Category: Stock Market

The A2 Milk Company Ltd (ASX: A2M) share price has been a top ASX share for a long time. In fact, the Kiwi dairy share is up 34.5% in 2020 and 2,556.3% in the last 5 years.

However, I think the unveiling of a new CEO could be a good sign for further growth.

Who is the new A2 Milk CEO?

A2 Milk on Tuesday announced its new leader with Geoffrey Babidge having been serving in an interim capacity since December 2019.

The new man for the job is Hanesbrands’ president of innerwear, David Bortolussi.

Mr Bortolussi will join the Kiwi dairy company in early 2021 with a base salary of $1.75 million.

The A2 Milk share price edged 1.20% lower on Tuesday following the news but I believe it could climb higher in the medium-term.

Why is that good for the A2 Milk share price?

I think this represents a step in the right direction for A2 Milk and its corporate governance controls.

CEO announcements are a hot topic for A2 Milk after former CEO Jayne Hrdlicka lasted just 18 months in the top job. 

Ms Hrdlicka was gifted rights to 600,000 A2 Milk shares upon signing in July 2018.

Those rights were sold almost as quickly as they were granted to net the former CEO a tidy profit without much risk in the company’s performance.

That’s why I think the latest appointment could be good news for the A2 Milk share price.

That seems to be the sentiment shared by prominent investors interviewed for an article in the Australian Financial Review (AFR).

Importantly, Mr Bortolussi will not be able to sell any shares until he owns the equivalent of one year’s salary.

That to me says that the A2 Milk board has learned its lesson. I like that the board is looking to re-align executive remuneration with shareholder interests.

Stronger corporate governance and a CEO with “skin in the game” can only be a good thing for the A2 Milk share price.

There are some challenges ahead, particularly with frosty Australia-China relations, but I’m quietly confident for 2021.

More reading

• 5 quality ASX shares to buy in August
• ASX 200 up 1%: Challenger disappoints, Sydney Airport to raise $2bn, a2 Milk names new CEO
• If you invested $10,000 in Afterpay shares last year, you’d have this much today…
• A2 Milk Company share price on watch after naming its new CEO
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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 Kogan.com Ltd (ASX: KGN) share price has surged more than 495% from its lows in mid-March.

Despite the bullish momentum, many investors would be questioning how much further the Kogan share price can keep going. Here’s what has led to the boom in the Kogan share price and what the future looks like for the online retailer.

Lockdown fuelling Kogan’s growth

Earlier this week, Kogan provided the market with an update on the company’s performance during July 2020. As at 31 July 2020, Kogan has reported an active customer base of 2,309,000, with the online retailer adding an additional 126,00 customers in July.

Kogan reported a 110% increase in gross sales for July on a year-on-year basis. The company also saw a 130% surge in year-on-year gross profit for the period, with EBITDA for July reported at $10 million.

The continued growth in Kogan epitomises how consumer behaviour has changed during the coronavirus pandemic. With more Australians confined to their homes, online retailers have benefited from consumer spending that was originally meant for travel and other activities.

Brokers neutral on Kogan

Broker Credit Suisse recently released a note on the Kogan share price. The note highlighted Kogan’s strong trading in July, however analysts were cautious in their outlook. Analysts noted that elevated online transaction and substitutions of spending due to the COVID-19 pandemic has allowed Kogan to gain substantial market share.

However, analysts also highlighted that the Kogan share price may have peaked in the short term. They cited that the company’s trading performance in FY21 and beyond remains uncertain in terms of the investment required to drive further growth. The research note also forecasts that in the near term, Kogan will produce lower EBITDA per month in comparison to July 2020.

As a result, analysts retained a neutral rating on the Kogan share price and slapped a valuation of $19.49 on the company’s shares. Kogan’s shares closed yesterday’s trading session at $20.87.

Has the Kogan share price peaked?

In my opinion, I think that the Kogan share price may have peaked in the short term. Analysts from Credit Suisse have echoed this point by highlighting the increased costs needed to sustain growth in the near term.

However, I am also of the belief that the coronavirus pandemic has accelerated the shift to online retail. For this reason, I think that companies like Kogan have a promising long-term future. In addition, Kogan has planned for future growth with the company acquiring furniture and homewares retailer Matt Blatt in May.  

Kogan is set to announce its results for FY20 next Monday 17 August.

More reading

• ASX reporting season reveals some upside surprises
• Why Kogan and these ASX shares just hit new record highs
• Are ASX retail shares buys right now?
• 4 ASX shares I’m expecting big things from this reporting season
• Why Adairs, Coles, Kogan, & Tyro shares are storming higher

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com 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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Yesterday Moneyme Ltd (ASX: MME) announced it had reached a lending milestone of $500 million, and that it was launching a new payments processing service. Consequently, the Moneyme share price shot up and finished the day 20.47% higher. The crux of the announcement was not that the company was launching a payments processing service, but that it would offer a buy now, pay later (BNPL) function at the point of sale. A business move headed up by former Zip Co Ltd (ASX: Z1P) sales professionals.

I believe this exposes two core truths about the Australian fintech sector in 2020. First, the BNPL sector, or pay by instalments, is no longer revolutionary in Australia. And second, all of this and more is due to the failure of the big four Australian banks.

The failure of the big four

The big four banks are fundamentally mortgage providers, with business loans and digital payments thrown in. They have been woeful at defending their turf. For instance, by population Australia is a small country, dominated by four large banks protected by legislation. So how on earth did Tyro Payments Ltd (ASX: TYR) become the fifth largest merchant acquiring bank, after the big four, by number of terminals? Moreover, bank lending to households via credit cards has been falling significantly since 2002. The Australian aversion to consumer debt has been growing for almost two decades. So why didn’t any of them come up with Afterpay Ltd (ASX: APT)? 

The Moneyme share price isn’t the only one to benefit by being more accessible, user friendly and offering cheap pricing. To paraphrase Paul Keating, every pet shop galah has an opinion on fintech shares these days. Companies like CML Group Ltd (ASX: CGR) provide cashflow solutions to small and medium sized companies through innovative debtor finance platforms. Additionally, lenders such as WISR Ltd (ASX: WZR) provide short term personal finance, while RAIZ Invest Ltd (ASX: RZI) is helping the public to save money.

It is almost like watching the death of Borders Bookstores again after the rise of Amazon.com (NASDAQ: AMZN). Consequently, given that the big four banks have allowed these spaces to open up, what does this mean for Moneyme?

Is the Moneyme share price sustainable?

In my view, there is not a chance that the company’s share price is sustainable. Not in the medium term anyway. It announced it had acquired 55 merchants. Zip Co has 23,600. Moreover, its most similar payments competitor, Tyro, has 32,000 Australian merchants. Not only that, but a BNPL service is something Tyro could quickly open up at the point of sale.

Furthermore, the Commonwealth Bank of Australia (ASX: CBA) is already doing so slowly via its part ownership of Klarna, the world’s largest BNPL company. To illustrate further just how competitive this sector is now, the Splitit Ltd (ASX: SPT) model of working with the large credit cards, to break down payments into instalments, is also likely to eat into market share. 

Foolish takeaway

The Australian buy now, pay later sector has become crowded to the point of normalcy. Accordingly, I believe the spike in the Moneyme share price is irrational optimism, not a sustainable valuation. Additionally, this is without considering the impacts of inevitable Australian regulation, and a raft of unlisted companies.

I think there are plenty of other growth opportunities in the fintech sector generally. However, within the BNPL sector, I believe it is now a race for the United States market. The startup companies that can establish a beachhead in that $5 trillion retail market are the ones that will survive this modern day gold rush.

More reading

• CBA delivers $7.3bn cash profit and declares 98 cents per share final dividend
• 5 things to watch on the ASX 200 on Wednesday
• Have $2,000 to invest? Try these 2 ASX growth shares today
• Flight Centre and Zip Co were among the most traded shares on the ASX last week
• Why this reporting season is different, and now’s a great time for ‘buy to hold’ investors in ASX shares

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daryl Mather 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 Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments and ZIPCOLTD FPO and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon. 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 Commonwealth Bank of Australia (ASX: CBA) share price will be in focus this morning following the release of its full year results.

How did Commonwealth Bank perform in FY 2020?

For the 12 months ended 30 June 2020, Commonwealth Bank reported operating income of $23,758 million, up 0.8% on the prior corresponding period. This reflects volume growth in home lending and deposits, which offset a 2 basis point decline in its net interest margin to 2.07%.

Management advised that home lending grew at 1.3x system growth due to strong operational execution. Household deposit balances grew 9.8% year-on-year, and spot transaction account balances were up 25%.

The bank’s statutory net profit after tax including discontinued operations was $9,634 million, up 12.4% on FY 2019. This statutory result includes significant gains on the sale of businesses.

Whereas the company’s cash net profit after tax from continuing operations was down 11.3% to $7,296 million. This was driven largely by higher COVID-19 loan impairment expense.

Commonwealth Bank dividend.

As was expected, Commonwealth Bank has cut its final dividend down materially following recent guidance by APRA.

It has declared a 98 cents per share fully franked final dividend, which represents a dividend payout ratio of 49.95% of second half statutory earnings. This was in line with APRA’s guidance that banks should retain at least 50% of earnings

This final dividend brings Commonwealth Bank’s full year dividend to $2.98 per share, which is down 31% on FY 2019’s dividend.

At the end of the period, Commonwealth Bank’s CET1 ratio stood at 11.6%. This is up 90 basis points year on year and comfortably ahead of APRA’s ‘unquestionably strong’ benchmark of 10.5%.

COVID-19 loan deferrals.

Commonwealth Bank also provided the market with an update on its COVID-19 loan deferrals.

As of the end of July, COVID-19 related home loan deferrals stood at 135,000 home loans. This represents 8% of total accounts and is down from a peak of 154,000 home loans.

Approximately 59,000 business loans are currently being deferred. This represents 15% of its total balance and is down from 86,000 business loans at the peak.

Management commentary.

Commonwealth Bank’s Chief Executive Officer, Matt Comyn, was pleased with the company’s performance in a challenging environment.

He said: “Despite the challenging environment, operational performance in the business remains strong. Combined with our strong balance sheet and capital position, this enables us to continue supporting customers and the economy. Using our strengths in customer service, technology and data we will check-in regularly with customers to assess their financial needs and to support their recovery.”

“The next few months will be critical and some sectors will take longer to recover than others, however, we remain positive about Australia’s long-term prospects. We will also continue to work with government, regulators and our industry peers to support initiatives that stimulate economic activity and jobs,” he concluded.

More reading

• MoneyMe share price surges, but is it sustainable?
• 5 things to watch on the ASX 200 on Wednesday
• Why this reporting season is different, and now’s a great time for ‘buy to hold’ investors in ASX shares
• ASX reporting season reveals some upside surprises
• Forget term deposits and buy these ASX dividend shares

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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ASX biotech shares have been persistent outperformers in recent times. CSL Limited (ASX: CSL) is one of the largest ASX shares by market capitalisation with a $127.6 billion valuation based on the current CSL share price.

However, CSL shares aren’t your only option for biotech exposure in the Aussie share market.

What other ASX biotech shares are available?

Polynovo Ltd (ASX: PNV) has been another top performer in recent years.  Polynovo’s proprietary NovoSorb BTM product has proven to be a highly successful solution in the treatment of severe burns.

The Polynovo share price is now up 15.6% in 2020 and 1,854.6% in the last 5 years. That’s good news for investors who backed the ASX biotech share from an early stage.

Then there’s Mesoblast limited (ASX: MSB). Mesoblast is an Aussie regenerative medicine company that provides treatments for inflammatory ailments, cardiovascular disease and back pain.

The Mesoblast share price was hammered in yesterday’s trade after a United States Food and Drug Administration (FDA) report.

The ASX biotech share crashed 31.0% lower after the release of the FDA briefing document. The FDA noted concerns about the clinical performance of Mesoblast’s treatment for paediatric steroid-resistant acute graft versus host disease.

That’s disappointing news for shareholders but I think the long-term outlook for Mesoblast is still intact. The company still has some exciting products in Phase 3 trials which could be big money earners in the future.

Is today’s CSL share price the best biotech buy?

CSL is the obvious choice if you’re looking for safety. It has an extensive history of research and development (R&D) success and is a big fish in the industry.

That blue-chip status could help the ASX biotech share in the current volatile market. It could also provide some piece of mind for investors who don’t want to buy a speculative growth share.

However, I think there is also some potential upside for both Polynovo and Mesoblast. 

Polynovo is looking to extend the application of the NovoSorb BTM product into other, lucrative industries. That includes breast augmentation and hernia treatment markets.

For Mesoblast, I think a 31.0% share price drop could present a tasty buying opportunity. That’s a big mental hurdle to overcome for investors and you’d have to really believe in the company’s long-term success.

However, ASX biotech shares can rise and fall with critical decisions on their products. That means I wouldn’t be writing off the Mesoblast share price solely based on the FDA announcement.

More reading

• Top ASX dividend shares to buy in August 2020
• ASX 200 rises 0.5%, Mesoblast plunges
• 5 quality ASX shares to buy in August
• Mesoblast share price crashes 29% lower on FDA doubts
• ASX 200 up 1%: Challenger disappoints, Sydney Airport to raise $2bn, a2 Milk names new CEO

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and POLYNOVO FPO. 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 Webjet Limited (ASX: WEB) share price jumped 5.6% yesterday and is now up 30% since last Monday. The Webjet share price has still been smashed in 2020 but is now seeing a strong recovery.

The big question for value investors is whether or not now is a good time to buy.

Why the Webjet share price is surging

This is a perplexing question. The Webjet share price is rocketing higher despite tight coronavirus restrictions across the country.

Prime Minister Scott Morrison was even quoted as saying internal borders may stay shut until Christmas.

That’s not good news for the travel industry but hasn’t stopped investors piling in to Webjet shares recently.

I believe some investors are thinking that part of the short-term danger has subsided.

It could be that large institutional backers are buying back in and betting that Webjet’s insolvency risk is subdued.

Whatever the reason, the Webjet share price has a lot of momentum behind it right now. So, is it a good time to buy?

Are other ASX travel shares in the buy zone?

I think Corporate Travel Management Ltd (ASX: CTD) has more to offer than the Webjet share price right now.

The Aussie travel share jumped 4.4% higher yesterday and is now up 121.5% since 19 March.

One reason I prefer Corporate Travel to Webjet is its significant earnings from the business and government sector.

This has proven to be more resilient compared to leisure bookings. But it’s not just Corporate Travel that I’d prefer to buy over Webjet right now.

Sydney Airport Holdings Pty Ltd (ASX: SYD) is another top travel share. 

Sydney Airport straddles the line between travel and infrastructure given its significant underlying assets.

Shares in the Aussie airport are down 37.5% this year as the company taps investors for a $2 billion capital raising.

The group’s half-year earnings report contained some soft numbers but that was largely to be expected in the current climate.

Foolish takeaway

I won’t be buying into ASX travel shares just yet. I certainly don’t like to invest in things I don’t understand and the Webjet share price is one of those things.

I will, however, be keeping an eye out for the Aussie travel agency’s full-year earnings report in August.

More reading

• ASX 200 rises 0.5%, Mesoblast plunges
• ASX 200 up 1%: Challenger disappoints, Sydney Airport to raise $2bn, a2 Milk names new CEO
• Why Bendigo and Adelaide Bank, CIMIC, James Hardie, & Webjet are storming higher
• Sydney Airport to raise $2 billion after COVID-19 profit collapse
• CBA and 2 more ASX 200 shares to watch this week

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 and 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.

The post Up 30% in a week, is the Webjet share price a strong buy? appeared first on Motley Fool Australia.

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If you have $12,000 to invest into ASX shares then you’re in luck. There are plenty of quality options to choose from.

The share market has rebounded strongly from the COVID-19 share market selloff a few months ago. There are plenty of ASX share ideas where prices may have reached almost as high as they can reach in the medium-term such as Coles Group Limited (ASX: COL) and Afterpay Ltd (ASX: APT).

I want to invest in ASX shares where there’s likely to be strong profit growth over the long-term but the valuation still seems reasonable.

If I had $12,000 to invest, this is where I’d put the money into these ASX shares:

Share 1: Pushpay Holdings Ltd (ASX: PPH) $4,000

Pushpay is one of the most exciting ASX growth shares in my opinion. It helps large and medium US churches to receive electronic donations. This is very useful during this COVID-19 era considering all of the social distancing and restrictions that is going on in the country. Pushpay also offers a livestreaming service to its church clients so it can still connect with its congregation.

I think Pushpay has a lot of growth potential. It was generating growth before COVID-19 came along but the unfortunate circumstances have really brought forward the adoption curve.

In FY20 it grew its revenue by a third to US$129.8 million and in FY21 it’s expecting to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to US$50 million..

I’m impressed that its gross margin is growing at a strong rate – in FY20 its gross margin improved from 60% to 65%. I also thought its recent acquisition of Church Community Builder was a really smart move. The combined business has a stronger offering. The two businesses can also sell to each other’s customer base.

Over the long-term the ASX share is aiming for US$1 billion of annual revenue which would make Pushpay a much bigger business if it achieves the goal.

At the current Pushpay share price it’s trading at 30x FY23’s estimated earnings.

Share 2: Bubs Australia Ltd (ASX: BUB) – $3,500

I think Bubs is a quality business with a lot of growth potential. Its management have proven they can grow the infant formula business effectively. I like how it used acquisitions to secure its supply chain with its own Chinese-approved manufacturing facility.

The ASX share has grown strongly over FY20 despite the issues relating to COVID-19.  FY20 revenue increased by 32% to $62 million. Its FY20 fourth quarter showed the international growth potential – Chinese direct sales increased 26% and other export market sales grew by 71%.

I’m not expecting Bubs to be as globally successful as one of its competitors, but I think it has a very long growth runway geographically. It can expand with new products like Vita Bubs and the organic grass-fed cow milk infant formula range.

Over the long-term I think this ASX share could grow substantially in size. The growing gross profit margin will help drive the bottom line higher.

Share 3: WAM Microcap Limited (ASX: WMI) – $4,500

WAM Microcap is a listed investment company (LIC) which targets ASX small caps with market caps under $300 million. It’s this hunting ground which can generate really strong long-term returns because not many investors are searching in this area.

The investment team at Wilson Asset Management (WAM) have proven to be very effective at delivering strong returns.

At 30 June 2020 its portfolio had made a gross return of 32.9% over the past three months and 15.9% per annum since inception in June 2017. I think the WAM team can continue to outperform over the long-term with the investment style and focus on ASX growth shares.

Another of the attractive things about the LIC is the good dividend payments. WAM Microcap is growing its ordinary dividend and it keeps paying special dividends.

At the current WAM Microcap share price it offers a grossed-up dividend yield of 5.75%.

Foolish takeaway

I think each of these ASX shares are capable of producing strong returns over the next five years. WAM Microcap offers great diversification, but I believe both Pushpay and Bubs can grow into much larger businesses over time.

More reading

• 5 quality ASX shares to buy in August
• 3 exciting ASX growth shares to buy with $3,000
• 3 ASX shares to buy and hold for the next decade
• A2 Milk and 1 other top ASX growth share to buy this month
• Can the Bubs share price go higher in 2020?

Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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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