Category: Stock Market

It was a painful day for the S&P/ASX 200 Index (ASX: XJO) as it fell around 2.4% to 6,673 points.

Reporting season has now finished for another six months, though there will be a few more over the next few weeks with businesses that don’t have December 2020 end dates for their reports.

Here are some of the highlights from the ASX:

Afterpay Ltd (ASX: APT) share price

The Afterpay share price fell by 11% today, it was one of the worst falls, but not the biggest.

Most of the ASX went into the red today, but Afterpay suffered heavily after returning to trade from its trading halt for its notes offering and the release of its FY21 half-year result.

Indeed, most of the buy now, pay later sector saw heavy declines today. The Zip Co Ltd (ASX: Z1P) share price fell by another 5%.

The Sezzle Inc (ASX: SZL) share price finished 2.9% lower after reporting, though it had been down more than 10%. Splitit Ltd (ASX: SPT) also reported today, it saw a share price fall of 3.8%.

AMP Limited (ASX: AMP)

The best performer in the ASX 200 was AMP.

It announced that AMP and Ares Management intend to pursue a joint venture partnership for AMP Capital’s private markets businesses of infrastructure equity and infrastructure debt, real estate and other minority investments.

In the proposed transaction, Ares would acquire 60% of private markets and assume management control, with AMP retaining 40%. The two businesses are going to enter into a 30-day period of exclusivity, to work towards a binding transaction.

Ares will be acquiring its stake for $1.35 billion, valuing the whole private markets joint venture business at $2.25 billion. This values AMP Capital’s entire private markets business at up to $3.15 billion.

Orica Ltd (ASX: ORI)

The Orica share price has fallen 18% today, it was the worst performer in the ASX 200.

Today, the company announced that CEO and managing director Alberto Calderon will step down from his position after almost six years in the role. The new person in charge will be Sanjeev Gandhi, who is currently group executive and President of Australian Pacific Asia.

The company also gave a market update.

It said that a number of factors were going to reduce earnings before interest and tax (EBIT) in the first half of FY21.

Mining activity earnings is going to be reduced by between $70 million to $80 million because of the trade tension between Australia and China which is impacting demand for its higher margin Australian thermal coal market.

In the first half of FY21, demand for Orica’s products and services from affected mines is expected to be approximately 60 thousand tonnes of ammonium nitrate lower than the prior corresponding period.

COVID-19 is also causing difficulties with mine disruptions and closures in Colombia, Europe, Africa, Mexico and Indonesia.

Foreign exchange impacts are being observed by the strengthening Australian dollar, hurting earnings to the tune of $20 million to $25 million.

There are also additional items amounting to $15 million to $20 million because of further arbitration costs relating to the Barrup plant and additional SAP system stabilisation costs in the first half.

More reading

• Here are 3 ASX 200 diamonds in the spotlight while the market sank today
• The big themes from ASX reporting season
• Why this ASX tech ETF is in the buy zone
• The Zip (ASX:Z1P) share price has slumped 26% in 8 days
• Brokers name 3 ASX shares to buy right now

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 ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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 PainChek Ltd (ASX: PCK) share price was among the few ASX shares that stayed in the green today, closing up 2.56% at 8 cents.

The share price increase came off the back of the company half-year report announced to the market yesterday. Let’s take a look.

Why did the Painchek share price rise today?

Shares in the small-cap rose as revenue jumped 40% to $2.08 million for the half-year ending 30 December 2020.

However, this does not fully represent how the company performed in the period. Looking deeper into the results, we can see that revenue from continuing operations fell 30% to $127,000. The majority of the group’s revenue was made up of research and development (R&D) and government grants.

As such, the company reported a net loss from operations for the half-year of $1.35 million.

PainChek continued to deliver sales growth in Australian residential aged care (RAC). Sales growth in the period resulted in total global licenses covering 71,318 beds, a 123% growth year on year (YoY). Furthermore, domestic sales reflected more than 30% of the Australian RAC.

Moreover, the company now has 884 aged care clients, growing 133% on the previous corresponding period. Forward-looking revenue equates to more than $3 million in annualised recurring revenue.

Looking ahead

PainChek aims to further develop its platform for use in new and larger healthcare market segments. The company said this was core to its business growth over the next 12 months.

In addition, the company has a number of products pending regulatory clearance. PainChek’s business strategy includes the release of an app for assessing pain in young children.

Having recently completed the app development and clinical validation work, the company is projecting Australian (TGA) and European (CE) mark regulatory clearances in the second quarter of the calendar year 2021.

Promisingly, its children’s app serves a potentially larger market than the adult app with a large hospital market and home care market opportunity.

More reading

• Here are 3 ASX 200 diamonds in the spotlight while the market sank today
• The Santos (ASX:STO) share price dips on stable credit rating
• Genworth Mortgage (ASX:GMA) share price slumps on $107 million loss
• Why the WhiteHawk (ASX:WHK) share price is crashing 8% lower
• Why the Immuron (ASX:IMC) share price fell today

Motley Fool contributor Daniel Ewing 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 was a sea of red on the US markets last night, as the Dow Jones Industrial Average (INDEXDJX: .DJI) and Nasdaq Composite (INDEXNASDAQ: .IXIC) fell 1.75% and 3.52% respectively.

The catalyst for this selloff has been a swift rise in bond yields, as reported by The Wall Street Journal.

10-year Treasury notes broke into a 52-week high, creating pressure on equities. As often happens, the Australian market followed suit with its own selloff.

The S&P/ASX 200 Index (ASX: XJO) plummeted 2.32% today, its biggest fall in 5 months.

3 ASX 200 shares shining today

Out of the ASX’s top 200 shares, only 36 of them finished in the green today. On days like today, it’s worth having a closer look at the performers and what might have given them that extra sparkle.

Eagers Automotive Ltd (ASX: APE)

Eagers Automotive was a green needle in the red ASX200 haystack today. The automotive retailer gained 2.47% today, amounting to a 56% return in 12 months.

It’s no secret that car sales have been going gangbusters since the COVID-19 low last year. This was reflected in the company’s recent FY20 results, with statutory revenue increasing by 50.4% to $8,749.7 million. Despite the result, shares sold off 7.3% on the announcement.

However, today tells a different story as investors push the price higher. As excitement wanes in ASX 200 tech shares, bricks-and-mortar is catching some of the outflows.

Eagers is eager to drive an even stronger bricks-and-mortar approach in the future after the company announced its plan to start popping up in shopping centres near you.

Austal Limited (ASX: ASB)

The Australian shipbuilder and global defence contractor, Austal, propelled 3.04% higher today. Although, it hasn’t been all smooth sailings for this ASX 200 participant. Over the last year, Austal has sunk 38%.

A combination of mismanagement allegations and impacted revenues have circled the company in recent months.

The ship lost its captain when Austal’s US president resigned following the commissioning of an investigation. The investigations pertain to the write-back of work in progress (WIP) from a past program.

With all the panic of overvaluations today, investors may have found comfort in Austal’s price-to-earnings (P/E) ratio of 8.9. Compared to the broader ASX 200, this is a relatively low multiple, potentially indicating that the company is ‘cheap’.

Lynas Rare Earths Ltd (ASX: LYC)

The Lynas Rare Earths’ share price gained 5.65% today. Lynas is a rare earth resource producer with operations in Malaysia. Today’s gain puts the ASX 200 member at a return of 219% in the last year.

So why all the exuberance today? The answer is mind-blowing first-half results. Revenue from operations increased by 12.4% to $202 million. But the truly bonkers metric is the company’s 944% growth in net profit – taking it $40.6 million.

Continued tensions with China have facilitated a favourable market for rare earths that can be sourced from elsewhere. Lynas also reinforced its ‘Lynas 2025 project’ in the results today. Using the $425 million raised during the half, the company expects to construct a new facility at Kalgoorlie.

More reading

• The big themes from ASX reporting season
• Why this ASX tech ETF is in the buy zone
• Growth outlook fails to save the Aristocrat share price today
• ASX 200 down 2.3%: Afterpay & Kogan sold off, Orica smashed, AMP pushes higher
• The Harvey Norman (ASX:HVN) share price slips despite soaring profits

Mitchell Lawler owns shares of Lynas Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. 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 Santos Ltd (ASX: STO) share price slipped lower today despite the gas company providing an update on its credit rating. The Santos share price finished the day slightly in the red, down 1.3% to $7.23.

Let’s take a closer look at what Santos announced to the ASX market.

What did Santos announce?

The Santos share price ended the day mostly unscathed from the wider ASX market plunge that took hold today.

In its release, Santos advised that S&P Global Ratings (S&P) reaffirmed its BBB-credit rating with a stable outlook.

The report stated that S&P recognised Santos’ successful strategy in improving its portfolio resilience and diversifying its assets. This included the company determination in lowering unit production costs across its different class of assets.

In addition, the broker said that Santos increased its exposure to fixed-price gas volumes within the Australian market.

Santos took this measure to protect its balance sheet and shore up positive cash flows to fund its Barossa Project. The ratings agency expects the company to maintain its well-controlled operating model over the next 12 to 24 months.

Head of management comments

Santos managing director and CEO Kevin Gallagher commented on the company’s progress in overcoming volatile trading conditions. He said:

The confirmation from S&P of Santos’ BBB- (stable) rating is an outcome of the disciplined operating model we have implemented over the past five years, combined with our diversified asset portfolio making us more resilient through the oil price cycle.

About the Santos share price

In the past 12 months, the Santos share price fared relatively well despite being hit by COVID-19 woes. The company’s shares are up just above 3% from this time last year.

In the March 2020 market sell-off, its shares hit a multi-year low of $2.73 before rebounding in the later months.

At the current share price, Santos commands a market capitalisation of more than $15.1 billion.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• ASX investors watch out for a rise in interest rates in 2022
• 4 ASX hydrogen shares powering forward in 2021
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Aaron Teboneras 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 Genworth Mortgage Insurance Australia Ltd (ASX: GMA) share price took a pummelling today. Shares in the lender’s mortgage insurance provider opened at $2.50 – compared to yesterday’s close of $2.68 — and sunk as low as $2.44 in early trade. The Genworth share price made a small recovery in afternoon trading to close the day at $2.58.

The losses come off the back of the company’s publication of its 2020 annual report.

Why the Genworth share price is tanking

Genworth Mortgage haemorrhaged a $107.6 million loss for the 2020 calendar year. To understand the magnitude of that number, in the prior corresponding period (pcp) Genworth made $120 million profit.

In a glimmer of good news, the net earned premium of the mortgage insurance broker was up on the pcp ($312 million versus $298 million). However, this was overwhelmed by the company’s operating expenses.

Net claims incurred were up 92.6% on the pcp (from $150.8 million to $289.8 million). Acquisition costs were up 319% on the pcp (from $46.9 million to $196.2 million). All up the underwriting result went from $42.1 million in the black to $234 million in the red.

Further compounding Genworth’s misery, investment income on assets backing insurance liabilities was down $6 million on the pcp. As well, investment income on equity holders’ funds collapsed by $43 million.

Earnings per share (EPS) went from 28.6 cents per share in 2019 to a loss of 26.1 cents per share in 2020.

Unsurprisingly, the company did not pay a dividend in the calendar year.

Why did it all go so wrong for Genworth in 2020?

According to Chair Ian MacDonald, the blame lies squarely on the COVID-19 pandemic.

“Genworth’s 2020 financial performance was materially impacted by the effects of COVID-19 on the economy, that led to increased reserving for anticipated future claims outcomes contributing to a full-year Statutory NPAT [net profits after tax] loss of $107.6 million.”

He added:

“As at 31 December 2020, Genworth’s regulatory solvency ratio was 1.65 times the Prescribed Capital Amount…representing surplus capital of $203.2 million above the top end of the range.”

According to the Australian Prudential Regulatory Authority, from May to December 2020, the gross value of loan deferrals totalled $156 billion. Housing loan deferral rates peaked at 11% in May 2020.

Genworth’s share price snapshot

Although investors offloaded Genworth’s shares en masse today, the stock has been trending upward over the last 6 months.

At one point the Genworth share price was trading at an all-time low of $1.33 in September 2020 – in the midst of the harsh Victorian lockdown.

More reading

• Why the Genworth (ASX:GMA) share price is tumbling 6% today
• The Genworth Mortgage (ASX:GMA) share price smashed 14% higher today

Motley Fool contributor Marc Sidarous 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 WhiteHawk Ltd (ASX: WHK) share price crashed lower today as the company announced its preliminary final report.

Shares in the online cybersecurity small-cap were down 7.69%, trading at 30 cents at market close.

Why is the WhiteHawk share price crashing lower?

Shares in the company were trading lower today amid the ASX market-wide sell-off. The fall in WhiteHawk share price may also have been triggered by the company’s report for the year ended 31 December 2020.

During the year, WhiteHawk invoiced for US$2.1 million, recognising US$1.9 million revenue for 2020. This was up 83.5% on the company’s revenue for 2019. However, the increase was not enough to stop the company from posting a loss of US$1.81 million, down 34.2% on the previous corresponding period.

During the 2020 calendar year, WhiteHawk also executed a number of important contracts. Notably with the United States Department of Homeland Security for US1.5 to $1.8 million, starting in October last year.

Furthermore, the company continued its transition to produce a cybersecurity exchange as a tailorable platform as a service (PaaS).  On this front, the company formed an initial partnership with a global insurance group and requested a quote from a US manufacturer association.

WhiteHawk finished 2020 with a cash balance of $2.4 million without any debt.

Outlook

Looking ahead, the company stated that it was strategically positioned for continued growth in 2021.

WhiteHawk is working on growing revenue through two primary paths.

As mentioned, PaaS enables users to manage cyber threats. The other stream will come from the company’s embedded SaaS offering. This aims to prevent financial fraud, identity theft and mobile device security among other things.

On the sales front, the company claims to have 40 ongoing engagements in the pipeline, of which 5 to 10 should be executed this year.

About the WhiteHawk share price

WhiteHawk recently underwent the due diligence to become an ESG (environment, social, governance) registered company. This is a new standard in measuring the sustainability and ethical impact that a company makes.

The WhiteHawk share price has performed well in the last year, gaining 408%.

More reading

• Why the Immuron (ASX:IMC) share price fell today
• Pentanet (ASX:5GG) share price falls despite strong gaming interest
• Some of my best gains last year were invisible
• The big themes from ASX reporting season
• Why this ASX tech ETF is in the buy zone

Motley Fool contributor Daniel Ewing 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 Immuron Ltd (ASX: IMC) share price closed over 4.4% lower today at 22 cents a share.

The slide follows the release of the biotechnology company’s half-year (1H21) results for the period ended 31 December 2020.

Let’s take a closer look at how Immuron has been performing recently.

What did Immuron report?

The company reported a 98.7% revenue crash for the period, with 1H21 revenue coming in at $20,000.

Immuron incurred a $5.7 million loss for the period, which was 277.2% greater than the $1.5 million loss of 1H20.

Compared to 30 June 2020, the group’s net assets increased from $5.6 million to $28.5 million as of 31 December 2020. Cash reserves also increased over this period from $3.3 million to $26.4 million.

The business received $358,280 during the period via the government’s research and development (R&D) income tax concession program.

The Immuron share price lost 2.6 cents a share for the 1H21 period, versus a loss of 9 cents a share for 1H20.

Clinical progress and updates

Immuron’s focus is the development and sale of oral immunotherapeutics to prevent and treat unmet medical needs. The company’s orally active polyclonal antibodies provide a targeted delivery inside the gastrointestinal tract so they do not cross into the bloodstream

The company advised that it continued to progress a number of clinical developments during the 1H21 period. 

Some milestones reached include receiving written guidance from the US Food and Drug Administration (FDA) in relation to a new drug the company is developing, completing a successful vaccination campaign, and executing a research agreement with Monash University.

Immuron also recommenced its Travelan US registration strategy. Travelan is an over-the-counter supplement that can be taken to reduce the risk of travellers’ diarrhoea. The company notes that the coronavirus has significantly disrupted international travel throughout the world. According to Immuron, COVID continues to impact every Travelan market.

Immuron share price snapshot

The Immuron share price has gained 60.7% over the previous year, however, it’s fallen 29.7% over the past 6 month period.

The company’s market capitalisation is approximately $51.1 million and there are 227.2 million shares outstanding.

More reading

• Pentanet (ASX:5GG) share price falls despite strong gaming interest
• Some of my best gains last year were invisible
• The big themes from ASX reporting season
• Why this ASX tech ETF is in the buy zone
• Is the Qantas (ASX:QAN) share price great value?

Motley Fool contributor Gretchen Kennedy 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 Pentanet Ltd (ASX:5GG) share price is falling in late afternoon trade despite announcing a positive update to the market. At the time of writing, the Pentanet share price is down 2.34% to 62.5 cents.

What’s driving the Pentanet share price?

The Pentanet share price is backtracking today, perhaps as a result of the heavy sell-off in the ASX market.

In its release, Pentanet advised it has received strong market interest in the Australian launch of GeForce Now – NVIDIA’s flagship cloud-based game streaming service.

The company launched an expression of interest to gauge potential market demand for gaming services late last month. Future GeForce Now users completed online registrations to receive an invitation to the Beta program.

So far, Pentanet has recorded more than 24,300 registered gamers, greatly exceeding early interest expectations for the upcoming new service. The company said the demand further validated its business case to ramp up its launch plans.

Due to the strong registration response, Pentanet upped its hardware order with NVIDIA from 12 to 18 RTX game servers. The order value is estimated to be around $3.2 million.

Once received, the company will split up and send the servers to Perth or Sydney.

In addition, Pentanet is targeting the rollout of GeForce Now beta in Australia sometime this year, followed by a commercial launch. Pricing for the service is yet to be determined and will be announced at a later date.

The beta program will give the company further insights on usage patterns, and how many users the server can support. This will allow for improvements to ensure a smooth transition to its commercial launch.

A quick take on Pentanet

Based in Perth, Western Australia, Pentanet is a telecommunications carrier and internet service provider (ISP). The company delivers high-speed internet services through its own NBN, LBN and private fixed-wireless network.

In the Perth metro area alone, Pentanet covers more than 80% of customers who require next-generation internet needs.

More recently, the company is seeking to expand in the cloud gaming market through a subscription-based entertainment service. Pentanet signed an alliance agreement with NVIDIA to use its GeForce Now technology throughout Australia.

Management comments

Pentanet managing director Stephen Cornish welcomed the registration response, saying:

We are encouraged by the very strong interest in GeForce NOW and now have a very clear indication from market demand that Australian gamers appear to understand and support the service, mirroring the strong demand also seen overseas.

As someone who grew up playing video games, I am proud to be championing the next generation of gaming service into Australia, and I am looking forward to demonstrating both the power of this technology and its ability to shift the gaming market.

Since listing at the end of last month, the Pentanet share price has risen 4.2%.

More reading

• Some of my best gains last year were invisible
• The big themes from ASX reporting season
• Why this ASX tech ETF is in the buy zone
• Is the Qantas (ASX:QAN) share price great value?
• The Zip (ASX:Z1P) share price has slumped 26% in 8 days

Motley Fool contributor Aaron Teboneras 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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We spend a lot of time, as investors, obsessing over our portfolios.

The big winners. The big losers. The ones that got away.

It’s natural.

It can even be healthy (well, the ‘keeping score’ part, not the obsessing part).

Like it or not, this investing game has a very stark, unforgiving scorecard.

Either you’re making money, or you’re not.

Either you’re beating the market, or you’re not.

There’s nowhere to hide.

(Actually, there are plenty of places to hide, for the dishonest. There is no shortage of underperforming fund managers and investment advisers who simply ignore their past failures, hide them, or simply rebrand. If you’re taking advice, ask to see the whole truth!)

 But, if you’re honest — and you really want to invest well — the scoreboard is the brutal truth.

I’m pleased to say that the service I run, Motley Fool Share Advisor, is currently showing an average return, per recommendation, of 60.5%, compared to 39.6% for the All Ordinaries Index (ASX: XAO) (both including dividends) since inception in 2011.

That’s every recommendation. Ever.

The great, the good, the ordinary and the terrible.

Not just over an arbitrary time frame.

Not just some of our recommendations.

Every stock, ever recommended.

Individually, there have been some big winners and some big losers. 

And, by the way, our members get to see all of that information, in all its glory, on the site.

We hide nothing.

Still, a scorecard can be, if not misleading, not quite the full story.

Here’s an example:

One of my recommendations is up 15% since 2016.

The market is up 60%. 

So, we’ve made money, but lost to the index. 

Not ideal.

Still, those numbers hide an important lesson.

The company is Virtus Health Ltd (ASX: VRT), the assisted reproduction (IVF) provider.

See, at one point, our Virtus recommendation, with a cost basis of $5.39, had fallen to $1.56 — a plunge of more than 70%.

That was in the depths of the COVID market crash.

Since then?

The shares are trading at $6.13 at the time of writing — close enough to four times their price of just 11 short months ago.

That 300% gain won’t show up anywhere, of course.

And I’m not suggesting it should — after all, our cost base is $5.39, not $1.56.

But here’s the thing: plenty of people were selling at $1.56 in March. Plenty sold for $2.00 and $2.50 either side of that low, too.

No, I’m not doing victory laps. We’re up, but still lagging the market.

But I am mindful that it could have been a whole lot worse. We could have given in to the gloom. We could have sold, in sadness and frustration. 

And, if we had, we would have missed out on the almost-300% gain that we earned just by refusing to let the market call the tune.

(I should add, too, that while we didn’t pick the very bottom of the share price journey, we did re-recommend Virtus to our members at $2.90 in April. Taken together, our Virtus position is ahead of the market. But that’s not my point.)

So, while we should all focus on the net result from our investments (and time will tell whether we simply overpaid for Virtus the first time around), it’s important that we sometimes break down the components of our results, to isolate the lessons — successes and mistakes — that go into the final score.

If I was a footy coach, I might talk about a game of two halves.

If I was a management consultant, I might say focus on the process, and the result will look after itself.

But, as a simple investor, I’m going to remind you that past prices, chart patterns and the market’s current moods should be irrelevant.

The only thing that matters is today’s price and long-term future, business performance.

That’s not always easy to remember — or put into practice — when times are tough.

But if you can, it might just meaningfully improve your results.

Fool on!

More reading

• Monash IVF (ASX:MVF) share price jumps on profit growth and dividend restart
• What’s with the Virtus Health (ASX:VRT) share price today?

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Virtus Health 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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As ASX reporting season comes to an end, Commsec reflects on the key themes in its ‘Earnings season: Half-time report’. 

Here’s a closer look at some of the insights from the online stockbroking platform’s commentary.

By the numbers

As at 22 February, more than 80% of the companies that have reported results managed to produce a statutory profit. Commsec reveals that this figure is well up on the 75% that reported a profit during the August reporting season last year. 

In the six months to December 2020, 72 companies, or 85%, elected to pay a dividend. This compares to the 68% which paid a distribution back in June 2020. Of the 72 companies paying dividends, 47% lifted the amount, 15% kept the payout steady and 38% cut their dividend amounts. 

Aggregate cash at hand as at December 31 2020 is up 48% on a year ago, most notably boosted by retailers and banks. 

Companies need to be agile 

Commsec notes that companies that acted quickly and decisively on cutting down expenses and shoring up the capital base, especially via capital raisings or debt, have been largely successful. 

Then it was a case of having a plan on lockdown. Certainly, the retailers that either had an online presence to begin with, or were quick to put plans in place, have been hugely successful. 

Stimulus is here to stay

There is still abundant stimulus and support being applied to the economy. The Reserve Bank has maintained its stance that support won’t be removed too quickly, and that ultra-low interest rates will be maintained for at least another three years. 

Commsec hopes to see a transition from government support to a business-led recovery. But a near-term threat for businesses is the imminent tapering of JobKeeper.

Infrastructure to drive economic recovery

There has been a global theme of infrastructure spending to drive economic recovery. Commsec expects spending on infrastructure, super-low interest rates, and a home-building boom spurred on by HomeBuilder (and state-based schemes) to provide the domestic economy with momentum over 2021.

A commodity supercycle taking place?

China’s insatiable demand for commodities has helped prop up commodity prices across the board. Iron ore is near 9-year highs. Copper is near 9-year highs. Oil is above pre-COVID levels. The main challenges that counteract soaring commodity prices are the firmer Australian dollar which are at two-year highs of almost 80 cents. 

Higher commodity prices means more significant cash flows and propped up dividend yields for ASX mining shares. The likes of Fortescue Metals Group Limited (ASX: FMG) is currently paying a market leading (and sustainable) dividend yield of 9.80%. 

Closing thoughts for ASX reporting season

CommSec expects the All Ordinaries Index (ASX: XAO) to be in a range of 7,200–7,600 by end of 2021, with the range for the S&P/ASX 200 Index (ASX: XJO)  between 7,000–7,400 points.

Commsec stated that its main concern is determining whether equities have become, or are becoming, too expensive. It cited rising rates as a near-term challenge to interest rate-sensitive sectors of the share market. This has been evidenced in recent days as bond yields have been on the rise, causing sectors such as ASX 200 tech shares to tank. 

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Motley Fool contributor Kerry Sun 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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