The PolyNovo Ltd (ASX: PNV) share price has started the week with a bang.

In morning trade, the medical device company’s shares are up 11% to $1.50.

Why is the PolyNovo share price storming higher?

Much to the dismay of short sellers, investors have been bidding the PolyNovo share price higher this morning following the release of an announcement.

According to the release, the company has received FDA 510(k) clearance for NovoSorb MTX, which it describes as a major new product innovation for soft tissue regeneration for the management of complex wounds.

The release notes that MTX leverages the technology platform underpinning the clinical success of BTM, but without a sealing membrane. It was developed in this way to satisfy clinician demand for a product for use in indications where the sealing membrane is not required.

BTM and MTX are complementary, and it is expected that clinicians will use both products for the treatment of soft tissue deficits.

Addressable market

The release reveals that MTX is indicated for use in partial and full thickness wounds, pressure ulcers, venous ulcers, chronic and vascular ulcers, diabetic ulcers, and surgical and trauma wounds. Management feels that this offers clinicians greater versatility in wound management.

Combined, the MTX product portfolio expands PolyNovo’s addressable market in the U.S. by an estimated A$500 million.

PolyNovo’s CEO, Swami Raote, was very pleased with the news. He said:

The creation of MTX is an exciting example of surgeon led product development that opens a significant new market for us. We are proud to bring MTX to U.S. surgeons and patients, and believe a product specifically designed for use in a single-stage procedure will leverage and expand our penetration of the advanced wound care space. We expect clinicians to carry BTM and MTX and provide them a richer tool kit for patient care. We aim to quickly put MTX in the hands of Key Opinion Leader surgeons.

The post PolyNovo share price jumps 11% on FDA update appeared first on The Motley Fool Australia.

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• Polynovo share price halted amid FDA news
• 3 ASX 300 healthcare share winners on Wednesday
• Why did the Polynovo share price plunge 17% today?
• Why Aussie Broadband, Grange, NextDC, and PolyNovo shares are being hammered
• Polynovo share price plummets 15% despite surging full-year revenue

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 POLYNOVO FPO. 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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Commonwealth Bank of Australia (ASX: CBA) and its shares may be known for being the biggest bank in Australia. The other big S&P/ASX 200 Index (ASX: XJO) bank shares are names like Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).

As the biggest banks, and essentially too big to allow to fail, they are required to hold the most amount of capital out of all banks in Australia.

One of the key ways that banks are measured by how strong their balance sheets are, and therefore how capitalised they are, is the common equity tier one (CET1) capital ratio.

Every quarter, banks tell investors what their CET1 ratio is. So we regularly get a view of the bank balance sheets.

Big ASX 200 bank share CET1 ratios

Seeing as we’re focused on CBA shares, we’ll first look at what CBA has most recently reported.

CBA’s FY22 result ended on 30 June 2022. It said that its CET1 capital ratio was 11.5%, which was a reduction of 160 basis points (1.60%) compared to FY21.

The biggest ASX 200 bank share said that it “maintained a strong capital position after returning $13 billion to shareholders via dividends and [share] buybacks, and absorbing a significant increase in risk weighted assets associated with the interest rate risk in the banking book”.

At 30 June 2022, Westpac said that its CET1 capital ratio was 10.75%, down from 11.33% at 31 March 2022. It was lower due to the dividend payment (45 basis points), higher risk-weighted assets (42 basis points) and higher capital deductions.

For the end of June 2022, NAB said that its group CET1 capital ratio was 11.6%. It was 12.5% at March 2022. It was reduced by 54 basis points due to the 2022 interim dividend, 31 basis points due to the acquisition of CitiGroup’s Australian consumer business and 19 basis points due to the ongoing share buyback.

For ANZ, it had a group CET1 capital ratio of 11.1%, with the interim dividend impacting it by 41 basis points and broad-based lending growth across the portfolio affecting the ratio by 17 basis points compared to the last update.

What does this mean for the CBA share price?

I think what this shows is that CBA and NAB have stronger, more capitalised balance sheets than ANZ and Westpac.

That extra capital could be used to fund more lending growth, pay stronger shareholder returns, or simply maintain a strong position for those two banks so that they can easily get through whatever happens over the next couple of years.

However, some brokers think that the current CBA share price is overvalued. For example, Morgan Stanley has an underweight rating on the ASX 200 bank share, with a price target of $83. Over the next year, that implies a fall of around 12% from today’s price.

The post Looking to buy CBA shares? Here’s how the bank’s balance sheet stacks up appeared first on The Motley Fool Australia.

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More reading

• Westpac shares: Buy, hold, or fold?
• Top brokers name 3 ASX shares to buy next week
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• Why is the Westpac share price outperforming the ASX 200 today?

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 Westpac Banking Corporation. 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 Medibank Private Ltd (ASX: MPL) share price has been volatile in recent months. It has managed to rise slightly in 2022 – up 3.5% – but since 30 August 2022 it’s actually down by 5.6%.

The last three years have been an interesting time for private health insurance businesses.

There was a lot of disruption caused by the COVID-19 pandemic. But, that also led to a number of elective surgeries being delayed, which may have helped increase Medibank’s profit during this period.

FY22 saw net resident policyholder growth of 60,900 (or 3.2%). Revenue rose 3.2%, with operating profit rising 12.5% to $594.1 million. However, the actual net profit after tax (NPAT) fell 10.7%. That was after the net investment income of $120 million in FY21 turned into a net investment expense of $24.8 million in FY22, as investment markets plummeted in the last few months of FY22.

Underlying NPAT, which aims to remove that investment volatility, rose by 9.1% to $435.1 million. The annual dividend per share increased 5.5% to 13.4 cents.

FY23 outlook

Growth within the business could have a positive effect on the Medibank share price.

In terms of FY23 policyholder growth, it’s expecting a rise of 2.7%. That’s assuming a modest decline in the growth rate of industry participation.

Looking at the comments about claims, it’s expecting the underlying net claims expense per policy unit to grow. The growth rate of 2.3% in FY22 is its “best indicator” of growth in FY23 among resident policyholders.

The company expects productivity with its management expenses to largely offset the inflation of expenses.

In terms of customer relief, it continues “to assess claims activity and any permanent net claims savings due to COVID will be given back to customers through additional support in the future”.

Management is focused on growth for the business. It’s looking at both organic growth and acquisition opportunities for Medibank Health and health insurance, supported by a “strong capital position”. It had health insurance business-related capital of $983.7 million at 30 June 2022, which was at the top end of its targeted range.

It has unallocated capital of $148 million, which “provides flexibility to fund future inorganic growth” and it will “consider further capital management if suitable opportunities do not arise”.

What do experts think of the Medibank share price?

The brokers Citi and Ord Minnett both rate Medibank as a buy. Both brokers thought the FY22 result was good.

Ord Minnett has a price target of $3.75 on the business, which implies a possible rise of around 5% over the next year.

Meanwhile, Citi has a price target of $4. That suggests that the Medibank share price could rise by more than 10% over the next year.

The post What’s the outlook for the Medibank share price in FY23? appeared first on The Motley Fool Australia.

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More reading

• ‘Sweet spot’: Citi names 2 ASX 200 shares that are ‘inexpensive’ right now
• Why is the Medibank share price slipping on Wednesday?
• 5 things to watch on the ASX 200 on Wednesday
• Ready for a storm: 3 ASX 200 shares with ironclad balance sheets
• Hoping to bag the latest Medibank dividend? Read this

Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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 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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Wilson Asset Management (WAM) is one fund manager that likes to hunt for smaller ASX shares that could have solid investment outlooks.

WAM runs a number of different listed investment companies (LICs) including WAM Capital Limited (ASX: WAM), WAM Active Limited (ASX: WAA), and WAM Research Limited (ASX: WAX).

The fund manager likes to look for compelling, undervalued growth opportunities on the ASX share market. The below companies are two investment ideas that WAM recently highlighted.

IPH Ltd (ASX: IPH)

WAM described IPH as Asia Pacific’s leading intellectual property (IP) services group with a network of member firms and clients in more than 25 countries.

Last month, IPH announced that it was buying Canadian IP agency Smart & Biggar for a total of $387 million.

The fund manager noted the acquisition will extend IPH’s international secondary markets network beyond the Asia Pacific region for the first time and lift IPH “towards being a global leading IP services group”.

IPH expects that the transaction will result in adding to underlying earnings per share (EPS) of approximately 10% in the first year of ownership and deliver access to more growth opportunities.

August was also reporting season. Last month, the company announced its full-year result, revealing a 14% year-over-year increase of underlying net profit after tax (NPAT) to $86.7 million as well as an 11% rise in underlying earnings before interest, tax, depreciation and amortisation (EBITDA).

Here is what WAM had to say about the company:

We remain positive on IPH and believe the business has a strong runway for organic and acquisition-led growth over the medium term.

Capitol Health Ltd (ASX: CAJ)

Capitol Health is described by the fund manager as a diagnostic imaging provider to the Australian healthcare market.

Last month, the ASX share announced the full-year result for its 2022 financial year which was better than the market was expecting. It also included the acquisition of Future Medical Imaging Group, a diagnostic imaging services provider, for a total cost of $56.1 million.

WAM pointed out the acquisition is expected to add to EPS in the high single digits. The fund manager said:

With a strong balance sheet and continued investment in well-defined growth opportunities, we believe the outlook for Capitol Health remains strong as diagnostic imaging providers recover from the coronavirus pandemic.

The post 2 little-known ASX shares that this fund manager says have ‘strong’ outlooks appeared first on The Motley Fool Australia.

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More reading

• Why did the WAM Capital share price outperform its sector today?
• Guess which ASX 200 CEO just sold $3.64 million worth of his company’s shares?
• ASX reporting season weekly wrap: Winners and losers

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 IPH Ltd. The Motley Fool Australia has recommended IPH Ltd. 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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At face value, the Flight Centre Travel Group Ltd (ASX: FLT) share price is languishing well below its pre-COVID levels.

Right before the S&P/ASX 200 Index (ASX: XJO) descended into the COVID crash of 2020, Flight Centre shares were trading at around $35 each.

Fast forward to today and the Flight Centre share price is currently sitting at $16.36.

So, you can pick up Flight Centre shares at a 50% discount compared to pre-COVID levels, right?

Well, not so fast.

While the Flight Centre share price is certainly down more than 50%, the overall market value of the company isn’t.

This is because Flight Centre tipped its hat to investors during the pandemic, raising capital to keep the company afloat.

So, when it comes to ASX travel shares such as Flight Centre, Webjet Limited (ASX: WEB), and Qantas Airways Limited (ASX: QAN), it’s important to dig a little deeper.

Share price charts fail to account for the dilution that happens when a company issues new shares.

As a shareholder, you’re a part owner of a company. But as more shares are issued, your ownership stake diminishes.

To use a food analogy, the pizza (i.e. company) has been cut up into more slices (shares). So each individual slice is smaller.

The impact of this is best reflected when calculating per-share metrics, such as earnings per share (EPS). As more shares are issued, a company’s profits are spread more thinly across its shareholder base.

So while the Flight Centre share price may historically look very cheap, you’re getting a lot less bang for your buck. Let’s take a closer look.

Flying under the radar

The overall size of a company is measured by its market capitalisation. 

To calculate a company’s market cap, you simply multiply its share price by the number of shares it has on issue.

In Flight Centre’s case, it has a much larger share count than it did before COVID. This is because it issued new shares to investors in return for cold hard cash.

In April 2020, the company launched a $700 million capital raising, issuing roughly 97 million new Flight Centre shares (at a steeply discounted price compared to their former glory, I should add).

But before this, the company had approximately 100 million shares on issue.

Multiplying this with Flight Centre’s pre-pandemic share price in February 2020 gives us a market cap of around $3.6 billion.

Fast forward to today and the company’s most recent ASX notice details roughly 200 million ordinary Flight Centre shares on issue.

So, the company currently commands a market cap of around $3.3 billion.

This means that in actual fact, Flight Centre is down just 9% from its pre-pandemic valuation.

Plus, it has up to 45 million new shares waiting in the wings in the form of convertible notes to further dilute shareholders. This isn’t reflected in the market cap.

While Flight Centre’s market valuation has nearly recovered, its financials certainly haven’t. 

The company recently handed in its FY22 results, revealing a 154% surge in revenue to $1 billion while delivering a net loss of $287 million.

In contrast, Flight Centre booked a $264 million profit in FY19 from revenue of $3 billion.

Can the Flight Centre share price gain altitude?

Looking at the lay of the land, it seems brokers are neither bullish nor bearish on the Flight Centre share price.

Analysts at Citi recently upgraded their rating on Flight Centre shares from sell to neutral. The broker has a 12-month price target of $16.60.

Meanwhile, analysts at Goldman Sachs have maintained a neutral rating on Flight Centre shares. On the back of the recent results, Goldman trimmed its price target to $19.60.

Analysts at Macquarie have also retained their neutral rating, with a 12-month price target of $18.20.

The post Here’s why the Flight Centre share price isn’t all that it seems appeared first on The Motley Fool Australia.

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More reading

• Why have Flight Centre shares been the most shorted on the ASX every week so far in 2022?
• Here are the 10 most shorted ASX shares
• Is now a good time to buy Flight Centre shares?
• Broker gives its verdict on the Flight Centre share price
• These are the 10 most shorted ASX shares

Motley Fool contributor Cathryn Goh 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 Flight Centre Travel Group Limited and Webjet Ltd. 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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When a baby enters the picture, it can be an event that changes a family’s thoughts about its financial situation. Sometimes parents may want to invest in ASX shares on behalf of their baby for the long term – or, perhaps, some family members may have even given them some money.

People invest with all sorts of different timelines in mind. But, if a family invests for the baby’s benefit then it could be done with an investment horizon of 18 or 20 years, or even longer,  in mind.

Certainly, it could be a very different world in two decades. Think how much has changed over the past 20 years! However, it gives us plenty of time to invest and benefit from compounding.

I have a few ideas that could be good long-term investments.

Australian Ethical Investment Ltd (ASX: AEF)

Australian Ethical is a business that families can be proud to own for the long term. It’s a fund manager that prides itself on the fact that its entire range of funds is “rigorously screened in ethical and investment merits. Going beyond environmental, social and governance criteria (ESG), the team proactively seeks out companies that “do good”.

This ASX share is growing its number of customers and funds under management (FUM). In FY22, the number of funded customers increased by 17%. Despite the volatility at the end of FY22, FUM rose by 2% over the year to $6.2 billion at 30 June 2022. FUM was $6.45 billion at 31 July 2022.

It’s benefiting from ongoing mandatory superannuation contributions. FY22 super net flows rose 22% to $0.8 billion. Growth of net flows is also expected in FY23.

BetaShares Global Sustainability Leaders ETF (ASX: ETHI)

This is an exchange-traded fund (ETF) based on getting exposure to a portfolio of large global companies that meet strict sustainability and ethical standards.

The ASX share starts with a selection of companies from global developed markets, and they must be of a certain size.

As well, companies must be in the top one-third of performers in terms of carbon efficiency for their industries or be engaged in activities that can help reduce carbon use by other industries.

A number of screens are then applied to exclude fossil fuel producers. There are also no companies significantly engaged in armaments, gambling, alcohol, or junk food. Companies with human rights or supply chain issues are excluded as well as companies that lack gender diversity on their boards, and so on.

Some of the 200 names in the current portfolio include Apple, Visa, Home Depot, Mastercard, Nvidia, Adobe, ASML, and PayPal. Its holdings can come from across the world.

Coincidentally, or perhaps not, the BetaShares Global Sustainability Leaders ETF has performed well. Since it started in January 2017, the ETF has returned an average of 16% per annum. But past performance is not a reliable indicator of future results.

I like that this investment provides diversification, it has compelling holdings, and it seems capable of producing good returns over time.

REA Group Limited (ASX: REA)

REA Group is the owner of Australia’s largest property portal – realestate.com.au. It takes a small ‘toll’ on almost every residential property that is sold in Australia. It has a strong market position, which allows it to regularly raise prices.

I think the 28% fall of the REA Group share price makes the ASX share a more attractive opportunity for the long term at the current level.

What would make this business an attractive option for the long term? It has investments in property sites in the US, India, and Southeast Asia. While each of these regions may not generate as much revenue per property as in Australia, the huge populations of these regions compared to Australia are certainly compelling. Each region could turn into a profit centre for REA Group.

The post How I’d invest $10,000 in ASX shares when starting a family appeared first on The Motley Fool Australia.

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More reading

• One very famous and one very obscure ASX share to buy: fund manager
• Why making your first purchase of ASX shares can be scary
• 2 under-appreciated ASX shares that Goldman Sachs rates as buys
• How I’d invest my very first $1,000 in ASX shares right now
• 2 popular ETFs that could be buys for ASX investors

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 ASML Holding, Adobe Inc., Apple, Australian Ethical Investment Ltd., Mastercard, Nvidia, PayPal Holdings, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2024 $420 calls on Adobe Inc., long March 2023 $120 calls on Apple, short January 2024 $430 calls on Adobe Inc., and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended ASML Holding, Adobe Inc., Apple, Australian Ethical Investment Ltd., Mastercard, Nvidia, PayPal Holdings, and REA Group Limited. 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 an important part of my portfolio. I have previously outlined why I decided to buy the company’s shares and how long I plan to hold them.

Currently, I’m receiving a large dividend from the S&P/ASX 200 Index (ASX: XJO) mining share. This is because Fortescue is generating significant net profit after tax (NPAT) and cash flow, enabling it to pay a juicy dividend to shareholders and continue to invest in its green division, Fortescue Future Industries (FFI).

Over the long term, I’m hoping that Fortescue can generate sizeable profits from the production and sale of products such as green hydrogen, green ammonia, green iron, and advanced batteries.

However, there are a few situations where I could see myself selling my Fortescue shares — or at least thinking about it.

Demerger

It was recently in the news that Fortescue chair Andrew Forrest revealed that Fortescue Future Industries may already be worth US$20 billion. This is “if solicitations from investment banks for an initial public offering (IPO) of the division were any guide to its valuation”, as reported by the Australian Financial Review.

Shareholders would probably realise significant value from a Fortescue demerger because it would mean that investors could properly value FFI and the company’s mining segments separately. It wouldn’t surprise me if some investors who just wanted the mining segment were unenthusiastic about getting FFI as part of the deal, so the combined value of the two businesses could rise on a demerger.

However, if I were left with Fortescue shares and FFI shares, I would very likely sell shares of the mining business.

There would also be a major question of how Fortescue Future Industries would fund its green endeavours. At the moment it gets 10% of Fortescue’s NPAT each year, plus access to the sizeable balance sheet.

I think Fortescue is better off staying a combined business for the long term.

Stopped paying dividends

Dividends aren’t everything with investing, but I like the investment income because of the additional cash flow it provides into my bank account for whatever purpose I decide, including re-investment into other opportunities.

Every single one of my holdings pays dividends, though I’m searching for total returns from my portfolio, not just dividends.

If Fortescue did stop paying dividends then I would need to evaluate how long the dividends were going to be halted and why. Would it have stopped because its financial position is in danger and it’s overloaded with debt? Or is it investing all available dollars into the green FFI opportunity, which could pay off in the long run?

It wouldn’t be a definite thing I’d sell in this situation, but I’d certainly think about it.

China stops buying Australian iron ore

For me, this is the biggest risk facing Aussie miners. If China stopped buying Australian iron ore, it would make me evaluate my holding of Fortescue shares.

China reportedly buys a sizeable majority of the global iron ore production each year. What would happen if China stopped buying Aussie iron? We have seen how it was willing to put tariffs on a number of other Australian exports, such as wine.

China has continued to buy Australian iron ore. It has been dependable during the COVID-19 pandemic, it’s geographically closer to China than Brazil is, and there isn’t really a replacement option (at this stage).

However, China is reportedly working on a plan to reduce its dependency on iron ore, according to reporting by the Australian Financial Review. African iron ore could become a competing force as well. Fortescue itself is looking to start an African iron ore project which could mitigate some future issues for Fortescue.

Finally, what would happen if China decided to invade Taiwan? That is definitely not a certain event — and I hope it never happens — but it has crossed my mind what the geopolitical and economic consequences of that could mean for Fortescue’s biggest customer.

Foolish takeaway

I’m planning to hold my Fortescue shares for years, perhaps decades, but I think it’s a good idea to assess some situations before they happen, where it’s possible I may want to sell.

The post I would only sell my Fortescue shares if this happened appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Monday
• Could the latest news out of China bode well for ASX 200 iron ore shares?
• How big will the Fortescue dividend be in 2023?
• Reinvesting your Fortescue dividends? Here’s what you need to know
• ASX 200 mining shares stage significant rebound in afternoon trading

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. 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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ASX tech shares look like a good sector to be focused on, in my opinion.

Sometimes the sector that has been hurt the most could be the place to go hunting because sentiment is so low.

While not every tech business is guaranteed to be a good choice, I think there are a number of interesting choices worth considering due to their growth potential and impressive margins.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This isn’t a single business. It’s an exchange-traded fund (ETF) that is invested in a range of different tech stocks.

Many of the largest holdings will probably be familiar to readers. We’re talking about names like Apple, Microsoft, Amazon.com, Tesla, Alphabet, Meta Platforms, and Nvidia.

There are plenty of others in the portfolio such as Broadcom, Cisco Systems, Texas Instruments, Adobe, Qualcomm, Advanced Micro Devices, and Intel.

It has been a solid performer in the last few years, despite the plunge seen this year. At 31 August 2022, the Betashares Nasdaq 100 ETF had returned an average of 16.4% per annum over the prior three years. But, that doesn’t mean that the next three years will be as strong.

Since the start of 2022, the ASX tech share has dropped by 25%. I like the diversification and tech exposure offered by this investment option.

Pushpay Holdings Ltd (ASX: PPH)

The Pushpay share price recently suffered a 10% plunge on news that a takeover was no longer likely to go ahead for the donation and church management software company.

However, I think this now represents a compelling opportunity for investors to look at the business.

This is despite investor worries that the normalisation of COVID-19 conditions would lead to the business suffering.

Revenue rose 13% in FY22 and it’s expecting between 10% to 15% revenue growth in FY23. Operating profit may be a bit lower in FY23 as the business invests for future growth.

It’s expecting “strong growth” in FY24 onwards with “significant revenue growth and increasing profitability”.

In FY22, total processing volume increased by 10% to US$7.6 billion. By FY25, it’s expecting its total processing volume to grow to more than US$10 billion, which suggests a rise of more than 30% between now and then.

I think the entry into the Catholic segment is a smart move by the ASX tech share because it diversifies and expands the potential Pushpay customer base.

If it can keep growing revenue in the coming years, while growing profit faster than revenue, I believe that the Pushpay share price represents compelling value at this lower level.

The post Here’s why I think these ASX tech shares are buys in September appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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 Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Meta Platforms, Inc., Microsoft, Nvidia, PUSHPAY FPO NZX, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS and PUSHPAY FPO NZX. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Meta Platforms, Inc., and Nvidia. 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, Elvest Co portfolio manager Adrian Ezquerro nominates two ASX shares that he’d be happy to hold for years to come.

The ASX share for a comfortable night’s sleep

The Motley Fool: If the market closed tomorrow for four years, which stock would you want to hold?

Adrian Ezquerro: This is a really good question. I must admit it’s something I’ve thought about. Being an analyst, you think about these sorts of things and having been well read in Warren Buffett, it’s something I’ve considered for a long period of time. 

I actually tend to think about this in two different ways and maybe that might be a bit strange. But anyway, without being too crass, firstly I think about a scenario where I’m asked about what would happen if, say, I was hit by a bus and I had to nominate one stock to leave to my wife and kids. This is the first way that I would frame it.

With that in mind, this would obviously need to be a stock that’s got a great long-term track record. It’s a strong, well-diversified business, it still has some long term growth potential, but has significant downside protection and preferably pays a regular dividend income. 

It’s in this context I’ll nominate Brickworks Limited (ASX: BKW). Brickworks has three core divisions. That’s investments, industrial property and building materials, as the name suggests. 

The investment division is basically a 26% shareholding in Washington H Soul Pattinson and Co Ltd (ASX: SOL), and that’s got a market cap in excess of $9 billion. And that provides exposure to high-quality assets across telco, energy, financial services and basically the industrial sector of the Australian economy. That’s the investment division. 

The industrial property division largely sits within a 50-50 joint venture Goodman Group (ASX: GMG). Brickworks is a massive landholder and over time they vend industrial property into that JV and that then becomes a trust. That’s developed into industrial assets and it’s leased on long-term deals to the likes of Amazon.com Inc (NASDAQ: AMZN), Coles Group Ltd (ASX: COL), Woolworths Group (ASX: WOW), et cetera. That’s highly valuable itself. 

For context, the current market cap of Brickworks is about $3 billion. If you were to have $3 billion and you were to buy the whole company, you would get that shareholding in Soul Patts, and that’s worth about $2.4 billion at current prices. The net assets of the industrial property and Brickworks’ share of that’s about $1.5 billion. Then you’d get the net tangible asset base of Brickworks building materials business, which minus group net debt is worth a few hundred million.

In total, you get asset backing of about $4.2 billion, which is close to $28 a share on a pre-tax basis. The current market price is between $20 and $21, and for that you get exposed to a really high-quality diversified portfolio at what we feel is a substantial discount to fair value. 

And that’s for a business that has consistently grown its ordinary dividend for, I think it’s something like 45, 46 years consecutively. That’s a remarkable achievement. It’s quite rare in the Australian market. 

I’d say, on a relative basis to my second stock that I’ll mention, it’s a lower-risk option and certainly more stable with downside protection.

Now, the second way that I tend to think about this type of question is what’s a stock that’s highly likely to substantially grow its earnings in the coming years? And, of course, the extension of that is, what stock might have multi-bag potential?

In this context I’d probably highlight the stock RPMGlobal Holdings Ltd (ASX: RUL). RPM is a leading provider of mine planning and operations software and that’s mainly to global tier one and tier two miners, many of which you’d know. The likes of BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), Glencore PLC (LON: GLEN), et cetera. 

Their products basically improve the efficiency of mining operations. In many cases, it replaces more manual legacy processes with more efficient software solutions. 

For context, its market cap is about $350 million. It’s got close to $40 million in cash, so it’s a well-funded business and the CEO has got a pretty good track record. He’s invested quite heavily over the past decade in evolving this business and its software solutions so that it’s now really well positioned as a vendor-of-choice for major mines. 

One of the most significant developments, though, in RPM’s recent history is that it successfully transitioned its revenue model from a perpetual licence model to a subscription revenue model.

This is really powerful and it’s important to understand in the context of its recent results because as you take out the value of the more lumpy perpetual sales, which have a higher one-off dollar value, and you transition that to a subscription revenue model, that has implications for your year-on-year cash flow. What it does [is] it clearly embeds longer-term value in the business. 

They’re now about to see the fruits of all that labour. If you look ahead, its revenue base now from a software division is largely recurring and it’s now pretty well established in the operations of BHP, Rio, Glencore, and many, many others. We actually see scope for substantial further contracts in the next 12 to 24 months. And for the first time in many years, management has actually provided guidance for the year ahead and I think that reflects their confidence in this pivot towards subscription revenue.

They guided to EBITDA of $14.2 million in the coming year, and that’s up from about $4 million achieved in FY22. And we actually think that that might, firstly, prove conservative and we’re also expecting even more growth in FY24 given the timing of new contract awards. 

You’ve got a scenario where you’ve got pretty explosive earnings growth, cash generation we expect to be really strong and… backed by growing recurring revenue profile. That’s pretty exciting. Again, it’s not without risk, but if it’s executed to plan, we expect that the stock may do pretty well over the next four or five years.

MF: The company was founded in 1968, which is quite old for a software company, isn’t it?

AE: Actually it started as an advisory business and RPM itself, the initials of some of the founders, it evolved out of an advisory business and that advisory business still exists today. 

I know I’ve talked about the software division, but that in itself has done pretty well in recent times and they’ve now got an ESG division, which as you can imagine, is seeing a lot of growth in demand. 

MF: That’s great. One safe one and one exciting one to hold onto for the next four years.

The post One ‘safe’ and one ‘exciting’ ASX share to own for years like Warren Buffett: fund manager appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tony Yoo has positions in Amazon, RPMGlobal Holdings, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Brickworks, RPMGlobal Holdings, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks, COLESGROUP DEF SET, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Amazon and RPMGlobal Holdings. 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 looking for dividend shares to buy, then the two listed below could be worth checking out.

Both have been named as buys by analysts recently and tipped to provide very attractive yields. Here’s what you need to know about them:

Accent Group Ltd (ASX: AX1)

The first ASX dividend share that has been tipped as a buy is footwear retailer Accent.

This is due to its attractive valuation and expectations that the company is well-placed to bounce back from a very difficult 12 months.

The team at Morgans recently commented:

AX1’s renewed focus on selling at full price will, in our view, support a recovery in the gross profit margin in FY23 back towards historical averages. We welcome AX1’s moderation of the pace of its store rollout in favour of a more selective expansion strategy focused on return on investment. We see AX1 as undervalued at the current share price.

Morgans is also expecting some attractive dividend yields from the company’s shares. It is forecasting fully franked dividends of 9 cents per share in FY 2023 and 11 cents per share in FY 2024. Based on the current Accent share price of $1.36, this will mean yields of 6.6% and 8.1%, respectively.

The broker also sees plenty of upside for its shares with its add rating with a $2.00 price target.

HomeCo Daily Needs REIT (ASX: HDN)

Another ASX dividend share that has been named as a buy for income investors is HomeCo Daily Needs.

HomeCo Daily Needs is a property investment company with a focus on metro-located, convenience-based assets across neighbourhood retail, large format retail, and health and services.

Goldman Sachs is a big fan of the company and believes its shares are cheap at the current levels. Particularly given its positive outlook due to the shift to omni channel retailing.

The broker commented:

We continue to believe HDN is undervalued at its current valuation given its diversified tenant base, and see it as well positioned to benefit from the shift to omni channel retailing, with additional external growth opportunities to drive earnings growth over the medium-term.

Its analysts also see potential for some big dividend yields in the coming years. The broker is forecasting dividends of 8.3 cents per share in FY 2023 and 8.5 cents per share in FY 2024. Based on the current HomeCo Daily Needs REIT unit price of $1.26, this will mean big yields of 6.6% and 6.75%, respectively.

Goldman currently has a buy rating and $1.63 price target on HomeCo Daily Needs’ shares.

The post Experts say these top ASX dividend shares are buys 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 recommended Accent 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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