Category: Stock Market

Profits are nosediving for our ASX listed airlines as the COVID-19 pandemic grounded nearly all air travel.

But there’s one in the sector that’s made a big profit upgrade, and chances are you haven’t heard of the stock before.

The airline is Alliance Aviation Services Ltd (ASX: AQZ), which issued a trading update yesterday and forecasted a FY20 profit before tax (PBT) that is excess of $40 million.

This is a big step-up from its March guidance of less than $33 million.

Best performing ASX airline

Most would have missed the good news as Qantas Airways Limited (ASX: QAN), Regional Express Holdings Ltd (ASX: REX) and the defunct Virgin Australia Holdings Limited (ASX: VAH) dominated headlines.

While much is written about the Qantas share price surging 50% since the bear market trough in March, it’s the Alliance Aviation share price that takes the crown for the sector as it flew 155%.

Credit Suisse calls Alliance “Australia’s most profitable airline” and management’s profit upgrade is well above the broker’s $24 million PBT estimate for the current financial year.

Earnings taking off

“Some of the significant tailwinds in the 4Q are one-off (namely more FIFO [fly-in, fly-out] flights post social distancing rules),” said the broker.

“However, of more relevance are medium-term contracts with new customers won as AQZ steps into the breach vacated by other RPT operators.”

Alliance operates Regular Public Transport (RPT), leases aircraft and provides other aviation services.

One of its customers was Virgin Australia, which went into voluntary administration but may be brought back to life by new owners.

Virgin to provide second tailwind

Regardless of what happens to Virgin, Credit Suisse believes Alliance is well placed to benefit in the new post COVID-19 world order.

If Virgin is revived, the new operators will likely continue to or expand aircraft leasing from Alliance to contain costs. On the other hand, should Virgin be permanently shuttered, Alliance is best placed to fill the RPT and FIFO hole left by Virgin, explained Credit Suisse.

“The second scenario would obviously require additional fleet (particularly given AQZ’s upgraded FIFO presence post recent events) and the market for aircraft presently favours the buyer,” said the broker.

More upside in the wings

Credit Suisse reiterated its “outperform” recommendation on the stock and upgraded its 12-momth price target to $3.20 from $1.90 a share.

But the valuation may prove to be too conservative. The price target assumes that wet lease (short-term aircraft leases) hours returns to pre-coronavirus levels in FY23. There’s a real possibility that this will rebound sooner.

More reading

• ASX retail stocks facing new billion-dollar earnings scare during COVID-19 recovery
• 2 ASX 200 dividend shares to buy for income in 2021
• This ASX 200 stock has rocketed 63% in 2 months. Is the Ansell share price still a buy?
• The Qantas share price is up 76% from its low: Is it too late to invest?
• 5 dark horse ASX shares that have tripled in the last 2 months

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) dropped 0.4% today after investors realised there was a potential threat to Australian iron ore miners from China.

Potential problems for the Australian iron ore sector

According to reporting by the Australian Financial Review, China is changing the supervising rules for inspecting iron ore.

The worry is that China could cause major disruptions to Australia’s iron ore exports. It could mean Australian iron ore gets checked but Brazilian imports don’t have the same checks. That could be bad for ASX 200 miners like BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG). 

But BHP isn’t worried about it and actually thinks it could lead to a quicker process. Fortescue also confirmed it was part of a process that has been in the works for years.

Plenty of people are linking Australia’s support for a coronavirus inquiry to a potential backlash by China. We have already seen the Asian superpower put tariffs onto Australian barley.

Service Stream Limited (ASX: SSM) share price drops 6%

The company warned there are negative impacts. Those impacts largely relate to delivering safe field-based operations. Also, some clients are temporarily pausing some work programs and some individual minor projects have been delayed.

The company is now expecting earnings before interest, tax, depreciation and amortisation (EBITDA) from operations to be $108 million. It would still be a record operating result for the company.

Service Stream said its balance sheet, cashflow and liquidity remains “very strong”. Management still expect the company to pay a dividend, unlike some other ASX 200 shares.

Afterpay Ltd (ASX: APT) keeps growing in the US

Afterpay said that Afterpay US has now reached 5 million active customers.

In reaction to this news the Afterpay share price rose by 2.6% to finish the day at $44. But at one point the Afterpay share price went up to $45. Today saw a new all-time high for the ASX 200 share.

However, investors also learned that global ecommerce giant Shopify is planning to launch a buy now, pay later service for customers.

Aristocrat Leisure Limited (ASX: ALL) releases its result

The ASX 200 gambling business announced its half-year result today.

Operating revenue rose by 7% to $2.25 billion and normalised net profit fell 14.2% to $305.9 million. However, reported net profit rose 277.2% to $1.3 billion which included the recognition of a $1 billion deferred tax asset.

But no interim dividend was declared so that liquidity remains as strong as possible.

More reading

• Why the share price of this top dividend share just sank 6%
• Is China about to blow up the dividends of BHP, Rio and Fortescue?
• 5 dark horse ASX shares that have tripled in the last 2 months
• A global tech giant wants to challenge Afterpay
• These ASX payments shares could be long term market beaters

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Service Stream Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I’ve been looking at IPOs recently to see how you would have fared if you had invested in them.

One of the most successful has been the CSL Limited (ASX: CSL). As I revealed here, a $10,000 investment in the biotherapeutics company’s IPO would have left you very wealthy.

A more recent IPO was undertaken by ecommerce company Kogan.com Ltd (ASX: KGN). Let’s have a look and see how successful investing in this would have been.

The Kogan IPO.

Kogan listed on the Australian share market just under four years ago on 30 June 2016. The company’s shares were listed at $1.80 per share, giving it a market capitalisation of $168 million.

This means that if you invested $10,000 into its IPO, you would have ended up with approximately 5,556 shares.

At that point Kogan was generating sales of $200 million and was targeting an increase to $240 million in FY 2017. Fast-forward to today and Kogan is now generating more than both these in just one half. In the first half of FY 2020 the company delivered gross sales of $322.9 million.

And given its strong performance in the third quarter and in April, it looks set to smash records and deliver bumper sales growth this year.

Kogan share price hits a record high.

Unsurprisingly, this strong performance has been reflected in its share price. Earlier today’s Kogan’s shares stormed to a record high of $9.56.

When its shares hit that level, it meant they had gained an impressive 431% since their IPO in June 2016.

This means those 5,556 shares you would have picked up at the IPO would have a market value of ~$53,515. I think that’s an excellent return in such a short space of time.

And let’s not forget that the Kogan story is only really starting. Given the rise of online shopping and the growing popularity of its offering, I suspect there could be more strong returns to come over the next decade.

In light of this, I wouldn’t be cashing in my shares any time soon if I invested in the IPO.

More reading

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• 1 ASX growth company I’d buy with $2,000
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• $2,500 invested in these 3 ASX shares could make you a fortune in 10 years
• 2 millionaire-maker ASX internet growth shares

James Mickleboro 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. The Motley Fool Australia owns shares of and 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 If you invested $10,000 in the Kogan IPO, this is how much you’d have now appeared first on Motley Fool Australia.

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The share price of Service Stream Limited (ASX: SSM) dropped 6% after giving an update to the market.

Service Stream said that it’s essential network service provider, demand for its services have generally remained strong throughout the coronavirus crisis. However, the company warned there are negative impacts. Those impacts largely relate to delivering safe field-based operations. Also, some clients are temporarily pausing some work programs and some individual minor projects have been delayed.

The company is now expecting earnings before interest, tax, depreciation and amortisation (EBITDA) from operations to be $108 million. It would still be a record operating result for the company. This estimate was able to be done after the conclusion of its April numbers. It also has the benefit of a clearer perspective on the likely impacts of work volumes to 30 June 2020.

Service Stream said its balance sheet, cashflow and liquidity remains “very strong”.

What about the Service Stream dividend?

Service Stream did specifically address dividends. The company said, initially referring to its financial strength: “Not only has this underpinned the Group’s ability to effectively deal to COVID-19 headwinds, but it provides the board with confidence as to the Group’s continuing ability to maintain its commitment to dividends to secure expansion opportunities across the utilities and telecommunications markets as they present.”

Is the Service Stream share price a buy?

Service Stream managing director Leigh Mackender commented: “Whilst it is unfortunate that some clients have had to temporarily adjust or delay aspects of their work programs, Service Stream continues to be in a strong position, with a healthy contracted pipeline of ongoing work across a blue chip client base.

“Whilst it is likely that COVID-19 impacts will continue to be felt into at least the early part of FY21, we will be in a better position to discuss the Group’s outlook following the release of our FY20 results.”

The Service Stream share price is lower than it was in early February 2020, but it’s only back to where it was a week ago. I still believe Service Stream is a quality long-term buy with a solid dividend (which was mentioned today). I’d be happy to buy shares today at the lower share price.

More reading

• ASX 200 drops 0.4%, Chinese threat to Australian iron
• 3 top ASX 200 shares every investor should buy

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Service Stream 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 Why the share price of this top dividend share just sank 6% appeared first on Motley Fool Australia.

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