Category: Stock Market

The long-awaited initial public offering (IPO) of shares for a neobank in Australian equity markets is expected to occur as early as next week.

According to a report in the Australian Financial Review (AFR), fintech company Douugh launched a pre-listing capital raise of $750,000 via the online platform Equitise late last week.

The AFR reported that the pre-IPO funding was secured within an hour of being shared, making it the quickest crowdfunding effort seen by the Equitise platform to date. This sensational backing by investors suggests a heap of excitement around the neobank and its unique features.

What is a neobank?

For those unfamiliar, neobanks perform almost identical functions to traditional bricks and mortar banks like the big four in Australia, but do so exclusively online without physical branches.

For some people, the inability to go into your local branch and do your banking is a deal-breaker. Neobank proponents believe the inevitable cost-reduction of being purely online represents a slimmer and more profitable business model.

Many would have heard of ‘Up Bank’, which is owned by Bendigo and Adelaide Bank Ltd (ASX: BEN). Up Bank was the first neobank to hit Australia, and provided snazzy features like a bright red debit card and a decent savings interest rate of 1.5%.

These innovative features draw in millennials and younger customers who find the benefits of a local bank branch negligible and would rather choose minimal fees and maximum savings.

How is Douugh different?

According to its webpage on Equitise, Douugh is taking “a proprietary artificial intelligence (AI) first approach to disrupting the business model of banking”. This to be achieved by helping customers spend wisely, pay off debt, save more and build wealth through a smart bank account and debit card.

It is believed that Douugh and a washed-up telecommunications company already listed, Ziptel Ltd (ASX: ZIP), will in effect merge in a complex deal known as a reverse takeover. In layman’s terms, the neobank will start as Ziptel but relist almost immediately as Douugh Ltd under the ticker ASX: DOU .

Douugh is predominantly a US-focused company. It has launched its mobile app to the US app store and partnered with American institution Choice Bank. Notably, Douugh has formed a global strategic partnership with payments powerhouse Mastercard, an alliance which is potentially adding to the hype of its pre-IPO popularity among investors.

Should you invest

It is widely known that the ‘GOAT’ investor Warren Buffet has never been much of a fan of IPOs. But at the end of the day, whether you should invest boils down to if you think neobanks are the future.

On one hand, neobanks attract minimal fees for customers, provide innovative budgeting tools and lower overheads, and often facilitate higher interest rates to encourage savings.

Overall, part of me thinks neobanks are the future – that they will incrementally chip away at the market share of the big 4 banks due to their popularity among millennials. For now though, the Douugh IPO is a bit too spicy for my risk appetite so I’m staying on the sidelines a little longer.

Keep an eye on Douugh when it launches in the coming days. If it performs well, I wouldn’t be shocked to see a few more neobanks listing on the ASX in the future.

More reading

• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Why Bendigo and Adelaide Bank, Kogan, NAB, & Treasury Wine are dropping lower
• Bendigo and Adelaide Bank share price craters as net profit slumps 49%
• Is the Bank of Queensland share price a better buy than Bendigo and Adelaide Bank?
• Why Bendigo and Adelaide Bank, CIMIC, James Hardie, & Webjet are storming higher

Motley Fool contributor Toby Thomas 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 Should you invest in Douugh when the neobank pioneer lists on the ASX? appeared first on Motley Fool Australia.

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If I were given $10,000 to invest into ASX shares I know what I’d do with it. I would invest it today!

I’d pick these four ASX shares:

City Chic Collective Ltd (ASX: CCX) – $2,000

City Chic is a retailer of plus-size women’s clothing, footwear and accessories. It sells through a variety of different brands. It has recently acquired US brands called Avenue and Hips & Curves.

The fashion retailer sells through marketplace and wholesale partnerships with US retailers like Macys and Nordstrom. City Chic also has a wholesale business with European and UK partners such as ASOS.

The ASX share’s FY20 sales were very impressive my opinion with growth of 31% to $194.5 million. Further international acquisitions would increase company’s reach, economies of scale and build its market share.

I’d only invest $2,000 because the City Chic share price has performed so strongly. Before the start of trading this week it was trading at 22x FY22’s estimated earnings.  

Pushpay Holdings Ltd (ASX: PPH) – $2,000

Pushpay is another business that has performed very well since the start of the COVID-19 crisis.

The electronic donation business helps large and medium US churches receive money digitally. Pushpay also offers the churches a livestreaming option to stay connected with their congregations.

The ASX share is expecting that FY20 will be another very strong year. In FY20 it grew revenue by around a third. In FY21 it’s expecting to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to between US$50 million to US$54 million.

I think we should be attracted to businesses with long-term growth runways. Pushpay is aiming for US$1 billion revenue from the US church sector.

I’d only invest $2,000 because the Pushpay share price has performed so strongly. Before the start of trading this week it was valued at 33x FY22’s estimated earnings.

Magellan High Conviction Trust (ASX: MHH) – $3,000

I think it’s a good idea to have some of the best growth shares in the world in your portfolio. Magellan High Conviction Trust is an ASX share, but it’s an listed investment trust (LIT) which is invested in some of the best businesses in the world.

It owns shares like Alibaba, Alphabet, Microsoft, Tencent and Facebook. These are technology businesses with lots of growth potential. They have high profit margins and generate their earnings from many countries. They among some of the least affected businesses by COVID-19 because of how they service customers. 

I think the large businesses that this ASX share invests in are going to perform better than the overall global share market over the longer-term.

At the current Magellan High Conviction Trust share price it’s trading at a 5% discount to the net asset value (NAV) per unit.

Citadel Group Ltd (ASX: CGL) – $3,000

I named Citadel as the ASX share I’d buy this week, it’s a technology business that provides software for clients in important sectors to manage information. Industries like healthcare, defence and education use Citadel’s software.

The company receives solid income from its contracts and it’s growing its recurring revenue, particularly after its Wellbeing Software acquisition. Wellbeing is a leading software provider in the UK with a market share of 59% and 23% of radiology and maternity software respectively. Around 70% of Wellbeing Software’s revenue is recurring with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of approximately 40%.

The ASX share is expected to steadily grow its earnings over the next few years. Before the start of trading this week it was valued at 12x FY22’s estimated earnings.

Foolish takeaway

I think all of these ASX shares can beat the overall ASX over the next 12 months and the longer-term. I like City Chic, Pushpay and Citadel, but Citadel looks the best value when you look at the expected earnings for FY22 and beyond. But the diversification of the Magellan High Conviction Trust is attractive too.

More reading

• Magellan’s top fundie Hamish Douglass names August share picks
• Why I would buy Afterpay and this quality ASX tech share
• I’d buy this ASX share this week
• 3 ASX shares trading at crazy cheap prices
• 3 five-star ASX shares to buy

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended Citadel Group Ltd and 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.

The post Where I’d invest $10,000 today into ASX shares appeared first on Motley Fool Australia.

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Brokers have been quick to pass judgement on JB Hi-Fi Limited’s (ASX: JBH) profit results which sent to stock racing to a new record high today.

The JBH share price jumped 4.9% to $49.64 in after lunch trade when the S&P/ASX 200 Index (Index:^AXJO) floundered and sank 0.7%.

JB Hi-Fi Results lift all boats

The retailer posted a 33% increase in FY20 underlying net profit of A$332.7 million, which is above management’s guidance of $325 million to $330 million.

The good result lifted shares in fellow retailers too. The Harvey Norman Holdings Limited (ASX: HVN) share price rallied 4.6% to $4.29 while the Super Retail Group Ltd (ASX: SUL) share price gained 2.3% to $9.65 at the time of writing.

Cash was the big surprise in JB Hi-Fi’s results

But it may not be JB Hi-Fi’s net profit beat that’s firing up the stock. The group’s bottom line missed Goldman Sachs’ forecast by around 3% but it was the operating cash flow that the broker called a “significant surprise”.

JB’s operating cash flow came in at $819.5 million for the year, which was miles ahead of Goldman’s estimates of $360.1 million and consensus of $531.6 million.

Cash is king in this COVID-19 stricken recession and JB Hi-Fi is delivering in spades. The strong cash flow allowed the group to declare a final dividend of 90 cents a share, which again was well ahead of Goldman’s forecast of 70 cents a share.

But the strong result wasn’t enough to convince Goldman to upgrade its “neutral” rating on the stock and its price target sits at $44.40 a share.

Margin squeeze a worry

Citigroup also wasn’t impressed enough with JB Hi-Fi’s result to change its “sell” recommendation on the stock.

While there were lots to like with the group’s results, such as the better than expected performance from its Good Guys business and strong net cash position, Citi pointed to several negatives too. For instance, second half gross margins fell even as sales surged.

“A 25bps [basis point] gross margin contraction at the group level is surprising, given the lack of promotional activity in the period,” said Citi.

“While the contraction is mix-driven, we would expect underlying gross margin accretion.”

The broker also noted signs that the group is running out of stock for some products and this poses a risk to sales in the current half.

Citi’s price target on JB Hi-Fi is $42 a share.

Good news can’t last

JB Hi-Fi’s results also failed to impress Macquarie Group Ltd (ASX: MQG) as the broker held its “neutral” recommendation on the stock with a price target of $41 a share.

Like-for-Like sales at JB’s Australian chain were the standout at 12.2%, which is comfortably ahead of Macquarie’s expectation at 10.8%.

Earnings before interest and tax (EBIT) at the Good Guys division was also better than the broker’s estimates.

However, Macquarie believes the good news is already reflected in JB Hi-Fi’s current share price.

“Overall, result was ahead of expectations and July 2020 comps are well above market expectations,” said the broker.

“However, near-term risks to discretionary spend are high in our view and the impressive comps likely cannot be maintained throughout year.”

More reading

• The Starpharma share price jumps on new partnership deal
• Millennials be warned! ASIC to examine irresponsible ‘social trading’
• These 3 ASX stocks just got upgraded by top brokers to “buy” today
• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Why Altium, Beach, JB Hi-Fi, & Starpharma shares are charging higher

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail 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 What experts are saying about JB Hi-Fi’s profit results as the stock surges to record appeared first on Motley Fool Australia.

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The coronavirus pandemic has officially driven Australia into its first recession since 1990-91. But buy now, pay later (BNPL) shares such as Afterpay Ltd (ASX: APT) appear to be recession proof with growth in customer numbers and transactions surging since the onset of the pandemic. We take a look at how the ASX BNPL shares are outperforming on key metrics despite the economic turmoil. 

Customer numbers surge 

Each of the BNPL shares listed on the ASX has reported accelerating growth in customer numbers in 2020. Afterpay, the largest of the BNPL providers by market capitalisation, boasted 9.9 million customers at the end of FY20, a 116% increase on FY19. This included 5.6 million customers in the United States and 1 million customers in the United Kingdom, with remaining customers in the more mature Australian and New Zealand markets. 

Zip Co Ltd (ASX: Z1P), arguably Afterpay’s fiercest Australian competitor, reported 2.1 million customers at 30 June 2020. This was a 63% increase year on year, with 197,000 customers added in the June quarter. Newer BNPL shares Splitit Ltd (ASX: SPT), Sezzle Inc (ASX: SZL), and Openpay Group Ltd (ASX: OPY) also saw strong growth in customer numbers. Splitit, which allows customers to split payments into interest-free monthly installments on existing credit or debit cards, reported total shoppers of 309,000 at the end of June 2020, an 85% increase year on year. 

Sezzle, which is focused on the North American market, saw record additions of customers in the June quarter, with customer numbers growing to 326,000. Openpay, which operates in Australia, the United Kingdom, and New Zealand, saw customer numbers grow to 319,000 in the June quarter, an increase of 141% on the prior corresponding period. 

Merchant numbers climb 

At the end of FY20, Afterpay was being offered by 55,400 merchants. Sezzle reported more than 16,000 merchants at 30 June 2020 with 3,397 merchants added during the quarter, well ahead of the company’s prior record of 2,705 in 1Q20. Openpay grew active merchant numbers by 52% in the June quarter relative to the prior corresponding period, finishing the quarter with 2,162 merchants. Splitit, which processed its first transaction in 2017, listed on the ASX early in 2019 with 380 active merchants on its books across 27 countries. As at the end of June, more than 1,000 merchants were offering Splitit to customers. 

Transaction volumes leap 

Afterpay has seen transaction volumes processed using its platform surge 127% in 4Q FY20 to $3.8 billion. This brought full year underlying sales to $11.1 billion in FY20, up 112% on FY19. 

Competitor Zip Co recorded transaction volumes of $570.7 million in the June quarter (up 62% year on year). This brought annualised transaction volumes to $2.3 billion, above the $2.2 billion target. 

Splitit has also seen significant growth in transaction volumes, which surged in Q2 2020 to US$65.4 million, an increase of 176% quarter on quarter or 260% year on year. Sezzle reported underlying sales of US$188 million in the June quarter, a 57.5% increase quarter on quarter and 348.6% increase year on year. Openpay saw transaction volumes increase 119% in the June quarter, bringing full year volumes to $198.2 million, an increase of 98.2% compared to FY19. 

BNPL share prices follow 

ASX BNPL shares were heavily sold off in the March downturn. The falls were rapidly reversed as investors realised the durability of the BNPL business model and its applicability in the current economic environment. An increase in digital transacting has benefitted the BNPL providers that can assist merchants with cart conversion. An increased focus on budgeting due to the economic downturn has also increased the attractiveness of buy now, pay later solutions. 

The Afterpay share price fell to a low of $8.90 in March but has since soared to nearly $74, booking gains of over 730%. The Zip Co share price saw falls to as low as $1.18, but is currently trading at $6.16, a 422% recovery. The Sezzle share price was trading as low as 37 cents in March but is currently swapping hands at $7.59. This gives a phenomenal 1951% return to shareholders who got in at the low point. The Splitit share price is currently $1.39, but was as low as 22 cents in March, providing a 531% return. The Openpay share price dropped to 32 cents in March, but has since recovered to trade at $3.64, giving a 1038% return to the faithful that bought in at the bottom.

Global expansion on the cards 

Each of these BNPL shares is strongly focused on rapid expansion to gain market share. Afterpay is pursuing global expansion, planning to launch into Canada in Q1 FY21. Potential new markets have been identified which the company may seek to enter in 2020 or 2021. Zip Co is also looking to expand globally and recently purchased QuadPay which provides it with access to the world’s largest retail market, the United States. Zip CEO, Larry Diamond says, “The credit card model is fundamentally broken with customers demanding flexible interest-free alternatives – the flight to BNPL is indeed a global trend.”

Splitit has recently partnered with Visa and Mastercard with platform integrations progressing well. These partnerships are expected to accelerate card-based installments payments and result in increased merchant acceptance and transaction volumes. Openpay has been growing its UK business, securing a new debt facility to fund growth. Business in the UK has surged and initial trading under a major agreement with retailer JD Sports has been well above expectations. 

Sezzle recently raised nearly $80 million in capital to accelerate its growth strategy and strengthen the balance sheet. There was a strong response from shareholders to the capital raising, which resulted in allotments having to be scaled back. Funds will be used to invest in initiatives to drive long-term value creation. 

Foolish takeaway 

BNPL shares are weathering the COVID-19 storm and coming out on top. Customers are embracing flexible payment options and online transacting, fuelling growth in the market share of buy now, pay later providers regardless of recession. 

More reading

• Why Warren Buffett would never buy Afterpay shares
• Why I would buy Afterpay and this quality ASX tech share
• These are the 10 most shorted shares on the ASX
• Can these two ASX buy now, pay later companies become the next Afterpay?
• Take a look at last week’s best performing ASX shares

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle 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 Are BNPL shares like Afterpay officially recession proof? appeared first on Motley Fool Australia.

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Much has been made of the impact of so-called ‘Robinhood traders’ on share market performance during and after the coronavirus-induced March crash.

Robinhood, although not yet available in Australia, is the pioneer of brokerage-free share trading in the United States. A popular brokering firm, it is well-loved by millennials in particular. It boasts a slick user interface and easy access to shares, options and cryptocurrencies.

In June, I penned an article discussing how signs of dangerous millennial share trading behaviour were growing.

Today, a report in the Australian Financial Review (AFR) tells us that the corporate regulator is increasingly concerned as well.

The AFR reports that the Australian Securities and Investment Commission (ASIC) has “social media accounts in its sights” over concerns they are fuelling high-risk investing behaviour.

ASIC has noticed a significant uptick in groups on social media platforms like Facebook, Reddit and Twitter targeting inexperienced retail investors by using exaggerated claims of rapid and enriching share market gains.

Penny stocks prove popular with millennials

The AFR quotes ASIC as stating: “Social influencers and social trading are contributing to herd momentum in speculative stocks. There are a lot of scams and misinformation about products and trading strategies.”

This sentiment isn’t helped by an ASIC analysis of trades between February and June. It found that ‘new’ account holders were allocating 69% of their holdings to S&P/ASX 200 Index (ASX: XJO) shares, with another 10% going to exchange-traded funds (ETFs) and 21% to ‘other’.

In contrast, the accounts of more experienced investors showed an average allocation of 86% to ASX 200 shares, 3% to ETFs and 11% to ‘other’.

It’s this ‘other’ that has ASIC worried for the former group. It indicates that newer investors are increasingly playing the smaller end of the share trading market outside the ASX 200. These shares are often called ‘penny stocks’ and are usually classed as ‘high-risk investments’.

ASIC also noted that:

“From April 6 to June 12, there were 255 ASX-listed companies where share prices doubled, 70 companies that tripled and 29 that quadrupled. Retail investors accounted for 80% of trades of these stocks, despite comprising just 16% of broader market activity.”

Of these 255 ASX shares, ASIC also noted 80% had negative earnings in FY2019. The remaining 20% had relatively high price-to-earnings (P/E) ratios (averaging around 55).

Foolish takeaway

The conclusion? ASIC is worried, and seems to be looking at ways to curtail these kinds of activities from ‘Robinhood traders’. Whether this comes in the form of new regulations and rules, we will have to wait and see. But I would consider the spruikers of these sorts of share trading tactics to be on watch.

More reading

• These 3 ASX stocks just got upgraded by top brokers to “buy” today
• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Bendigo and Adelaide Bank share price craters as net profit slumps 49%
• Take a look at last week’s worst performing ASX shares
• Take a look at last week’s best performing ASX shares

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia has recommended Facebook. 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 Millennials be warned! ASIC to examine irresponsible ‘social trading’ appeared first on Motley Fool Australia.

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Valuations on the S&P/ASX 200 Index (Index:^AXJO) may be looking stretched during this reporting season, but this didn’t stop brokers from upgrading three ASX stocks today.

One of these upgrade candidates is from the retail sector, which has seen the JB Hi-Fi Limited (ASX: JBH) share price and Kogan.com Ltd (ASX: KGN) share price hit record highs on strong results.

There’s expectation that the Harvey Norman Holdings Limited (ASX: HVN) could be next to reach for the stars after JPMorgan lifted its rating on the stock to “overweight” from “neutral”.

Better leverage to spending

The broker is looking for retailers that are well placed during the COVID-19 fallout that aren’t being artificially bolstered by temporary support measures. These include government wage supplements that have an expiry date and one-off withdrawals from superannuation.

“Rather, retailer success has been due to lower spending in other consumption categories,” said JPMorgan.

“This is expected to drive strong FY20 results with trading to start 1H21 to be strong, and while Melbourne Stage 4 lockdown is a negative, the size overall is modest.”

The broker upgraded Harvey Norman due to its operating leverage and exposure to the housing market. JP Morgan’s price target on the stock is $4.75 a share.

Too cheap to ignore

Another stock to get upgraded is the Metcash Limited (ASX: MTS) share price. Credit Suisse upped its call on the grocery distributor to “outperform” from “neutral” as it noted the stock is trading at a big discount to the Woolworths Group Ltd (ASX: WOW) share price.

This is unjustified as many of the tailwinds from COVID-19 that are lifting Woolies applies to Metcash.

“With macro factors expected to support expenditure on food retail and localised shopping behaviour continuing at least for the near term, Metcash is likely to experience mid-to-high single digit underlying sales growth,” said the broker.

“The near-term impact from Melbourne’s stage 4 restrictions is low as only 1% of Mitre 10 and Home Timber and Hardware stores are based in the Melbourne metropolitan region.”

Credit Suisse’s 12-month price target on Metcash is $3.47 a share.

Expanding upside

Meanwhile, the recent pullback in the Breville Group Ltd (ASX: BRG) share price prompted Goldman Sachs to lift its recommendation on the stock to “buy”.

The broker believes the market isn’t fully appreciating the earnings growth potential for the kitchen appliance maker after it posted a profit result that was ahead of Goldman’s expectations.

“BRG continues to extend its runway for growth as it expands into new geographies (Italy, Portugal and Mexico were confirmed for FY21),” said the broker.

“Our analysis shows that if BRG were to achieve 50% of the relative market penetration it has in the ANZ market in North American and European markets, we estimate its EBIT potential could be 78% higher than our current FY23E EBIT forecast.

“And if BRG achieved 100% of the relative market penetration of ANZ, its EBIT potential could be 217% higher.”

The broker’s 12-month price target on Breville is $30.35 a share.

More reading

• Millennials be warned! ASIC to examine irresponsible ‘social trading’
• ASX 200 down 0.85%: JB Hi-Fi impresses, Altium shoots higher, Bendigo and Adelaide Bank sinks
• Why Bendigo and Adelaide Bank, Kogan, NAB, & Treasury Wine are dropping lower
• Why Altium, Beach, JB Hi-Fi, & Starpharma shares are charging higher
• Bendigo and Adelaide Bank share price craters as net profit slumps 49%

Brendon Lau owns shares of Breville Group Ltd and Woolworths Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of Woolworths Limited. 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.

The post These 3 ASX stocks just got upgraded by top brokers to “buy” today appeared first on Motley Fool Australia.

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The Commonwealth Bank of Australia Ltd (ASX: CBA) released its FY20 results on Wednesday 12 August. The report reflects the impact of COVID-19 on the Australian economy but a resilient business and strong operational performance. All things considered, could the Commonwealth Bank share price be a buy for long-term investors? 

FY20 Results 

On the morning of the announcement, the Commonwealth Bank share price jumped as much as 2% before finishing the day in the red. The share price has shed more than 5% from the recent peak last Wednesday to its current price of $70.98. The company’s earnings were supported by a fundamentally strong performing business but impacted by higher loan impairment expenses due to COVID-19. While its statutory NPAT increased 12.4% on FY19, the banking behemoth’s cash NPAT fell by 11.3%. Its dividend was also slashed by 31% on FY19 to $2.98 per share. CommBank’s dividend payout ratio of 49.9% was in line with APRA’s suggestion to cap dividend payouts to 50% of earnings. 

Despite a sturdy result, the announcement highlights some inherent risks in home and business lending, which have likely been reflected in the falling Commonwealth Bank share price late last week. In the context of home lending, approximately 8% of accounts have been deferred, representing 135,000 deferrals and a total of $48 billion in balances. Of the deferrals, 25% were making some repayments and 14% had 12 months or more worth of payments already made in advance. There were however, 14% receiving JobSeeker and 58% which came from joint accounts with only one borrower on JobSeeker. 

CommBank’s business lending has active deferrals which represent 15% of balances or $14 billion. 30% have continued to make repayments in full as at 30 June. However approximately 23% of deferred accounts are classified as higher risk and approximately 30% are receiving JobKeeper. 

Should you buy the Commonwealth Bank share price? 

I believe the Commonwealth Bank share price is stuck between a rock and a hard place. It has delivered a fair result given the challenges presented by COVID-19 and record low interest rates. Its dividend payment represents a solid yield of around 4% based on the current Commonwealth Bank share price. This is despite the cut and APRA’s suggested dividend cap. In fact, its revised dividend yield is very reasonable compared to the likes of some ASX 200 companies in the real estate investment trust (REIT) and industrial sectors. 

The full impact of home and business lending deferrals may take some time to surface given factors such as government support schemes and recent ‘second wave’ concerns. All things considered, I believe the Commonwealth Bank share price is fairly valued, but there are better opportunities out there for dividend or growth plays. 

More reading

• These were the highlights of ASX reporting season last week
• Take a look at last week’s worst performing ASX shares
• Take a look at last week’s best performing ASX shares
• Is the CBA share price a buy?
• 2 easy ASX shares for a beginner to buy today

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Is the Commonwealth Bank share price a long-term buy? appeared first on Motley Fool Australia.

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The Costa Group Holdings Ltd (ASX: CGC) share price has been a positive performer in 2020 despite the pandemic.

Since the start of the year, the horticulture company’s shares have generated a return of 17.5%.

In light of this, expectations are likely to be high for Costa’s half year results on 28 August.

Ahead of the release, I thought I would take a look to see what is expected from the company when it hands in its report card.

What is expected from Costa in the first half of FY 2020?

According to a note out of Goldman Sachs, its analysts have upgraded their estimates slightly on the belief that Costa will deliver a much improved first half result.

It expects most parts of the business to be trading ahead of last year, with the exception of the Citrus business. It notes that the timing of its harvests this year means the citrus crop could push more earnings into the second half.

Nevertheless, Goldman expects first half revenue of $588.3 million. This will be up 3% on the prior corresponding period.

What about earnings?

The broker is forecasting much stronger profit growth thanks to its international business. It has pencilled in earnings before interest, tax, depreciation, and amortisation before self-generating and regenerating assets, leasing, and material items (EBITDA-SL) of $108 million. This will be a 31% increase on the prior corresponding period.

Produce EBITDA is expected to be up 15% to $54 million, whereas international EBITDA is forecast to be up 61% to $50.7 million.

Finally, on the bottom line net profit after tax before SL is expected to be $51.9 million. This will be up 27% on the first half of FY 2019.

What else should you look out for?

Goldman Sachs has suggested investors look out for costs relating to COVID-19. This includes additional labour costs required to maintain social distancing on farms and to secure labour. It will also be looking for any cost outlook commentary post-COVID.

The broker will also be looking for commentary on certain sides of the business with negative exposure to COVID-19. Goldman notes that Costa is mainly exposed to the supermarket channel, with 70% of revenue coming from here. However, it also has exposure to food service and wholesale markets. It expects these businesses to be a drag in FY 2020 given social distancing restrictions and lockdowns.

Finally, it will be looking for commentary on key produce categories. Although the company has moved away from quantitative guidance, the broker expects an update on conditions in key product categories.

Should you invest?

Goldman Sachs has a neutral rating and $3.30 price target on Costa shares at present.

This price target implies potential upside of 12% over the next 12 months, which isn’t too bad for a neutral rating. However, I’m not in a rush to invest. I would rather wait for its results release to see how it is faring and its expectations for the next six months.

More reading

• Why the Coca-Cola share price and these ASX stocks just got upgraded by brokers to “buy”
• 3 top ASX dividend shares for income investors in August
• My ASX share of the week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP 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 Earnings preview: What to expect from the Costa Group half year result appeared first on Motley Fool Australia.

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The ASX is home to a growing number of exciting tech companies. Each year the number of listed ASX tech shares continues to grow. Just a decade ago this segment was dominated by the traditional sectors of telecommunications and IT services. However, sector coverage has expanded massively since then. It now also includes ASX tech shares linked with a growing number of exciting industries such as data centres, cloud computing, the Internet of Things (IoT) and the buy now, pay later (BNPL) industry.

Here we look at 2 ASX tech shares that are on my buy list right now:  Dicker Data Ltd (ASX: DDR) and Bravura Solutions Ltd (ASX: BVS).

2 ASX tech shares to buy and hold for the long term

Dicker Data

Dicker Data is a local wholesale distributor of computer hardware, software and cloud-based solutions. The company recorded unaudited revenue for the half year to June 2020 amounting to $1 billion. That was a solid 18.3% increase over the prior corresponding period. Heightened demand for remote working solutions during the pandemic was a significant reason for this increase. This also contributed to the strong Dicker Data share price growth we’ve witnessed since April.

What really appeals to me about Dicker Data as an ASX tech share is that it pays an attractive fully franked dividend. At the time of writing, it provides a forward dividend yield of 4.04%. Grossed up, that amounts to an annual return of 5.77%.

I believe that Dicker Data is well placed to maintain this strong dividend in the years to come, as well as seeing additional share price growth. Growth will be driven by its entrenched local market position and a growing demand for local ICT services.

Bravura

Another ASX tech share that is in my buy zone right now is Bravura. This locally based fintech company provides mission-critical enterprise software solutions for the wealth management and funds administration industries.

Despite a dip in the early phase of the coronavirus pandemic, this locally based tech company has seen very strong share price growth over the past 3 years.

I am confident that the Bravura growth story is set to continue over the next few years, driven by increased demand for its industry leading wealth and fund management product set.

Bravura also pays a forward annual dividend yield of 2.5% at the time of writing.

Foolish takeaway

Dicker Data and Bravura are both quality ASX tech shares with strong growth prospects over the next 5 years. In addition, both companies pay an attractive dividend. That’s rare to find amongst tech companies.

More reading

• 3 ASX dividend shares offering generous yields
• Rates on hold until 2023? Buy these ASX dividend shares
• 2 ASX growth shares to buy with $2,000
• 2 ASX dividend shares for income investors to buy right now
• 3 exciting ASX growth shares to buy with $3,000

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd and Dicker Data 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 2 top ASX tech shares to buy and hold beyond 2026 appeared first on Motley Fool Australia.

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The Baby Bunting Group Ltd (ASX: BBN) share price has gained 26.4% so far in August. That’s compares to a 2.8% gain from the All Ordinaries Index (ASX: XAO) over the same period. In late morning trading today, the company’s shares are up 5.8% from Friday’s close while the All Ords is down 0.7%

Year to date, the Baby Bunting share price is up 35%, giving the company a market capitalisation of $561 million at the current price of $4.40 per share.

That gain masks the gut wrenching, 60% decline seen by the Baby Bunting share price during the COVID-19 driven sell off from 13 February through to 19 March. But investors who held on — or were lucky enough to buy at the low — were handsomely rewarded. Baby Bunting’s share price has gained a stellar 188% since the company’s 19 March low.

What does Baby Bunting do?

Baby Bunting was established in Melbourne in 1979 as a family-owned business. The company began trading on the ASX in October 2015. Today it’s ranked as Australia’s largest specialty nursery retailer and one-stop baby shop.

Baby Bunting currently has 56 stores across Australia. These offer a broad selection of prams, car seats, cots, nursery furniture, high chairs, bathing and feeding accessories, toys, and of course babywear.

Why is the Baby Bunting share price up 26% in August?

Baby Bunting has been a strong performer all year, with the notable exception of the viral sell-off in the February/March bear market.

The company’s ability to shift much of its sales to its online platform demonstrates the value in adaptability during times of change and immense uncertainty.

This was confirmed when Baby Bunting released its full year results on Friday. The company reported an 11.8% increase in total sales, which reached $405.2 million. Online sales growth was an impressive 39.1%, with online sales reaching 14.5% of total sales over the 12-month period.

Baby Bunting also opened 5 new stores during the financial year, reporting comparable store sales growth of 4.9%. It also confirmed its plans to open 4 to 6 new stores over the coming year.

The company declared a final, fully-franked dividend of 6.4 cents per share, bringing its full year dividend to 10.5 cents per share.

With its success in growing online sales and plans for store expansions, I think the Baby Bunting share price will be one to watch moving forward.

More reading

• Leading brokers name 3 ASX shares to buy today
• ASX 200 rises 0.6%, Mesoblast soars
• Why Baby Bunting, Evolution, Mesoblast, & Xero shares are zooming higher
• Baby Bunting share price in focus after strong FY 2020 profit growth despite the pandemic
• 3 ASX small cap shares with serious growth potential

Motley Fool contributor Bernd Struben 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 Why the Baby Bunting share price is up 26% in August appeared first on Motley Fool Australia.

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