BHP Group Ltd (ASX: BHP) shares are trading higher on Wednesday.

In afternoon trade, the mining giant’s shares are up 2.5% to $46.39.

Investors have been piling into the resources sector today following the release of strong economic data out of China.

According to CNBC, China’s official manufacturing PMI hit 52.6 in February, which is above the 50-point mark that separates growth from contraction. Importantly, it is also the highest reading since April 2012, when the manufacturing PMI hit 53.5.

Should you buy BHP shares at $46?

In light of the above, investors may be wondering if BHP shares are good value at $46.00.

Unfortunately, opinion remains divided on the mining giant at the current level.

Goldman Sachs, for example, sees modest upside for the Big Australian’s shares and has a neutral rating and $48.00 price target. It commented:

BHP is currently trading at ~6x NTM EBITDA vs. global peers (including RIO, GLEN & AAL) at ~5x EBITDA, and at ~1.1x NAV vs. RIO at ~0.9x NAV. Although we believe this premium vs. peers can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore), high returning copper growth, and lower iron ore replacement & decarbonisation capex, we highlight potential downside to our PT of A$48.0/sh.

However, over at Macquarie, its analysts are far more positive and see plenty of value in the BHP share price.

Last week, the broker put an outperform rating and $52.00 price target on its shares. This implies potential upside of 12% over the next 12 months.

In addition, the broker is expecting a ~$2.66 per share fully franked dividend in FY 2023. This equates to a 5.7% dividend yield, which stretches the total potential return to almost 18%.

Time will tell which broker makes the right call.

The post Should I buy BHP shares at $46? appeared first on The Motley Fool Australia.

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• Why did the BHP share price tumble 9% in February?
• Own BHP shares? Here’s how the ASX 200 miner is cutting emissions
• Why are ASX 200 mining shares ending the week in the red?
• Brokers name 3 ASX shares to buy now
• Could this send the BHP share price rocketing to all-time highs?

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.

from The Motley Fool Australia https://www.fool.com.au/2023/03/01/should-i-buy-bhp-shares-at-46/

Most of us want a second income or side hustle. It’s certainly a little unsettling to rely on one primary course of income when you think about it. Although it’s good practice to build up a rainy day fund of savings, the threat of losing one’s job is something that most of us would still find (understandably) terrifying regardless.

But having a source of secondary, passive income would certainly help allay much of those fears.

However, just saying that you want a second source of passive income is the easy part. Finding a viable side hustle is the hard ask.

Do you start a business out of your garage? Or perhaps doing a podcast or starting a YouTube channel is the way to go? Then there’s always that fan favourite of drop shipping to consider…

But the side hustle that perhaps requires the least effort is right in front of us: investing in ASX dividend shares.

How can shares give you passive income?

ASX dividend shares are just as viable as a side source of passive income as anything else. And dividend shares pay out income by their very nature. Most investors enjoy a paycheque from their dividend shares every six months, and sometimes even more frequently.

And the secondary income you can receive from dividend shares is truly passive: you will get paid if you own the shares. There’s no further qualification needed. You can be sick or healthy, old or young, working or not working.

Now you might think that picking and choosing the right quality dividend shares that pay you income is hard work.

To a certain extent, this is true. No one wants a lemon in the form of the dreaded dividend trap: a company that seemingly offers a high dividend yield, only to cut it down the road.

So building your own share portfolio consisting of individual, dividend-paying companies can require a lot of effort, education and dedication. Some people love this hustle though, so this might be a perfect way to build up a high-performance source of secondary income.

For those who truly want a passive income, there is a path open for them as well. It’s investing in an ASX index fund.

An index fund tracks a broad swathe of a country’s share market. Such a fund, for example, will hold everything from Commonwealth Bank of Australia (ASX: CBA) and Woolworths Group Ltd (ASX: WOW) to JB Hi-Fi Limited (ASX: JBH) and Block Inc (ASX: SQ2) here in Australia.

The easiest side hustle out there?

The best thing about an index fund is that it does all the work for you. To illustrate, most ASX index funds tack the S&P/ASX 200 Index (ASX: XJO). The ASX 200 Index has a mandate to only hold the largest 200 companies listed on our share market.

If a company does well over time, its value will increase, and have a heavier presence in the index, meaning that our index fund will buy more of its shares over time. Conversely, if a company does poorly and loses value over time, it will be progressively weeded out of the fund.

The ASX 200 is rebalanced every three months or so, so this process is always happening in the background. And you as the index fund investor only have to leave it in the bottom drawer and collect the dividend distributions that your fund will pay out.

Yes, index funds usually pay dividends, simply because they hold so many dividend shares within them. If the said fund holds CBA and Woolworths shares, you will be passed on any dividends the funds receive from these companies.

ASX 200 index funds typically offer dividend distribution yields of anywhere between 3% and 8%, plus some franking credits too.

So in this way creating a side hustle by investing in dividend shares is a great way anyone can start a secondary source of passive income.

It might not make you as much money upfront as starting a wildly successful business or podcast. But unlike these two other paths, the effort required can be as low as you’d like.

The post Want a second income? Here’s how to make ASX dividend shares your side hustle appeared first on The Motley Fool Australia.

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More reading

• Why Allkem, Argosy Minerals, Mayne Pharma, and NextDC shares are racing higher
• Has this ‘completely changed the landscape’ for the future of Fortescue shares?
• Why Brainchip, Cooper Energy, Link, and Telstra shares are dropping today
• ASX 200 leaps higher on latest GDP and inflation news
• Guess which ASX 300 share has rocketed 27% in 2 days since reporting

Motley Fool contributor Sebastian Bowen 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 Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool Australia has recommended Jb Hi-Fi. 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) has bounced back from a poor start. In afternoon trade, the benchmark index is up 0.1% to 7,264.4 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are starting the month strongly:

Allkem Ltd (ASX: AKE)

The Allkem share price is up 5% to $11.95. Investors have been buying this lithium miner’s shares amid a rebound in the industry. In addition, a note out of Goldman Sachs may have given its shares a boost. The broker has reiterated its buy rating with a $15.40 price target. This implies potential upside of 29% from current levels.

Argosy Minerals Limited (ASX: AGY)

The Argosy Minerals share price is up 3.5% to 72 cents. This morning, this lithium developer announced that it has made further progress at the Rincon Lithium Project in Argentina. Argosy revealed the commencement of lithium carbonate batch production works, where 5.1 tonnes of battery quality product has currently been produced.

Mayne Pharma Group Ltd (ASX: MYX)

The Mayne Pharma share price is up 21% to $4.02. This appears to have been driven by recent news that it has signed an agreement for the sale of its US generics business. Management expects the transaction to create a leaner organisation and free up working capital to focus on core areas of business growth/value drivers. Another positive is management’s belief that it is on course to return to profit.

NextDC Ltd (ASX: NXT)

The NextDC share price is up over 3% to $10.60. This follows the release of a number of bullish broker notes this morning in response to the data centre operator’s half-year results. Citi was pleased with the company’s performance, noting that “NextDC reported underlying EBITDA of $97.5 million, up +17% yoy, and +5%/6% ahead of CitiE/Visible Alpha consensus.” It has a buy rating and $12.60 price target on the company’s shares.

The post Why Allkem, Argosy Minerals, Mayne Pharma, and NextDC shares are racing higher appeared first on The Motley Fool Australia.

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More reading

• Guess which ASX 300 share has rocketed 27% in 2 days since reporting
• Own ASX lithium shares? Here is the latest Goldman Sachs lithium price forecast
• Broker says buy ASX 200 lithium share Allkem for 34% upside
• 5 things to watch on the ASX 200 on Wednesday
• Why ASX 200 lithium shares are eyeing this surprising new Chinese move

Motley Fool contributor James Mickleboro has positions in Allkem and Nextdc. 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.

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Fortescue Metals Group Limited (ASX: FMG) shares are up 2.57% today to $21.95 apiece amid news that the miner’s green subsidiary is looking to expand its investments in the United States.

According to reporting in The Australian, Fortescue’s executive chair Andrew Forrest says the company has been encouraged to invest in the US instead of Australia.

This is because of incentives contained in the US Inflation Reduction Act (IRA) for green energy projects.

The IRA includes $US437 billion worth of subsidies for new energy projects.

Forrest made the comments at a conference in Sydney.

He said the head of Fortescue Future Industries (FFI), Mark Hutchison, has put forward three new “significant” proposals for green hydrogen investment in the US to the company’s board.

Hutchison is flying to the US today for meetings.

Forrest said the US Inflation Reduction Act had “completely changed the landscape” for FFI.

He said:

We are going to have to work hard to keep Australia competitive (with the US). I can see us going backwards.

Forrest has been a leader among Australian companies on climate change and renewable energy.

He has travelled the world putting together partnership deals with many governments and businesses.

Together, they will develop renewable energy, green hydrogen, and green ammonia projects through FFI.

As we reported previously, FFI worked with the US government, the White House, and Senator Joe Manchin to support the IRA.

Hutchinson described the bill’s passage as “game changing for the green hydrogen market globally and a brilliant outcome for FFI”.

He said green hydrogen will become a multi-trillion-dollar market and “our role is to ensure FFI remains at the forefront of this global movement, to move at a rapid pace to capture this new market …”.

He added that FFI is “acknowledged internationally already” as a leading developer of green hydrogen.

Fortescue shares are up by 7.65% in the year to date and up 24% over the past 12 months.

The post Has this ‘completely changed the landscape’ for the future of Fortescue shares? appeared first on The Motley Fool Australia.

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More reading

• Fortescue share price rebounds on possible China supply restrictions
• Why Appen, Downer, Fortescue, and Invocare shares are crashing today
• Why is the Fortescue share price sinking 8% today?
• Why are ASX 200 mining shares ending the week in the red?
• 7 ASX 200 shares with ex-dividend dates next week

Motley Fool contributor Bronwyn Allen has positions in Fortescue Metals 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 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.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) has fought back from a soft start and is trading slightly higher. The benchmark index is currently up 0.1% to 7,268.1 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why these shares are starting the month in the red:

Brainchip Holdings Ltd (ASX: BRN)

The Brainchip share price is down almost 4% to 52 cents. Investors have been selling this semiconductor company’s shares since the release of its full-year results on Friday. Those results revealed that the billion-dollar company generated only US$250k of revenue during the second half of FY 2022.

Cooper Energy Ltd (ASX: COE)

The Cooper Energy share price is down 9% to 15 cents. This morning, analysts at Macquarie responded negatively to the energy producer’s half-year results. Its analysts note that Cooper Energy’s earnings fell well short of expectations. In response, the broker retained its neutral rating and cut its price target to 19 cents.

Link Administration Holdings Ltd (ASX: LNK)

The Link share price is down 4.5% to $2.19. The majority of this decline is attributable to the administration services company’s shares trading ex-dividend this morning for its latest dividend. Eligible Link shareholders can now look forward to receiving its 4.5 cents per share partially franked dividend on 11 April.

Telstra Group Ltd (ASX: TLS)

The Telstra share price is down 2.5% to $4.06. Once again, this has also been driven by the telco giant’s shares going ex-dividend this morning. Last month, Telstra released its half-year results and declared a fully franked 8.5 cents per share interim dividend. This will now be paid to eligible shareholders at the very end of the month on 31 March.

The post Why Brainchip, Cooper Energy, Link, and Telstra shares are dropping today appeared first on The Motley Fool Australia.

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• Why is the Telstra share price sliding lower on Wednesday?
• These ASX 200 shares smashed the market in February
• Top ASX shares to buy in March 2023
• Here are the top ten ASX 200 shares today
• Here are the 3 most heavily traded ASX 200 shares 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 Link Administration. The Motley Fool Australia has positions in and has recommended Telstra Group. 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) was down as much as 0.6% in morning trade today.

Then, at 11:30am AEDT, the Australian Bureau of Statistics (ABS) released the latest data on Australia’s gross domestic product (GDP) growth and the monthly consumer price index (CPI) indicator.

In the following minutes, the ASX 200 charged 0.5% higher.

At the time of writing, the benchmark index is up a fraction of a percent for the day.

Here’s what investors are mulling over.

ASX 200 lifts on easing inflation

First, the inflation print.

The ABS reported that the monthly CPI indicator increased by 7.4% in the year to January 2023.

Michelle Marquardt, ABS head of prices statistics, noted that this remains the second highest year on year increase since the ABS began reporting on the monthly CPI in September 2018 “signifying ongoing high inflation.”

However, investors’ spirits look to have been buoyed by the fact that inflation came in below expectations, and significantly lower than last month.

“This month’s annual increase of 7.4% is lower than the 8.4% rise for the year to December 2022,” Marquardt said.

Easing inflation could signal that the Reserve Bank of Australia (RBA) might not need to raise interest rates as much as the market has been pricing in. And the prospect of a less hawkish RBA looks to have given the ASX 200 a healthy boost.

As for the areas where inflation is running the hottest in the monthly January CPI indicator, recreation and culture increased 10.2%, housing was up 9.8%, and the price for food and non-alcoholic beverages increased 8.2%.

How about the GDP figures?

Then there was the latest data on the Aussie economy, which also looks to have offered some tailwinds for the ASX 200.

The ABS reported GDP increased by 0.5% for the December quarter, also falling short of expectations. GDP expanded by 2.7% through the year.

While the December quarter marked the fifth consecutive quarter of growth for the Aussie economy, the ABS noted that growth has slowed in each of the last two quarters.

This is a case of bad news potentially being good news for stocks. That’s because a slowing economy would also indicate the RBA’s rate increases are having an impact, meaning a potential easing of the central bank’s rapid tightening policies.

Of course, not all stocks stand to benefit from the report.

In a potential red flag for the medium-term outlook for ASX 200 consumer discretionary shares, the ABS noted that the household saving ratio decreased to 4.5% from 7.1% in the prior quarter.

The post ASX 200 leaps higher on latest GDP and inflation news appeared first on The Motley Fool Australia.

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• Why is the Telstra share price sliding lower on Wednesday?
• These ASX 200 shares were crushed in February
• These ASX 200 shares smashed the market in February
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top ten ASX 200 shares today

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.

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The share price of S&P/ASX 300 Index (ASX: XKO) stock Mayne Pharma Group Ltd (ASX: MYX) has soared since the company dropped its half-year earnings on Tuesday morning.

Right now, the pharmaceutical manufacturer’s stock is trading at $4 – 27% higher than it was before it broke a trading halt with news of its results, a divestment, and its capital return.

Let’s take a closer look at what’s been going right for the ASX 300 share this week.

ASX 300 share Mayne Pharma rockets 27% in 2 sessions

Here are the key takeaways from Mayne Pharma’s first-half earnings:

• $101.2 million of revenue excluding discontinued segments – a 33% drop on that of the prior comparable period (pcp)
• Earnings before interest, tax, depreciation, and amortisation (EBITDA) came to a $99.2 million loss
• $129.2 million net loss after tax – down from a $66.3 million loss in the pcp
• Basic earnings per share (EPS) came in at 17.6 cents
• No dividend declared

The company’s earnings were dinted by lower revenues, driven by higher inventory levels, discontinued products, and foreign exchange losses.

The company’s branded products division saw revenue more than triple to $13.4 million last half amid strong growth in NEXSTELIS sales. Its portfolio products division saw revenue fall 49% to $60.1 million. Finally, its international segment’s revenue was flat at $27.6 million.

What else did the company announce this week?

The Mayne Pharma share price was put into a trading halt on Monday morning, returning to trade on Tuesday, as the ASX 300 company prepared to release news of a material divestment and its capital management.

Later that day, it announced the sale of its US retail generics portfolio business for up to US$90 million cash and up to US$15 million of contingent milestone payments.

The move supports the company’s aim to transform into a speciality pharmaceutical company with leading positions in women’s health and dermatology.

It also announced the cancellation of its $113 million capital return on Tuesday. It said the return was no longer in the company’s best interests.

What did management say?

Mayne Pharma CEO Shawn Patrick O’Brien commented on the news seemingly driving the ASX 300 share sky-high in recent sessions, saying:

We have taken decisive action this half to address the issues that have created the disappointing results in both our PPD and International businesses.

We are creating a leaner company with strong commercial and sales execution capabilities and [with the sale of the US retail generics business] we move a step closer to achieving our goal of generating operating cash and returning the business to profitability.

The board is supportive of our strategy and ambition, and the cancellation of the capital return is a prudent step to retain balance sheet flexibility whilst we drive improved operating performance, and the board considers the appropriate capital structure to support profitable growth and a restoration of shareholder value.

What’s next?

The company heralded an encouraging start to the second half. It flagged improvement in its dermatology segment and positive impacts from the scaling up of its US women’s health business.

The latter is on track to exit financial year 2023 with a positive run rate contribution. Meanwhile, the newly acquired TherapeuticsMD portfolio is expected to deliver positive earnings in the second half.

At the same time, launches of various products are expected to drive growth across the company.

Maybe Pharma share price underperforms the ASX 300

Despite this week’s surge, the Mayne Pharma share price is still in the longer-term red.

It has fallen 5% so far this year and 13% over the last 12 months.

For comparison, the ASX 300 has gained 4% year to date and 2% over the last 12 months.

The post Guess which ASX 300 share has rocketed 27% in 2 days since reporting appeared first on The Motley Fool Australia.

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• Why De Grey, Kogan, Mayne Pharma, and Mesoblast shares are charging higher

Motley Fool contributor Brooke Cooper 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.

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AMP Ltd (ASX: AMP) fans likely have their sights on the embattled wealth management share on Wednesday.

Not only is the company trading ex-dividend, but it announced yet another delay to its $225 million domestic Collimate Capital sale.

After starting the day off in the red, AMP shares have turned it around. They’re currently trading 0.48% higher at $1.04.

For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.06% right now.

Let’s take a closer look at all that might be going wrong for AMP shares today.

$225 million sale delayed once more

The AMP share price has recovered this afternoon.

Meanwhile, new investors have officially missed out on the company’s long-awaited 2.5 cents per share dividend, to be paid out early next month.

The market may have also been initially disappointed by the latest news of the sale of Collimate Capital’s domestic real estate and infrastructure equity business.

Dexus Property Group (ASX: DXS) agreed to buy the business in April 2022.

However, the sale is conditional on Chinese regulators approving the transfer of AMP’s interest in China Life AMP Asset Management. Gaining such approval has proven challenging.

In fact, AMP and Dexus are in the process of splitting the transaction into two stages.

The first stage is expected to complete without the approvals on or before 20 March. The second is dependent on the ownership of China Life AMP being transferred out of the entities being purchased.

Not to mention, the sale price has been dropped on the back of the delays. Dexus will now pay just $225 million – $25 million less than it would have if conditions were met by Sunday. AMP has also forfeited the remaining $26 million of potential funds under management-based earn-outs.

The sale of Collimate Capital’s international infrastructure equity business was completed early last month for a total realised value of $582 million. The ASX 200 company is eligible for another $180 million cash earn-out, subject to conditions being met.

AMP share price snapshot

The AMP share price has suffered in 2023 despite today’s uptick. The stock has fallen 20% since the start of the year. Though, it’s gained 7% since this time last year.

For comparison, the ASX 200 is up 4% year to date and 2% over the last 12 months.

The post AMP shares drop then pop amid ex-dividend and delay of $225 million sale appeared first on The Motley Fool Australia.

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More reading

• Why is the AMP share price sinking today?
• These ASX 200 shares were crushed in February
• Hoping to bag the newly reinstated AMP dividend? Read this
• 7 ASX 200 shares with ex-dividend dates next week
• Here are the 3 most heavily traded ASX 200 shares on Thursday

Motley Fool contributor Brooke Cooper 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.

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If you have purchased a lottery ticket online in Australia, there’s a fair chance you’ve used a platform provided by Jumbo Interactive Ltd (ASX: JIN). This ASX All Ords share has cut out a respectable slice of a growing market and raked in considerable profits in the process. Yet, the Jumbo Interactive share price is down 21% in the past year.

I pulled the trigger on adding more Jumbo shares to my portfolio amid the depressed valuation during the second half of 2022.

Here is why I see further upside to this investment over the coming five or so years, potentially making it a cheap ASX share. In addition, I provide my current concerns for the company and what would prompt me to unwind my position.

Compelling solution spreading its wings

Whether it is your bet on the horses, food delivery order, or stab at being a millionaire — everything is shifting online.

The digitisation drivers are simple for the lottery industry… consumers want to purchase a ticket from the comfort of their couch, rather than lining up in a store. Meanwhile, lottery retailers want to make bigger profits through a more scalable approach.

For decades, Jumbo Interactive has catered to these combined demands through its fully compliant lottery software. Along the way, agreements were entered to resell Tabcorp, now The Lottery Corporation (ASX: TLC), on Jumbo’s Ozlotteries website, propelling further growth for the ASX All Ords share.

Over the past five years, Jumbo has achieved profit margins exceeding 20%. Impressively, this was done without any leverage on the balance sheet up until recently. However, the move to expand into the United Kingdom and Canada (pictured below) is a necessary one, in my opinion, to deliver further growth for shareholders.

I’d argue, the main upside in this ASX share is contained in providing its software (Powered by Jumbo) to government and charity lottery operators. Currently, software as a service (SaaS) has the best EBITDA margins of the company’s three segments, at ~68%.

Governments and charities are less likely to deploy the resources to develop their own online solutions. As opposed to the likes of large private lottery operators, such as The Lottery Corporation, which Jumbo is now engaged in a precarious dance with — more on that later…

Furthermore, as discovered by Regulus Partners in their Charity Lotteries and the European Lottery Sector: impact analysis report, charity lotteries typically outperform state lotteries on a revenue growth basis. Sounds like an attractive part of the market for Jumbo to go after, right?

Between a rock and a hard place

Now, more on that precarious dance I alluded to earlier… While I do believe Jumbo shares have been cheap, it is not without some reason.

The company could be coming to a crossroads where it needs to break free from the very thing that boosted it to success in the first place — lottery retailing for Australia’s largest lottery company. I suspect the increased Lottery Corp service fee under the agreement renewal in 2020 has been a major catalyst for Jumbo’s invigorated acquisition strategy.

Under the agreement, Jumbo will pay the larger ASX share a max fee of 4.65% of the ticket price from FY24 onwards, which has been incrementally increasing from 1.5% since FY21. Unfortunately, the lottery retailing segment is Jumbo’s largest revenue source.

Ultimately, Lottery Corp knows that Jumbo needs it, but it doesn’t need Jumbo, as it operates its own digital sales channel through TheLott. Hence, there is a real risk of more service fee increases in the future, which would be painful for the bottom line.

In the first half of FY23, EBITDA margins for the segment shrunk by 3.3% to 30.6% — partly attributed to the 1% fee rise.

As shown above, I believe lottery retailing earnings (red) will struggle to grow significantly over the next five years despite my belief that total transaction value (TTV) growth will remain between 5% to 10%. However, I’m expecting Jumbo’s SaaS operations (yellow) to deliver if the company can capitalise on its entry into new markets.

When would I reconsider holding this ASX share?

Fortunately, The Lottery Corporation is locked in with Jumbo until 2030, barring any contract breaches. In my eyes, that gives the ASX All Ords share around another seven years to de-risk its earnings profile and establish other avenues for growth.

If Jumbo fails to grow its SaaS business meaningfully, i.e. around 20% to 25% segment TTV growth in FY23 and FY24, then I’d seriously have to question the company’s future earnings potential.

Secondly, Lottery Corp offers online charity lotteries through a partnership with the 50-50 Foundation under the Play For Purpose banner. The online solution is operational with more than 500 charitable causes.

In my opinion, it would be a major red flag if any of Jumbo’s current charities decided to switch to this alternative option.

Final takeaway

Investors don’t like uncertainty. Where the relationship between Jumbo and The Lottery Corp goes from 2030 onwards is unknown, adding pressure on the price of this ASX share. But, there is a seven-year window between now and then, and a lot can be accomplished during that time.

Seven years ago, Jumbo Interactive reported a first-half profit of $1.9 million. Last week, the company reported a first-half profit of $17.2 million — a ninefold increase.

My conviction lies in a well-incentivised management team and a structural shift to digital. For those reasons, I believe Jumbo shares could still be a reasonably cheap buy at current prices.

The post I’ve been loading up on this ASX All Ords share while it’s cheap appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has positions in Jumbo Interactive. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Jumbo Interactive. The Motley Fool Australia has recommended Jumbo Interactive. 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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If you’re an owner of ASX lithium shares, then the price of the battery making ingredient will no doubt be very important to you.

That’s because share markets are forward-looking, with valuations tied to the profits and free cash flow that companies generate down the line.

And with so many lithium shares still in the development or exploration stage, the price of lithium when they finally start producing will have a big say in the profits they make and whether your investment is ultimately a success or failure.

Lithium price forecast

Unfortunately, I have some bad news for you. Goldman Sachs has reiterated its extremely bearish view that lithium prices are about to crash materially from current levels.

And while it expects Allkem Ltd (ASX: AKE) to be able to offset the impact of these declines on its earnings with its production growth and downstream opportunity, it may not be as easy for smaller and up-and-coming players.

According to the note, Goldman is now forecasting the following average prices for these lithium types in the coming years compared to current spot prices:

Lithium carbonate (per tonne)

• Spot: US$61,350
• 2023: US$53,300
• 2024: US$11,000
• 2025: US$11,000

Lithium hydroxide (per tonne)

• Spot: US$70,350
• 2023: US$58,650
• 2024: US$12,500
• 2025: US$12,500

Lithium spodumene 6% (per tonne)

• Spot: US$5,800
• 2023: US$4,330
• 2024: US$800
• 2025: US$800

Spot prices continue to fall

Earlier this week, the broker noted that spot and forwards prices have continued to come under pressure. It commented:

We note the lithium chemicals spot and forward pricing has continued to decline, with our commodities team reiterating their expectation for lithium prices to decline from 2H23, supported by recent China trip feedback suggesting risk of higher than expected lithium supply, and the larger operating Australian spodumene projects either recently outperforming production expectations (and increasing near term production guidance) or lifting medium term production growth targets.

The post Own ASX lithium shares? Here is the latest Goldman Sachs lithium price forecast appeared first on The Motley Fool Australia.

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setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
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More reading

• Broker says buy ASX 200 lithium share Allkem for 34% upside
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• Allkem share price in the green as ASX 200 lithium stock posts record revenue

Motley Fool contributor James Mickleboro has positions in Allkem. 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.

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