Category: Stock Market

The Baby Bunting Group Ltd (ASX: BBN) share price is surging higher today after the retailer provided a business update. At the time of writing, Baby Bunting shares are trading 14.98% higher for the day at $3.07 on the back of continued sales growth throughout the COVID-19 pandemic.

Online sales boom

This morning, Baby Bunting provided an update on its business performance during the second half of FY20. From the period between 30 December 2019 and 17 May 2020, the company posted total sales growth of 13.2% and comparable-store sales growth of 8.1%. Meanwhile, online sales in this period represented 17.3% of total sales – an impressive 66% jump compared to the prior corresponding period.

On a year-to-date basis, total sales growth is 10.3% while comparable-store sales growth comes in at 3.4%. Baby Bunting noted this sales performance reflects the less discretionary nature of the baby category.

Breaking down online sales further, the company saw online sales increasing from 12.4% of all sales before 23 March 2020 to 22.4% of sales through the following 2-month period to 17 May 2020. This represents an increase in online sales of 121% during this period, year over year.

Baby Bunting’s click and collect service is also proving to be a popular option, with around 42% of all online orders ending up as click and collect transactions at its stores.

However, the company noted that online sales have lower gross margins due to higher freight fulfilment costs compared to in-store sales.

All stores remain open

Throughout the coronavirus pandemic, all Baby Bunting stores have remained open but the company has adapted to the various social distancing and hygiene measures.

According to today’s release, individual store performance has been mixed, while stores located in shopping centres and selected stores in Victoria and New South Wales have been affected by lower foot traffic.

In terms of buying trends, CEO Matt Spencer said there was strong initial demand for lower margin consumable products, such as baby wipes and nappies. As the lockdown period progressed, the company experienced a ramp-up in purchases of products for the nursery, including cots, furniture, toys, and bedding. Now that restrictions are beginning to be eased, demand for travel-related products, such as prams and car seats, has started to recover.

Capital expenditure program

In anticipation of future cash flow pressures, Baby Bunting introduced a prudent cost management program in March and April. However, now that the impact of COVID-19 on financial performance has become clearer, the company has decided to recommence capital expenditure that had previously been paused.

These costs are largely associated with the roll-out of the new brand across the full store network. The new brand features a more contemporary and gender-neutral logo and the roll-out is expected to be completed by the end of Q1 FY2021.

What’s next for Baby Bunting?

On 23 March, Baby Bunting withdrew its FY20 earnings guidance due to the uncertain nature of the COVID-19 pandemic. Despite the stellar sales result, the company notes that it remains difficult to anticipate consumer behaviour and the associated effect on sales, gross margin, and expenses. Therefore, no guidance will be provided for FY20.

The back end of the financial year (ending 30 June 2020) is traditionally Baby Bunting’s largest and most important promotional period.

Importantly, the company highlighted that its balance sheet remains strong with approximately $35 million in undrawn debt facilities.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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While budget measures have been effective in keeping the economy on life support, the real economic numbers have yet to be announced. Last week in parliament, Treasurer Josh Frydenberg revealed that the economic contraction for the current quarter is expected to be 10%. This will be the biggest 3 month decline on record. It’s a sobering number, but a recovery can be anticipated when lockdowns ease and economic activity around the globe returns to normal.

Here are 5 ASX 200 dividend shares that can be expected to bounce when an economic recovery takes hold.

Premier Investments Limited (ASX: PMV)

Premier Investments is the investment company of retail mogul Solomon Lew. It owns several famous retail brands including Just Jeans, Portmans, Peter Alexander and Smiggle. The company has been in temporary lockdown as a result of the coronavirus pandemic and all its stores have been closed. While the company’s online retailing was up a massive 99%, its sales overall were down 74% for the 6 weeks to 6 May 2020 on the prior corresponding period.  

In response, the Premier Investments share price has fallen from a high of $21.31 in February to $15.58 at present, previously falling as low as $8.95 at the height of the crisis. However, all of the company’s Australian stores reopened on Friday 15 May. This should assist the company in returning to previous earnings and maintaining its dividends. Premier Investments has a trailing dividend yield of 4.56% fully franked.

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi is a retailer of consumer goods in Australia and New Zealand. It also owns The Good Guys network of stores. Despite the recent crisis, JB Hi-Fi stores in Australia have remained open and the company has continued taking online orders. JB Hi-Fi have actually announced sales growth throughout the last 2 months. The company attributes this growth to people stocking up in preparation for the COVID-19 crisis. Whatever the cause, it is good news for JB Hi-Fi shareholders.

JB Hi-Fi is a considered a consumer discretionary stock. This means that as a recession kicks in people can be expected to spend less on its products than they would otherwise. However, when the economy recovers and consumer confidence picks up, JB Hi-Fi can be expected to see increased buying by consumers. JB Hi-Fi trades on a trailing dividend yield of 4.32% fully franked.

BHP Group Ltd (ASX: BHP)

BHP is one of the oldest companies listed on the ASX. While it is often seen as an engine of stability in an often unpredictable share market, it is actually highly cyclical. During the GFC, the BHP share price dropped from a high of $95 in May 2008 down to a low of just $24.62 in November 2009. Just 2 years later in 2011, it recovered to a high $102.68. Currently it sits back at $34.52.

In a question and answer session with the BHP CEO on 30 April, the company’s leader promised a continued dividend and strong balance sheet through the economic cycle. These are reassuring words considering that this could be the worst recession since the Great Depression. BHP is deferring investments in projects to keep cash on hand and maintain a dividend of at least 50% of earnings.

Additionally, the company is looking out for strategic acquisitions that may be brought about by the economic downturn. BHP is leveraged to a recovery in the world economy and a subsequent recovery in oil, coal and iron ore prices. This is something that has historically eventuated throughout the economic cycles of previous decades. BHP has a trailing dividend yield of 6.17%, fully franked.

National Australia Bank Ltd. (ASX: NAB)

NAB is the third largest bank on the ASX by market capitalisation. With dividends from rival banks becoming uncertain, NAB’s recently announced capital raising will allow it to continue paying a dividend. This will also help them to keep a strong balance sheet during a severe economic downturn. NAB’s ratio of tier one equity capital, an important ratio for liquidity and balance sheet strength, is high by international standards at around 11.20%. This means that the bank should remain financially secure in difficult times.

When an economic rebound eventuates, NAB will see a significant boost to new loans issued by the bank. This will mean more interest and higher profits. Additionally, NAB has recently been required to make provisions of $4.4 billion to allow for bad debts. During an economic recovery, this number will be significantly reduced freeing up cash for dividend increases. NAB has a trailing dividend yield of 7.32% fully franked.

Boral Limited (ASX: BLD)

Boral is a manufacturer of bricks and other construction materials. Its share price has recently fallen a massive 50.38% from a high of $5.20 in February to just $2.58. Last week, Boral released an update to the market. The company recently worked to ensure the liquidity of its balance sheet by issuing US$200 million of unsecured notes and extending its banking facilities. In addition to keeping Boral in good shape financially, these measures are a smart move while the US dollar is fetching $1.56 Australian (at the time of writing).

During the COVID-19 crisis, Boral’s products have been considered essential and the company has been allowed to keep operating throughout the crisis. Additionally, despite a >50% drop in share price, Boral’s revenue has only been affected by around 6% compared to 2019, despite the bushfires and the coronavirus crisis. Going forward, Boral is leveraged to continued strength in the property market as Australia absorbs significant population growth. While short-term weakness in property prices is expected, history has shown that Australia’s housing market has recovered over time. Boral trades on a trailing dividend yield of 9.35% with 50% franking.

More reading

• This is the latest ASX 200 stock to unveil double digit profit growth
• 4 ASX 200 shares exposed to a fall in house prices
• NAB is going to question borrowers with loan holidays
• 3 industries that may never recover from COVID-19
• Why ASX iron ore miners like BHP aren’t afraid of the China trade war

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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 travel shares have been hit hard in 2020, but could they be back in the buy zone today?

Why Aussie travel stocks have slumped lower

The biggest factor hitting Aussie travel shares has been the coronavirus pandemic. Countries have been shutting their borders since late February and still many domestic borders remain shut.

The S&P/ASX 200 Index (ASX: XJO) is down 18.31% in 2020 but many of the Aussie travel shares have fallen much further than that.

The extraordinary measures taken both in Australia and abroad are designed to reduce the spread of the global pandemic. However, it’s also reduced the value of ASX 200 travel shares and left shareholders blindsided by the sudden turn of events but some of the biggest travel names might have been oversold in 2020…

Can ASX 200 travel shares bounce back in 2020?

There does appear to be light at the end of the tunnel for travel companies. The Federal Government is looking to ease COVID-19 restrictions and that could soon see domestic border restrictions loosened. There’s even talk of creating a “bubble” with New Zealand to boost tourism and ease the economic burden.

That means travel shares like Flight Centre Travel Group Ltd (ASX: FLT) could be in the buy zone. The Flight Centre share price has slumped 74.05% in 2020 while Corporate Travel Management Ltd (ASX: CTD) shares are down 45.51%.

Now, I don’t think anyone believes that these travel groups should be valued what they were before. The International Air Transport Association (IATA) has said we may not see travel normalise until 2023 which means things have changed. Earnings have changed, dividends have changed and that means that share prices have changed. 

One bit of good news for ASX 200 travel shares is in Aussie business and the government sector. If businesses and the government are returning to work, that could mean more bookings for companies like Corporate Travel.

Foolish takeaway

ASX 200 travel shares have been hammered lower in 2020, but I think they could be oversold. Flight Centre and Corporate Travel seem like speculative buys right now, but there could be big upside for investors willing to roll the dice and add travel exposure to a diversified portfolio.

More reading

• Is the Bega Cheese share price a strong ASX buy today?
• ASX 200 storms 2% higher: Big four banks jump on COVID-19 vaccine news
• This ASX 200 tech share is sinking 5% lower after its half year update
• 3 ASX 200 dividend shares I’d buy today
• How to invest $10,000 in ASX 200 shares today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. 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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The Bega Cheese Ltd (ASX: BGA) share price hit a new 52-week high in morning trade before dipping slightly, but is it a strong ASX buy right now?

Why the Bega Cheese share price hit a new 52-week high

It’s been a hectic start to the year for many ASX 200 shares. The S&P/ASX 200 Index (ASX: XJO) is down 16.67% this year but Bega Cheese has been one of the least volatile constituents. The Aussie food company’s shares started the year at $4.32 per share and it’s lowest closing price has been $3.92 per share. That was on January 6, meaning the coronavirus pandemic hadn’t yet gripped markets.

The relative stability of Bega’s share price can partly be attributed to the fact that it operates in the Consumer Staples sector and has non-cyclical earnings. The dairy producer has also benefitted from strong supermarket sales this year as Aussies flocked to stock up on essential supplies. This strong consumer demand has trickled down from ASX supermarkets to boost suppliers like Bega this year.

This has also been good news for shareholders with the Bega Cheese share price closing at a new 52-week high of $5.29 per share yesterday before opening higher again today and rallying to $5.50 before dropping back late morning. This is in stark contrast to last year when Bega’s share price largely followed a downward trajectory resulting partly from a devastating bushfire season that hit the region around Bega particularly hard. While Australia grapples with the pandemic, many local businesses and individuals are still reeling from last summer.

But with the Bega Cheese share price rocketing 21.53% higher in 2020, is it still a strong ASX buy?

Is Bega a strong ASX buy today?

It’s great news for shareholders and the Aussie economy when Bega is doing well. However, when it comes to investing in ASX shares, I’m focused on the long-term.

I think the recent boost for Bega may be a little short-lived. There’s strong competition from the homebrand products in Coles Group Ltd (ASX: COL) supermarkets which are supplied by rival Murray Goulburn. On top of that, Australia’s relationship with China appears frayed which could hit Aussie exports hard.

Bega exports over 60 million units of cheese per year to approximately 40 different countries. That means the Aussie dairy group is facing some medium-term headwinds and could see earnings under pressure in 2021.

Foolish takeaway

The Bega Cheese share price has been a strong outperformer in 2020. It’s hard to bet against ASX shares with positive momentum, but no one knows what to expect right now. I wouldn’t be speculating on Bega’s short-term share price movements. Instead, I’d only buy if the long-term picture makes it a strong ASX buy for the future.

More reading

• Are ASX 200 travel shares in the buy zone?
• ASX 200 storms 2% higher: Big four banks jump on COVID-19 vaccine news
• This ASX 200 tech share is sinking 5% lower after its half year update
• 3 ASX 200 dividend shares I’d buy today
• How to invest $10,000 in ASX 200 shares today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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At lunch on Tuesday the S&P/ASX 200 Index (ASX: XJO) is on course to record a very strong gain. The benchmark index is currently up 2% to 5,568.7 points.

Here’s what has been happening on the market today:

ASX 200 jumps on Moderna coronavirus vaccine news.

The ASX 200 is racing higher today after U.S. biotechnology company Moderna released phase one trial results for its coronavirus vaccine candidate, mRNA-1273. The results showed that the vaccine produced COVID-19 antibodies in all 45 participants. Moderna is aiming to start a phase 3 trial in July. This has sparked hopes that an effective vaccine could be ready in the near future.

Big four banks charge higher.

The shares of the big four banks have all responded positively to this development. All four banks are trading notably higher at lunch. The best performer in the group has been the Westpac Banking Corp (ASX: WBC) share price with a gain of almost 4.5%. Investors may believe the banks have overestimated the provisions that will be required during the crisis.

TechnologyOne results.

The TechnologyOne Ltd (ASX: TNE) share price is sliding lower on Tuesday after its half year update disappointed the market. The enterprise software company posted a 6% lift in both sales and profits during the half. This was driven by strong growth in its SaaS business once again. In respect to the full year, management expects net profit before tax to increase 8% to 12% year on year. Some investors may believe this growth doesn’t justify the premium its shares trade at.

Best and worst ASX 200 performers.

The best performer on the ASX 200 at lunch is the James Hardie Industries plc (ASX: JHX) share price with a 10% gain. Investors have been buying the building products company’s shares after the release of a strong full year result. The worst performer is the Regis Resources Limited (ASX: RRL) share price with a 5% decline. Investors have been selling the gold miners after demand for safe haven assets reduced.

More reading

• Are ASX 200 travel shares in the buy zone?
• Is the Bega Cheese share price a strong ASX buy today?
• Why James Hardie, Oil Search, Webjet, & Westpac shares are jumping higher
• Why Fisher & Paykel Healthcare, Mesoblast, Northern Star, & TechnologyOne are tumbling lower
• This ASX 200 tech share is sinking 5% lower after its half year update

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The S&P/ASX 200 Index (ASX: XJO) has followed the lead of international markets and is storming higher on Tuesday. In late morning trade the benchmark index is up 2% to 5,569.9 points following positive COVID19 vaccine news.

Four shares that are climbing more than most today are listed below. Here’s why they are jumping higher:

The James Hardie Industries plc (ASX: JHX) share price has stormed almost 11% higher to $23.75. Investors have been buying the building products company’s shares after the release of its full year results. James Hardie delivered a 4% increase in revenue to US$2.61 billion and a 20% lift in EBIT to US$486.8 million for the year ended March 31.

The Oil Search Limited (ASX: OSH) share price has jumped 9% to $3.27. The catalyst for this strong gain was a sharp rise in oil prices overnight. Traders appear optimistic that a vaccine could open up economies much quicker than expected and lead to an increase in demand for oil. The S&P/ASX 200 Energy index is up 4.5% at the time of writing.

The Webjet Limited (ASX: WEB) share price has surged 6% higher to $3.33. Once again, this strong gain appears to have been driven by the vaccine news. The travel sector would be a big winner if this vaccine solves the COVID19 crisis. It could mean that international travel returns much sooner than the market was expecting, which would only be good news for travel bookers like Webjet.

The Westpac Banking Corp (ASX: WBC) share price is up 4.5% to $15.58. Australia’s big four banks have responded very positively to today’s development and are all notably higher. If the crisis ends earlier than expected, it could mean the banks have all overestimated the provisions that will be required. This could have positive consequences for future dividend payments.

More reading

• This is the latest ASX 200 stock to unveil double digit profit growth
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• 3 industries that may never recover from COVID-19
• ASX 200 up 1.35%: Gold miners and Fortescue rocket higher, big four banks tumble

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. 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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In late morning trade positive COVID19 vaccine news has given the S&P/ASX 200 Index (ASX: XJO) a major lift. At the time of writing the benchmark index is up a sizeable 2% to 5,572.6 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are tumbling lower:

The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price has fallen 2% to $27.82. Investors may believe that the prospect of a COVID19 vaccine being released in the near future will lead to a reduction in demand for this medical device company’s ventilators.

The Mesoblast limited (ASX: MSB) share price has crashed 8% lower to $3.82. This decline also appears to have been driven by the vaccine news. Mesoblast has been busy trialling its own treatment for COVID19, with promising results. If a vaccine is successful then there would arguably be little need for a treatment.

The Northern Star Resources Ltd (ASX: NST) share price is down over 3% to $14.14. Investors have been selling Northern Star and other gold miners today after a sharp pullback in the price of the precious metal. The prospect of a vaccine has given risk on assets a major boost and led to a fall in demand for safe haven assets.

The TechnologyOne Ltd (ASX: TNE) share price is down over 1.5% to $9.66. This enterprise software company’s shares were down as much as 5% following the release of its half year update. Investors appear underwhelmed by its 6% lift in sales and profits during the six months ending March 31. Especially given the significant premium of 52x trailing earnings that its shares trade at. TechnologyOne provided guidance for the full year and expects net profit before tax to increase 8% to 12% year on year.

More reading

• This ASX 200 tech share is sinking 5% lower after its half year update
• 5 things to watch on the ASX 200 on Tuesday
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• ASX 200 Weekly Wrap: Gold miners help edge ASX ever higher

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. 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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The TechnologyOne Ltd (ASX: TNE) share price has come under pressure today following the release of its half year update.

At the time of writing the enterprise software company’s shares are down 5% to $9.34.

This compares to a strong 2% gain by the S&P/ASX 200 Index (ASX: XJO) this morning.

How did TechnologyOne perform in the first half?

For the six months ended March 31, TechnologyOne reported a 6% increase in revenue to $138.4 million and a 6% lift in profit after tax to $19.1 million. This result was underpinned by continuing strong demand for its SaaS ERP Solution.

Speaking of which. At the end of March the company’s SaaS Annual Recurring Revenue (ARR) stood at $110.2 million, up 33% on the prior corresponding period.

This ARR growth was driven largely by an increase in the number of large-scale enterprise SaaS customers. They have increased 22% over the last 12 months to 475. Pleasingly, management advised that the SaaS business continues to grow during the current pandemic.

Growing at an even quicker rate was its cash flow generation. TechnologyOne more than doubled its cash flow to $9.9 million during the half. This led to its cash and cash equivalents lifting 23% to $84 million.

In light of this and its confidence in its near term outlook, the company’s board has declared an interim dividend of 3.47 cents per share. This represents a 10% increase on last year’s interim dividend.

Outlook.

Unlike countless other companies, TechnologyOne has been able to provide guidance for the full year.

TechnologyOne’s CEO, Edward Chung, revealed that it has a strong pipeline and a high proportion of locked in recurring revenues. As a result, he is confident the company is well positioned to deliver continuing strong growth over the full year.

He commented: “TechnologyOne is well positioned, as the markets we serve are generally resilient. Our global SaaS ERP solution is mission critical to the markets we serve, and also enables any device, any time access from anywhere around the world.”

In light of this, the chief executive expects the company’s FY 2020 net profit before tax to increase 8% to 12% year on year.

Foolish Takeaway.

While growth in the current environment is clearly a big positive, I suspect the market was looking for stronger guidance given the premium its shares trade at. Based on its last close price, its shares were trading at 52x trailing earnings this morning.

More reading

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• A vaccine (probably) won’t be a quick fix for the ASX 200

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. 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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