Category: Stock Market

All eyes will be on the Telstra Corporation Ltd (ASX: TLS) share price today.

This follows the release of the telco giant’s highly anticipated full year results for FY 2021.

Telstra share price on watch after achieving guidance

• Total income fell 11.6% to $23.1 billion
• Reported earnings before interest, tax, depreciation and amortisation (EBITDA) fell 14.2% to $7.6 billion
• Underlying EBITDA was down 9.7% to $6.7 billion (versus guidance of $6.6 billion to $6.9 billion)
• Net profit after tax increased 3.4% to $1.9 billion
• Free cash flow up 11.6% to $3.8 billion
• Fully franked final dividend of 8 cents per share, bringing full year dividend to 16 cents per share
• FY 2022 guidance: Underlying EBITDA growth of 4.5% to 9%
• $1.35 billion on-market share buyback

What happened in FY 2021 for Telstra?

For the 12 months ended 30 June, Telstra reported an 11.6% reduction in total income and a 9.7% decline in underlying EBITDA. Given the latter was in line with its guidance, this could bode well for the Telstra share price today.

Telstra’s EBITDA result reflects an in-year NBN headwind of $650 million and an estimated $380 million financial impact from COVID-19. If you exclude the NBN headwind, Telstra’s underlying EBITDA would have fallen only $70 million year on year.

A key driver of its improving performance was its mobile business. In the second half, mobile service revenue grew 3.7% over the prior corresponding period. Pleasingly, further growth is expected in FY 2022 from the key segment.

Also supporting its performance was an underlying fixed cost reduction of $490 million. But management doesn’t expect it to stop there and is guiding to a further ~$430 million of cost outs in FY 2022. It also sees opportunities beyond this.

Another positive which could boost the Telstra share price today is its expectation for the NBN headwind to ease. Management expects this to be just $350 million in FY 2022, down from $650 million in FY 2021.

What did management say?

Telstra’s CEO, Andy Penn, was pleased with the company’s performance. Particularly the successful investments it has made in innovation, digitisation and networks, its commitment to improving customer experiences, and its disciplined approach to capital management and productivity.

He believes this leaves Telstra well-positioned going into FY 2022.

Mr Penn said: “2021 was a really significant year for Telstra. We delivered results in line with guidance and we are seeing the focus and discipline on T22 pay off. It represents a turning point in our financial trajectory. Our second half underlying EBITDA was up on the first half, and our guidance for FY22 underlying EBITDA is $7.0-7.3 billion, which represents mid to high single digit growth.”

“We are clearly building financial momentum and I am very pleased to be able to say that our underlying business will return to full-year growth in FY22. We have confidence because we see strong performance in our mobile business, continued discipline on our cost reduction target, green shoots in some of our growth businesses and a diminishing impact from the nbn.”

Share buyback

Another positive from today’s result that could support the Telstra share price was the announcement of a $1.35 billion on-market share buyback. This follows the recent InfraCo Towers transaction.

Commenting on the buyback, Mr Penn said: “When we launched T22, we committed to establishing a standalone infrastructure business unit for three reasons: to give transparency of those assets, to bring a harder commercial edge to how we operationalise them, and to create optionality with a view to maximising shareholder value. This share buy-back is a clear demonstration of how we are creating additional long-term value for our shareholders.”

What’s next for Telstra in FY 2022?

Telstra has provided guidance for FY 2022 and is expecting the underlying business to return to full year growth.

It expects:

• Total Income of $21.6 billion to $23.6 billion
• Underlying EBITDA of $7 billion to $7.3 billion
• Capex of $2.8 billion to $3.0 billion
• Free cashflow after lease payments (FCFal) of $3.5 billion to $3.9 billion

Telstra share price outperforms in 2021

The Telstra share price has been outperforming in 2021 and is up 27% year to date. Shareholders will no doubt be hoping this result, its guidance, and the buyback will be enough to extend these gains today.

The post Telstra (ASX:TLS) share price on watch after hitting guidance & $1.35bn buyback appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Telstra (ASX:TLS) FY 2021 results preview
• Why the Aussie Broadband (ASX:ABB) share price rose 8% to a new high
• How did the Telstra (ASX:TLS) share price respond last earnings season?
• Telstra (ASX:TLS) and this ASX dividend share are rated as buys

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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It’s been a disappointing 2021 so far for the Woodside Petroleum Limited (ASX: WPL) share price. Shares in Australia’s oil and gas production giant have fallen 5.0% lower to $21.91 as at Wednesday’s close.

We’re now well in the swing of the August reporting season. Woodside investors will be waiting in anticipation for the company’s half-year results release on Wednesday 18 August.

As it stands, the Woodside share price is trading at a 2.3% forward dividend yield. Let’s explore a little bit more about what that means and how it compares to Woodside’s ASX peers.

Woodside share price dividend yield

There are a couple of ways to calculate a dividend yield – a commonly cited valuation metric for shares. It can either be done on a trailing (i.e. actual, historical payments) or forward (forecast or blended) basis.

According to The Motley Fool calculations, the Woodside share price is currently priced with a 2.3% dividend yield.

At the current $21.91 share price, that means the forecast full-year dividend for the Aussie energy share is roughly 51.5 cents per share. That is almost exactly the same as the FY2021 combined distributions of 51.6 cents (15.3 cents paid in March 2021 and 36.25 cents paid in September 2020).

The Woodside share price is trading on a higher dividend yield relative to its ASX peers. Santos Ltd (ASX: STO) shares are trading on a 1.43% dividend yield with Oil Search Ltd (ASX: OSH) shares at 0.16%.

Foolish takeaway

It’s useful to analyse multiple metrics when considering investments. A company’s dividend yield is simply a dividend estimate (or past dividend) divided by the current share price.

The Woodside share price has struggled to climb higher in 2021. That means the denominator in the dividend yield calculation is lower, making its yield higher.

Keen-eyed investors will be watching the 18 August results for further commentary and earnings outlooks to help guide dividend expectations going forward.

The post The Woodside (ASX:WPL) share price is now trading on a forecast 2.3% fully franked dividend yield appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Ken Hall 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 last 30 days have been good to the CSL Limited (ASX: CSL) share price.

Its gained 4.97% over the month to today, despite releasing no news to the market. In fact, the last time the ASX heard price-sensitive news from CSL was back in early May.

Right now, the CSL share price is $292.73.

Let’s take a look at what’s been driving it lately.

What’s up with the CSL share price?

It’s been a quiet, yet productive month on the ASX for CSL.

While it has been in and out of the news due to its contract to produce AstraZeneca‘s COVID-19 vaccine, the company itself hasn’t announced anything.

So, it’s a mystery as to why the CSL share price is gaining. Or is it? Here are two happenings that might explain why the healthcare giant’s stock is surging.

Australian dollar

CSL is an Australian company, but most of its profit comes from overseas.

In financial year 2020, only 1.5% of CSL’s external operating revenue came from Australia.

Most of its income came from the United States. And right now, $1 Australian is only getting US$0.73.

That means when CSL earns income in US dollars, it gets more Aussie bucks back in its pocket. Although, the company does report in US dollars, so we likely won’t see the impact of the currency fluctuation in its upcoming full year report.

mRNA possibility

It’s also less than a month since the federal government’s approach to the market, calling for companies to submit their interest in creating mRNA vaccines, closed to new applicants.

According to reporting by ABC News, Industry Minister Christian Porter confirmed CSL has put itself forward to be considered as an mRNA vaccine manufacturer.

The anticipation of finding out who has won the federal government’s favour might also be boosting the CSL share price.

Of course, CSL already makes the AstraZeneca vaccine in its Melbourne facility.

CSL share price snapshot

The month that’s been has added to CSL’s strong performance on the ASX.

The CSL share price is currently 2% higher than it was at the start of 2021. It has also gained 3% since this time last year.

The post Here’s why the CSL (ASX:CSL) share price is up 5% in a month 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. owns shares of 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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The NEXTDC Ltd (ASX: NXT) share price will be one to watch this morning.

This follows the release of an announcement by the data centre operator after the market close on Wednesday.

What did NEXTDC announce?

The NEXTDC share price could be given a boost today by a positive update on the development of its Melbourne (M3) data centre.

According to the release, the company has been successful in obtaining planning consent for the new centre and has proceeded with construction. Furthermore, the company has acquired an additional 40,000sqm of adjoining land for $24 million, lifting the overall size of the M3 site to approximately 100,000sqm.

The release notes that, subject to planning consent, the site will be developed into a hyperscale campus which is expected to accommodate a data centre capable of approximately 150MW of capacity. This is in addition to housing its customers’ mission critical operation centres, administrative offices, and collaboration spaces.

Management advised that M3 will provide data centre services to Enterprise and Government customers, as well as hyperscale cloud providers in a new Availability Zone within the Melbourne market.

The ground works and base building construction of the initial 13.5MW of capacity is progressing, with practical completion planned for the first half of FY 2023.

NEXTDC’s Chief Executive Officer and Managing Director, Craig Scroggie, commented: “The upgraded development of this new hyperscale technology campus in Melbourne is driven by ongoing customer demand for premium quality data centre infrastructure. NEXTDC looks forward to being able to offer our customers multiple availability zone solutions across our existing M1 Port Melbourne, M2 Tullamarine, as well as this new M3 hyperscale campus in West Footscray.”

Is the NEXTDC share price in the buy zone?

The team at Goldman Sachs have looked over the announcement and remain very positive on the NEXTDC share price.

This morning the broker retained its conviction buy rating and $14.80 price target. Based on the current NEXTDC share price, this implies potential upside of over 13%.

Goldman said: “Overall we are pleased with this update, given the marginally faster completion of the M3 facility, along with the increased overall size. We also believe this facility is now much more comparable and complementary to the recently announced S4 hyperscale campus (300MW), so is a more logical and appealing inclusion within any Joint Venture structure (which we expect).”

“We continue to believe that these Hyperscale campuses are a relatively low risk way for NXT to accelerate its growth profile, given they are delivering incremental growth (i.e. new availability zone), but within existing markets. The use of a JV structure will also allow NXT to maintain its attractive return profile, along with significant funding flexibility,” it added.

The post Is the NEXTDC (ASX:NXT) share price in the buy zone after its update? appeared first on The Motley Fool Australia.

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• 2 ASX tech shares rated as buys

Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has 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 AMP Limited (ASX: AMP) share price is one to watch this morning after the Aussie financial group’s half-yearly results release.

AMP share price in focus as profit lifts

AMP provided its operational and financial update for the half-year ended 30 June 2020 (1H21). Investors will be keeping an eye on the AMP share price today after the company reported the following highlights:

• Net profit after tax up 57% on the prior corresponding period (pcp) to $181 million.
• Australian wealth management assets under management (AUM) up 8% to $121.0 billion.
• Australian wealth management net cash outflows of $2.7 billion, compared to net cash outflows of $4.0 billion in 1H20.
• Controllable costs (ex AMP Capital) down 6% to $387 million.
• Surplus capital of $452 million above target requirements.
• Underlying group return on equity up to 8.3% (6.0% in 1H20).

The AMP share price is also one to watch this morning after the board declined to pay an interim 2021 dividend.

What did management say?

The AMP share price has been under pressure in 2021 and investors will be watching today’s results carefully. Newly appointed AMP CEO Alexis George, however, was positive about the performance and turnaround efforts.

Our business has had a stronger first half financially, we have demonstrated our commitment to deliver our strategic priorities of reshaping and simplifying the business and focusing AMP Capital on private markets.

We are starting to see some positive signs of growth and innovation, particularly in our bank and platforms businesses where we are introducing new services that our clients want.

Getting our demerger done will be a core priority. We’ve set out a clear timeline to establish and separate the AMP Capital Private Markets business this year, and complete the demerger in 1H 22.

What’s the outlook for FY21?

The AMP share price will be in the spotlight on Thursday following the financial giant’s half-yearly update. AMP did also provide some full-year guidance to the market this morning.

The financial group is forecasting controllable costs of $775 million, in line with previous guidance figures. AMP is expecting the Global Equities and Fixed Income (GEFI) and Private Markets businesses to internally separate in FY21.

Loan growth momentum for AMP Bank is expected to continue in the second half of the year while AMP Capital FY21 earnings are forecast to decline versus FY20 due to lower performance and investment returns.

How has the AMP share price performed recently?

The AMP share price climbed 1.4% higher on Wednesday ahead of today’s results release. However, shares in the Aussie financial group are down 30.8% in 2021 and are trading near an all-time low.

The post AMP (ASX:AMP) share price on watch as net profit jumps 57% appeared first on The Motley Fool Australia.

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Motley Fool contributor Ken Hall 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 Rio Tinto Limited (ASX: RIO) share price has fallen 4% over the last week. Could it be worth looking at after its recent drop?

Iron ore miners are in focus as the iron ore price drops. According to reporting by various media, Chinese iron demand is falling at the moment.

As one of the world’s biggest iron ore miners, Rio Tinto is being put in focus.

The decline of the iron ore price isn’t a surprise to some analysts out there. The broker UBS was expecting the iron price to fall with demand falling and an expectation of larger iron ore supply.

Rio Tinto is one of the miners expected to deliver a higher level of iron ore production in the next few months.

Rio Tinto’s production guidance

In 2021, Rio Tinto is expecting Pilbara iron ore production to be between 325 Mt to 340 Mt. In the first six months, it produced 152.3 Mt of iron ore, which was a decline from 161.1 Mt produced in the first half of 2020.

The miner also highlighted in its FY21 half-year result that mining has commenced at the $2.6 billion Gudai-Darri replacement iron ore mine in Western Australia, with more than nine million cubic metres of pre-stripping completed in June. Despite labour shortages, first ore in the crusher is expected in 2021, although commissioning is later than originally planned. The project is expected to ramp up in early 2022 and reach full capacity in 2023.

A large recent announcement has been that $2.4 billion of funding has been committed to the Jadar project in Serbia, one of the world’s largest greenfield lithium projects, subject to receiving all necessary regulatory approvals. First saleable production is expected to be in 2026, with full production in 2029.

Broker ratings on the Rio Tinto share price

This increased supply is one of the reasons why UBS rates the Rio Tinto share price as a sell with a price target of $102.

The broker thinks Rio Tinto is valued at 12x FY22’s estimated earnings with a projected grossed-up dividend yield of 14% in the next financial year.

Though some brokers aren’t as pessimistic about the Rio Tinto share price such as Credit Suisse, which has a price target of $133 which is attracted to the prospect of the dividends from Rio Tinto.

Looking ahead to FY22, Credit Suisse thinks that Rio Tinto shares are valued at 8x FY22’s estimated earnings, with a projected grossed-up dividend yield of 11.2%.

In the FY21 half-year result, Rio Tinto declared a total dividend of US$5.61 per share (up 262%), which included a special dividend of US$3.76 per share.

The post Is the Rio Tinto (ASX:RIO) share price a buy right now? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Are you interested in adding some ASX growth shares to your portfolio this month? If you are, you may want to look at the ones listed below that have recently been named as buys.

Here’s what you need to know about them:

Appen Ltd (ASX: APX)

The first growth share to look at is Appen. It has a team of over one million crowd sourced experts preparing the data that goes into artificial intelligence (AI) and machine learning models. It does this for some of the biggest tech companies in the world such as Google and Facebook. And while demand softened during the pandemic, there are early signs emerging that indicate a rebound is taking place.

For this reason, last week Citi put a buy rating and $18.00 price target on its shares.

Cochlear Limited (ASX: COH)

Another growth share to consider is Cochlear. It is one of the world’s leading hearing solutions companies. Cochlear has been consistently delivering solid earnings growth for years thanks to its world class portfolio of products, ageing populations, and its high level of investment in research and development. And with all these drivers still in place today, Cochlear appears to be in a position to continue its growth over the next decade.

Macquarie currently has an outperform rating and $246.00 price target on its shares.

IDP Education Ltd (ASX: IEL)

A final ASX growth share to look at is IDP Education. It is a provider of international student placement services and English language testing services. Although the company has been hit hard by the pandemic, it is expected to come out of the crisis in a stronger position. This, together with pent up demand and acquisitions, is expected to underpin rapid growth once trading conditions return to normal.

Morgan Stanley has an overweight rating and $33.00 price target on its shares.

The post 3 buy-rated ASX growth shares appeared first on The Motley Fool Australia.

More reading

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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 shares of and has recommended Appen Ltd, Cochlear Ltd., and Idp Education Pty Ltd. The Motley Fool Australia owns shares of and has recommended Appen Ltd. The Motley Fool Australia has recommended Cochlear 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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There is a small number of ASX shares that are broadly liked by a number of brokers.

If many brokers like a business at the same time then that may suggest there could be a potentially opportunity there.

Or it may mean that all of the brokers are wrong at the same time. Only time will tell.

Here are two that are highly liked by multiple brokers:

Credit Corp Group Limited (ASX: CCP)

Macquarie Group Ltd (ASX: MQG) is currently one of the brokers that rate the debt collector as a buy. It’s rated as a buy by at least three brokers.

The broker thinks Credit Corp is performing soundly considering the environment that it’s seeing in both Australia and the US.

Credit Corp recently released its FY21 result to the market. It said that there was an 11% increase of net profit after tax (NPAT) to $88.1 million. Within that, its US segment reported that NPAT doubled to $17.7 million.

There was a near record purchased debt ledger (PDL) investment outlay of $293 million, including $146 million for the PDL purchase from Collection House Limited (ASX: CLH).

But the ASX share did achieve records in other areas. There was a record second half gross lending volume of $105 million. It also saw a record starting PDL investment pipeline of $150 million for FY22.

The company said that it entered FY22 with considerable momentum. Charge off volumes are growing across all markets and the company is expecting further opportunities to grow purchasing over the course of the year.

Credit Corp outlined that the increase in organic PDL investment, together with the ongoing impact of the Collection House PDL acquisition, is expected to produce “solid” earnings growth of 8% at the top end of its guidance range. The top end of its profit guidance is $95 million in FY22.

According to Macquarie, the Credit Corp share price is valued at 19x FY23’s estimated earnings.

Bank of Queensland Limited (ASX: BOQ)

The regional bank is currently rated as a buy by at least five brokers. One of the brokers that likes Bank of Queensland is Credit Suisse, which has a price target on the ASX share of $11.50. That suggests a potential increase of the share price of approximately 20% over the next 12 months, if Credit Suisse is right.

One of the main reasons that the broker likes BOQ is due to its deal to buy ME Bank which could lead to substantial synergies. Credit Suisse also believes that BOQ’s net interest margin (NIM) could increase after the acquisition is completed.

If readers didn’t catch the original details of the deal, BOQ is buying ME Bank for $1.325 billion.

BOQ said the acquisition is expected to deliver material scale, broadly doubling the retail bank and providing geographic diversification. It’s expected to add to cash earnings per share (EPS) at a rate of between low double digit to mid-teens including the full run rate of synergies in the first year, being FY22.

The anticipated annualised pre-tax synergies are expected to be between $70 million to $80 million.

In the first half of FY21, BOQ generated $165 million of cash earnings after tax – up 9%. But statutory profit was up 66% to $154 million. The NIM improved by 3 basis points to 1.95%, whilst the interim dividend was increased by 11 cents per share to 17 cents per share.

According to Credit Suisse, the BOQ share price is valued at 15x FY22’s estimated earnings with a projected FY22 grossed-up dividend yield of 6.3%.

The post These 2 ASX shares are rated as strong buys by brokers appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie 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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If you’re looking for big dividends, then look no further. The two ASX dividend shares below have been tipped by analysts to provide investors with yields greater than 6%.

Here’s what you need to know:

Adairs Ltd (ASX: ADH)

The first high yield ASX dividend share to look at is Adairs. It is a leading homewares and home furnishings retailer in the ANZ market. It has a growing presence both in retail parks across Australia and online with its Adairs and Mocka brands.

Thanks to its strong market position, the booming housing market, and a redirection in consumer spending, Adairs has been a very positive performer this year. This led to a very strong first half result, with more of the same forecast in the second half.

The team at Goldman Sachs are very positive on Adairs. They have a buy rating and $4.80 price target on the company’s shares.

The broker is also forecasting fully franked dividends per share of 26 cents in FY 2021, 25.1 cents in FY 2022, and then 26.8 cents in FY 2023. Based on the current Adairs share price of $4.22, this will mean yields of 6.15%, 5.9%, and 6.35%, respectively.

BHP Group Ltd (ASX: BHP)

Another high yield ASX dividend share to consider is BHP. This mining behemoth could be a top option for income investors that are happy to invest in the resources sector.

Australia’s largest miner has a diverse portfolio of world class operations across a number of commodities. This includes petroleum, copper, nickel, and iron ore. And thanks to favourable prices and its low operating costs, the company is currently generating significant free cash flow.

The team at Macquarie expect this to underpin very generous dividend payments in the near term. The broker is forecasting fully franked dividends per share of approximately $3.71 in FY 2021 and then $3.63 in FY 2022. Based on the latest BHP share price of $52.52, this will mean yields of 7% and 6.9%, respectively.

Macquarie has an outperform rating and $60.00 price target on its shares.

The post 2 high yield ASX dividend shares analysts rate as buys 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 recommended ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended ADAIRS FPO. 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, NAOS Asset Management portfolio manager Robert Miller reveals 2 ASX shares he loves that play in very different sectors.

Investment style

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

Robert Miller: We offer a boutique funds management business that is focused on ASX-listed industrials, with a focus outside the S&P/ASX 50 Index (ASX:XFL). Our motto across the business is ‘conviction, long-term and aligned’. 

We’re very concentrated in what we do. We only hold about 20 positions at the moment, approximately, across our total pool of capital. 

We’re long-term investors. All of the shareholder funds that we currently manage are structured as listed investment companies. That allows us to be patient and have a disciplined investment strategy, which is typically a 5-year-plus investment timeframe that we’re looking at.

Another big one for us is alignment. So we’re big believers in investing in businesses alongside founders and management teams that have significant equity ownership in those businesses themselves. 

They’re our 3 key points. It’s a pure focus on industrial-type businesses and we’ve got a strong ESG focus internally as well.

Our ASX share portfolio

MF: Can you name a couple of your holdings and why you love them?

RM: The one I’ll start with is COG Financial Services Ltd (ASX: COG), which is an asset finance, aggregation and broker group. They’re Australia’s largest asset finance and broking aggregator. So it has approximately between 17% and 20% of the market. 

We believe this is a very hard asset to replicate in terms of their distribution footprint. So if you think about what’s happened with the mortgage and insurance industries, to use two examples, clearly there is an intermediary channel there where brokers are the vast majority — or have a very large influence. 

We believe asset finance is going in the same trajectory as the other two industries, and COG has very much a firm footing in that marketplace, being the largest at what they do. So this gives them the opportunity to cross-sell other products over time because the asset finance relationship between the customer and the broker can be very strong. 

A typical product would be, say you needed to buy a bit of yellow kit for farming or construction building — and you need a tractor or a ute, then COG, through their broker network, are the ones who would organise the finance for that.

I touched on insurance before and, obviously, the key in that market, one of the key ones is Steadfast here in Australia. And some of the ex-Steadfast people, including Cameron McCullagh who set this up, are involved in COG. So it’s got that flavour to it. 

They had a very strong FY21 but I think there’s a long way to go in terms of the underlying tailwinds that we’re seeing in a lot of the industries they operate in. Obviously, agriculture is strong, construction and housing and whatnot, that should be relatively strong over the next little while. 

All of those factors, as well [as] the stimulus around the instant asset write-off programs, should all be beneficial to COG over the medium to longer term.

MF: And the other one?

Again, not necessarily our biggest but a material one for us, is Big River Industries Ltd (ASX: BRI). They’re actually [an] over 100-year-old business, despite listing on the ASX in early April 2017, I think it was. 

They’re a building supplies and distribution business. And if you think about Bunnings and Mitre 10… they’re predominantly retail. This is trade-only so there’s absolutely no retail store footprint. 

What they do is, as I said, provide and distribute building supplies. Say frame and truss timber, plywood and formply, and architectural products. They’ve got approximately 22 sites across the country at the moment where they sell products. And they’ve got some manufacturing operations as well, where they manufacture niche products like formply and some architectural products.

We think this business is run by an excellent CEO who knows everything inside-out in that business. And we think there’s a very big opportunity to grow from here. As I said, they’ve only got low 20s in terms of the sites they operate. It’s a very, very large [addressable] market. We believe, for instance, they’ve only got one site in Sydney. Their peers would have many more than that in terms of sites per capital city. So there’s a long way to go in terms of the upside of site M&A, and also the ability to get strong revenues synergies out of that by, say you’re buying a new site, an existing site that rolls into the rest of the group, you then have the ability to cross-sell all of your existing products and distribution capabilities over to that new asset that you’ve bought. In turn, you get margin expansion with scale, and we’re starting to see this materialise now across the BRI group.

Secondly, the building cycle peaked in 2017 and it’s been on the down cycle since then. And I think certainly with the example of [government program] HomeBuilder, obviously there’s been a lot of building approvals over the last little while. A lot of that’s yet to turn dirt. So we think that the building cycle is here to stay for the medium term. It’s certainly in the upward trend and this should benefit Big River.

MF: It gives out a dividend as well.

RM: Yes, it does. As I said at the start, it’s over a 100-year-old business and they’ve been paying dividends for a very long time — throughout many, many cycles. For us, that’s a big factor that the business is able to survive all kinds of cycles and certainly thrive in some as well, like we’re seeing at the moment.

The post This 100-year-old company is the ASX share that keeps giving appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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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