price isn’t alone in this iron ore rout, with its peers including Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) sliding 26% and 40% respectively since the start of August.

Iron ore prices reversed so fast that Mount Gibson Iron Limited (ASX: MGX) announced plans to ramp down operations at its Shine mine site “given recent significant adverse movements in iron ore prices, product discounting and shipping freight rates …”.

What’s driving iron ore prices lower?

There’s a lot of moving parts (most of which are linked to China) as to why the BHP share price came down as fast as it went up.

Chinese policymakers have made firm commitments to meet emissions and energy consumption targets. This has resulted in a clampdown on domestic steel production and a shift away from iron ore in favour of low-emissions steel scrap.

According to S&P Global, China is on track to reduce its crude steel output this year below 2020 levels for the first time since 2016.

“A few mill sources expected China’s steel output cuts to widen further in late-September or October, mainly as the overall cuts by mid-September have remained insufficient to keep the country’s 2021 crude steel output within 2020 levels.”

In addition, steel scrap is playing its part in reducing industry emissions and resource consumption.

In a separate report from S&P Global, it flagged that Chinese policymakers “prohibited further expansion of steel refining capacity in the 2021-25 period” with plans to shift production into steel scrap.

The goal is to raise production via electric arc furnaces to 15%-30% of total crude steel output during the five-year period, compared to a 10% level at present, with 30% of this production coming from scrap. 

Also troubling the BHP share price is China’s Evergrande debt crisis.

China is the world’s largest steel producer, accounting for approximately 70% of global iron ore imports. With about 60% of its imports coming from Australia.

Most of that ends up as steel which feeds into its construction and infrastructure sectors.

The Evergrande debacle could take a toll on investor confidence, dampen property development and deteriorate China’s all-important housing activity.

What’s next for the BHP share price?

The next week should be a quiet week for iron ore markets, given China’s week-long National Day public holiday.

The short-to-medium term outlook for iron ore remains grim, with recent reports from the Bank of America forecasting iron ore prices to slump to US$70 a tonne.

If its assumptions hold true, then it could spell more trouble for the BHP share price.

The post Why is the BHP (ASX:BHP) share price trading at 10-month lows? appeared first on The Motley Fool Australia.

More reading

• Why the BHP (ASX:BHP) share price tanked 17% in September
• 2 ASX 200 dividend shares named as buys for October
• Does the 11% BHP (ASX:BHP) dividend yield make it good value?
• 5 things to watch on the ASX 200 on Thursday
• The S&P 500 just dropped 2%. Why is this impacting ASX 200 shares?

Motley Fool contributor Kerry Sun 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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As some Australian’s relish a public holiday today, one might be quick to put the thought of investing and the local share market onto the back-burner.

However – no rest for the wicked, as they say – as the local share market ready’s itself for another big week of activity.

The benchmark S&P/ASX 200 Index (ASX: XJO) finished the week 2.1% in the red to 7,185 points, its same level in May this year.

Read on for more details.

Is the ASX open today?

Yes. Despite being a public holiday for 4 of Australia’s states and territories, the ASX is open today.

Trading will resume at 10am Australian Eastern Daylight Time (AEDT) after New South Wales, Victoria, the Australian Capital Territory, Tasmania, and South Australia rolled the clocks forward into daylight savings over the weekend.

According to the ASX, the Australian markets will trade until 24 December, the day we settle in for a post-pandemic Christmas Eve.

In fact, the ASX is only closed 10 days of the year, the first New Year’s Day and the last New Year’s Eve.

The last time Mr Market took a day off to recuperate was back on 14 June for the Queen’s Birthday long weekend. And ANZAC Day before that.

The public holidays that apply to the ASX are listed in the table below.

Public Holiday	Dates for 2021
New Year’s Day	Friday 1 January
Australia Day	Tuesday 26 January
Good Friday	Friday 2 April
Easter Monday	Monday 5 April
ANZAC Day	Sunday 25 April
Queen’s Birthday	Monday 14 June
Last Business Day before Christmas Day	Friday 24 December
Christmas Day	Monday 27 December
Boxing Day	Tuesday 28 December
Last Business Day of the Year	Friday 31 December

Source: ASX

So it may be prudent to keep an eye on the ASX today if you are invested or have been following a company’s growth narrative.

Day-to-day volatility can be construed as just noise, but at the same time, avoiding it completely could be testing providence as well.

Aside from this, it will be business as usual for market participants in the Australian markets today.

Foolish takeaway

The ASX is open and trading today. It only has 10 days off this year and basically operates full-time otherwise.

The next business day off for the ASX is Christmas Eve this year, with a few days off in the holiday period afterwards.

The post Is the ASX open and trading today? appeared first on The Motley Fool Australia.

More reading

• If you invested $1,000 in Flight Centre (ASX:FLT) shares a decade ago, here’s what it would be worth now
• A 15% correction? One expert’s advice for a sinking ASX 200
• 5 things to watch on the ASX 200 on Monday
• These were the worst performing ASX 200 shares last week
• These were the best performing ASX 200 shares last week

The author Zach Bristow has no positions 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 Flight Centre Travel Group Ltd (ASX: FLT) share price has recorded strong gains over the past year, up 55%. This comes as Australia’s largest travel agent navigates through government-mandated travel restrictions and the COVID-19 headwind.

Below, we calculate how much Flight Centre shares would be worth if a shareholder invested 10 years ago.

What if you had invested $1,000 in Flight Centre shares 10 years ago?

If you had invested $1,000 in Flight Centre shares on this day 10 years ago, you would have bought them for around $14.63 each. This would have given you approximately 68 shares without factoring in any dividend reinvestments over the years.

Fast forward to today, and the current Flight Centre share price is $21.85. Those 68 shares would now be worth around $1,485.80 (68 shares x $21.85). When considering percentage terms, this implies an upside of 48.6%.

How do Flight Centre shares compare to the ASX 200?

On average, the ASX 200 has returned a yearly average of 6.01% to shareholders in the past decade. The most significant gain was achieved in 2019 when the index grew by 23.02%.

On the other hand, the biggest fall came in 2011, down by 10.84%. You might be thinking that 2020 would be on the list due to major COVID-19 disruptions, but the ASX 200 rebounded sharply during that year.

The travel agent’s shares have historically moved in circles whilst the benchmark ASX 200 has consistently trended upwards. In the past 10 years, the company has delivered a yearly average return of 4.09% since 2011.

And the dividends?

Over the last decade, Flight Centre has made 17 biannual dividend payments from 2011 to 2019. Its most recent dividend distributions have been suspended due to the pandemic severely affecting its operations and bottom line.

Adding those 17 dividends payments gives us an amount of $13.66 per share. Calculating the number of shares owned against the total dividend payment gives us a figure of $928.88 (68 shares x $13.66).

Counting both the initial investment gains and dividend distribution, an investor would have made roughly $2,414.68.

In comparison, investing the same amount in the ASX 200 would have netted you a total figure of $1,881.50.

Flight Centre share price snapshot

Up until late August, Flight Centre shares were trading mostly sideways. However, during the company’s full-year results release, its shares skyrocketed almost 60% in just 5 weeks.

Flight Centre has an attractive price-to-earnings (P/E) ratio of 7.07 and commands a market capitalisation of roughly $4.28 billion.

The post If you invested $1,000 in Flight Centre (ASX:FLT) shares a decade ago, here’s what it would be worth now appeared first on The Motley Fool Australia.

More reading

• A 15% correction? One expert’s advice for a sinking ASX 200
• 5 things to watch on the ASX 200 on Monday
• These were the worst performing ASX 200 shares last week
• These were the best performing ASX 200 shares last week
• Here are the top 10 ASX shares today

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 recommended Flight Centre Travel Group 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 has been a bitterly disappointing year for the AGL Energy Limited (ASX: AGL) share price.

Since the start of the year, the energy company’s shares have lost just over half of their value.

This leaves AGL’s shares trading close to their lowest levels in over two decades.

Is the AGL share price good value now?

While the weakness in the AGL share price has been disappointing for shareholders, one leading broker believes it could have created a buying opportunity for non-shareholders.

According to a note out of Ord Minnett from late last month, the broker has upgraded the company’s shares to a buy rating with a $7.55 price target.

Based on the current AGL share price of $5.79, this implies potential upside of 30% over the next 12 months.

In addition, the broker has pencilled in a fully franked 35 cents per share dividend in FY 2022. This represents an attractive 6% yield.

What did the broker say?

Ord Minnett made the move on valuation grounds. It believes that the current AGL share price implies an overall valuation less than just its retail business.

In fact, it feels its valuation has dropped so much it could make it a takeover target. Though, the broker notes just for the retail business and not the less attractive power generation assets which are being spun off next year.

But who would buy the retail business? Ord Minnett has suggested that Telstra Corporation Ltd (ASX: TLS) could be a potential suitor.

The broker commented: “Telstra has expressed interest in growing its energy retailing business and we see substantial synergies between the largest telco company and the second-largest energy retailer.”

It believes Telstra’s extensive reach would help AGL grow in markets where it has a limited presence, such as Western Australia.

This could make the AGL share price one to watch in the coming months.

The post Why this broker sees 30% upside for the AGL (ASX:AGL) share price appeared first on The Motley Fool Australia.

More reading

• 2 ASX dividend shares with fully franked yields of more than 5% today
• Did Optus just get a better deal than Telstra (ASX:TLS) for its towers?
• Why did the AGL share price have such a lousy month in September?
• 4 ASX shares looking ripe for the picking now
• 3 reasons why the Telstra (ASX:TLS) share price could be a buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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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