Category: Stock Market

The G8 Education Ltd (ASX: GEM) share price will be on watch this morning after the release of a trading update.

How is G8 Education performing?

G8 Education has experienced a further recovery in its occupancy since the release of its half year results in August.

According to the release, the childcare centre operator’s like-for-like occupancy currently stands at 75.5%. This represents an occupancy gap of 4.5 percentage points compared to the same period last year. It is also a 5.5 percentage points improvement from its April low at the height of the pandemic.

Another positive is that G8 Education has managed to deliver wage efficiencies in line with its targets for the year. This was driven by the utilisation of its technology platform that forms part of its new rostering system.

This means that on a year-on-year comparison, based on the same occupancy levels as last year, there has been a clear improvement in its wage costs.

However, due to the decline in its occupancy rate, its wage hours per booking metric is currently higher than the prior corresponding period.

Nevertheless, despite the challenges it is facing, G8 Education is still profitable.

The release explains that the company has recorded underlying earnings before interest and tax (EBIT) of $98 million for the first 11 months of calendar year 2020. This includes current year employment costs relating to its employee payment remediation program.

Outlook.

Management expects 2021 to be a recovery year due to the absence of additional government subsidies and the ongoing impacts of COVID-19 on its occupancy.

In addition to this, the absence of a 2020 fee increase (as stipulated by the government COVID-19 subsidiary arrangements) and its lower occupancy, is expected to see wages increase as a percentage of revenue.

Gary Carroll, Chief Executive Officer, commented: “Progress in our strategic focus areas has been pleasing. Together with our significantly strengthened balance sheet, this provides the group with confidence to increase the pace in our strategic focus areas as they will deliver significant benefits in the medium term. The program costs in 2021 will be carefully managed to ensure they do not result in a material drag to earnings in the near term.”

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• G8 Education (ASX:GEM) share price rebounds after lawsuit news

Motley Fool contributor James Mickleboro 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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Late yesterday, we were treated to the news that the states of New South Wales and Victoria have lost their coveted ‘AAA’ credit ratings.

According to reporting in the Australian Financial Review (AFR), it was the rating agency S&P Global (Standard & Poor’s) that issued the downgrades. NSW now has a credit rating of ‘AA+’, and Victoria now ‘AA’.

The AFR reports that S&P had placed Victoria’s AAA rating ‘on-watch’ in August, but has re-rated the state due to its deteriorating budget position. The AFR quoted S&P as stating the following on the re-rating:

The lowered rating reflects our view that the COVID-19 pandemic has dealt Victoria a severe economic and fiscal shock that has materially weakened its credit metrics more than domestic and international ‘AAA’ and ‘AA+’ rated governments… In our view, the Victorian government’s path to fiscal repair will be more challenging and prolonged than other states because of the significant increase in debt stock projected over the next few years.

Meanwhile, NSW did manage to receive a higher rating of ‘AA+’ over Victoria, despite still receiving a downgrade. Here’s what S&P said about NSW:

The downgrade primarily reflects our expectation that NSW’s debt burden will rise substantially during the next three years… We expect NSW to post a historically large after-capital-account deficit this fiscal year, though the deficit should narrow in future years. NSW has a higher degree of flexibility than its peers, with some potential upside to our deficit and debt projections from unbudgeted asset sales and expenditure reviews.

So what does all of this mean? And what exactly is a credit rating to begin with?

Credit where credit is due

A credit rating is a rating usually issued by one of the ‘big three’ dominant credit rating agencies: S&P Global, Moody’s and Fitch Group (although others exist as well). These ratings agencies issue ratings for everything from corporations and bonds to sovereign governments. 

The ratings essentially reflect the quality of the rated institution as a debtor. Think of it as a supercharged version of the credit check a bank will perform on a potential customer applying for a home loan.

The ‘ratings’ these agencies issue reflect this paradigm. The ratings differ slightly from issuer to issuer, but generally speaking, they range from ‘AAA’ to ‘D’ or ‘DDD’. Sometimes (especially for bonds), the ‘BBB-‘ and above are referred to as ‘investment-grade’, whereas ‘BB+’ and below are ‘non-investment grade’ (sometimes called ‘junk’ or ‘subprime’).

Usually, the credit rating an entity receives (whether it be a government or corporation) affects the kind of interest rates it can borrow at. Obviously, an entity with a ‘AAA’ rating is, in theory, a ‘safer’ investment to loan money to than a ‘D’ rated one. Hence, the higher the rating, the less expensive it is for the entity to borrow money.

That’s why it’s a big deal of sorts when a state government gets a downgraded rating.

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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Moody’s. 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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A former managing director of Legacy Iron Ore Limited (ASX: LCY) has been charged with 13 counts of stealing from the company.

Former Legacy boss, Sharon Kia Le Heng, appeared in Perth Magistrates Court on Friday facing allegations of theft from the ASX-listed mining business.

Karen Kwan, an ex-Legacy accountant, also appeared in court facing the same charges.

Prosecutors claim the pair stole about $725,000 over a period of 17 months in 2012 and 2013.

The Australian Securities and Investments Commission is accusing the two women of making 13 electronic transfers out of Legacy’s bank account into an entity called Regency Infrastructure Pty Ltd.

Regency is allegedly a company controlled by Heng, with the corporate watchdog claiming there was “no legitimate basis” for the payments.

The Motley Fool has contacted Legacy Iron Ore for comment.

The court granted Heng and Kwan bail but with strict conditions they surrender their passports and not flee overseas.

The case has been adjourned to 26 March.

The Legacy share price was unchanged Monday, staying at 0.7 cents. 

More reading

• Red hot ASX IPOs that you might have missed from last week
• AML3D (ASX:AL3) share price on watch following body armour development
• 3 reasons the A2 Milk (ASX:A2M) share price could be a buy
• 2 excellent ASX dividend shares with 6%+ yields
• Link (ASX:LNK) share price on watch after receiving second takeover approach

Motley Fool contributor Tony Yoo 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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A number of classic Australian brands listed on the ASX last week. These tech-enabled companies saw significant increases in their share prices after listing. Here’s the rundown for ASX IPOs you might have missed. 

Booktopia Group Ltd (ASX: BKG) 

Booktopia is the largest Australian-owned online book retailer by market share with revenue in FY20 of $165.8 million. More than 85% of the items it sold in FY2020 were books. However it also sells eBooks, DVDs, audiobooks, magazines, maps, calendars, puzzles, stationery and cards. The company’s revenue has grown at a compound annual growth rate of approximately 26.4% between FY15 and FY20. 

The company raised $43.1 million at an offer price of $2.30 per share.  The Booktopia share price has since jumped more than 30% to almost $3.00. 

Nuix Ltd (ASX: NXL) 

Nuix is a provider of investigative analytics and intelligence software. Its platform supports a range of established use cases, including criminal investigations, financial crime, litigation support, employee and insider investigations, data protection and privacy, data governance, legal eDiscovery and regulatory compliance.

The company has been involved in some headline events over the last 15 years including the Panama Papers, the Royal Commission into the misconduct in the banking, superannuation and financial service industry in Australia, organised crime rings, corporate scandals and terrorist activities. 

Nuix has a customer base of more than 1,000 existing customers, including large government agencies, regulators, corporations and professional services firms. In FY20, the company achieved $175.9 million in total revenue, an increase of 25.9% on the previous financial year.

The company successfully raised $953 million at an offer price of $5.31 per share. Its shares opened more than 50% higher on its debut last Friday and closed at $9.06 on Monday. 

Cashrewards Ltd (ASX: CRW) 

Cashrewards is the largest Australian-owned-and-operated cashback ecosystem with more than 800,000 members and 1,500+ merchant partners. Members can browse brands and access cashback offers while shopping online or in-store with participating merchant partners.

The company generates revenue from commission from merchant partner sales and gift cards. In FY20, the company achieved $17.1 million in revenue and a net profit after tax loss of $5.7 million.

Its IPO raised $65.0 million at $1.73 per share. The Cashrewards share price is closed at $2.03 on Monday, or 17% higher than its offer price. 

More reading

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• ASX 200 goes up on Friday
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Motley Fool contributor Lina Lim 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 AML3D Ltd (ASX: AL3) share price will be on watch this morning. This comes after yesterday’s market close announcement that the company is progressing with its next-gen body armour program.

Progression to stage 2 development

The AML3D share price could be on the move today after the company advised its next-gen body armour program has progressed to the second stage.

According to the release, AML3D’s ‘made-to-fit’ titanium body armour entered the next stage of prototype development with Lightforce Australia Pty Ltd.

Lightforce is a developer and manufacturer of defence solutions with operations in Australia and the United States.

Production of the innovative, high-tech body armour is under direct supervision of AML3D’s Wire Arc Manufacturing division. It is stated that the prototype is uniquely printed in a way that is not possible using traditional techniques. Potential applications include creating ‘made-to-fit’ body armour by scanning the torsos of individual soliders. 

The first stage of the program marked the beginning of the Memorandum of Understanding (MoU) with Lightforce and involved product testing. The second stage will encompass ballistics testing with additional prototypes. These samples will be used with a variety of thicknesses and finished using a range of different techniques and treatments. The end goal for AML3D is to optimise the design to deliver the lightest, yet strongest armour to market.

Finalisation of the second stage will conclude the testing phase under the MoU. AML3D will spend $55,000 on providing several prototypes to Lightforce for testing.

AML3D advised it is confident it will succeed in developing the next-gen body armour product for commercialisation. The company also noted the opportunity for contract manufacturing revenues is significant.

According to AML3D, the market for such a product is expected to be above US$3 billion by 2025, representing a compound annual growth rate of 5.5%.

Management commentary

AML3D managing director, Mr Andrew Sales, was pleased with the company’s achievements. He said:

We’re excited to progress to Stage 2 with Lightforce in the development of a disruptive, world- first product offering. We’re confident that our highly qualified team will be able to deliver a range of prototypes that meet or exceed Lightforce’s required specifications.

Post the recent capital raise, AML3D is now well capitalised to fulfil the demands of opportunities such as Lightforce, which have the potential to deliver significant contract manufacturing revenues.

About the AML3D share price

The AML3D share price has risen strongly since its initial public offering (IPO) earlier this year. Back in April, AML3D shares were asking just 15 cents but have since increased to 42 cents as at yesterday’s close. This reflects a gain of 180% for investors who held the company’s shares over this eight month period.

The AML3D share price reached an all-time high of 73 cents in September, and has been gradually trending lower in the months following.

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• This cheap ASX share is supplying US giants: fundie

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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There are a few different reasons to be interested in watching the A2 Milk Company Ltd (ASX: A2M) share price.

What does A2 Milk do?

It’s a premium-branded dairy nutritional company which is focused on products containing the A2 beta-casein protein type. Its sales items like liquid milk, powdered milk, ice cream and infant formula.

Its products are sold in various places including New Zealand, Australia, China, the US, Vietnam and South Korea. It’s also testing a fresh milk presence in Singapore and recently launched into the Canadian market.

Here are three reasons to consider looking at A2 Milk shares:

International growth

The company has experienced difficulties this year because of impacts relating to COVID-19.

A2 Milk said it has seen disruption to the corporate daigou and reseller channel, particularly because of the restrictions in Victoria. The daigou revenue reduction was beyond its previous expectations and without the replenishment orders that would have been expected by that point.

Sales in the daigou channel represent a significant portion of infant formula sales in the Australia and New Zealand business.

However, sales made internationally are growing strongly. In FY20 A2 Milk achieved sales of $337.7 million for the Chinese label infant nutrition business, which was growth of over 100%. Its Chinese mother and baby store (MBS) value share was 2%, compared to 1.7% at 31 December 2019 and 1.3% at FY19. It also saw 40.3% growth of its English label infant nutrition cross border-commerce sales in FY20.

In the US it achieved 91.2% growth of its revenue, whilst earnings from Western Canada had just started.

A2 Milk’s recent trading update said that its US milk revenue continues to grow strongly, whilst the local China business is performing strongly as well.

Once local COVID-19 impacts subside, A2 Milk is expecting significant improvement in the second half of FY21 and beyond.

Strong balance sheet

Many businesses had to carry out a capital raising during the 2020 to ensure stability during the difficult COVID-19 conditions.

A2 Milk wasn’t one of those businesses that had to do a dilutive capital raising at a low share price.

That’s because it has a large amount of cash sitting on the balance sheet. At the end of FY20 it had a closing cash balance of NZ$854.2 million and no debt.

At the moment A2 Milk is contemplating using some of that cash, around NZ$385 million, to buy a 75.1% interest in Mataura Valley Milk. This business has recently constructed and commissioned a state of the art nutritional facility which could be used to complement A2 Milk’s existing supply relationships. Management think it’s well located for access to a growing productive milk pool supported by favourable climactic conditions and water availability.

Mataura Valley Milk has agreed to provide A2 Milk with a period of exclusivity to conduct confirmatory due diligence and negotiate definitive transaction documentation.

Valuation

The A2 Milk share price has fallen down to almost $13. It didn’t even fall that low during the COVID-19 crash. It was November 2019 when it was last that low.

At this level, it’s priced at 23x FY22’s estimated earnings according to Commsec. This compares to other popular growth shares like Appen Ltd (ASX: APX) which is trading at 30x FY22’s estimated earnings.

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• 10 fantastic ASX shares to buy in December
• 2 fantastic ASX growth shares to buy

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 Appen Ltd. The Motley Fool Australia owns shares of and 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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With the outlook for interest rates remaining very bleak, it is fortunate that there such a large number of dividend shares for investors to choose from on the Australian share market.

Two ASX dividend shares that offer investors very generous yields are listed below. Here’s why they come highly rated:

Aventus Group (ASX: AVN)

Aventus is a retail property company with a difference. It is the owner and operator of 20 large format retail parks across Australia. These retail parks count major retailers such as ALDI, Bunnings, Officeworks, and The Good Guys as tenants.

It was thanks to its high weighting to national retailers, and particularly everyday needs, that allowed Aventus to come out of the pandemic relatively unscathed. The company was able to collect the majority of its rent as normal despite the disruption in the retail sector.

One broker that is positive on the company is Goldman Sachs. Its analysts have a buy rating and $2.76 price target on its shares. They also estimate that the current Aventus share price currently offers a forward ~6.1% dividend yield.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue is one of the world’s leading iron ore producers. It appears well-positioned to deliver another very strong result in FY 2021. This is thanks to its record shipments, ultra low C1 costs of US$12.74 per wet metric tonne, and sky high iron ore prices.

In respect to the latter, on Friday the spot iron ore price jumped a further 5.4% to a seven year high of US$145.30 a tonne. This was driven by production cuts in Brazil by mining giant Vale.

This news led to analysts at Macquarie reaffirming their outperform rating and lifting their price target on the company’s shares to $23.00. The broker is also now forecasting a $2.61 per share fully franked dividend in FY 2021. Based on the latest Fortescue share price, this equates to a massive 12% dividend yield.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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 Link Administration Holdings Ltd (ASX: LNK) share price will be on watch on Tuesday following the release of an announcement after the market close yesterday.

What did Link announce?

On Monday afternoon Link announced that it has received a new unsolicited takeover approach, potentially sparking a bidding war.

According to the release, SS&C Technology has tabled an offer of $5.65 per share. This represents a 13.9% premium to Link’s last close price. This offer price assumes no further dividends, distributions, or reductions in capital.

SS&C Technology is a NASDAQ listed global provider of investment and financial software-enabled services and software for the financial services and healthcare industries.

This isn’t the first time SS&C Technology has taken a liking to an ASX listed share. Last year it outbid Bravura Solutions Ltd (ASX: BVS) in an ultimately unsuccessful attempt to acquire GBST Holdings.

What now?

The Link board advised that it will now consider the SS&C Technology proposal. This includes obtaining advice from its financial and legal advisers.

In the meantime, a consortium comprising Pacific Equity Partners and Carlyle Group continues to undertake due diligence in the Link data room.

The consortium currently has an offer of $5.40 per share on the table. Though, shareholders will no doubt be hoping that the offer from SS&C Technology, which is a 4.6% premium, will lead to an improved offer from the Pacific Equity Partners and Carlyle Group consortium.

For now, Link has told shareholders that they do not need to take any action in relation to the SS&C Technology proposal. It also warned that there is no certainty that the discussions with SS&C Technology will result in any transaction.

However, if there are material developments in the future, Link will inform shareholders as required under its continuous disclosure obligations.

More reading

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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 Link Administration Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia has recommended Link Administration Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week on a positive note. The benchmark index rose 0.6% to 6,675 points.

Will the market be able to build on this on Tuesday? Here are five things to watch:

ASX 200 expected to fall.

The Australian share market looks set to give back some of its gains on Tuesday. According to the latest SPI futures, the ASX 200 is poised to open the day 16 points or 0.25% lower this morning. This follows a reasonably mixed start to the week on Wall Street. In late trade the Dow Jones is down 0.65%, the S&P 500 is down 0.4%, and the Nasdaq is up 0.3%.

Link receives takeover offer.

The Link Administration Holdings Ltd (ASX: LNK) share price could be on the rise today after it revealed the receipt of an unsolicited takeover approach. SS&C Technology Holdings has tabled an offer of $5.65 per share. This represents a 13.9% premium to Link’s last close price. The Link board will now consider the SS&C proposal, including obtaining advice from its financial and legal advisers.

Oil prices soften.

It could be a tough day for energy producers including Oil Search Ltd (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) on Tuesday after oil prices softened. According to Bloomberg, the WTI crude oil price is down 0.75% to US$45.91 a barrel and the Brent crude oil price has fallen 0.75% to US$48.88 a barrel. COVID-related forced lockdowns are weighing on demand for oil.

Gold price jumps.

Gold miners such as Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could be on the rise today after the gold price jumped higher. According to CNBC, the spot gold price is up 1.3% to US$1,863.90 an ounce. This was driven by US stimulus optimism and a weaker US dollar.

Bank of Queensland AGM.

The Bank of Queensland Limited (ASX: BOQ) share price will be in focus today when it holds its annual general meeting. Shareholders will be keen to see how the regional bank is faring in the first half of FY 2021. In the last financial year the bank recorded $133 million in COVID-19 collective provisions. They will be optimistic that no further provisions will be necessary.

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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 Link Administration Holdings Ltd. The Motley Fool Australia has recommended Link Administration Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Antipodes Partners, which is the manager of Antipodes Global Investment Company Ltd (ASX: APL), has been scouring the global market for investment options and identified three which it feels are top options for value investors.

Which shares does Antipodes like?

The first share which Antipodes believes is great value is US-based specialty beauty chain, Ulta Beauty (NASDAQ: ULTA).

Client Portfolio Manager, Alison Savas, commented: “Ulta Beauty is one of the largest specialty beauty chains in the US. It’s a similar beauty concept to Sephora or Mecca here in Australia but stands apart for providing both mass and prestige brands to consumers under the one roof.”

Ms Savas believes Ulta Beauty can outperform the beauty industry’s growth by winning market share from department stores and smaller market participants. In addition to this, the company’s strong online business is expected to be a key driver of growth.

“COVID forced Ulta to shut down its 1,200 stores, but the business was well placed from earlier ecommerce platform investment. Its online sales have grown triple digits but Ulta also remains a reopening beneficiary as customers get back to their stores for the unique advice and experience from testing products and getting treatments,” she added.

A retail property option.

The portfolio manager also sees an opportunity for investors with Simon Property Group (NYSE: SPG). It is a dominant force in the US retail mall and outlet sector with a share of over 40% of the premium malls and outlets. This makes it a go-to partner for US retailers, according to Antipodes.

While trading conditions will remain volatile in the near term, Ms Savas believes Simon Property Group is well-placed for the future. An added bonus is the attractive dividend yield it offers.

She explained: “Adjustments are occurring in the retailing industry. Some Simon tenants will disappear, as they have during prior retail cycles, but they’ll be replaced by other retailers looking for access to high traffic real estate.  Whilst waiting for sentiment to improve, Simon pays a sustainable 6% cash dividend yield.”

A beverage giant to buy.

A final option that Antipodes believes offers a lot of value is the global parent of Coca-Cola Amatil Ltd (ASX: CCL) – The Coca-Cola Company (NYSE: KO).

Ms Savas believes the beverage giant is well-placed to benefit once the pandemic passes.

She explained: “We believe Coca-Cola is another great reopening play. Coke generates just over 40% of its global revenue from on-premise consumption – which is cafes, restaurants, bars and entertainment/sporting venues. These have all been shuttered thanks to lockdown and social distancing.”  

“As well as a reopening opportunity, Coke is distinctive from most other consumer staples by retaining strong influence over its bottler supply chain, right up to delivery and stocking customer shelves. This helps the business keep distribution costs low, maintain customer relationships and sustain pricing power,” she added.

The portfolio manager expects the company to grow faster than its peers, leading to a re-rating of its shares to higher multiples.

More reading

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• Can these fund managers drive the Coca-Cola Amatil (ASX:CCL) share price 10% higher?
• BlueScope (ASX:BSL) share price on watch as takeover rumours swirl
• Aussie companies blast ‘knee-jerk’ COVID-19 border closures
• 3 shares that have strongly outperformed their sectors this month

Motley Fool contributor James Mickleboro 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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