Category: Stock Market

The AGL Energy Limited (ASX: AGL) share price will be one to watch when trading resumes on Thursday. That’s after the company released its full-year results for FY21 this morning.

At close of trade yesterday, the AGL share price was trading at $7.60 – up 2.15%. The S&P/ASX 200 Index (ASX: XJO) ended yesterday 0.29% higher, for comparison.

Let’s take a closer look at what the energy producer reported.

AGL share price in focus with 34% drop in underlying profits

Investors will be keenly watching the AGL share price this morning after the company reported the following key results:

• Revenue decreased 10.0% on the prior corresponding period (pcp) to $10.9 billion.
• Underlying profits fell 33.5% to $537 million on the pcp.
• Underlying earnings per share (EPS) dropped 31.6% to 86.2 cents.
• Net operating cash outflow before significant items was $870 million – a 35% drop.
• Full year dividend of 75 cents per share (41 cents interim + 35 cents final). This is down 23.5% on the pcp for a yield of 9.87% on the current AGL share price.

What happened in FY21 for AGL?

On the last day of the financial year, AGL announced plans to demerge into two businesses, both listed on the ASX. Accel Energy would focus on low-carbon energy production while AGL Australia’s remit will pertain to multiple energy products as well as energy trading, storage, and supply. The AGL share price slumped on this news.

In June, AGL announced the suspension of its special dividend program, in which it planned to pay 25% of underlying profits over the next 2 years.

Finally, there were multiple updates relating to the company’s current and proposed work sites, including Crib Point, Loy Yang, the Portland smelter, and Liddell.

What did management say?

AGL Energy managing director and CEO Graeme Hunt said:

Our FY21 result reflects a challenging year for AGL Energy as we realised the impact of lower wholesale electricity prices, reduced electricity generation output at peak periods, and the roll-off of legacy supply contracts in Wholesale Gas.

Although wholesale electricity prices have rallied in recent months, our result reflected the impact over the past two years of increasing generation supply and lower demand arising from the COVID-19 pandemic and milder weather.

What’s next for AGL?

As stated, AGL will demerge its business into two entities. It expects this process to be completed by the fourth quarter of this financial year.

AGL also says it will be “continuing” its self-proclaimed “leadership role in the energy transition”. The company is committing to publishing decarbonisation targets and climate roadmaps in the near future.

AGL share price snapshot

Over the last 12 months, the AGL share price has fallen 55.3%. Year to date, it is down 37.3%.

AGL Energy has a market capitalisation of around $4.7 billion.

The post AGL (ASX:AGL) share price on watch following FY21 earnings appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• How did the AGL (ASX:AGL) share price perform last earnings season?
• What can we learn from the AGL Energy (ASX:AGL) share price history?
• Could it be time to consider buying AGL (ASX:AGL) shares?
• Own AGL (ASX:AGL) shares? Here’s what to look for during reporting season

Motley Fool contributor Marc Sidarous 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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Investors will be watching the Downer Ltd (ASX: DOW) share price upon market open on Thursday.

This is on the back of the integrated services provider reporting its full-year results to the ASX this morning.

Downer share price on watch after swinging to net profit

• Underlying net profit after tax and amortisation up 21.4% year on year to $261.2 million
• Revenue down 8.8% to $12,234.2 million
• Statutory earnings before interest, tax, and amortisation increased by $371 million to $401 million
• Statutory net profit after tax of $230 million, up from a loss of $105.8 million
• Earnings per share (EPS) of 25.4 cents per share, up from a loss of 26.1 cents per share
• Unfranked final dividend of 12 cents per share, taking full year dividend to 21 cents per share unfranked

What happened in FY21 for Downer

The Downer share price will be in focus this morning after the $3.89 billion company reported its anticipated FY21 results.

On the top line, the company generated $12,234.2 million in group revenue during the 12-month period. This was 8.8% lower year on year and driven by the completion of projects and continued wind-down of nbn contracts. For instance, rollingstock services revenue were lower due to the completion of the Waratah bogie overhaul. Likewise, utilities revenue decreased 21.6% to $581.7 million with nbn contracts drying up.

Additionally, the bottom line benefitted by a 10% decrease to $1,241.7 million in total expenses when excluding one-offs. The lower costs were primarily driven by a reduction in employee benefits following the disposal of businesses, contract completions, and benefits following FY20 restructuring.

Notably, the profitable result was helped along by $447.8 million in cash proceeds from business disposals. This included the divestment of its laundry business, along with the sale of its open-cut mining business, underground mining services, and tyre management business. This refocusing of the company was met with optimism, as the Downer share price moved higher.

On the injury front, Downers’ lost time injury frequency rate (LTIFR) decreased to 0.99 from 1.08. Similarly, the total recordable frequency rate fell to 2.60 from 3.10 per million hours worked.

What did management say?

Commenting on the result, Downer chief executive officer Grant Fenn said:

Our focus on critical urban services has meant that demand has remained strong throughout the
year, resulting in a very resilient performance. I want to acknowledge the effort of
our people as we have continued delivering for our customers.

Underlying earnings were up 21.4% and our cash performance was excellent. If we adjust for
cash outflows from individually significant items recognised as expenses last year, our cash
conversion was 101%. Without that adjustment, it was 92%. Either way, it is a terrific result.

What’s next for Downer and its share price?

Positively, Downer outlined that it has $35.4 billion worth of work-in-hand. Additionally, 90% of that work is in the form of government contracts in Australia and New Zealand. This compares to only 56% of work-in-hand being government-backed contracts five years ago.

Furthermore, the company noted it expects its core urban services business to grow in FY22 on the top and bottom lines. However, Downer failed to given any more granular detail, citing COVID-19 as the reason.

The Downer share price has performed slightly better than the S&P/ASX 200 Index (ASX: XJO) over the past 12 months. Specifically, the contractor has delivered a 28.8% return while the benchmark gained 23.7%.

The post The Downer (ASX:DOW) share price on watch after FY21 earnings appeared first on The Motley Fool Australia.

More reading

• Here’s why the Electro Optic Systems (ASX:EOS) share price is 40% lower than its 52-week high
• How do you value the BHP (ASX:BHP) share price?
• ASX 200 bank shares rejoice. Life just got tougher for new neobanks
• NAB (ASX:NAB) share price on watch following June quarter update
• Here’s why the Wesfarmers (ASX:WES) share price is up 9% in a month

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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It’s been a tough year so far for shareholders of ASX space and defence company Electro Optic Systems Holdings Limited (ASX: EOS). The company’s share price has plunged almost 30% in 2021 – to just $4.20, as at the time of writing. This means that Electro Optic Systems shares are now almost 40% below the 52-week high price of $6.92 they set all the way back in November of last year.

Company background

EOS specialises in electro-optic technologies – machinery and other applications that convert light rays into electronic signals. This type of technology supports clients operating in the space, defence and communications sectors. Electro-optic technologies can assist with a diverse range of highly technical and complex scenarios, like satellite tracking, missile defence and even military combat.

What is behind the Electro Optic Systems share price decline?

The reality is that the Electro Optic Systems share price woes stretch back a lot further than just the last 12 months. Prior to the COVID-19 market crash in March 2020, EOS shares were valued above $10 a share – well over twice their current price.

But when COVID struck the Electro Optics Systems share price dropped off a cliff. After looking set to cross $11 for the first time in their history, EOS shares plunged more than 65% in the space of just 6 weeks, dipping below $3.70.

It was pretty apparent why. In its activity report for the quarter ended 31 March 2020, EOS revealed that the coronavirus pandemic had caused disruptions at several points along the company’s product delivery chain.

Given the highly specialised nature of Electro Optic System’s products, many require significant checking, installation and testing by trained professionals – all prior to being accepted by the customer. Lockdowns in many jurisdictions, as well as government-imposed travel restrictions, prevented EOS from performing these crucial steps in its delivery chain.

This all led to the company being forced to massively downgrade its revenue guidance for 2020 – from year-on-year growth of 70% to just 25%. In the end, its total revenues fell short of even that target, increasing 15% to $190.2 million.

What else was in the company’s financials?

EOS, which reports based on a year ending 31 December, released its FY20 results at the end of February. It was a bad result across the board for EOS, with the big drop in revenues translating to an overall net loss after tax of almost $26 million for the year. By comparison, the year before, EOS reported a net profit of almost $18 million.

According to EOS, short-term profitability tanked because the company couldn’t deliver its products to its customers, meaning the majority of its revenues were being delayed to 2021. However, it was still racking up expenses.

For its part, Electro Optics Systems believes it can rebound swiftly as the effects of the pandemic ease globally. According to a presentation given at the company’s Annual General Meeting in late May, EOS expects revenues for 2021 to be between $235 million and $245 million, potentially representing year-on-year growth of close to 30%.

Recent movements in the Electro Optics Systems share price

For a moment there, it almost looked as though the Electro Optics Systems share price was staging a recovery in June. The company’s optimistic revenue guidance, combined with news that its cash receipts were finally beginning to accelerate, sparked a brief rally in the Electro Optics Systems share price.

However, renewed lockdowns and global fears around the spread of the delta strain of coronavirus may be again weighing on the Electro Optics Systems share price – particularly given the impacts COVID has had on its delivery chains. This puts an incredible amount of focus on the company’s first-half FY21 results, to be released to the market on 30 August. EOS will be hoping it can reassure investors that the worst of the pandemic is finally behind it.

The post Here’s why the Electro Optic Systems (ASX:EOS) share price is 40% lower than its 52-week high appeared first on The Motley Fool Australia.

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• Why Bigtincan, EOS, Evolution, & Western Areas shares are charging higher
• Electro Optic Systems (ASX:EOS) share price up 9% on quarterly report

Motley Fool contributor Rhys Brock owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool Australia owns shares of and has recommended Electro Optic Systems Holdings 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 BHP Group Ltd (ASX: BHP) share price has been a strong performer this year.

Since the start of the year, the mining giant’s shares have risen 22%.

Is the BHP share price still good value?

Given how strong the BHP share price has performed in 2021, investors may be wondering if it is still good value.

Investors may also be wondering how you would begin to value a company like BHP.

Unfortunately, using the traditional price to earnings (PE) ratio is not recommended when valuing a mining share. So, if you’re judging the value of BHP share price purely on this ratio, you may want to reconsider things.

How do you value BHP?

Luckily for investors, the team at Goldman Sachs has provided a breakdown on how it values the mining giant.

Goldman uses an equal blend of its net asset value (NAV) and its next 12-month (NTM) EBITDA estimate to value the Big Australian.

In respect to its NAV, Goldman estimates that BHP’s operations have a NAV of US$179 billion. This equates to US$35.50 per share or approximately A$48.70 per share.

Whereas the company’s NTM EBITDA is estimated by the broker to be US$51 billion. Goldman then applies a 5x EV/EBITDA multiple to this, giving BHP an enterprise value of US$251.3 billion. The broker then subtracts its debt estimate of US$5.9 billion, giving it an equity value of US$254.4 billion or A$66.7 per share.

The final step sees Goldman equally blend its NAV per share of $48.70 with its equity value per share of $66.70, which leads to a valuation and BHP share price target of $57.70.

Are BHP shares in the buy zone?

With the BHP share price currently fetching $52.52, Goldman believes it is in the buy zone.

It recently commented: “Undervalued vs. historical multiple at peak earnings: On an EV/EBITDA basis 1-2yr multiples for BHP look strong at 4x, below the 4.5-5x level in 2011 when earnings last peaked, yet BHP’s balance sheet and FCF are much stronger now.”

The post How do you value the BHP (ASX:BHP) share price? 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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S&P/ASX 200 Index (ASX: XJO) bank shares may see their future competition dwindle as the Australian Prudential Regulatory Authority (APRA) tightens its controls on new banking licences.

Under APRA’s new rules, new authorised deposit-taking institutions (banks) will have to jump through additional hoops before gaining the regulator’s favour.

This could see the ASX 200 banks with less competition on their block in the future, particularly from neobanks.  

Neobanks are banks that purely exist online. Think, Douugh Ltd (ASX: DOU) and the recently collapsed Xinja.

Let’s take a look at the new rules.

ASX 200 banks in focus on higher hurdles for new kids

ASX 200 bank shares may be in the spotlight today while their potential competitors feel the blues.

Following Xinja’s failure, APRA now requires new banks on the block to provide both deposit and income-generating products.

Of course, Xinja famously offered deposit only options to its customers, negating to launch any real income-generating products. Xinja’s banking licence barely made it past its first birthday before the former bank threw in the towel.

Not much has changed for established banks, like those on the ASX 200. However, APRA now calls on all banks to have response plans in place to navigate tough times. Banks are also required to plan for how they’d exit the banking business if they flopped.

New banks will also have to keep a generous capital conservation buffer – a certain amount tucked away in case of a rainy day. As well as a limit on how much cash they can mind for their customers.

From now on, APRA will provide 3 types of banking licences:

• The first is a 2-year restricted licence, allowing a new bank to get on its feet while planning how it would pay back its customers if it all goes wrong.

  Restricted banks have a $2 million deposit limit and must have $3 million of ongoing capital and $1 million in a resolution reserve.  

  If a new bank has a good amount of cash in its coffers and a history of running a successful banking-related business, it can skip this licence.

• The next is a new licence. Banks that hold a new licence have higher capital requirements they must meet.

• And finally, existing banks like those on the ASX 200 can pretty much continue working as normal. Though, that doesn’t mean APRA won’t be looking over their shoulder!

The post ASX 200 bank shares rejoice. Life just got tougher for new neobanks appeared first on The Motley Fool Australia.

More reading

• Why is the Douugh (ASX:DOU) share price up 5% on Monday?

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 National Australia Bank Ltd (ASX: NAB) share price could be a mover on Thursday after the company released its third-quarter trading update.

How did NAB perform in the third quarter?

The NAB share price will be in focus today after the bank reported an unaudited statutory net profit of $1.65 billion and unaudited cash earnings of $1.70 billion for the June quarter.

NAB’s revenue fell 1% as declines in Markets & Treasury (M&T) income outweighed higher volumes and margins in its lending businesses.

The M&T division experienced limited trading opportunities, impacted by current global monetary policy settings.

Excluding M&T, the group’s revenue would have increased by 1.9%.

The bank’s net interest margin (NIM) was broadly stable, reflecting lower deposit and funding costs, partly offset by the impact of low-interest rates and home lending competition.

NAB’s expenses fell 1% for the quarter with productivity benefits outweighing the bank’s technology and investment spend.

The company chose to compare today’s figures against FY21 first-half quarterly averages, which reflect a 1% increase in cash earnings and a 1% decrease in cash earnings before tax and credit impairment charges.

Management commentary

NAB Chief Executive Officer, Ross McEwan was pleased with the quarter, saying:

Our performance this quarter is encouraging. Cash earnings rose 10.3% compared with 3Q last year, supported by significantly better credit impairment outcomes.

Particularly pleasing is the strong momentum across our business. In Australia, lousing lending rose 2% and SME business lending grew 4.3%, both outpacing system in recent months. Our New Zealand business also delivered robust growth with lending up 2.7%. These outcomes are a result of the decisions and investments we are making, which are having a positive impact for customers and colleagues.

We have a clear focus on where and how we will continue to grow. The exit of MLC Wealth is now complete, and the acquisitions of 86 400 and Citigroup’s Australian consumer business will help accelerate our growth strategy.

Despite the near-term uncertainty and challenges for the Australian economy in the wake of recent lockdowns, McEwan remains confident in the long term:

However, we remain optimistic about the long-term outlook for Australia and New Zealand. The strong economic momentum leading into this period, ongoing government support and customers’ relatively healthy starting positions give us confidence that once restrictions are eased, the economy will again bounce back.

NAB share price snapshot

The NAB share price has rallied 18.75% year to date and is up 48.9% in the last 12-months.

However, NAB shares have struggled to make a meaningful move above their pre-COVID highs of about $27.40.

The post NAB (ASX:NAB) share price on watch following June quarter update appeared first on The Motley Fool Australia.

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• Why the NAB (ASX:NAB) share price is closing in on a 52-week high
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• Is now a good time to buy Bendigo and Adelaide Bank (ASX:BEN) shares?
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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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The Wesfarmers Ltd (ASX: WES) share price has been on the move, soaring 9% over the past month alone. This comes despite no price sensitive news being released by the retail conglomerate since late July.

After Wednesday’s market close, Wesfarmers shares finished the day slightly down 0.31% to $63.56. It’s worth noting that its shares reached an all-time high of $64.10 on Monday.

What’s driving Wesfarmers shares into uncharted territory?

The Wesfarmers share price has been attracting a number of investors to its registry since March 2020.

When COVID-19 arrived within our shores, Australians began to panic-buy in supermarkets, hardware stores and other retail outlets. The surge in spending led to bumper profits for Wesfarmers, which recorded strong sales and earnings growth across its businesses.

Fast-forward to today, half of Australia is again in lockdown, particularly with no end in sight for New South Wales. This has led consumers to again splurge on DIY projects from Bunnings, as well as business supplies from Officeworks.

Recently, Wesfarmers put forward a $687 million offer to acquire 100% of Australian Pharmaceutical Industries Ltd (ASX: API). The retail conglomerate is seeking to further diversify its growing portfolio with entry into the pharmaceutical market. However, this offer has since been rejected by the API board, indicating that the proposal undervalued the business.

Only time will tell if Wesfarmers will increase its offer to API shareholders. If successful in its takeover, this would expand the company’s presence into new markets.

Wesfarmers is scheduled to report its FY21 full-year results on Friday 27 August 2021.

Wesfarmers share price snapshot

No doubt, investors will be happy with how the Wesfarmers share price has tracked over the last 12 months, up 35%. The company has a price-to-earnings (P/E) ratio of 38.46, and a trailing dividend yield of 2.58%.

Wesfarmers commands a market capitalisation of roughly $72 billion, making it the 7th largest company on the ASX.

The post Here’s why the Wesfarmers (ASX:WES) share price is up 9% in a month 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 owns shares of and has recommended 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 A2 Milk Company Ltd (ASX: A2M) share price now looks as though it’s taken a page out of AGL Energy Limited (ASX: AGL) or Myer Holdings Ltd (ASX: MYR)’s books.

Shares in the ex-market darling have been trending lower since late July last year, losing more than 70% in value during this time.

Right in the middle of the decline marked the worst ever day for the A2 Milk share price, which plummeted 23.7% on 18 December from $13.26 to $10.12.

Why did the A2 Milk share price fall off a cliff?

Things went from bad to ugly for the infant formula business following the release of updated half-year and full-year FY21 guidance.

This is when A2 Milk flagged a far greater and protracted disruption to its all-important daigou channel.

The continued underperformance was driven by the flow-on effect of pantry destocking following a strong sales uplift in the 2020 third quarter and a weak retail daigou performance in Australia as a result of reduced tourism and international students.

A2 Milk would issue grim FY21 guidance which included:

• Group revenue for FY21 of NZ$1.40 billion to NZ$1.55 billion.
• Group earnings before interest, tax, depreciation, and amortisation (EBITDA) margin for FY21 of between 26% and 29%.

The new figures would imply a year-on-year revenue decline between 11.9% and 20.5%.

It only got worse from there

The A2 Milk share price would continue to fall sharply on two separate occasions.

The release of the company’s half-year FY21 results on 25 February would witness a 16% tumble from $10.45 to $8.76.

This was heavily influenced by yet another guidance downgrade which expected:

• FY21 revenue of NZ$1.4 billion.
• EBITDA margin between 24% and 26%.

Just three months later, on 11 May, the A2 Milk share price would stage another double-digit decline, sliding 18.6% from $7.02 to $5.71.

Why you might ask?

Another guidance downgrade. This time, forecasting:

• FY21 revenue between NZ$1.2 billion and NZ$1.25 billion.
• EBITDA margin between 11% and 12%.

After multiple downgrades, A2 now expects FY21 revenue to decline 29% to 31% against FY20 figures. Meanwhile, EBITDA margins have tumbled all the way from 26.4% to a forecast 11% to 12%.

What to expect this earnings season

A2 Milk is expected to report its full-year FY21 results on Thursday 26 August.

With results right around the corner, here’s a preview of what investors might be able to expect.

The post When was the worst ever day for the A2 Milk (ASX:A2M) share price? appeared first on The Motley Fool Australia.

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• a2 Milk (ASX:A2M) share price rises on bullish broker note
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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 recommended A2 Milk. 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 QBE Insurance Group Ltd (ASX: QBE) share price could be on the move today.

This follows the release of the insurance giant’s half year results this morning.

QBE share price on watch after reporting strong first half growth

• Gross written premium (GWP) increased 26.9% to US$10,203 million
• Net earned premium rose 8.9% to US$6,571 million
• Combined operating ratio improved to 93.3%
• Underwriting result of US$642 million, compared to loss of US$189 million
• Adjusted cash profit after tax of US$463 million, compared to US$66 million loss.
• Interim dividend of 11 Australian cents per share, up from 4 Australian cents per share in the prior period

What happened for QBE in the first half?

Positively for the QBE share price, for the six months ended 30 June, a material turnaround in both underwriting and investment returns underpinned strong profit growth for the company.

The release notes that QBE’s GWP grew strongly over the prior corresponding period thanks to the strong premium rate environment, improved customer retention, and new business growth across all regions.

One of the highlights was its Crop business. It grew 48% due to the significant increase in corn and soybean prices and targeted organic growth. For example, overall GWP increased by 14% on a constant currency basis excluding Crop and 20% including Crop.

In respect to premium increases, the company revealed that it achieved group-wide average rate increases of 9.7% during the half. Though, it does note that rate momentum is showing signs of moderating in some geographies and products. This is particularly the case in International Markets.

Another positive that may give the QBE share price a boost today was its improving combined operating ratio. It came in at 93.3% during the half, compared to 103.4% in the prior period. A reading below 100% represents profitable underwriting.

What did management say?

QBE’s Interim CEO, Richard Pryce, was pleased with the improved performance during the half.

He said: “Notwithstanding the heightened level of catastrophes during the half which remain a major issue for the industry, I am very pleased with the improvement in the underwriting result and the strong but targeted premium growth.”

“While we continue to benefit from meaningful compound premium rate increases in all our geographies, there are signs that pricing momentum is moderating, particularly in International Markets. Regardless, we will remain vigilant in balancing premium growth and pricing adequacy for an appropriate risk adjusted return on capital, with claims inflation and catastrophe costs key areas of ongoing focus,” he added.

What’s next for QBE?

No guidance has been provided for the second half of FY 2021, which could potentially weigh on the QBE share price a little today.

Though, the company advised that it continue to push on with its efficiency program focused on IT modernisation and digitisation. It notes that it has challenged itself around historic operating structures and work practices to develop a more modern and high performing business.

As part of this, QBE is targeting an expense ratio of 13% by 2023 compared with 13.7% today. It expects to incur a restructuring charge of $150 million to be expensed over three years, of which $29 million was recognised in the half.

The QBE share price is up 35% in 2021.

The post QBE (ASX:QBE) share price in focus after delivering strong first half growth appeared first on The Motley Fool Australia.

More reading

• How did the QBE (ASX:QBE) share price respond last earnings season?
• Here are the 10 top moving ASX shares on Monday
• Here’s why the QBE (ASX:QBE) share price is up 27% so far in 2021

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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Quality exchange-traded funds (ETFs) could be good considerations to think about for the long-term.

ETFs allow investors to get exposure to a number of investments in a single trade. Some are focused on a particular industry, such as Betashares Global Cybersecurity ETF (ASX: HACK) whereas others give exposure to a wider array of businesses such as an index of shares like iShares S&P 500 ETF (ASX: IVV).

These two ETFs could be ones to think about:

Vanguard Msci Index International Shares ETF (ASX: VGS)

This is a broad ETF which has over 1,500 holdings spread across the world. That represents a lot of diversification. It’s a globally-focused ETF that looks to track the MSCI World ex-Australia Index. In other words, it’s giving investors exposure to many of the world’s largest companies listed in major developed countries.

Whilst the US gets almost 70% of the portfolio’s allocation, there are a number of places that get an allocation of at least 1%: Japan, the UK, Canada, France, Switzerland, Germany, the Netherlands, Germany, Sweden and Hong Kong.

The top holdings represent around 18% of the portfolio, so it’s not quite as concentrated as some other ETF portfolios that give exposure to the growth-focused FAANG names (Facebook, Apple, Amazon and so on).

Vanguard Msci Index International Shares ETF’s biggest 10 holdings are: Apple, Microsoft, Alphabet, Amazon.com, Facebook, Tesla, Nvidia, JPMorgan Chase, Johnson & Johnson and Visa.

It has a pretty low annual management fee of just 0.18%, which is a lot cheaper than most active fund managers.

The long-term returns of this ETF have been in the double digits, though past performance is not an indicator of future performance. Over the last five years it has produced an average return per annum of 14.7%.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

This ETF operates fairly differently to the Vanguard one.

VanEck says the ETF: “Gives investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar’s equity research team.”

The businesses are only sourced from US stock exchanges, but the underlying businesses can (and do) generate earnings from overseas.

Companies only make it into the portfolio if they are trading at good value prices compared to the estimate of fair value by Morningstar.

As of 10 August 2021, the biggest 10 weightings in the portfolio (with each allocation between 2.5% and 3% of the portfolio) were: Pfizer, Alphabet, Servicenow, Microsoft, Facebook, Wells Fargo, Tyler Technologies, Cheniere Energy, Salesforce.com and General Dynamics.

At the end of July 2021, just over 20% of the portfolio was invested in healthcare, with 16.6% invested in IT and 15.4% invested in industrials. Financials (13.3%) and consumer staples (11.1%) were the other two sectors with double digit weightings.

VanEck Vectors Morningstar Wide Moat ETF comes with an annual cost of 0.49%.

Past performance is not a reliable indictor of future performance. Over the last five years, the ETF has produced an average return per annum of 19.4%.

The post Why these 2 top ETFs could be buys appeared first on The Motley Fool Australia.

More reading

• ASX investors can’t get enough! ETF inflows hit new record high
• 3 excellent ETFs for ASX investors in August
• 2 ASX shares that might be worth looking at this weekend
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• 3 high quality ETFs for ASX investors

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF and Vanguard MSCI Index International Shares ETF. 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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