Category: Stock Market

Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Computershare Ltd (ASX: CPU)

According to a note out of Citi, its analysts have retained their sell rating but lifted their price target on this share registry company’s shares to $15.00. Citi has downgraded its earnings estimates for Computershare to reflect a tough near term outlook and margin income weakness. It also has concerns that its guidance for FY 2022 could disappointment the market and weigh on its shares. The Computershare share price ended the week at $16.14.

Dacian Gold Ltd (ASX: DCN)

A note out of Macquarie reveals that its analysts have downgraded this gold miner’s shares to an underperform rating with a reduced price target of 28 cents. This follows a disappointing end to FY 2021, which led to Dacian Gold falling short of its guidance. But perhaps the biggest disappointment was the company’s capital expenditure guidance for Mt Morgans, which was significantly greater than Macquarie was anticipating. The Dacian Gold share price ended the week at 31 cents.

Wesfarmers Ltd (ASX: WES)

Another note out of Citi reveals that its analysts have retained their sell rating and $45.00 price target on this conglomerate’s shares. According to the note, the broker was expecting Wesfarmers to use its excess capital for acquisitions. However, it sees few synergies from its potential acquisition of Australian Pharmaceutical Industries Ltd (ASX: API). And while it sees the acquisition as a way to boost its post-pandemic growth, it feels it will need to make further investments to realise this. The Wesfarmers share price was fetching $59.12 at the end of the week.

The post Top brokers name 3 ASX shares to sell next week 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 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 Fortescue Metals Group Limited (ASX: FMG) share price has been performing well in July 2021. Since the start of the month it has gone up by around 10%.

Fortescue is one of the ASX’s biggest iron ore miners. It’s actually one of the biggest companies, of any sector, on the ASX with a market capitalisation of $79 billion according to the ASX.

The iron ore price is a major contributor to the profit that Fortescue can make each year. The iron ore price is close to its 2021 high with it currently at just over US$220 per tonne. A year ago it was around half that price.

Nicholas Snowdon, head of base metals and bulks research at Goldman Sachs, was recently talking at the Singapore Iron Ore Forum according to reporting by CNBC. Mr Snowdon said that prices are high with very strong demand and supply isn’t being increased by the miners. Inventories are also low.

The Goldman Sachs analyst suggested that it won’t be until at least 2023 that iron ore prices go back to more normal levels. He suggested there won’t be a price collapse and that prices could stay between US$100 to US$150 per tonne. He also said:

It would be wrong to say that the bull market for iron ore, you know, is on the cusp of ending.

Fortescue Future Industries (FFI)

In recent weeks, FFI has been making the headlines.

DRC

About a month ago the business referred to media talk regarding the company’s discussions with the Government of the Democratic Republic of Congo on the exclusive rights to develop the suite of Grand Inga Hydroelectric Projects, including the Matadi and Pioka projects.

FFI revealed that the DRC Government has invited interested corporations and governments to contact FFI if they have investment or service interest in the Inga Projects on the condition that personnel will be trained and sourced from the DRC as Fortescue has done in Australia.

The company confirmed that discussions have taken place with the DRC Government about the grant of exclusive rights to develop the Grand Inga suite of projects. No formal binding agreement has been concluded yet.

Green initiatives

Fortescue also updated investors on 6 July 2021 about how its initial decarbonisation projects are going.

It said it had achieved successful combustion of ammonia in a locomotive fuel, with a pathway to achieve completely renewable green fuel.

FFI has completed the design and construction of a combustion testing device for large marine (ship) engines, with pilot test work underway and a path to achieve completely renewable green shipping fuel. It has also finalised design of a next generation ore carrier (ship) that will consume renewable green ammonia.

It’s testing battery cells which aim to be used on Fortescue haul trucks.

The design and construction of hydrogen powered haul tracks and drill rigs for technology demonstration has been completed, with systems testing underway.

FFI has also achieved successful production of high purity (more than 97%) green iron ore from Fortescue ores at low temperature in a continuous flow process.

The final update was that it has achieved a successful initial trial to use waste from the green iron processes (noted above), with other “easily sourced materials”, to make green cement.

Where to next for the Fortescue Metals share price?

The brokers at Macquarie Group Ltd (ASX: MQG) are one of the few brokers that still have a buy rating on Fortescue and a share price target above the current share price.

Macquarie’s price target for Fortescue is $27.

The post July’s been a great month so far for the Fortescue Metals (ASX:FMG) share price appeared first on The Motley Fool Australia.

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• Why the BlueScope (ASX:BSL) share price could be set to jump higher
• These 2 ASX dividend shares are offering trailing yields of 10% today
• Why the Fortescue (ASX:FMG) share price has rallied 6% in the last week
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Tristan Harrison owns shares of Fortescue Metals Group 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 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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A2 Milk Company Ltd (ASX: A2M) shares have gone gangbusters in the past month, rising more than 16.6%.

But of course, that’s after its investors cried over much spilt milk in the past year. The stock has lost more than 63% in the past 12 months.

This month has seen the agricultural stock become one of the most traded among Australian investors, with it involved in 2.1% of all transactions on CommSec last week.

Pleasingly, buyers accounted for 71% of that volume.

So what’s with the July revival?

Acquisition about to complete

A2 Milk’s proposed majority-acquisition of Mataura Valley Milk will complete by the end of this month.

That follows a 5 July blessing from the New Zealand Overseas Investment Office, which sent the shares rocketing up.

“Management expects the acquisition to provide the opportunity for a2 Milk to participate in nutritional products manufacturing, provide supplier and geographic diversification, and strengthen its relationship with key partners in China,” reported The Motley Fool’s James Mickleboro at the time.

Analysts warming to A2 Milk

Fund managers are starting to take notice of A2 Milk, with some arguing the stock has been oversold.

Bell Potter senior industrial analyst Jonathan Snape said last week that the business was absolutely flying before COVID-19 took hold last year.

So A2 Milk could be a nice pandemic recovery story.

“While not without near-term risks as supply chains stabilise, at its core we see A2M as a business that, once [margin] is consolidated, has baseline revenue of ~NZ$1.4 to $1.5 billion and EBITDA of ~NZ$300m,” he said in a memo to clients.

Snape can see A2 Milk hitting NZ$1.7 billion in revenue with NZ$445 million EBITDA.

Watermark portfolio manager Daniel Broeren posted on Livewire that the A2 Platinum formula brand continues to be popular with Chinese mothers.

“While there are some risks around market size (declining birth rate), and recovery timeline for Chinese travellers (daigou), these are palatable risks when the stock is trading at such a significant discount to prior valuations.”

Still plenty of short interest on A2 Milk 

While the discounted share price has won over some fans, there are still plenty of sceptics.

Last week, The Motley Fool reported A2 Milk shares had re-entered the top 10 most shorted stocks on the ASX.

About 6.8% of its shares have been shorted, on the back of worries about the still-depressed daigou sales channel and the competition from Chinese baby formula makers.

The post The A2 Milk (ASX:A2M) share price is up 17% in the last month, here’s why appeared first on The Motley Fool Australia.

More reading

• Why is the A2 Milk (ASX:A2M) share price down almost 3% on Thursday?
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• A2 Milk and Zip were among the most traded ASX shares last week
• These are the 10 most shorted shares on the ASX
• A2 Milk (ASX:A2M) share price in focus following update

Motley Fool contributor Tony Yoo owns shares of A2 Milk. 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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High-performing fund manager Wilson Asset Management (WAM) has revealed two ASX shares that it rates as buys within the WAM Research Limited (ASX: WAX) portfolio.

WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Leaders Ltd (ASX: WLE).

One of the LICs is called WAM Research, which looks at smaller businesses on the ASX.

WAM describes WAM Research as a LIC that invests in the most compelling undervalued growth opportunities in the Australian market.

The WAM Research portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 16.4% per annum since the strategy changed in July 2010, which is superior to the S&P/ASX All Ordinaries Accumulation Index return of 9.6% per annum.

These are the two ASX shares that WAM outlined in its most recent monthly update:

Johns Lyng Group Ltd (ASX: JLG)

The fund manager explained that this company is all about providing building and restoration services in Australia for properties and contents that have been damaged by events like weather and fire.

It operates in all the major metro areas as well as high-risk regional areas like Far North Queensland.

In June, the ASX share announced an increase of its earnings expectations by 10% compared to the guidance given in February, bringing the earnings before interest, tax, depreciation and amortisation (EBITDA) to $52.1 million.

WAM explained that the increase was driven by strong demand for core services and catastrophe recovery services in northern New South Wales and southern Queensland.

The fund manager remains positive on the outlook, underpinned by a “strong” pipeline of work and balance sheet capacity to execute on additional earnings accretive acquisitions, with three businesses acquired in the strata and building management sector subsequent to the year end.

Maas Group Holdings Ltd (ASX: MGH)

WAM Research’s other idea that it outlined was Maas Group. This business was only listed in December 2020, though it was founded in 2002.

The LIC explains that Maas Group is a founder-led, vertically integrated construction materials, equipment and services business. It operates across the civil, infrastructure, mining and real estate markets.

The ASX share is led by the founder and significant shareholder, Wes Mass, the company operates a fleet of more than 400 machines with over 850 employees.

It was noted by WAM that in a June business update, Maas Group confirmed earnings guidance for FY21 with EBITDA of between $70 million to $77 million and announced an increase in debt facilities which were partially used to deploy into earnings accretive acquisitions of businesses and property assets to support long-term growth.

In early July, Maas Group announced a capital raising of up to $79 million to provide capacity to fund further growth and acquisition initiatives, including near-term opportunities in residential property and construction materials.

The fund manager is positive on Maas Group for the competitive advantages offered by its vertical integration and exposure to growing end markets, supported by further accretive acquisitions.

The post Top fund manager names these 2 ASX shares as buys appeared first on The Motley Fool Australia.

More reading

• Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy
• Johns Lyng (ASX:JLG) share price edges higher on acquisition update
• This ASX share is up 104% and just gave $280m to shareholders
• What’s boosting the Maas Group (ASX:MGH) share price today?

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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I’m a big fan of buy and hold investing and believe it is the best way for investors to grow their wealth.

To demonstrate how successful it can be, I like to pick out a number of popular ASX shares to see how much a single $20,000 investment 10 years ago would be worth today.

This time around I have picked out the three ASX shares that are listed below:

Carsales.Com Ltd (ASX: CAR)

This auto listings company has gone from strength to strength over the last decade. Gone are the days when consumers would look through newspapers for cars to buy. Now they grab their phone or laptop and look online. This shift to online auto listings has led to Carsales delivering consistently strong earnings growth over the period. As has the company’s successful expansion internationally, which continued this year with its entry into the US market. This has ultimately led to its shares generating an average total return of 18.6% per annum over the last 10 years. This would have turned a $20,000 investment into $110,000.

Corporate Travel Management Ltd (ASX: CTD)

This corporate travel booking company’s shares may be trading well below their record high because of the pandemic, but that hasn’t stopped them from outperforming the market materially over the last decade. This has been driven by its very strong revenue and earnings growth over the period. For example, in FY 2011, Corporate Travel Management reported revenue of $64.9 million and profit after tax of $11.8 million. Analysts at Citi are now forecasting a profit after tax of $46.9 million in FY 2022 and then $100 million in FY 2023. Which I feel demonstrates just how far the company has come. Given its strong growth, it won’t be a surprise to learn that its shares have given investors a total return of 29.7% per annum over the period. This would have turned a $20,000 investment into just over $269,400.

ResMed Inc. (ASX: RMD)

Another market beater over the last 10 years has been the ResMed share price. This has been driven by increasing demand for the sleep treatment focused medical device company’s world class portfolio. And with an estimated 1 billion people suffering from sleep apnoea globally, the majority undiagnosed, ResMed still has a long runway for growth. Over the last decade, ResMed’s shares have generated an average total return of 27.4% per annum. This would have turned a $20,000 investment into ~$225,500 today.

The post How to turn $20,000 into $250,000 in 10 years with ASX shares appeared first on The Motley Fool Australia.

More reading

• WAM Leaders thinks these ASX shares might be buys
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• Why Alkane, Carsales, Platinum, & Stockland shares are tumbling lower

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 ResMed. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended ResMed Inc. and carsales.com 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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Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it owns in its portfolio.

WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Leaders Ltd (ASX: WLE).

There’s also one called WAM Active Limited (ASX: WAA) which looks at businesses it thinks are the most undervalued.  

WAM says WAM Active invests in market mispricing opportunities in the Australian market.  

The WAM Active portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 12.1% per annum since inception in January 2008, which is superior to the Bloomberg AusBond Bank Bill Index return per annum of 3%.  

These are the two ASX shares that WAM outlined in its most recent monthly update:

Domino’s Pizza Enterprises Ltd. (ASX: DMP)

WAM Active explains that Domino’s Pizza is a multinational pizza restaurant chain, with the Australian business representing the largest franchisee outside of the US. It also has operations in Europe and Japan.

The fund manager pointed out that in June, Domino’s Pizza entered its tenth market, with an agreement with Formosa International Hotels Corporation to acquire the corporate stores and franchise rights of Domino’s Taiwan for $79 million on a cash and debt free basis.

Domino’s Pizza is the second largest operator in Taiwan with 157 stores and long-term market potential of more than 400 stores.

WAM says that the deal expands Domino’s Pizza Asian market by more than 18%. It has increase its store count outlook in Asia to 1,900 by 2030 to 2032 as a result of the acquisition.

The fund manager is positive about the future of Domino’s Pizza, with “key” growth markets such as Japan and Germany reaching an inflection point supporting a “robust” organic growth profile. The business has the potential for further acquisitions in the future, according to WAM.

Seven West Media Ltd (ASX: SWM)

Seven West was the other ASX share that WAM Active referenced as an opportunity.

The fund manager described Seven West Media as a large diversified media business. It makes content for television, publishing and digital networks.

Seven West is made up of a few different subsidiaries such as the Seven Network and affiliate channels, as well as The West Australian, The Sunday Times and Seven Studios.

WAM pointed out that, last month, Seven West Media released a “positive” fourth quarter trading update. Those quarterly numbers showed advertising revenue grew by more than 45%. Momentum is expected to continue into the quarter ending 30 September 2021.

Seven West Media’s 7plus has also seen a 62% rise in registered users in the year to date. That was faster growth than the market growth of 50.7%. Digital revenue saw an increase of 130% for FY21, with earnings before interest, tax, depreciation and amortisation (EBITDA) of $60 million.

The fund manager is still positive on Seven West Media, with the company expecting to more than double its digital EBITDA in FY22 and continuing cost control. WAM also pointed to the strong free cashflow which is helping de-leverage the balance sheet, which WAM believes is being undervalued by the market.

The post 2 top ASX shares to buy according to WAM appeared first on The Motley Fool Australia.

More reading

• Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy
• 2 excellent ASX shares that could be buy and hold options
• 3 ASX growth shares that could be excellent buy and hold options
• 2 quality ASX growth shares that could be buys in July
• Domino’s Pizza (ASX:DMP) shares fall 3%. What’s going on?

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 Dominos Pizza Enterprises 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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Are you looking for some quality ASX dividend shares to add to your income portfolio next week?

Then you might want to look at the ones listed below. Here’s what you need to know about these dividend shares:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share to look at is Accent. It is a retail group with a growing collection of popular footwear-focused store brands.

Among its portfolio are the likes of 4 Workers, Glue Store, HYPEDC, Platypus, Sneaker Lab, Stylerunner, and The Athlete’s Foot. In addition to this, the company has the rights to a number of popular brands in the Australian market.

Accent has been growing at a solid rate for years and has been tipped to continue doing so in the future by Bell Potter. This is thanks to the popularity of its brands and its store expansion plans.

Bell Potter expects this to lead to dividends of 11.7 cents per share in FY 2021 and then 12.3 cents per share in FY 2022. Based on the latest Accent share price of $2.69, this represents fully franked yields of 4.3% and 4.6%, respectively.

The broker has a buy rating and $3.30 price target on its shares.

National Australia Bank Ltd (ASX: NAB)

This banking giant could be a top option for income investors that don’t already have exposure to the sector. This is due to the Australian economy’s strong recovery, the thriving housing market, cost reductions, and its improving outlook.

One broker that is very positive on the bank is Macquarie. A recent note reveals that its analysts have upgraded this banking giant’s shares to an outperform rating with a $28.00 price target.

Macquarie notes that NAB has a strong capital position, which it feels should allow the bank to absorb any negative impacts of the AUSTRAC investigation and a potential COVID-induced economic slowdown.

In respect to dividends, Macquarie is forecasting fully franked dividends of $1.20 per share in FY 2021 and then $1.25 per share in FY 2022. Based on the latest NAB share price of $25.96, this will mean yields of 4.6% and 4.8%, respectively, over the next two years.

The post Here are 2 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. 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 Santos Ltd (ASX: STO) share price ended the week lower after the company abandoned its plans to drill for oil in the Great Australian Bight.

Shares in Santos finished Friday’s session trading for $7.02 – 1.26% lower than last week’s close.

Santos is the fourth energy company to hand in its licence to explore the area in recent years.

Let’s take a closer look at the latest news from the oil and gas producers.

Santos leaves the Bight

Santos confirmed yesterday it and its joint venture partner Murphy Oil (NYSE: MUR) have ceased exploring the Great Australian Bight.

The joint venture had previously held a licence to explore a 16,525 square kilometre area in the Great Australian Bight since 2013.

The news likely didn’t help the Santos share price. It spent all of Friday in the red.

A Santos spokesperson told The Motley Fool Australia the companies have surrendered their licence as they’ve completed the joint venture’s work program obligations, saying:

The Santos strategy is to build and grow around our five core long-life natural gas assets and the Great Australian Bight falls outside these assets.

Equinor, BP, and Chevron have all previously pulled out of drilling for oil in the Bight.

Bight Petroleum is the last company standing with an exploration licence for the Great Australian Bight.

Drilling in the area has faced intense criticism from environmental groups, with Greenpeace finding an oil spill in the Bight could affect Australian coast lines as far north as Newcastle.

Santos is still moving forward with offshore gas and oil projects in the Northern Territory and Western Australia.

Santos share price snapshot

Despite a poor week on the ASX, the Santos share price has been performing well this year.

It has gained 9.1% since the beginning of 2021. It has also increased by 31.2% since this time last year.

The company has a market capitalisation of around $14.7 billion, with approximately 2 billion shares outstanding.

The post Santos (ASX:STO) share price falls as company abandons drilling in the Bight appeared first on The Motley Fool Australia.

More reading

• Why the Santos (ASX:STO) share price is outperforming Woodside in 2021
• 5 things to watch on the ASX 200 on Friday
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• Are the 10 highest paid ASX 200 CEOs worth their paypackets?
• The Santos (ASX:STO) share price is having a rough 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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Are you interested in boosting your portfolio with some exchange traded funds (ETFs)?

If you are, then you may want to look at these highly rated ETFs listed below. Here’s what you need to know about them:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

If you want to gain exposure to the growing Asian economy, then the BetaShares Asia Technology Tigers ETF could help you achieve it. This ETF gives investors a slice of a number of the most promising tech shares in the Asian market.

This means you’ll be owning well-known companies such as ecommerce giant Alibaba, search engine company Baidu, online retail platform Pinduoduo, and WeChat owner Tencent. These are some of the quickest growing tech companies in the region, with millions of active users and very bright growth prospects.

The index the fund tracks has generated a return of 26.3% per annum over the last five years. This would have turned a $10,000 investment five years ago into over $32,000 today.

BetaShares Global Cybersecurity ETF (ASX: HACK)

A second ASX ETF to look at is the BetaShares Global Cybersecurity ETF. As it names implies, this ETF gives investors exposure to the leading companies in the global cybersecurity sector. This could be a great place to invest, given how demand for cybersecurity services continues to increase due to the growing threat of cyberattacks.

You only need to ask Telstra Corporation Ltd (ASX: TLS) CEO, Andy Penn, about this. As my colleague covered here, Mr Penn has warned that the rise of more sophisticated supercomputers and artificial intelligence (AI) could be one of the greatest threats to Australia’s cybersecurity.

Included in the ETF are quality companies at the forefront of the industry such as Accenture, Cisco, Cloudflare, Crowdstrike, Fortinet, Okta, Splunk, and Zscaler.

Over the last five years, the index the BetaShares Global Cybersecurity ETF tracks has delivered a return of 23% per annum. This would have turn a $10,000 investment five years ago into over $28,000 today.

The post 2 highly rated ETFs for ASX investors appeared first on The Motley Fool Australia.

More reading

• Why do some ASX ETFs have dividend yields of 20% right now?
• 2 quality ETFs that could give your portfolio a big boost
• 3 excellent ASX shares for growth investors in July
• 3 excellent ETFs for ASX investors in July
• 2 ETFs that could be buys in July 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. owns shares of and has recommended BETA CYBER ETF UNITS. The Motley Fool Australia owns shares of and has recommended BETA CYBER ETF UNITS and BetaShares Asia Technology Tigers 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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There are some wonderful ASX tech shares that might be long-term opportunities at the current prices.

Tech businesses with a strong operating model can produce good profit margins if they reach sufficient scale.

The below two ASX tech shares are producing growth and are expecting more:

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is currently rated as a buy by Morgans with a price target of $1.87. That suggest a potential upside of more than 60% over the next 12 months if the broker is proven correct.

The company aims to prevent advanced-stage breast cancer through an integrated breast health platform that assists in the delivery on personalised patient care.

Its FY22 focus is risk and genetics. The company aims to invest and improve for both the radiologist and the patient. Whilst its focus is on breast cancer, it’s also “seeking partners” to help give ‘lung’ the focus it deserves.

Its gross profit margin has increased to 91% and Volpara’s market share in the US has improved to around a third.

A key focus of the ASX tech share is increasing its average revenue per user (ARPU).

It wants to increase ARPU by selling a platform, not just a product. On 1 October 2020, it released the Volpara breast health platform. This includes all of its products with the power of multiple integrations to make the suite even more compelling, according to the company. Most new sales are now for two or three products, representing significantly increased ARPU. The relationship with genetics companies is expected to increase that further.

Upselling is an important part of the strategy. Management said that the upselling is a very significant opportunity. It is upgrading MRS 6 users and moving MRS 7 users to the more compelling patient hub, along with Volpara products. The company has seen that for those that upgrade it leads to an increase in 200% to 300% of recurring revenue.

Class Ltd (ASX: CL1)

Class is a leading provider of cloud accounting software for the self-managed superannuation fund (SMSF) sector.

It’s currently rated as a buy by the broker Ord Minnett. The broker has a price target of $2.40 on the ASX tech share, which suggests that the Class share price could potentially rise by around 40% over the next 12 months.

The company is still growing its market share in the SMSF accounting space. But it also has new products that it’s looking to grow its total addressable market with.

It has made acquisitions to enter into other areas like corporate compliance and trust compliance. Those acquisitions include NowInfinity, Smartcorp and ReckonDocs. This allowed it to quickly gain market leadership in the documentation and compliance sector – its market share is now 14% by revenue.

Between FY19 and FY21, it’s looking to increase its revenue from $38 million to $54 million, with an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 40%.

New Class products can increase its relevance with existing accounting clients, and win new customers, with Class Portfolio and Class Trust.

As Class gets bigger, it’s expecting to need to spend less as a percentage of revenue on product development, which could lead to stronger margins.

The ASX tech share is expecting that being able to offer a suite a products will lead to organic revenue growth.

The post 2 great ASX tech shares that could be buys 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. owns shares of and has recommended VOLPARA FPO NZ. The Motley Fool Australia owns shares of and has recommended Class Limited and VOLPARA FPO NZ. 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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