The BHP Group Ltd (ASX: BHP) share price is rising today amid news of a new copper deal.

BHP shares are climbing 0.73% and are currently trading at $49.76. For perspective, the S&P/ASX 200 (ASX: XJO) is up 0.05% today.

Let’s take a look at what could be weighing on the BHP share price today.

What’s going on ?

BHP has entered a deal with Canadian company Mundoro Capital Inc. (TSXV: MUN) to explore copper in Serbia.

In a release overnight, Mundoro said it had entered into a “definitive agreement” with a wholly owned subsidiary of BHP. This will provide BHP with the right to earn an option in three copper exploration areas held by Mundoro.

The copper projects are located within and near the Timok Magmatic Complex in Serbia.

Commenting on the news, Mundoro CEO Teo Dechev said:

Mundoro welcomes BHP as an exploration partner that recognizes the potential of further exploration in the western Tethyan Belt. 

The news comes after BHP entered a scheme implementation deed to potentially acquire 100% of copper miner OZ Minerals Ltd (ASX: OZL) in late December. The proposal is subject to approval by Oz Minerals shareholders at a meeting likely to be held in late March or early April 2023.

The copper price edged higher overnight amid stronger demand from China. Copper lifted 0.3% to US $9,356 a tonne. In a research note this morning, ANZ senior economist Catherine Birch said:

Copper edged higher as supply risks added to the positive tone as investors look to stronger demand from China.

The reopening of the world’s second largest economy is expected to unleash a wave of pent-up demand.

BHP is also a major iron ore producer. The iron ore price has fallen 0.18% to US$121.94 a tonne, trading economics data shows. The share price of fellow iron ore giant Rio Tinto Ltd (ASX: RIO) is down 0.1% today, while Fortescue Metals (ASX: FMG) shares are climbing 0.4%.

Share price snapshot

The BHP share price has soared nearly 23% in the last year. In the past month, BHP shares have climbed 7.8%.

BHP has a market capitalisation of about $252 billion based on the current share price.

The post BHP share price lifts amid copper deal appeared first on The Motley Fool Australia.

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• Why a merger between Fortescue and this major-league miner could make sense: expert
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• Should I buy ASX mining shares now or not?
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Motley Fool contributor Monica O’Shea 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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S&P/ASX 200 Index (ASX: XJO) gold share Evolution Mining Ltd (ASX: EVN) is marching higher on Tuesday. The Evolution share price was up more than 2% in early trade and is currently up 0.3% at $3.26 per share.

This comes on the heels of this morning’s release of the gold miner’s December quarterly report along with updates on several of its gold projects.

Below we look at the highlights from the quarter just gone.

ASX 200 gold share gains as costs fall

The Evolution Mining share price is in the green after the miner reported a 3% quarter-on-quarter increase in gold production to 166,404 ounces.

Copper production was up 7% from the prior quarter to 15,483 tonnes.

On the cost side, the ASX 200 gold share reported a 27% reduction in all-in-sustaining costs (AISC), which dipped to $1,099 per ounce (US$722/oz). This came alongside a 6% increase in the miner’s achieved gold price.

These factors saw Evolution Mining’s operating mine cash flow grow 31% to $270 million for the quarter.

The company reported it held $313 million in cash with liquidity of $838 million after scheduled debt repayments of $40 million.

Both its Cowal and Ernest Henry projects were highlighted as standout performers. Ongoing exploration drilling at Ernest Henry has intersected significant mineralisation indicating a potential expansion.

Evolution also reported on promising assay results just in from a diamond drilling campaign at its Cue Joint Venture with Musgrave Minerals Ltd (ASX: MGV) in Western Australia’s Murchison district.

What did management say?

Commenting on the results sending the ASX 200 gold share higher, Evolution CEO Lawrie Conway said:

We generated very strong operating cash flow this quarter which reinforces our position as one of the lowest cost, highest margin global gold producers. Our sustained focus on operating and capital costs in the current environment continues to deliver benefits.

What’s next for the ASX 200 gold share?

Evolution Mining maintained its FY23 production and AISC guidance at 720,000 ounces (+/- 5%) and $1,240 ounces (+/- 5%).

“We remain on track to deliver Group FY23 production and cost guidance with planned quarterly performance weighted to the second half of the year,” Conway said.

Evolution Mining share price snapshot

As you can see in the chart below, the Evolution Mining share price took a tumble as gold prices retraced mid-2022. Over the past 12 months, the ASX 200 gold share is down 18%.

The post ASX 200 gold share Evolution Mining gains on increased production and falling costs appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• ‘Upwards trend to continue’ for this ASX 200 gold share: expert
• ‘No signs of weakness’: Expert names 2 ASX shares to buy just starting their rise

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 Myer Holdings Ltd (ASX: MYR) share price is getting more attention than a Boxing Day sale today after releasing a trading update.

At the time of writing, shares in the Australian department store group are trading 5.9% higher to 90 cents. The sizeable gain has set yet another 52-week high for the company’s shares, continuing a blazing 6-month stint for the Myer share price.

Let’s peer into the latest update to understand what all the fuss is about.

Clawing its way back to record numbers

After a long stretch of declining sales (pictured below), the 122-year-old Aussie retail chain has posted its best sales on record for the first five months of the financial year.

According to the update, Myer increased its sales by 24.8% for the five months ending 31 December 2022 compared to the prior corresponding period. Investors are cheering about the solid performance, pushing the Myer share price higher.

The substantial increase was buoyed by store sales, which surged 37.9%. Meanwhile, online sales scaled back 9.4% compared to the comparative period. Pleasingly, sales surpassed pre-COVID levels in the first half of FY19 by 14.3%.

Though, it was pointed out that the prior period being compared was impacted by store closures — possibly assisting with larger gains year over year.

Notably, total sales were up 8.7% for the six weeks leading up to Christmas compared to last year.

What about profits?

Record sales are always good to see, but profits are what really counts. Fortunately, Myer is expecting net profit after tax (NPAT) of between $61 million and $66 million in the first half of FY23. The commendable result would reflect an astounding increase between 89% and 104%.

Exact figures will be presented in early March as the company’s interim reporting period finishes on 28 January.

Despite the stellar expected results, Myer CEO John King noted their continued vigilance, stating:

As with most retailers, we remain cautious on the macroeconomic environment for the remainder of the calendar year but are equally confident in the continuing momentum we have within the Customer First Plan and a range of initiatives we are executing.

Myer share price snapshot

The Myer share price has wiped the floor with the S&P/ASX 200 Index (ASX: XJO) during the past 12 months. Where the benchmark has returned a mediocre 4.6%, Myer has delivered a mouthwatering 143% gain before dividends.

Myer currently holds a market capitalisation of approximately $735 million.

The post Myer share price leaps 6% amid supercharged sales appeared first on The Motley Fool Australia.

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More reading

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• Kogan share price sinks on record half-year loss

Motley Fool contributor Mitchell Lawler 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 Pilbara Minerals Ltd (ASX: PLS) share price is pushing higher again on Tuesday.

In morning trade, the lithium miner’s shares are up 1.5% to $4.92.

As you can see below, this means the Pilbara Minerals share price is now up an impressive 32% since the start of the year.

Can the Pilbara Minerals share price keep rising?

One leading broker believes that it isn’t too late to snap up shares.

According to a note out of Morgans, its analysts have retained their add rating and lifted their price target on the lithium giant’s shares to $5.40.

Based on the latest Pilbara Minerals shares price, this implies potential upside of 10% for investors over the next 12 months.

In addition, the broker is expecting a maiden dividend of 20 cents per share in FY 2023. This equates to a 4% dividend yield, stretching the total potential return to 14%.

What did the broker say?

Morgans was impressed with Pilbara Minerals’ quarterly update, noting that its production beat its forecasts. It said:

PLS grew production 10% qoq and beat our forecast by 10% and Visible Alpha consensus by 15%. Sales volumes were more in line with our forecast (+2%) but pricing was also stronger so revenue beat our forecast by 10%.

In addition, the broker suspects that lithium supply could not be as great as expected due to project slippage. It expects this to support higher lithium prices for longer, which bodes well for Pilbara Minerals and other miners. Morgans adds:

We have rolled through our higher expected prices for spodumene and hydroxide as per our recent update for AKE. We see a trend of project slippage for other lithium producers and therefore think a slower roll off in FY24 towards our long-term price forecasts is more likely.

We maintain our ADD rating given the upside that we see to our target price. The company’s growing cash balance gives it options for capital management including buybacks or a special dividend.

The post Analyst says Pilbara Minerals share price can keep rising appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
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• Should I buy Pilbara Minerals shares following the lithium miner’s latest update?

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.

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The Sayona Mining Ltd (ASX: SYA) share price has started 2023 out on the right foot, to say the least.

The stock has soared 37.9% year to date to trade at 26 cents a share right now as the company gears up to restart production at its North American Lithium (NAL) operation.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has lifted 4.4% since the start of this year.

But have ASX lithium fans not yet on-board Sayona shares missed the boat? Let’s take a look at what the future might hold for the lithium up-and-comer.

What might 2023 hold for Sayona shares?

It’s shaping up to be a big year for Sayona and, seemingly, its share price. However, there are a few factors I believe are worth considering when sussing out the stock as a potential buy. The first being its maiden revenue.

The company expects to restart its NAL operation’s production in the current quarter. After that, partner Piedmont Lithium Inc (ASX: PLL) has agreed to buy up 113,000 tonnes of spodumene concentrate or half of the operation’s production each year, whichever is greater.

For reference, the ASX 200 lithium favourite aims to produce 220 kilotons of spodumene 6% from its Abitibi lithium hub in Canada, which comprises the NAL operation and the Authier project.

Thanks in part to Piedmont’s offtake agreement, Sayona will likely recognise its maiden revenue on the restart, set to occur amid soaring lithium prices – a potential harbinger of share price gains.

But there’s a slight hitch.

The agreement between Sayona and Piedmont will see the latter paying a maximum of US$900 a tonne for the lithium product. That’s well below current spot prices.

Indeed, Goldman Sachs is tipping the price of lithium spodumene 6% to trade at US$4,330 a tonne this year, as my Fool colleague James reports. Though, the broker expects the material’s value to slip to US$800 a tonne in 2024.

Thus, Sayona’s revenue might not initially stack up against that of some of its ASX 200 lithium peers.

Additionally, as I recently explored, it might be some time until Sayona is operating in the green.

Indeed, many of its lithium projects are still in the exploration phase, thereby dragging on its bottom line.

Is the ASX 200 lithium share a buy right now?

Unprofitable companies often face greater risks than their profitable counterparts.

On that note, I’d argue shares in ASX 200 lithium companies that are already producing and profiting, like Pilbara Minerals Ltd (ASX: PLS) and Allkem Ltd (ASX: AKE), could be better positioned to gain in 2023 than Sayona, as their earnings might be bolstered amid demand for the battery-making material.

On the other hand, unprofitable outfits can also house greater rewards.

As Sayona noted in its most recent quarterly report, it’s expecting to launch production ahead of other North American projects. That could see it “on a fast track” to downstream value-adding lithium carbonate or hydroxide production – a key benefit over its nearby peers.

Not to mention, demand for lithium is expected to hold up over the coming years amid decarbonisation.

Therefore, I think Sayona shares might be worth considering as a longer-term buy, depending on an investors’ risk tolerance.

The post ASX 200 lithium share Sayona has surged 38% in 2023. Too late to buy? appeared first on The Motley Fool Australia.

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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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It has been a wild morning for the Zip Co Ltd (ASX: ZIP) share price following the release of the company’s quarterly update.

In early trade, the buy now pay later (BNPL) provider’s shares were up as much as 11% to 92.5 cents.

Whereas the Zip share price is now down 6.5% to 78 cents.

Zip share price bouncing around on record quarter

• Record quarterly transaction volume up 22% quarter on quarter to $2.7 billion
• Transaction numbers up 15% quarter on quarter to a record of 22.6 million
• Record quarterly revenue up 12% quarter on quarter to $188 million
• Revenue margin of 6.9%
• Cash transaction margin of 2.6%
• US business delivered positive operating earnings in November and December
• Credit loss rates down to 1.1% of total transaction value
• Active customer numbers flat at 7.4 million

What happened during the quarter?

For the three months ended 31 December, Zip reported a 16% quarter on quarter increase in revenue to $183.9 million. This reflects a 28% increase in US revenue to $85.7 million, a 7% lift in ANZ revenue to $88.6 million, and a 13% rise in Rest of the World revenue to $9.6 million.

This revenue growth was underpinned by a 23% increase in transaction volume and a 15% lift in transactions, which offset flat active customer numbers.

However, the big news, which is likely what gave the Zip share price its huge early boost this morning, is that the company’s US operations delivered positive cash EBTDA in November and December. Pleasingly, this isn’t expected to be a one-off during the holiday period. Management believes that the business is on track to exit FY 2023 cash EBTDA positive on a sustainable basis.

And with Zip ending the period with available cash and liquidity of $78.5 million, management appears confident that this will be sufficient to support the company through to cash EBTDA profitability.

Management commentary

Zip co-founder, global CEO, and managing director, Larry Diamond, was very pleased with the quarter. He commented:

We are very pleased to deliver another strong quarter of record volumes despite the challenging external environment and adjustments to our risk settings. During the quarter Zip continued to make great progress on the strategy to deliver sustainable growth, right-size our global cost base and accelerate our path to profitability.

The underlying business remains strong, and we are pleased with the benefits and reduction in cash burn from the ongoing simplification of the business footprint and focus on core products and core markets.

In the current environment of heightened inflation and cost of living pressures, Zip continues to provide a simple, fair and easy to use product that customers can use everywhere and every day, creating a world where people can live fearlessly today, knowing they’re in control of tomorrow.”

The post Zip share price on the move amid record quarter and US profitability appeared first on The Motley Fool Australia.

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More reading

• Why Boss Energy, Pilbara Minerals, Sezzle, and Zip shares are charging higher
• Why is the Zip share price rocketing 18% higher today?
• Should I buy the dip on Zip shares right now?
• Why Arafura, Data#3, Leo Lithium, and Zip shares are charging higher today
• Will Zip deliver a profit in 2023?

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 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.

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Ask A Fund Manager

The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Eley Griffiths portfolio manager Nick Guidera warns investors which factors to look out for in 2023.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Nick Guidera: The Eley Griffiths Group Emerging Companies Fund invests in the smaller end of the Australian & New Zealand equities market — listed companies that are at an earlier stage of their lifecycle or growth journey. Typically these stocks are outside S&P/ASX 200 Index (ASX: XJO).

The fund typically consists of 35 to 55 stocks with an average market capitalisation as at 31 October 2022 of around $700 million.

The fund aims to outperform the S&P/ASX Small Ordinaries Accumulation Index (ASX: XSOA) over a rolling five-year period.

Eley Griffiths is a style-agnostic manager, meaning we can invest in both growth and value stocks, which is important through the cycle. We also look to invest across sectors, including resource and energy stocks, which are a large proportion of the S&P/ASX small ordinaries accumulation index.

We have an experienced and incredibly capable investment team that spends time researching and modelling small and emerging companies to identify the next successful listed company that is early in its life cycle. The team has traversed many market cycles, and is acutely aware of the factors that impact the smaller end of the Australian equities market — liquidity, volatility. 

This fund is appropriate for investors with “high” and “very high” risk and return profiles. This means an investor in the fund is typically prepared to accept high risk in the pursuit of capital growth with a medium to long investment timeframe. No returns are guaranteed. 

Investors should refer to the target market determination and product disclosure statement for further information or making an investment decision — these are available on our website. 

MF: Where do you think the market is heading?

NG: Markets are at a very interesting juncture right now. After dominating most of 2022, we expect the macro — central banks, economic data releases, bond yields, currencies — to continue to dictate the equity market direction in the months to come. 

This means we are likely to see continued volatility, selective outperformance from stocks and sectors with solid fundamentals that are insulated from the macro, and a requirement as investors to continue to be nimble and open-minded to the ever-changing market backdrop. 

For context, central banks globally appear closer to the end of the tightening cycle than the beginning with the pace and size of interest rate hikes set to slow significantly into 2023.     

The impact of tightening policy is being felt in economies all over the world with economic surveys pointing to a slowdown in demand for new orders, higher mortgage rates slowing housing markets, and in the US, consumers beginning to slow their retail spending. Locally, the consumer continues to be robust according to some recent company releases from Australian retailers — but the future does contain some uncertainty. 

China is showing signs of reopening its economy at a rapid pace, and loosening monetary policy to stimulate growth, at a time when almost every other bank is still maintaining higher rates. At a time when growth globally is seemingly harder to come by, the potential growth opportunity of this reopening may be tempting for many.

A recession in the US and Europe is now consensus among global economists. However, the timing and the severity is questionable.

Despite the economic challenges that persist, inflation remains elevated, albeit declining, and labour markets remain tight — unemployment low. Both these factors suggest central bankers will continue to need to raise rates in the coming months and maintain these tighter policy settings for longer.

Small-cap investors had a tough 2022, with the index down more than 20%; as such, valuations have been reset in some sectors.

Reporting season, which is due to kick off in February, will give further insights to investors as to whether the earnings expectations for smaller companies need to be revised down for 2023.

The outlook for earnings and the macro backdrop will ultimately dictate the direction of the market in 2023.

The post Two factors to decide if your ASX shares will make money in 2023: fund manager appeared first on The Motley Fool Australia.

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More reading

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​​DISCLAIMER: This presentation has been prepared and issued by Eley Griffiths Group Pty Limited (ABN 66 102 271 812, AFSL 224 818) (EGG) as the investment manager of the Eley Griffiths Group Small Companies Fund and Eley Griffiths Group Emerging Companies Fund (Fund). The Trust Company (RE Services) Limited ABN 45 003 278 830, AFSL 235 150 (Perpetual) is the Responsible entity and issuer of units in the Fund. It is general information only and is not intended to provide you with financial advice and has been prepared without taking into account your objectives, financial situation or needs. You should consider the product disclosure statement (PDS), prior to making any investment decisions. The PDS and target market determination (TMD) can be obtained for free by visiting our website https://www.eleygriffithsgroup.com/invest/.  If you require financial advice that takes into account your personal objectives, financial situation or needs, you should consult your licensed or authorised financial adviser. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. 

Neither EGG, nor any company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. Neither EGG nor Perpetual give any representation or warranty as to the reliability or accuracy of the information contained in this presentation. Any opinions, forecasts,  estimates or projections reflect judgments of EGG as at the date of this document and are subject to change without notice. Rates of return cannot be guaranteed and any forecasts, estimates or projections as to future returns should not be relied on, as they are based on assumptions which may or may not ultimately be correct. Actual returns could differ significantly from any forecasts, estimates or projections provided. Past performance is not a reliable indicator of future performance.

Motley Fool contributor Tony Yoo 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 Kogan.com Ltd (ASX: KGN) share price is sinking on Tuesday.

In morning trade, the ecommerce company’s shares are down 6% to $4.07.

This follows the release of Kogan’s half year update this morning.

Kogan share price drops on half year update

• Gross sales down 32.5% to $471.1 million
• Gross profit down 42% to $62.9 million
• Record loss before interest and tax of $31.3 million
• Active customers down 18.4% to 3,323,000

What happened during the half?

For the six months ended 31 December, Kogan reported a 32.5% decline in gross sales to $471.1 million.

This reflects a 35.7% decline in Kogan Marketplace sales, a 41% reduction in Exclusive Brands sales, a 49.2% fall in third-party brands sales, and a 9.1% drop in Mighty Ape sales.

Things were even worse for its earnings, with gross profit falling 42% to $62.9 million and its loss before interest and tax increasing to $31.3 million. Management advised that this was driven by its soft top line performance along with significant discounting to clear through the bulk of excess inventory.

One small positive is that Kogan’s inventory position is improving. It finished the period with inventory in-warehouse 39% lower than at the end of June. Management notes that it has now cleared through the bulk of its excess inventory. As a result, it is expecting margins to improve in the second half.

Management commentary

Kogan’s under-fire founder and CEO, Ruslan Kogan, didn’t comment on the company’s abject performance during the half. However, he revealed that he remains positive on the future despite the current economic environment. He said:

The impacts of inflation and interest rates have begun to affect the lives of Australians and New Zealanders. We’ve been growing Kogan.com for more than 16 years now, so we’ve been through many cycles and we know that when customers are watching their costs carefully, ecommerce becomes even more important. Since Kogan.com launched out of a garage in 2006, we’ve been obsessed with making the most in-demand products and services more affordable. We are proud to be making that possible for our millions of customers and the growing base of loyal Kogan First Subscribers.

As you can see above, the Kogan share price is now X over the last 12 months.

The post Kogan share price sinks on record half-year loss appeared first on The Motley Fool Australia.

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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 Kogan.com. The Motley Fool Australia has positions in and has recommended Kogan.com. 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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Telstra Group Ltd (ASX: TLS) shares have started 2023 in a reasonably positive fashion.

Since the start of the year, the telco giant’s shares have risen 2.5%.

The good news, though, is that one leading broker believes that this is only the start of greater gains.

Telstra shares tipped to rise

According to a note out of Morgans this morning, its analysts have reiterated their add rating and $4.60 price target.

Based on the current Telstra share price of $4.08, this suggests that its shares could rise almost 13% over the next 12 months.

In addition, Morgans continues to forecast a 16.5 cents per share fully franked dividend in FY 2023. This equates to a 4% dividend yield, boosting the total potential return to approximately 17%.

‘Some healthy options that are underappreciated’

Morgans has been looking at Telstra’s healthcare business, Telstra Health, and believes it has “some healthy options that are underappreciated.” It commented:

Telstra Health combines MedicalDirector (medical practice management software), PowerHealth (hospital management software) and Telstra’s existing e-Health businesses. It helps healthcare providers and governments digitally connect the health, aged care and social service systems by enabling the seamless flow of information across the continuum of care.

Telstra Health resembles Enterprise Resource Planning / accounting firms like TNE, OCL and XRO. It provides the core business software and processes. This means long-duration (sticky) customers but also means sales cycles and software implementations can take years to complete. Peers trade on high multiples reflecting impressive delivery and characteristics of defensiveness and growth.

The broker notes that the business currently generates $250 million of sticky revenue and is aiming to double this by FY 2025. If successful, it believes it could add $50 million in earnings by then. It adds:

Telstra Health generates ~$250m revenue now and is targeting $500m by FY25, which requires a 26% revenue CAGR. Today it’s broadly cash flow breakeven. Based on peer benchmarking and some broad assumptions we think Telstra Health could generate ~$50m of EBIT by FY25.

All going to plan Telstra Health could be worth ~$1.5bn /11cps for TLS shareholders on our estimates. While not material, we think it is underappreciated.

The post Telstra shares: ‘Some healthy options that are underappreciated’ appeared first on The Motley Fool Australia.

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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 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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Sure, 2022 might be the year when interest rates rose at a breakneck pace. But 2023 is when consumers and businesses will really feel the pinch.

That’s because any changes in central bank rates take a while to cascade into the real world, then even longer for that to have an impact on household budgets and company earnings.

The team at Firetrail reckons ASX-listed businesses will have to deal with a double-whammy this year.

“As we enter 2023, businesses continue to grapple with inflationary cost pressures, but now have the accompanying issue of a slowing demand environment,” read its memo to clients this week.

“As the lagged impact of central bank rate tightening filters through the economy and conditions get tougher, only the best businesses will navigate effectively.”

Weak companies will “be under pressure”, warned the Firetrail analysts.

“For 2023, consensus is expecting 10% growth in earnings per share for the S&P/ASX 200 Index (ASX: XJO) ex-resources,” read the memo.

“In talking to companies and doing our own analysis, we believe that will prove too optimistic.”

Yes, this is a pretty pessimistic assessment of the state of play. But fortunately, the Firetrail team reckons it has successfully looked past “the short-term noise” to identify “significant medium-term upside”. 

Let’s go overweight on health

One sector that they’re bullish on is healthcare.

In fact, the Firetrail Australian High Conviction Fund is now “substantially overweight” in that industry through three particular ASX shares:

• CSL Limited (ASX: CSL)
• Resmed CDI (ASX: RMD)
• Ramsay Health Care Ltd (ASX: RHC)

“The defensive nature of healthcare is an attractive feature supporting all three companies,” read the memo.

“However, our high conviction in these names is derived from our bottom-up work.”

Resmed scored a huge win about 18 months ago when major competitor Koninklijke Philips NV (AMS: PHIA) was forced to recall its CPAP machines due to safety issues.

Unfortunately, the company was not able to take full advantage in 2022.

“ResMed has been hamstrung due to a global semiconductor shortage. The chip shortage has prevented ResMed from being able to supply the soaring demand of customers,” read the Firetrail memo.

“As chip shortages ease, which is happening right now, we believe 2023 calendar year earnings will beat expectations.”

‘The ultimate defensive’

In 2022, CSL saw a recovery in plasma collection rates, but the effects of that have not yet made it to the balance sheet.

“Plasma collections flow through to earnings with a lag, which suggests 2023/24 will be strong years for earnings.”

The Firetrail team called CSL shares “the ultimate defensive”. 

“The cost of collecting plasma tends to run counter to the economic cycle. Tougher economic conditions lead to an increase in donors, typically at lower cost.”

Private hospital operator Ramsay hasn’t yet fully returned to pre-COVID activity levels, but the Firetrail team is banking on a 2023 comeback.

“Ramsay will likely deliver above-trend growth in 2023/24 as the surgery backlog is addressed,” read the memo.

“Nursing shortages and wage negotiations are placing pressure on Ramsay’s expenses line. However, the recent contract negotiation with BUPA illustrates that Ramsay is now flexing its muscles to offset these higher costs.”

The Firetrail analysts conceded all three healthcare stocks are trading on price to financial year 2023 earnings ratios of greater than 30. 

But the team is forecasting that 2025 earnings will be 35% to 40% higher for the trio.

“On a three-year view, the healthcare stocks provide growth, relative earnings certainty, and valuation upside. An attractive trifecta in a tough environment.”

The post 3 ASX shares to buy in the hottest sector for 2023: Firetrail appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has positions in CSL and ResMed. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and ResMed. The Motley Fool Australia has positions in and has recommended ResMed. 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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