Category: Stock Market

If you’re wanting to invest in the tech sector, then you may want to consider Hub24 Ltd (ASX: HUB) shares.

That’s the view of analysts at Bell Potter, which see value in the investment platform provider’s shares and a huge long-term growth opportunity.

What is the broker saying about this ASX tech stock?

Firstly, if you’re not familiar with the company, it is a specialist investment platform provider with over $100 billion in funds under administration (FUA). The vast majority of this relates to custodial services that provide financial intermediaries with a consolidated way to acquire, hold, and administer a broad range of investments.

Last week, Bell Potter initiated coverage on the ASX tech stock with a buy rating and $53.20 price target.

Based on its current share price of $46.88, this implies potential upside of approximately 13.5% for investors over the next 12 months.

Commenting on its initiation, the broker said the following:

We initiate on HUB with a Buy recommendation and a Target Price of $53.20 p/s. Our favourable investment view is supported by: (1) changes in advice, with investment professionals shifting away from institutionally owned platforms while seeking comprehensive technology solutions; (2) single digit market share and leading capital flows; and (3) increases to the super guarantee contribution and rollovers into self-managed super funds.

$600 billion opportunity

Bell Potter highlights that the area of the market that Hub24 operates is suffering from a lack of investment in technology. In light of this, it sees Hub24 as well-positioned to capture an estimated $600 billion in FUA from incumbents on legacy systems. It adds:

Traditional Dealer Group attrition and a decade of underinvestment in technology has been a tailwind for specialist platform providers. Incumbents with legacy systems have ~$600bn in total FUA that could be redistributed in the medium-term. Adviser ratings recognised HUB as the best functional platform for the second consecutive year and we see this as an opportunity to upsell on capital flows.

So, with this ASX tech stock having such a bright future and trading at a discount to rival Netwealth Group Ltd (ASX: NWL), it feels now is the time for investors to invest. Bell Potter concludes:

Netwealth is trading on a blended 1 year forward EV/EBITDA of 32.9x with lower forecast FUA and mature EBIT margins. We don’t believe HUB’s trading discount of ~26% is justified and see the potential for it to rerate, predicated on superior technology, recurring revenue growth and operating leverage.

The post Buy this ASX tech stock with a $600b opportunity appeared first on The Motley Fool Australia.

More reading

• The best ASX 200 share of each market sector in FY24
• Shares vs. property: Which delivered the best growth in FY24?
• These 2 ASX 200 stocks just scored substantial broker upgrades
• Brokers just put buy ratings on these ASX 200 tech stocks
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Hub24 and Netwealth Group. The Motley Fool Australia has positions in and has recommended Netwealth Group. The Motley Fool Australia has recommended Hub24. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Core Lithium Ltd (ASX: CXO) share price is soaring higher today.

Shares in the All Ordinaries Index (ASX: XAO) lithium stock closed Friday trading for 9.1 cents. In morning trade on Monday, shares are swapping hands for 9.9 cents apiece, up 8.8%.

For some context, the All Ordinaries Index (ASX: XAO) is down 0.2% at this time.

This outperformance follows the release of the lithium miner’s preliminary results for FY 2024, which caught a raft of short sellers wrong-footed today.

Here’s what the company just reported.

Why is the Core Lithium share price surging?

Investors are bidding up the Core Lithium share price on Monday after the company revealed it had exceeded its FY 2024 production guidance. Over the 12 months, Core produced 95,020 dry metric tonnes (dmt) of spodumene concentrate and shipped 97,423 dmt.

That tops management’s revised guidance of 90,000dmt-95,000dmt of production. And the spodumene concentrate sales exceeded revised guidance of 80,000dmt-90,000dmt.

This was aided by the quarter just past, which saw record shipments of spodumene concentrate of 33,027 dmt, atop of 19,771 dmt of lithium fines.

Lithium fines sales in FY 2024 came in at 66,140 dmt.

And the balance sheets took a turn for the better, with Core Lithium reporting an unaudited cash balance of $87.6 million at 30 June, up from $80.4 million at the end of March. The company has no debt.

The miner said it will now pause its Finniss operations, with restart assessments currently underway. It will now prioritise the safe preservation of the Finniss assets in a restart ready state.

Core is also preparing to commence drilling programs at Shoobridge, Finniss and Napperby. Results of that drilling campaign are expected in the coming months.

What did management say?

Commenting on the results sending the Core Lithium share price soaring today, CEO Paul Brown said, “I would like to commend the team on the operational performance in FY24, particularly the safe and orderly cessation of production activities at Finniss while achieving record production and shipments.”

Brown added:

Our commitment is to judiciously protect our balance sheet by reducing costs across the organisation and making prudent investments in our assets where we believe it can grow shareholder value.

Central to this is putting Finniss in a position where operations can rapidly resume with minimal capital. This would only occur when we are confident the lithium market conditions support such a decision.

Our strategic focus will be on making Finniss a more robust operation in the future, and exploration is a key enabler of this.

In FY 2025, we will be drill testing priority targets around Finniss, potentially adding meaningful life to future lithium mining operations. We will also be advancing earlier stage, low multi-commodity exploration activities within our Northern Territory landholding to demonstrate the value in these projects.

Our business will stay agile and prepared for future opportunities, both within the company and externally, as they arise.

Core Lithium share price snapshot

Despite today’s bounce, the Core Lithium share price remains down 89% over 12 months.

The post Core Lithium share price leaps 9% as results catch short sellers by surprise appeared first on The Motley Fool Australia.

More reading

• Why did the Core Lithium share price crash 90% in FY 2024
• Guess which 2 ASX All Ordinaries shares were the best and worst performers of FY24?
• ASX lithium shares: Screaming bargains or falling knives?
• Which ASX lithium shares are financially primed to survive this rut?
• Will FY25 be kinder to Core Lithium shares?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Accent Group Ltd (ASX: AX1) is a leading shoe retailer, but it’s also usually an impressive ASX dividend share. In 2026, it’s projected to have a very large dividend yield.

This business acts as the distributor for a number of global shoe brands including Vans, Hoka, Kappa, Skechers, Herschel, Sebago, Merrell, CAT, Saucony, Dr Martens, Palladium, Ugg, Autry, Superga and Timberland.

It also owns several businesses, including The Athlete’s Foot, Nude Lucy, Article One, Stylerunner, Lulu and Rose, Platypus, Glue Store, and Hype.

Due to its retail nature, the business usually trades on a relatively low price/earnings (P/E) ratio, which can enable a fairly high dividend yield.

Huge projected dividend yield

Accent’s FY24 result may show some disappointing year-over-year profit numbers because of the weak consumer environment at the moment. Households don’t have as much to spend at the moment because of high interest rates, high rent and inflation of other costs.

However, conditions could start improving in FY25 and rebound in FY26, according to the projections on Commsec.

The ASX dividend share is predicted to pay an annual dividend per share of 12.2 cents in FY24. That’d be a grossed-up dividend yield of 9.4%.

In 2025, owners of Accent shares could receive a dividend per share of 13.5 cents. If that projection comes true, it will equate to a grossed-up dividend yield of 10.4%.

Then, in 2026, the company could pay an annual dividend per share of 15 cents. Incredibly, that implies a possible grossed-up dividend yield of 11.5%. There aren’t many S&P/ASX 300 Index (ASX: XKO) shares that are projected to pay a dividend yield of more than 10% in FY26.

Can the ASX dividend share’s earnings grow?

FY24 is likely to be a fairly weak report, but I think there could be positives to focus on regarding the future.

Australian inflation has reduced compared to last year, which could mean that Accent’s costs, like rent and wages, stop increasing as fast in FY25 and FY26.

One of the main drivers of Accent’s earnings for the foreseeable future is its ongoing store rollout. It reached 888 stores in the FY24 first half and planned to open at least 20 new stores in the second half of FY24.

The company sees a continued store rollout opportunity “in both its core banners and new businesses.” The ASX dividend share also believes there is a “significant growth opportunity” with its online sales as well.

Pleasingly, the underlying gross profit margin continues to improve, which can support the other profit margin levels.

Another positive for Accent is that its total ‘owned’ sales in the year to date to the end of January were up 1.6%.

According to the estimate on Commsec, the Accent share price is valued at just 11x FY26’s estimated earnings.

The post Could this ASX dividend share offer a huge 11% yield in 2026? appeared first on The Motley Fool Australia.

More reading

• Analysts say these ASX dividend stocks with ~7% yields are top buys
• 3 cheap ASX passive income shares I’d buy to target $1,000 a month
• Which ASX dividend shares are predicted to have the highest yields in FY25?
• 2 high-yield ASX shares predicted to pay huge dividends in FY26
• Forget term deposits and buy these ASX dividend shares

Motley Fool contributor Tristan Harrison has positions in Accent Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Zip Co Ltd (ASX: ZIP) shares wrapped up FY24 on a high. Over the 12 months to June 28 2024, shares in the buy now, pay later (BNPL) stock soared 256% into the green.

The benchmark S&P/ASX 200 index (ASX: XJO) didn’t even come close to that result.

Investors are eager to know what the future holds for the BNPL player. Especially as gains have continued into the new financial year.

Let’s dive into the factors driving the recent performance and explore the expert outlook for FY25.

Why are Zip shares soaring?

Zip share price performance was impressive through the COVID-19 pandemic years. Investors sent the stock on a meteoric rise to an all-time high of $12.35 per share in February 2021.

They plunged not long after, wiping billions in market capitalisation from the company’s value. The selling continued until October last year when investors returned to buy Zip shares at lows of 25.5 cents per share.

Fast forward to today, and Zip shares have rebounded to their current price of $1.65.

Zip’s business performance under new management has been a major driver of its stock price recently. The company shifted from an aggressive growth strategy to a more sustainable, profitable model, garnering positive sentiment from investors.

Tyndall Asset Management’s James Nguyen highlighted this transformation as a key differentiator from its BNPL peers. Speaking to The Australian Financial Review, Nguyen said:

[Zip] was previously a market darling, capitalised at over $6 billion despite reporting losses of more than $200 million per annum. Higher interest rates, loose credit leading to high bad debts, and a weaker consumer resulted in significant shareholder value losses.

While the macro environment is now more supportive, it is the company-specific turnaround under new management that sets Zip apart from its BNPL counterparts. Growth for growth’s sake has been abandoned, as has its international domination aspirations, and in place is a sustainable, profitable growth strategy.

Nguyen says Zip’s focus on profitability over growth for growth’s sake is paying off. Within 18 months, the company expects to earn nearly $100 million in earnings before interest, tax, depreciation, and amortisation (EBITDA).

Additionally, Apple Inc.’s (NASDAQ: AAPL) decision to cancel its BNPL service in the United States, Apple Pay Later, appears to have increased investor confidence. This reduction in competition could help Zip increase its market share in the lucrative American market.

What’s next for Zip shares in FY25?

UBS and Ord Minnett both maintain buy ratings for Zip shares, setting price targets of $1.55 apiece, respectively.

According to CommSec, the stock is rated a buy from consensus. Out of the seven firms covering Zip, five rate it a buy directly, four say it’s a hold, and one firm rates it a sell.

Looking ahead, Zip’s ability to maintain its profitability focus while growing market share will be crucial, in my view.

One key area to monitor is Zip’s performance in the US market, where it has shown significant growth. Apple’s decision to withdraw from the BNPL race could be a tailwind.

Setting context for this, in its most recent quarterly results, Zip reported a 14.6% year-on-year increase in transaction volume to $2.4 billion despite a 3% rise in active customers to 6 million.

But US revenues were up more than 49% to US$74.3 million, underscored by a 43% growth in transaction volume there.

Foolish takeaway

Zip shares have delivered stellar gains in FY24, locking in triple-digit gains for the year.

As the company continues its transformation under new management, the outlook for FY25 remains promising but requires careful monitoring. As always, remember to conduct your own due diligence.

The post Zip shares FY24 recap: Up 256%, what’s next for FY25? appeared first on The Motley Fool Australia.

More reading

• 5 ASX All Ords shares that rose 250% to 700% in FY24
• Zip shares surge 10%, bringing gains to 55% in a month
• The three best ASX All Ords shares to buy and hold in FY 2024 unveiled
• Could Apple’s latest move boost Zip shares?
• Has the Zip share price ‘risen too rapidly’?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Zip Co. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

A number of ASX 200 gold stocks are pushing higher on Monday. This has led to the S&P/ASX All Ords Gold index rising by an impressive 1.7% in morning trade.

This catalyst for this has been a solid rise in the gold price on Friday night amid interest rate cut hopes.

In addition, a couple of updates have given the shareholders of two ASX 200 gold stocks a reason to smile today. Let’s dig a little deeper into these updates now:

Ramelius Resources Ltd (ASX: RMS)

The Ramelius share price is up 3.5% to $1.98. This morning, this ASX 200 gold stock revealed that it achieved a production record of 293,033 ounces for FY 2024. This means that it has hit the upper end of its upgraded guidance of 285,000 to 295,000 ounces.

Another positive is that management expects its full year all-in sustaining costs (AISC) to be at the lower end of its upgraded guidance range of A$1,550 to A$1,650 per ounce.

This underpinned total free cash flow of A$315.8 million for the 12 months, boosting its cash and gold balance to A$446.6 million. The latter is up from a balance of $272.1 million at the end of FY 2023.

Regis Resources Ltd (ASX: RRL)

The Regis Resources share price is up 6.5% to $1.89. Investors have been buying this ASX 200 gold stock after it released its fourth quarter update.

During the quarter, the operational performance across its Duketon and Tropicana operations continued to recover from the major rain events that occurred in March. This led to Duketon producing 75,600 ounces of gold, resulting in FY 2024 gold production of 289,900 ounces. This is within its FY 2024 production guidance range.

Tropicana, which management notes experienced more significant impacts from the rain, has had a slower recovery. It produced 30,800 ounces of gold, resulting in FY 2024 gold production of 127,800 ounces. This was below its FY 2024 production guidance range.

Nevertheless, this couldn’t stop the gold miner from achieving production of 417,700 ounces of gold for the year. This was within its group production guidance range for the year.

And with Regis Resources now fully unhedged and receiving a $20 million tax refund, it reported a record $109 million increase in its quarterly cash and bullion balance. At the end of the period, its cash and bullion balance was at its highest ever level of $295 million.

The post 2 ASX 200 gold stocks racing higher on record results appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Tuesday
• Buy these ASX 200 shares that could rise 30%+ before it’s too late
• Here are the top 10 ASX 200 shares today
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The market may be having a subdued start to the week, but that hasn’t stopped one ASX mining stock from rocketing higher today.

At the time of writing, Rex Minerals Ltd (ASX: RXM) shares are up 65% to 45.5 cents.

Why is this ASX mining stock rocketing?

Investors have been scrambling to get hold of the copper and gold developer’s shares after it received and accepted a takeover offer.

According to the release, Rex Minerals has entered into a scheme implementation deed with MACH Metals Australia.

Under the scheme, it is proposed that MACH will acquire all of the shares in Rex Minerals which it does not already own for cash consideration of 47 cents per share. This represents a 71% premium to where the ASX mining stock ended last week and values the company at $393 million.

The release notes that the MACH offer was received following a competitive global partnering process. This process was focused on the $854 million funding and subsequent development pathway for the Hillside Copper-Gold Project in South Australia.

The Rex Minerals board carefully assessed the offer against a range of other alternatives. After taking into account the risks and potential ownership dilution associated with a stand-alone development of Hillside, it decided the offer was the superior option.

As a result, the ASX mining stock’s board unanimously recommends that shareholders support the transaction by voting in favour of it. This is in the absence of a superior proposal and subject to the independent expert’s report.

‘Significant premium’

Rex Minerals’ CEO and managing director, Richard Laufmann, said:

The Transaction provides certainty of value and a significant premium representing a 98% uplift relative to Rex’s 90-day VWAP, as well as the opportunity for Rex shareholders to realise their investment at a 10-year historical share price high. This Transaction also represents a more certain outcome for wider stakeholders in Hillside, including the local community, the South Australian Government and Rex employees who will benefit from the significant financial strength and proven track record of MACH to deliver the successful development of Hillside.

The South Australian Government has been a leader in Australia in support of decarbonisation and copper development. The successful development of Hillside will very much align with their strategy. Subject to approvals, we look forward to working with MACH through to completion and watching them develop the Hillside Project, Australia’s largest fully permitted and shovel ready copper project.

The post Guess which ASX mining stock is rocketing 65% on takeover deal appeared first on The Motley Fool Australia.

More reading

• Could this ASX dividend share offer a huge 11% yield in 2026?
• Zip shares FY24 recap: Up 256%, what’s next for FY25?
• 2 ASX 200 gold stocks racing higher on record results
• Why I’m bullish about this exciting ASX small-cap share
• Is this ASX ETF the best way to invest in Australian property?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The ASX small-cap share section of the market is full of stocks with the potential to deliver good returns. An ASX tech small cap with a compelling future is particularly exciting because it can deliver higher profit margins.

One such company is Airtasker Ltd (ASX: ART). It claims to be Australia’s leading online marketplace for local services, connecting people and businesses that need work done with people who want to work.

Airtasker shares have been trending higher in the last couple of weeks, as shown in the chart above. I believe there is plenty more to come over the long term.

High gross profit margin

Airtasker has an enormous gross profit margin of more than 90%, which means that almost all of its revenue turns into usable gross profit. With gross profit, the business can spend on growth activities such as advertising and development while also potentially achieving stronger cash flow and better earnings before interest, tax, depreciation and amortisation (EBITDA) margin.

The business is now achieving profit rather than losses, which is an important milestone.

In the third quarter, Airtasker achieved a positive free cash flow of $2.5 million, an improvement of $5.1 million year over year. The group EBITDA was $0.6 million in the third quarter, up $1.5 million compared to the prior corresponding period.

Thanks to growing scale benefits, I think the cash flow margin and EBITDA margin can significantly increase in the coming years.

Strong revenue growth

With good margins, the ASX small-cap share just needs to grow its revenue to deliver good financial progress.

The business revealed its group revenue was $12.2 million in the third quarter of FY24, with Airtasker marketplace revenue growing by 11.5% to $10.1 million.

The company said the revenue growth was driven by a “recovery in consumer demand (posted tasks) from the prior year as well as successful funnel optimisation programs, including a revised cancellation policy designed to improve platform reliability and address task leakage.”

Those programs saw cancellations reduce by 23.9% year over year, resulting in the ‘monetisation rate’ improving by 12.8% year over year to 20.5% for the ASX small-cap share.

Airtasker recently made agreements with media businesses oOh!Media Ltd (ASX: OML) and ARN Media Ltd (ASX: A1N) for $11 million to grow its brand awareness.

Large addressable market

Users can advertise almost any task on Airtasker, including removalists, home cleaning, furniture assembly, deliveries, gardening and landscaping, painting and other handyperson work, business and admin, photography, and many more. There are many categories with a high annual value of work.

Airtasker is growing rapidly in the United Kingdom — a much bigger market than Australia — partly thanks to its partnership with Channel 4. In the FY24 third quarter, UK posted tasks increased by 49.1% year over year.

It has a smaller presence in the United States, but it’s growing there too. FY24 US gross marketplace value (GMV) went up 23% from a small base. It’s seeing “healthy growth” in marketplace activity while “maintaining a disciplined approach to investment” as it explores “several media partnership opportunities.”

I think the international growth could power this ASX small-cap share much higher.

The post Why I’m bullish about this exciting ASX small-cap share appeared first on The Motley Fool Australia.

More reading

• Could this ASX dividend share offer a huge 11% yield in 2026?
• Zip shares FY24 recap: Up 256%, what’s next for FY25?
• 2 ASX 200 gold stocks racing higher on record results
• Guess which ASX mining stock is rocketing 65% on takeover deal
• Is this ASX ETF the best way to invest in Australian property?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Vanguard Australian Property Securities Index ETF (ASX: VAP) is one of the larger exchange-traded funds (ETFs) in Australia.

It gives investors exposure to the commercial property sector by investing in real estate investment trusts (REITs) within the S&P/ASX 300 Index (ASX: XKO). The ASX ETF is approximately $3 billion in size and has 33 holdings.

There are a couple of reasons why this ASX ETF could be a good way to invest in property. Let’s take a look.

Diversification

The VAP ETF is invested in several property sectors, including industrial, retail, office, self-storage, healthcare, hotels, farming, and more.

The larger the business, the greater its weighting in the Vanguard Australian Property Securities Index ETF portfolio.

I’ll point out that one REIT owns a portfolio of properties, which is much more diversified than a single residential property. This ASX ETF owns a portfolio of REITs, so there are a lot of underlying properties.

At 31 May 2024, these were the biggest 10 positions:

• Goodman Group (ASX: GMG) – 37.9%
• Scentre Group (ASX: SCG) – 10.7%
• Stockland Corporation Ltd (ASX: SGP) – 7%
• GPT Group (ASX: GPT) – 5.2%
• Mirvac Group (ASX: MGR) – 5%  
• Vicinity Centres (ASX: VCX) – 4.9%
• Dexus (ASX: DXS) – 4.75%
• Charter Hall Group (ASX: CHC) – 3.75%
• National Storage REIT (ASX: NSR) – 1.85%
• Region Re Ltd (ASX: RGN) – 1.6%

At the end of May 2024, it included three REIT sectors with large weightings: industrial REITs (39.5% of the portfolio), diversified REITs (24%), and retail REITs (23.9%).

Low costs

One of the main advantages of choosing a Vanguard ETF is that they usually have low management fee costs. Low expenses mean more of the returns stay in the hands of investors.

According to Vanguard, the VAP ETF has an annual management fee of 0.23%.

My 2 cents on this ASX ETF

I think it’s an effective investment for people wanting exposure to the property market through REITs.

It hasn’t exactly shot the lights out. Over the past ten years, the VAP ETF has returned an average of 9.3%, with 5.2% of that being a distribution return.

It is a decent option for passive income but may not produce much capital growth because of the relatively low rental growth of some of the underlying businesses. If investors prefer a particular sub-sector, they could just go for a specific REIT such as Goodman or Scentre.

The post Is this ASX ETF the best way to invest in Australian property? appeared first on The Motley Fool Australia.

More reading

• Would Warren Buffett buy this impressive ASX 300 stock?
• 3 ASX 200 passive income stocks to buy in July
• 1 ASX dividend stock down 28% to buy right now
• Buy these ASX uranium stocks for big returns in FY25
• How did the Vanguard Australian Shares Index ETF (VAS) perform in FY24?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group. The Motley Fool Australia has positions in and has recommended Region Group. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

I think S&P/ASX 300 Index (ASX: XKO) stock Nick Scali Limited (ASX: NCK) is one of the more exciting ASX retail shares around. It could be the sort of business that legendary investor Warren Buffett may want to buy.

During his stewardship of Berkshire Hathaway, Buffett has demonstrated an incredible ability to invest in the right businesses at the right time. He has led the investment house to become one of the biggest companies in the United States and, indeed, the world.

The first question is whether Buffett would consider a furniture retailing business like Nick Scali. Berkshire actually owns a few furniture businesses, including Star Furniture, RC Willey Home Furnishings, and Jordan’s Furniture.

But there are a few things that make Nick Scali more interesting than an average furniture retailer.

Large store rollout planned

Nick Scali already has a sizeable national network of stores across Australia and New Zealand. The company aims to grow its Nick Scali store network from 64 stores in December 2023 to 86 stores over the long term.

The ASX 300 stock also owns the furniture retailer Plush, which had 44 stores in December 2023. In the long term, the company aims to grow to 90 to 100 stores.

Nick Scali has a long domestic growth runway, which is a big positive.

The stock also recently completed the acquisition of a company in the United Kingdom that trades under the name Fabb Furniture. Nick Scali paid just $3.82 for the business, which came with $6.7 million of secured debt. The furniture retailer also paid $1 million to exercise its option to exit the existing distribution centre arrangement. This will provide a net working capital injection of up to $11.5 million.

Nick Scali intends to invest further in the existing Fabb Furniture network and establish the Nick Scali brand in the UK. Its strategy will include store refurbishments, rebranding, establishing a new distribution centre, and new store openings. There will be a transition to the Nick Scali product range, and it will leverage its buying power and supply chain.

Considering the UK’s population is more than double Australia’s, I think this ASX 300 stock has plenty of growth potential there.

Excellent return on equity

One of the best profit measures is a company’s return on equity (ROE). This tells the market how much profit the business is making on retained shareholder money.

A high ROE can suggest it’s an appealing business, and it can earn good returns on additional generated profit, which is retained in the company.

Nick Scali’s ROE of more than 50% in FY23 suggests it’s very profitable for shareholders. I believe that expanding the store network in Australia and, hopefully, the UK can unlock significant additional profit.

Appealing metrics

ASX retail shares usually trade on a relatively appealing earnings multiple compared to other sectors. This can lead to a cheap price/earnings (P/E) ratio and a good dividend yield if the company pays a dividend.

According to the estimates on Commsec, Nick Scali shares are trading at 15x FY25’s estimated earnings and 12x FY26’s estimated earnings.

Nick Scali is projected to pay a grossed-up dividend yield of 6.7% in FY25 and 7.8% in FY26.

Whilst the ASX 300 stock is not as cheap as it could be, I think Nick Scali shares would appeal to Warren Buffett because of its quality, growth plans and lower share price – it’s down 16% since April 2024.

The post Would Warren Buffett buy this impressive ASX 300 stock? appeared first on The Motley Fool Australia.

More reading

• 9 ASX All Ords shares lifted to ‘strong buy’ consensus ratings in June
• 3 ASX retail shares that could benefit from potential interest rate cuts

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nick Scali. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Australian share market is a great place to generate passive income thanks to the countless dividend-paying stocks that trade on the local bourse.

But which ASX 200 passive income stocks could be in the buy zone for investors this week?

Let’s take a look at three options that brokers have named as buys and tipped to offer very attractive dividends yields in the near term. They are as follows:

IPH Ltd (ASX: IPH)

The first ASX 200 passive income stock that could be a buy is IPH. It is a global intellectual property (IP) services company with a network of member firms across 10 IP jurisdictions.

Goldman Sachs is a fan of the company and currently has a buy rating and $8.70 price target on its shares.

Its analysts are bullish due to the company’s “defensive earnings, strong cash flow, M&A optionality and potential MtM FX upside.”

As for income, Goldman is forecasting fully franked dividends of 34 cents per share in FY 2024 and then 37 cents per share in FY 2025. Based on the current IPH share price of $6.21, this represents yields of 5.5% and 6%, respectively.

Suncorp Group Ltd (ASX: SUN)

Goldman Sachs also think that Suncorp could be a top ASX 200 passive income stock to buy. The broker currently has a buy rating and $18.00 price target on the insurance giant’s shares.

Its analysts believe that Suncorp is well-positioned to benefit from tailwinds in the general insurance market.

The broker expects this to underpin fully franked dividends of 79 cents per share in FY 2024 and then 85 cents per share in FY 2025. Based on the current Suncorp share price of $16.80, this will mean attractive dividend yields of 4.7% and 5.1%, respectively.

Transurban Group (ASX: TCL)

The team at UBS thinks toll road operator Transurban could an ASX 200 passive income stock to buy right now. The broker currently has a buy rating and $14.80 price target on its shares.

UBS likes the company due to its positive outlook and belief that its margins are improving thanks to lower costs. Another reason to be positive is that the West Gate Tunnel project is on track to complete next year and be another boost to its earnings and dividends.

For now, the broker is forecasting dividends per share of 63 cents this year and then 66 cents in FY 2025. Based on the current Transurban share price of $12.38, this will mean yields of 5.1% and 5.3%, respectively.

The post 3 ASX 200 passive income stocks to buy in July appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• 5 ASX dividend shares to buy next week
• Brokers name 3 ASX shares to buy now
• The best ASX 200 shares to buy when interest rates fall
• 3 strong ASX dividend stocks for income investors to buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Transurban Group. The Motley Fool Australia has recommended IPH. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.