Category: Stock Market

The market closed higher last week on hopes of an imminent easing in coronavirus restrictions. The S&P/ASX 200 Index (ASX: XJO) finished the week up 2.78% as Scott Morrison announced a staged reopening of the economy. 

Treasury has estimated the coronavirus shutdown is costing the economy $4 billion a week. The economic hit is due to a combination of unemployment, productivity loss, and a drop in consumption. 

The unemployment rate is predicted to hit 10% by June. But a recovery in GDP growth is expected by the end of the year, limiting the fall in GDP to 6% over 2020. Unemployment is predicted to improve slightly to 9% by the end of the year. 

Market conditions remain challenging given COVID-19 uncertainty and the unknown speed of recovery. Nonetheless, ASX travel shares soared as Morrison announced “some” interstate travel would be permissible under stage 2 of the 3-step plan to reopen the economy.

If all goes well under Morrison’s 3-step plan, 850,000 people will be back in work and around $9 billion pumped into the economy in about 8 weeks’ time. As restrictions ease, we take a look at the ASX 200 shares that fell the most last week. 

Inghams Group Ltd (ASX: ING)

Shares in Inghams Group fell 6.5% last week to close the week at $3.19. Last Monday, Inghams refused to draw conclusions around FY20 trading results given changes in volume and channel mix.

COVID-19 restrictions have had an impact on the food supply chain, and there have been volatile conditions in poultry markets. Inghams had to swiftly realign its operations to manage social distancing requirements at its facilities. This has created additional inefficiencies and costs and led to the suspended production of some products. 

COVID-19 restrictions caused a temporary surge in retail sales in March and early April but since then, store traffic has decreased and shopping behaviours shifted. Out of home consumption of poultry products has been negatively impacted. Customers supplying hospitality and tourism industries have significantly reduced purchases, leading to weaker conditions in wholesale markets. 

Inghams is closely managing its working capital and inventory, and remains focused on debtors and cashflow collection. In some circumstances where customers have experienced difficulties, Inghams is working to support them. The company is supported by its lenders and has significant headroom in its covenants. 

Orocobre Limited (ASX: ORE)

Orocobre shares ended last week 6.5% lower at $2.03. Its Olaroz lithium facility stopped production during the March quarter due to Argentinian COVID-19 restrictions. The shutdown, combined with planned maintenance, resulted in 21 days of lost production. 

Production for the quarter was down 11% on the prior corresponding period due to the shutdown. March quarter product pricing was also below that of the December quarter with continuing weak demand and aggressive competitor behaviour. Sales revenue was down 32% QoQ to US$12.1 million.

The existing challenges in the lithium market were compounded by the spread of COVID-19 which impacted operations throughout the supply chain. Future demand rests on increased appetite for electric vehicles, with Orocobre confident in its long-term prospects given government emission targets and European carbon emissions penalties. 

Alumina Limited (ASX: AWC)

Shares in Alumina lost 6.2% last week, finishing the week at $1.525. The price of aluminium has declined 17.7% since the beginning of 2020, and is expected to decline further over the next 12 months. 

In the March quarter, Alumina reduced cash costs of production by $1 per tonne. Daily production was in line with that of the previous quarter. The average realised alumina price was also broadly in line with the previous quarter despite a decline in the spot price towards the end of the quarter. 

To preserve cash in the current environment, Alumina has put growth capital expenditure on hold for the rest of 2020. This will reduce spending by $30 million, with Alumina looking to save a similar amount on non-critical sustaining capital expenditure. 

Qantas Airways Limited (ASX: QAN)

Qantas shares closed last week down 6.1% at 3.40. A dispute with Perth airport over alleged unpaid aviation and rental fees has led to the airport issuing Qantas with termination notices. Qantas said the notices amounted to eviction notices and could result in operations at the airport stopping within a fortnight. 

“We understand Qantas needs to keep trading and that the significant profits it is generating from these lucrative FIFO flights are crucial to them,” Perth Airport Chief Executive Kevin Brown told the Sydney Morning Herald. “But paying nothing while using all of the airport’s services is no longer an option.”

Qantas has struck deals with most airports around Australia and is in negotiations with others. Perth Airport is the exception. Qantas is currently operating around 350 services a week through Perth airport, most headed to Western Australian resource projects. 

National Storage REIT (ASX: NSR)

The National Storage REIT finished last week down 5.9% at $1.59. National Storage announced a $330 million equity raising during the week. A $300 million placement was conducted at $1.57 per stapled security, which was a 7.1% discount to the last closing price. A further $30 million will be raised under a security purchase plan. 

Proceeds from the raising will be used to strengthen the balance sheet, replenish investment capacity and provide additional funding flexibility. National Storage says it has $120 million of acquisition and development opportunities under active consideration. 

Self-storage markets in Australia and New Zealand are fragmented. National Storage believes the COVID-19 pandemic may provide additional acquisition opportunities over the next 12 to 18 months. With strengthened liquidity as a result of the capital raising, National Storage says it will be in a strong position to capitalise on these opportunities.

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Motley Fool contributor Kate O’Brien 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.

The post These ASX 200 shares saw the biggest falls last week appeared first on Motley Fool Australia.

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The homegrown investment bank is not regarded as a competitor to Commonwealth Bank of Australia (ASX: CBA) before, but that may be about to change.

I am not talking about Macquarie Group Ltd (ASX: MQG) vying to overtake CBA in home loans or market cap. CBA’s position in both these fronts look unassailable.

But I am referring to the hearts and minds of investors. CBA dominated investor perception of what is a high-quality financial institution for so long, and some of this gloss is wearing off.

CBA’s leadership losing its shine

CBA commands a market premium as it’s the undisputed leader when it comes to these revered qualities. This is also why mum and dad investors are fiercely loyal shareholders that are hooked in its dividends.

I am not suggesting for a moment that CBA isn’t a quality institution. But Australia’s largest home lender’s reputation could take a hit this Wednesday when it releases its quarterly update.

This will stand in contrast to Macquarie’s full year results unveiled on Friday that triggered a 6% jump in the Macquarie share price to a two-month high of $105.19.

This is despite the investment bank posting an 8% drop in FY20 profit, the halving of the dividend and withdrawing of its profit guidance.

Macquarie vs. big banks

But the profit outlook for the big four domestic banks makes Macquarie’s “bad” news look delectably good!

The three big banks turned in big double-digit profit crashes in the first half. Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) even went as far as suspending their dividends.

Meanwhile, National Australia Bank Ltd (ASX: NAB) slashed its interim dividend by more than two-thirds to 30 cents a share while pleading with investors to provide a $3.5 billion in extra cash via its cap raise.

Talk about a reverse capital return – big bank style!

Better protected

Further, Macquarie’s provisioning of a little over $1 billion is modest compared with what the big banks have to set aside for bad debts amid the COVID-19 pandemic.

CBA is tipped to announce total provisioning of $3 billion this week and a significant fall in quarterly cash profit that will make Macquarie look like the king of the banking hill.

Macquarie isn’t seen to be a direct rival to other ASX Australian banks as its income mix is different, even though it’s aggressively moved into home lending recently.

Foolish takeaway

The bank’s commercial lending and asset management business helped buoy its results with a 12% increase over FY19, while its commodities, markets and capital divisions, took a 29% profit hit.

While Macquarie isn’t immune to the coronavirus economic fallout, its better spread of income, which also includes offshore operations, means it may hold up better than our domestic banks.

For these reasons, some of the premium gloss from CBA could well rub-off on Macquarie – at least for the interim.

More reading

• ASX 200 Weekly Wrap: New ASX bull run continues
• 3 top ASX dividend shares to buy right now
• 5 things to watch on the ASX 200 on Monday
• Which is the cheapest ASX bank stock on the market?
• What to watch on the ASX 200 next week

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie 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.

The post How Macquarie Group is vying to unseat CBA appeared first on Motley Fool Australia.

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The market closed higher last week on hopes of an imminent easing of coronavirus restrictions. The S&P/ASX 200 Index (ASX: XJO) finished the week up nearly 3% as Scott Morrison announced a staged reopening of the economy. 

Treasury estimates the coronavirus shutdown is costing the economy $4 billion a week. The economic hit is due to a combination of unemployment, productivity loss, and a drop in consumption.

Unemployment is predicted to hit 10% by June. But a recovery in GDP growth is expected by the end of the year, limiting the fall in GDP to 6% over 2020. Unemployment is predicted to improve slightly to 9% by the end of the year. 

Market conditions remain challenging given the uncertainty around COVID-19 and unknown speed of recovery. Nonetheless, ASX travel shares soared as Morrison announced “some” interstate travel would be permissible under stage 2 of the 3-step plan to reopen the economy. Shares in Flight Centre Travel Group Ltd (ASX: FLT) rose by 8.1% on Friday while Webjet Limited (ASX: WEB) shares were up by 9.3%. 

If all goes well under Morrison’s 3-step plan, 850,000 people will be back in work and around $9 billion pumped into the economy in about 8 weeks’ time. As restrictions ease, we take a look at the ASX shares that gained the most last week. 

Afterpay Limited (ASX: APT)

Shares in Afterpay gained 36.8% last week to finish the week at $39.88. Afterpay shares have now gained a massive 348% from their March low. The buy now, pay later provider reported March was its third-largest underlying sales month on record. Underlying sales in the March quarter increased 97% compared to Q3 FY19. 

Afterpay reported underlying sales of $7.3 billion for the year to the end of March, growing at 105% compared to the prior corresponding period. Healthy growth in merchant and customer numbers was recorded during the quarter – active customers grew to 8.4 million, up 122% on the prior corresponding period. Merchant numbers grew to 48,400 globally, up 78% on the prior corresponding period. 

Afterpay has made pre-emptive adjustments to risk settings which have had a positive impact on loss performance lead indicators in the second half of March and early April. The company has a strong balance sheet and liquidity position, meaning there should be no requirement to raise capital in the foreseeable future. 

EML Payments Ltd (ASX: EML)

EML Payments shares closed last week up 28.7% at $3.41. The payment solution company provides gift card and incentive programs, reloadable value cards, and virtual accounts for business payments. 

In the 5 years to FY19, EML Payments’ earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 82% on a compound annual basis. Revenue increased 37% in FY19 to $97.2 million. Approximately 87% of revenue was generated from recurring revenue streams. 

EML completed its acquisition of Prepaid Financial Services in April. Prepaid is a provider of white-label payments and banking-as-a-service technology. The terms of the acquisition were renegotiated with the enterprise value reduced by £94.5 million to £131.5 million. 

PolyNovo Ltd (ASX: PNV)

PolyNovo shares rose 28.1% last week to close the week at $2.55. The medical company released a presentation last week which estimated its near-term total addressable market at $7.5 billion. 

PolyNovo produces NovoSorb BTM, an implantable dressing that can be absorbed into the body as it heals. Currently used as a dermal scaffold, PolyNovo is also exploring the use of the technology in hernia repair, breast augmentation and reconstruction, and drug elation. 

PolyNovo recorded record sales of the NovoSorb BTM product in the US in March. The product has received CE mark approval and has launched in Europe with excellent results. A factory is being built in Port Melbourne to produce hernia products with the global hernia market estimated to be worth $3.1 billion. 

Appen Limited (ASX: APX)

Shares in Appen lifted 18.3% last week to finish the week at $30. Appen shares have now lifted 75% from March lows with the company benefitting from increased demand for its services due to the increasing importance of artificial intelligence for businesses. 

Appen develops human-annotated datasets for machine learning and artificial intelligence. The company recorded a massive 42% increase in EBITDA in FY19 and has forecast EBITDA of $125 million to $130 million in FY20. 

A pandemic-led increase in the use of search, social media, and eCommerce platforms is likely to support FY20 performance. The weaker Australian dollar and greater availability of crowd workers may also assist. Appen maintains a healthy balance sheet with cash resources in excess of $100 million so is well placed to weather the pandemic and respond to opportunities that arise. 

Qube Holdings Ltd (ASX: QUB)

Qube Holdings shares finished last week up 15.9% at $2.52. Qube was reinstated to official quotation last week after a $500 million equity raising. The raising provides Qube with significant balance sheet flexibility with over $1,150 million in liquidity. 

Qube Holdings provides import and export logistics services across Australia, New Zealand, and South-East Asia. Funds from the equity raising will be used to support continued investment in its core business. This includes capital expenditure on recent contract wins and strategic acquisitions. Additional opportunities are expected to arise in the current environment. 

Qube expects to spend a minimum of $420 million on capital expenditure (capex) between April 2020 and June 2021. This will cover maintenance capex, capex to support contracts with BlueScope Steel Limited (ASX: BSL), Shell, and BHP Group Ltd (ASX: BHP), and the purchase of new equipment to support growth and productivity. 

Qube has experienced a number of near-term impacts associated with COVID-19, but its investment in long-term strategic growth priorities remains unchanged. The business model remains resilient and continues to generate solid earnings from its diversified logistics activities. 

More reading

• Is Santos the best ASX 200 energy share?
• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday
• Which is the cheapest ASX bank stock on the market?

Kate O’Brien owns shares of Appen Ltd, BHP Billiton Limited, and POLYNOVO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended Emerchants 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 These ASX shares booked the biggest gains last week appeared first on Motley Fool Australia.

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The Suncorp Group Ltd (ASX: SUN) share price will be on watch today after the banking and insurance giant released a trading update.

How is Suncorp performing?

This morning Suncorp released a comprehensive update on how the coronavirus pandemic is impacting its businesses.

According to the release, the significant market volatility seen over recent months has resulted in $205 million mark-to-market losses on its investments portfolio to March 31.

It would have been worse had the company not had hedging strategies put in place.

In addition to this, the company’s Insurance business has been impacted both positively and negatively by the pandemic. It has been negatively impacted by landlord loss of rent claims, but positively impacted by motor claims frequency.

In respect to landlord claims, Suncorp expects there to be an increase in claims frequency and severity for loss of rent claims.

However, it advised that the precise impact is hard to predict given the legislative responses at Federal and State levels. The company is hopeful that many landlords and tenants will reach amicable arrangements, which would not trigger their policies.

Whereas with motor claims, the company notes that the introduction of restrictions in March has led to a reduction in claims lodgements in the consumer motor portfolio. This dynamic is also evident in commercial motor, albeit to a lesser extent.

However, with restrictions easing, it has already observed a discernible rise in lodgements over the last two weeks.

Finally, the company is expecting a modest drag on its gross written premium (GWP) growth in FY 2020. This is a result of take-up of hardship relief options, and the weaker operating environment.

Suncorp Bank.

In response to the pandemic, Suncorp Bank has included a $133 million management overlay within the third quarter collective provision. This also includes appropriate amounts for its exposure to commercial segments.

This takes the total collective provision balance to $234 million, more than double the equivalent number in the first half.

Management advised that this is underpinned by its view of unemployment reaching 11.5% and an 11% reduction in house prices, with property prices remaining depressed for a prolonged period of time.

Positively, management notes that the company is currently well capitalised, with capital levels in excess of what is required to cover the expected deterioration due to the pandemic.

What about dividends?

Suncorp advised that it will consider any final dividend in its normal year end process.

Though, consistent with maintaining a robust balance sheet, management and the board will adopt a conservative mindset when making decisions about any final dividend. This will involve consideration of its capital position, the outlook for the economy, and APRA’s guidance on dividends.

More reading

• These ASX shares booked the biggest gains last week
• Where I’d invest $1,000 into ASX shares right now
• Is Santos the best ASX 200 energy share?
• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues

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.

The post Suncorp share price on watch after trading and dividend update appeared first on Motley Fool Australia.

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