Stock Pick

Category: Stock Market

  • These top ASX shares have doubled in value in 12 months

    The last 12 months have been very eventful for the S&P/ASX 200 Index (ASX: XJO).

    After storming notably higher for 9 months, the last three months have wiped out all those gains and more.

    Not all shares have been dragged lower during the pandemic, though. In fact, some have even managed to double in value during the period.

    Here’s why these ASX shares are up more than 100% since this time last year:

    BWX Ltd (ASX: BWX)

    The BWX share price is up 136% over the last 12 months. The majority of these gains were made last year when the personal care products company reported a major improvement in its performance after a sustained period of weakness. The company behind the Sukin brand finished FY 2019 strongly and forecast solid growth in the current financial year. It is targeting full year revenue growth of 20% to 25% and earnings before interest, tax, depreciation, and amortisation (EBITDA) growth of 25% to 35%. Positively, this guidance remains in place despite the pandemic.

    Codan Limited (ASX: CDA)

    The Codan share price is up a solid 123% over the last 12 months. The catalyst for this strong gain has been a jump in the gold price which is driving strong demand for the electronic products manufacturer’s metal detectors. For the first half of FY 2020, Codan delivered revenue of $171 million and EBITDA of $54 million. This was a 33% and 42% increase, respectively on the prior corresponding period. With the gold price remaining at lofty levels, investors appear confident that its metal detectors will remain in demand for the foreseeable future.

    Megaport Ltd (ASX: MP1)

    The Megaport share price has jumped 133% since this time last year. Investors have been buying the elasticity connectivity and network services company’s shares after it continued its remarkable growth in FY 2020. In the first half of FY 2020 Megaport delivered a 70% increase in revenue to $25.9 million. Pleasingly, its strong form has continued in the second half despite the pandemic. In the third quarter its Monthly Recurring Revenue increased 19% over the three months to $5.4 million.

    Missed out on these gains? Then don’t miss out on these dirt cheap shares before they rebound…

    NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!….

    Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

    One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

    Another is a diversified conglomerate trading over 40% off it’s high, all while offering a fully franked dividend yield over 3%…

    Plus 3 more cheap bets that could position you to profit over the next 12 months!

    See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

    CLICK HERE FOR YOUR FREE REPORT!

    More reading

    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 MEGAPORT FPO. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post These top ASX shares have doubled in value in 12 months appeared first on Motley Fool Australia.

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  • Dow futures soar 500 pts to start the week on reopening hopes

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  • 2 ASX shares that are absurdly cheap right now

    red sale tag, cheap asx shares, discount shares

    The S&P/ASX 200 Index (ASX: XJO) had a phenomenal day today, reaching an 11-week high and closing 2.93% higher at 5,780 points.

    As you would expect, most ASX shares – blue chips and small caps alike – have now risen substantially off the lows we saw in March. But there are some ASX shares still out there that I think are cheap right now, perhaps even absurdly so. Here are 2 for your perusal today.

    2 cheap ASX shares worth a look today

    Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

    Soul Patts is one such company. It was hit hard in the market crash we saw in March, falling from over $23 per share to under $17 per share. Today, the Soul Patts share price is sitting at $19.01 – around 12.4% off of its lows and well below the highs we saw back in February.

    But here’s why I think Soul Patts is still cheap today. The company is dividend royalty for one – having delivered its investors a dividend pay rise every year since 2000. On current prices, this dividend is worth a 3.1% yield (or 4.46% grossed-up).

    Secondly, this company has substantial stakes in other ASX businesses. Its shares of TPG Telecom Ltd (ASX: TPM) alone are worth approximately $1.93 billion. Its stake in Brickworks Limited (ASX: BKW) is worth another ~$930 million.

    Given Soul Patts’ market capitalisation is just $4.55 billion, it’s my view that the market is under-pricing this conglomerate. Thus, it’s a cheap ASX share well worth considering today.

    WAM Global Ltd (ASX: WGB)

    WAM Global is another ASX share that I consider to be undervalued. In fact, I’m certain. How? Well, WAM Global is a Listed Investment Company (LIC), which means it invests in a portfolio of other shares on its investors’ behalf. The value of this portfolio is periodically disclosed to the ASX and, as of 30 April, stood at $2.25 a share.

    Given the WGB share price is today sitting at $2.05, we can reasonably assume that this is an undervalued company.

    Now, WAM Global is a relatively new company that only invests in stocks from international markets. It’s possible investors are taking into consideration the lack of performance track record and currency and sovereign risk and adjusting the share price accordingly. But Wilson Asset Management itself has a long history of delivering market-beating returns for its investors, and I’m confident that this cheap ASX share is an undervalued opportunity today.

    For some more ASX shares you might want to check out today, take a look at the report below!

    NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!….

    Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

    One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

    Another is a diversified conglomerate trading over 40% off it’s high, all while offering a fully franked dividend yield over 3%…

    Plus 3 more cheap bets that could position you to profit over the next 12 months!

    See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

    CLICK HERE FOR YOUR FREE REPORT!

    More reading

    Motley Fool contributor Sebastian Bowen owns shares of WAMGLOBAL FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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  • EU Sets Price for Backing $9.8 Billion Lufthansa Rescue Deal

    EU Sets Price for Backing $9.8 Billion Lufthansa Rescue Deal(Bloomberg) — The German government’s 9 billion-euro ($9.8 billion) bailout of Deutsche Lufthansa AG may cost the stricken carrier some valuable assets: Key flight slots at airports in Frankfurt and Munich.The European Commission wants Lufthansa to surrender the slots out of concern the aid will give the carrier unfair advantage over competitors, people familiar with the matter said.After weeks of talks, Germany on Monday offered Lufthansa a package of loans and equity investment to keep the carrier aloft through the coronavirus storm. = Officials in Brussels are concerned the deal will distort competition and fuel lawsuits from competitors like Ryanair Holdings Plc, the people said. Approval of the deal could take several weeks, they said, asking not to be named discussing confidential deliberations.To compensate for the state help, the European Union’s executive arm also would like the airline to decrease the number of aircraft based in Germany, the people said. German Chancellor Angela Merkel told a meeting of conservative lawmakers the government would fight for Lufthansa to keep key slots, people familiar with the matter said.“The discussions with the European Commission are continuing at full speed,” German Economy Minister Peter Altmaier said Monday at a news conference in Berlin. “So far, we have managed to get approval from Brussels for all our aid requests during the corona crisis. How long it will take I cannot say, but the main point for us is that we want to achieve a good result.”Shares GainLufthansa shares advanced on Tuesday, building on Monday’s 7.5% gain in the wake of the deal. As of 9:29 a.m. in Frankfurt, the stock was up 6.4%. Still, it remains down 44% for the year.Analysts at Deutsche Bank AG said that while some of the terms of the German government deal were less punitive than expected, it would leave Lufthansa with high debt levels.Airport slots are a crucial currency for airlines, which rarely give up the ability to operate flights at popular times and to destinations. It’s a commodity that EU regulators have often asked carriers to cede to smaller rivals when seeking approval for mergers, including during Lufthansa’s 2017 takeover of a unit of Air Berlin.Like airlines the world over, Lufthansa is fighting for survival as restrictions to contain the coronavirus puncture a decades-long aviation boom. The company plans to operate fewer aircraft when flights resume and is closing discount arm Germanwings to resize for what it warns could be years of depressed demand.The EU press office said it had no comment on the Lufthansa plan and was “in constant contact” with governments. It defended the need for “additional commitments to preserve effective competition” that are required for recapitalizations of more than 250 million euros to a company, according to an emailed statement.“This is important to preserve the level playing field in the single market post-coronavirus crisis to the benefit of all European consumers and companies,” the EU said.The Lufthansa package will be the first recapitalization to be weighed by the EU after it loosened rules this month that usually prevent governments from pumping money into favored firms. Regulators are facing criticism from Ryanair that they are violating EU principles on fair competition by allowing huge amounts of state cash to prop up inefficient airlines. Ryanair argues that this could fund a price war or expansion spree to knock out rivals.EU officials are aware of the need for speedy approvals, said Margrethe Vestager, the bloc’s antitrust chief. Officials have been “working seven days a week around the clock” and at night “in order to make sure that things can be processed as fast as possible,” she told EU lawmakers on Monday.Blocking StakeThe German government on Monday unveiled an aid package for Lufthansa that involves taking an initial 20% stake that could rise to a blocking minority of 25% plus one share in the event of a hostile takeover. The deal also includes a 5.7 billion-euro investment via a so-called silent participation — a debt-equity hybrid instrument that wouldn’t dilute shareholder voting rights. The state will also back a three-year loan of 3 billion euros.As well as approval from the European Commission, Lufthansa’s supervisory board must approve the deal and shareholders will have to vote on the capital increase at a special meeting, likely to be held in late June. Lufthansa is poised to receive some 2 billion euros in ad from Austria, Belgium and Switzerland.The German package represents the biggest corporate rescue in the country during the pandemic crisis. It’s also the only one that involves a direct investment by Merkel’s government, but more may be coming. The government set up the 100 billion-euro fund to buy stakes in stricken companies as part of its effort to stabilize Europe’s largest economy.(Updates with share price move in sixth paragraph, analyst comment)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Novavax Begins Human Testing For Covid-19 Vaccine, Expects Results In July

    Novavax Begins Human Testing For Covid-19 Vaccine, Expects Results In JulyNovavax (NVAX) is now beginning human testing in its Phase 1/2 clinical trial of its coronavirus vaccine candidate, NVX‑CoV2373. Preliminary immunogenicity and safety results from the Phase 1 part of the trial are expected in July 2020, the company says.NVX‑CoV2373 is a stable, prefusion protein that uses Novavax’s Matrix‑M adjuvant to enhance immune responses and stimulate high levels of neutralizing antibodies.“Administering our vaccine in the first participants of this clinical trial is a significant achievement, bringing us one step closer toward addressing the fundamental need for a vaccine in the fight against the global COVID‑19 pandemic,” said Stanley C. Erck, CEO of Novavax. “We look forward to sharing the clinical results in July and, if promising, quickly initiating the Phase 2 portion of the trial.”The Phase 1/2 clinical trial will be held in two parts. Phase 1 is a randomized, observer-blinded, placebo-controlled trial to evaluate the vaccine’s immunogenicity and safety, both adjuvanted with Matrix‑M and unadjuvanted. The trial is enrolling 130 healthy participants 18 to 59 years old at two sites in Australia. The protocol’s two-dose trial regimen assesses two dose sizes (5 and 25 micrograms) with Matrix‑M and without.If Phase 1 is successful, the Phase 2 part will begin ‘promptly’ says NVAX. It will be held in multiple countries, including the US, and would assess immunity, safety and Covid‑19 disease reduction in a broader age range. This Phase 1/2 approach allows for rapid advancement of NVX‑CoV2373 during the pandemic, says Novavax. The trial is being supported by $388M in funding from the Coalition for Epidemic Preparedness Innovations (CEPI).According to the Wall Street Journal, Novavax is already ramping up manufacturing for NVX‑CoV2373 even though trials are only beginning now. “Time is the most important thing here,” Erck told the publisher, adding that normally NVAX would wait 6-9 months before taking this step.Shares in Novavax have exploded by 1059% year-to-date, and analysts have a firmly bullish Strong Buy stock consensus. The average analyst price target currently stands at $48 (3% upside potential). (See Novavax stock analysis on TipRanks).Ladenburg Thalmann analyst Michael Higgins has just boosted his price target from $38 to $50. “Our higher price target reflects our continued confidence in the successful completion of development and global approval of NVX-CoV2373, with an increased estimate for the procurement of this vaccine in 2021, from 100M to 300M doses, at $10/dose, for a ~3% share of global vaccine consumption, with our continued assumption for a $5 CGS/dose” he explains.Related News: Novavax Spikes 31% on $384 Million Cash Injection for Vaccine Production Novavax Seeks To Raise $250 Million From Share Sale; Top Analyst Bumps Up PT Regeneron To Repurchase $5 Billion Stake From Sanofi   More recent articles from Smarter Analyst: * Blackstone-Backed Phoenix Snaps Up 650 Wireless Towers, Analyst Upgrades BX To Buy * Regeneron and Sanofi’s Dupixent Shows ‘Positive’ Trial Data, Meets Co-Primary Endpoints * Molson Coors Suspends Dividend; Cuts Costs By $200M * Lufthansa Clinches $9.8 Billion Bailout Deal With German Government

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  • Got $1,000 to invest? These quality ASX shares could be the ones to buy

    dollar sign growth concept

    If you have $1,000 in a savings account and no immediate plans for it, I would suggest you consider investing it into the share market.

    After all, the potential returns on offer from the share market are vastly superior to the paltry interest rates being offered by the big four banks.

    Two top ASX shares that I think could generate very strong returns for investors over the next decade are listed below.

    Here’s why I would invest $1,000 into these shares for 10 years:

    BetaShares NASDAQ 100 ETF (ASX: NDQ)

    The first option to consider investing $1,000 into is the BetaShares NASDAQ 100 ETF. As its name implies, this popular exchange traded fund provides investors with exposure to the NASDAQ 100. This index comprises the 100 largest non-financial shares on the NASDAQ.

    You’ll no doubt be familiar with the majority of the companies on this index as they are largely household names. This includes coffee giant Starbucks, tech behemoths Amazon, Apple, Facebook, and Google, electric car company Tesla, and retailer Costco.

    As a whole, I think these 100 companies have the potential to grow at a quicker rate than the rest of the global economy over the next decade. In light of this, I expect the BetaShares NASDAQ 100 ETF to provide investors with strong returns for many years to come.

    ResMed Inc. (ASX: RMD)

    Another option to consider investing $1,000 into is ResMed. I think it is one of the best long term options on the Australian share market and well-positioned for growth over the next decade.

    This is because the sleep treatment focused medical device company looks well-placed to profit from the proliferation of obstructive sleep apnoea (OSA). Management estimates that just 20% of OSA sufferers have been diagnosed at this point. This means that there is still a significant market opportunity for the company to capture in the future.

    I expect this to underpin above-average earnings growth and drive market-beating returns for investors for the foreseeable future.

    And here are more top shares which analysts have just given buy ratings to. All five recommendations below look dirt cheap after the crash…

    NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!….

    Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

    One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

    Another is a diversified conglomerate trading over 40% off it’s high, all while offering a fully franked dividend yield over 3%…

    Plus 3 more cheap bets that could position you to profit over the next 12 months!

    See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

    CLICK HERE FOR YOUR FREE REPORT!

    More reading

    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post Got $1,000 to invest? These quality ASX shares could be the ones to buy appeared first on Motley Fool Australia.

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  • How Airlines Are Generating Revenue on Flights That Will Never Take Off

    How Airlines Are Generating Revenue on Flights That Will Never Take OffU.S. leisure travelers often buy airfare months ahead of departure, betting they can score a deal with shrewd advance planning. But in these atypical times, that may not be the best strategy — provided they want to fly what they bought. That's because many airlines have not yet decided what they're going to fly more […]

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  • Why ASX 200 travel shares are soaring higher today

    plane flying across share markey graph, asx 200 travel shares

    The S&P/ASX 200 Index (ASX: XJO) has seen strong share price gains across the board today. In fact, the index was up by a very healthy 2.5% at the close. This follows strong share price gains yesterday, as general market sentiment continues to lift. These gains are largely being driven by hopes the Australian economy can start recovering from the coronavirus pandemic more quickly than anticipated.

    Easing restrictions bring hope to the travel sector

    ASX 200 travel shares have been punished harshly in recent months. With severe lockdown restrictions coming into effect in March, both local and international travel has virtually ground to a halt since then.

    However, it is now looking increasingly likely that domestic travel will gradually start to pick up in the months ahead. As the Australian government begins to ease lockdown restrictions, renewed hope is starting to flow through to the travel sector. Increased optimism surrounding a possible coronavirus vaccine is also boosting spirits amongst ASX 200 investors.

    It’s true that the possibility of international travel resuming to any significant degree before the end of this year is still highly unlikely. There is, however, the possibility of a trans-Tasman bubble that will open up travel between Australia and New Zealand later in the year.

    This good news is helping spur on a partial rebound amongst heavily sold off shares within the ASX 200 travel sector. Corporate Travel Management Ltd (ASX: CTD) is up 3.8% today whilst Webjet Limited (ASX: WEB) climbed by 5.5%. Likewise, Flight Centre Travel Group Ltd (ASX: FLT) is up by 8.8% and Qantas Airways Limited (ASX: QAN) surged by 4.9%.

    Travel bookings segment hit particularly hard

    In the travel bookings segment, Flight Centre has been hit particularly hard by the economic fallout from COVID-19. This is primarily related to the company’s high fixed overhead costs. These are necessary to support the company’s nationwide chain of retail outlets. Despite its strong rally today, Flight Centre’s share price is still down by over 60% since January. In a recent capital raising, Flight Centre successfully raised $700 million from institutional and retail shareholders. The company has also undertaken a range of cost reduction initiatives in order to make it through these unprecedented market conditions.

    Due to its online only business model, Webjet may have less overheads than its main rival, Flight Centre. However with bookings drying up, the company has also been forced to enter survival mode in recent months. The Webjet share price has also been hit hard by a highly dilutive equity raising back in April. It would seem though that investors are now feeling a bit more optimistic that domestic flight bookings may begin again soon. Likewise, Corporate Travel Management will be hoping that some corporate travel in Australia will begin to resume in the months ahead. This should continue providing renewed optimism to its investors.

    Meanwhile, our national airline carrier, Qantas, has seen its fleet of planes largely grounded over the past few months. However, the company secured additional debt funding of $550 million in early May. It’s strong cash position makes it relatively well placed to ride out the remainder of the coronavirus crisis, before domestic travel starts to resume. This has helped to see its share price rise higher today as news surrounding the sector continues to look more optimistic.

    If you’re looking for more possible ASX 200 buying opportunities in the current market, check out the free report below.

    NEW. The Motley Fool AU Releases Five Cheap and Good Stocks to Buy for 2020 and beyond!….

    Our experts here at The Motley Fool Australia have just released a fantastic report, detailing 5 dirt cheap shares that you can buy in 2020.

    One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

    Another is a diversified conglomerate trading over 40% off it’s high, all while offering a fully franked dividend yield over 3%…

    Plus 3 more cheap bets that could position you to profit over the next 12 months!

    See for yourself now. Simply click here or the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

    CLICK HERE FOR YOUR FREE REPORT!

    More reading

    Motley Fool contributor Phil Harpur owns shares of Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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  • ASX 200 rallies hard, no longer in bear territory

    ASX 200

    The S&P/ASX 200 Index (ASX: XJO) jumped almost 3% today to 5,780 points, it is now out of the bear market territory we’ve been in since March 2020.

    The ASX 200 is now down by just 19% from the 21 February 2020 level. Since 23 March 2020 the ASX 200 has risen by 27% in an extraordinary turnaround.

    ASX banks boost the index

    The big four ASX banks don’t quite make up as much of the index as they used to, but their combined movements can still have a big impact on the share market. They all rose strongly today. 

    Looking at those movements:

    The Commonwealth Bank of Australia (ASX: CBA) share price rose by almost 4%.

    The Westpac Banking Corp (ASX: WBC) share price went up 6.1%.

    Australia and New Zealand Banking Group (ASX: ANZ) saw its share price increase by 6%.

    The National Australia Bank Ltd (ASX: NAB) share price went up 5.6%.

    Investors appear to be much more hopeful about the Australian economy’s trajectory.

    ASX 200 travel shares continue to soar

    After yesterday’s comments from Treasurer Josh Frydenberg about prolonging support, the travel industry has continued to fly today with investors seeing a return of travel on the horizon.

    Some of the ASX 200 travel shares that experienced another large gain today were:

    The Flight Centre Travel Group Ltd (ASX: FLT) share price went up 9.5%.

    The Webjet Limited (ASX: WEB) share price rose 5.8%.

    Infrastructure giant Sydney Airport Holdings Pty Ltd (ASX: SYD) saw its share price fly higher by 4.2%.

    The Qantas Airways Limited (ASX: QAN) share price went up 5.4%.

    Coca-Cola Amatil Ltd (ASX: CCL) is hurting

    The Coca Cola share price fell 1.6% today after the food and beverage business said that its volumes were down heavily whilst also suffering earnings before interest and tax (EBIT) margin pain.

    COVID-19 struck at a particularly difficult point with Easter and Ramadan falling during the heaviest restrictions.

    The business also withdrew its dividend payout ratio guidance.

    NEW: Expert names top dividend stock for 2020 (free report)

    When our resident dividend expert Edward Vesely has a stock tip, it can pay to listen. After all, he’s the investing genius that runs Motley Fool Dividend Investor, the newsletter service that has picked huge winners like Dicker Data (+92%), SDI Limited (+53%) and National Storage (+35%).*

    Edward has just named what he believes is the number one ASX dividend stock to buy for 2020.

    This fully franked “under the radar” company is currently trading more than 24% below its all-time high and paying a 6.7% grossed-up dividend.

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    Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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  • Why this small-cap ASX pharmaceutical share rocketed 27% higher today

    The Palla Pharma Ltd (ASX: PAL) share price was an impressive performer on the ASX today. Despite a number of gains across the board, Palla Pharma stood out with a big 27.46% share price rise in intra-day trading. As the day went on, Palla Pharma shares pulled back from these levels and closed 12.68% higher at 80 cents per share.

    About Palla Pharma

    Palla Pharma is a growing global supplier of opiate-based pain relief medicines. It is a fully-integrated opiate manufacturer, involved in a number of activities from poppy straw growing through to tableting production. 

    The company is one of three licensed poppy processors in Australia, and the only Australian-owned company. Additionally, it is one of six licensed opiate producers globally.

    The company was founded in 2004 as TPI and rebranded in 2019. ASX investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is a major shareholder and its CEO, Todd Barlow, sits on the Palla Pharma board.

    What caused the Palla Pharma share price to spike?

    This morning, Palla Pharma announced it would not be going ahead with the acquisition of a major UK customer – ending almost a year’s worth of negotiations.

    Since July 2019, Palla Pharma has been in discussions with its largest UK customer, a manufacturer of finished dosage codeine phosphate, regarding the potential acquisition of the customer’s UK operations. This was part of Palla Pharma’s strategy to continue to move down the value chain.

    According to Palla Pharma, the customer’s manufacturing site has the capacity to tablet over 120 tonnes of codeine phosphate. This equates to revenue of approximately US$120 million.

    Acquisition discussions intensified earlier this year after the UK regulator imposed a 3-month suspension of the customer’s operating license. The suspension resulted in a need for working capital and management support, which was provided by Palla Pharma. To address the customer’s working capital needs, Palla Pharma acquired 4 of the customer’s marketing authorisations for the supply of codeine-based products into the UK.

    In return for its management assistance and investment of resources in the due diligence process, Palla Pharma noted it had been given an “option to acquire the business at an attractive valuation”.

    Fast forward to April and Palla Pharma announced it had acquired further marketing authorisations from the customer. Despite electing not to exercise the option, Palla Pharma stated it was in advanced negotiations with the owners and senior creditors in regard to the potential acquisition. However, there remained “material differences between the parties with respect to valuation”.

    All of this takes us to today’s announcement, in which Palla Pharma revealed it had ceased negotiations with the customer as it became evident a commercial agreement could not be reached.

    What now?

    The UK customer has been recapitalised by a new minority shareholder and Palla Pharma stated it will be seeking to have its current outstanding invoices for codeine phosphate supply in 2019 paid in full.

    While exploring the possible acquisition, Palla Pharma acquired 7 marketing authorisations from the customer, which accounted for approximately 70% of the customer’s revenue. The ownership of these authorisations has been transferred to Palla Pharma and manufacturing is in the process of being transferred to the company’s Norway site.

    Looking forward, Palla Pharma expects earnings in the second half of FY20 to be “significantly stronger” than the first half. This comes as the company finalises the transition of its sales profile from volume-based commodities to higher-value products. As a result, Palla Pharma anticipates a material uplift in full-year earnings.

    Palla Pharma is set to hold its AGM on Thursday, 28 May, where it will provide a more detailed trading update and outlook.

    In the meantime, be sure to check out the 5 ASX share ideas in the free report below.

    5 “Bounce Back” Stocks To Tame The Bear Market (FREE REPORT)

    Master investor Scott Phillips has sifted through the wreckage and identified the 5 stocks he thinks could bounce back the hardest once the coronavirus is contained.

    Given how far some of them have fallen, the upside potential could be enormous.

    The report is called 5 Stocks For Building Wealth after 50, and you can grab a copy for FREE for a limited time only.

    But you will have to hurry — history has shown the market could bounce significantly higher before the virus is contained, meaning the cheap prices on offer today might not last for long.

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    More reading

    Motley Fool contributor Cathryn Goh owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post Why this small-cap ASX pharmaceutical share rocketed 27% higher today appeared first on Motley Fool Australia.

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