The Carnaby Resources Ltd (ASX: CNB) share price is flying higher in morning trade. It’s up 14% after leaping more than 27% higher in the early minutes after the opening bell.

Below we look at the drill results that look the be driving ASX investor interest.

What drill results did Carnaby announce?

The Carnaby Resources share price is rocketing after the company reported “stunning drill results“. The results are from the exploration campaign at its Greater Duchess Copper Gold Project in Mt Isa, Queensland.

The results come from both reverse circulation and diamond drilling.

One of the drill holes intersected the widest high-grade intercept Carnaby has discovered to date. Results were 68 metres at 2.4% copper, 0.4 grams per tonne of gold from 40 metres, including 42m @ 3.6% copper, 0.5 g/t gold from 63m.

The ASX resource explorer said it has now intersected “wide, high-grade and very shallow” copper-gold mineralisation across a zone of more than 300 metres strike length that remains open.

Atop this, it reported receiving a number of other new results and visual intersections. Those include a 30-metre zone of very strong copper sulphides.

On the results that look to be lifting the Carnaby Resources share price today, Carnaby managing director Rob Watkins said:

These stunning drill results clearly demonstrate the resource and development potential of the Greater Duchess Copper Gold Project. We are discovering and building a pipeline of exceptional and highly desirable copper gold deposits whose intrinsic value will only grow over time as we define and grow the maiden resource and move towards a development timetable.

Drilling at the project continues with two dedicated drill rigs on site.

Carnaby Resources share price snapshot

Though it has come under pressure in 2022, the Carnaby Resources share price remains up 220% in the past 12 months. By comparison, the All Ordinaries Index (ASX: XAO) is up 0.48% since this time last year.

The post Here’s why the Carnaby Resources share price just rocketed 27% appeared first on The Motley Fool Australia.

More reading

• Why is the Carnaby Resources share price surging 8% on Monday?

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 Westpac Banking Corp (ASX: WBC) share price appears to be off to the right start this week after the bank upped its interim dividend.

The second largest ‘big four’ bank increased its half-yearly payment despite reporting that its cash earnings slipped over the first half of financial year 2022 this morning.

It brought in around $3 billion of cash earnings last half – a 12% drop on that of the prior comparable period. Its revenue also slumped 8% to approximately $10 billion.

At the time of writing, the Westpac share price is $24.37, 2.27% higher than its previous close.

So, what do investors need to know about the S&P/ASX 200 Index (ASX: XJO) bank’s latest dividend? Let’s take a look.

All the details on Westpac’s latest dividend

The Westpac share price is in the green after the bank upped its interim dividend to 61 cents per share.

The dividend is fully franked and represents a payout ratio of 69%.

Additionally, considering Westpac’s previous closing price, the bank is now trading with a 5% dividend yield.

Interested market watchers have until 19 May to acquire the bank’s stock or miss out on receiving the banking giant’s upcoming dividend. That’s the day the stock will trade ex-dividend.

The dividend will reach investors’ bank accounts from 24 June.

The interim dividend announced today is the bank’s biggest payout since the onset of COVID-19.

It’s 1 cent more than Westpac’s final dividend for financial year 2021. It’s also 3 cents more than Westpac’s previous interim dividend.  

Westpac shareholders also have the option of receiving new shares in the bank instead of a cash dividend.

That option is offered through the bank’s dividend reinvestment plan. Shareholders have until 23 May to opt into the plan.

The Westpac share price has gained 12% since the start of 2022. Meanwhile, the ASX 200 has slumped nearly 6%.

The post Everything you need to know about the latest Westpac dividend appeared first on The Motley Fool Australia.

More reading

• Westpac share price on watch amid half-year profit slide
• 5 things to watch on the ASX 200 on Monday
• Own Westpac shares? Here’s what to expect from the bank’s half-year results
• Why ASX 200 bank shares are in the spotlight
• Here’s how some of the biggest ASX 200 shares are responding to the RBA’s rate rise

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 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 Spirit Technology Solutions Ltd (ASX: ST1) share price was looking greener than usual in early trade on Monday.

Investor excitement resonated following the telecommunications company’s announcement to sell its fixed wireless assets. Shares in Spirit were trading 11.8% higher to 85 cents apiece near the open. However, they have since lost some ground and are currently trading at 78 cents, up 2.63%.

Joining the telecom trend

Spirit Technologies is the latest ASX-listed telecommunications company to sell its infrastructure assets. The announcement this morning coincidentally lands at the same time that TPG Telecom Ltd (ASX: TPG) is revealing the sale of its mobile tower and rooftop assets for $950 million.

According to the release, Spirit has entered into a binding sale agreement with Maret Infrastructure Pty Ltd (Maret Group). As part of the deal, the company will divest its wholesale fixed wireless assets for up to $21 million.

The total consideration will comprise an upfront $15 million payment, in addition to a $6 million performance fee over the next 12 to 24 months.

What did management say?

Commenting on the deal, Spirit managing director Sol Lukatsky said:

[…] this transaction returns a material amount of capital for a company of our size. Combined with the divestment of the consumer business last October, the proceeds of this sale, (once completed), will have returned over $20M in cash to our balance sheet in FY22.

Spirit is also undertaking an internal transformation project (Spirit 2.0) to reduce costs and ensure it is well-positioned to capitalise on the growth we are seeing for our services in the SMB market and Cyber solutions.

Much like other tower sales we have seen from Telstra Corporation Ltd (ASX: TLS) and Optus, Spirit will retain its customer relationships and revenues associated with the network. Meanwhile, Maret Group will charge Spirit a wholesale ‘last-mile’ services fee for the provision of services.

Furthermore, the partnership between Spirit and Maret also unlocks the use of Maret’s own spectrum licensing assets for the ASX-listed telecom company. Following this, Spirit plans to bring new fixed wireless products to market under a broader network.

How has the Spirit share price performed?

Despite growing revenue by around 94% year over year and turning profitable, the Spirit share price has been a doozy over the past year.

Specifically, ASX-listed Spirit has tumbled nearly 80% during the 12-month period. Meanwhile, staples of the communications sector, such as Telstra and Uniti Group Ltd (ASX: UWL), have rallied 14% and 78% respectively.

Undoubtedly, Spirit shareholders will be hoping this latest deal represents a pivotal moment for the share price.

The post Why the Spirit share price bounced 12% this morning appeared first on The Motley Fool Australia.

More reading

• Analysts name 2 high yield ASX dividend shares to buy now
• Why is the ANZ share price sliding on Monday?
• Why is the AVZ share price halted today?
• Are ASX 200 travel shares already fully valued in May?
• Are these 2 ASX dividend shares buys in May 2022?

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 positions in and has recommended SPIRIT TC FPO. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended SPIRIT TC FPO, TPG Telecom Limited, and Uniti 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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If you’re looking to boost your income portfolio with some new dividend shares this week to combat rising inflation, then the two listed below could be worth considering.

Here’s why analysts are positive on these dividend shares right now:

Centuria Industrial Reit (ASX: CIP)

The first ASX dividend share that is rated as a buy is Centuria Industrial. It is a property company with a focus on high quality industrial assets.

Thanks to strong demand for industrial property, and particularly from ecommerce-related tenants, Centuria Industrial has been reporting strong rental income and funds from operations (FFO) growth during the first half of FY 2022.

The good news is that Macquarie appears confident this strong form will continue thanks to ongoing demand for these properties. It currently has an outperform rating and $4.27 price target on the company’s shares.

As for dividends, Macquarie is forecasting dividends per share of 17.3 cents in FY 2022 and then 17.8 cents in FY 2023. Based on the current Centuria Industrial REIT share price of $3.58, this will mean yields of 4.8% and 5%, respectively.

HomeCo Daily Needs REIT (ASX: HDN)

Another ASX dividend share that has been rated as a buy is HomeCo Daily Needs REIT. It is another property company but with a focus on convenience-based assets. This includes neighbourhood retail and large format retail (retail parks).

Like Centuria Industrial, HomeCo Daily Needs has been on form in FY 2022 and delivered solid growth during the first half.

Pleasingly, Goldman Sachs believes the company is well-positioned to continue its growth over the medium term thanks to “the shift to omni channel retailing.”

In addition, the broker feels HDN is undervalued at its current level given this growth outlook and its diversified tenant base. As a result, the broker has put a buy rating and $1.70 price target on the company’s shares.

In respect to dividends, Goldman is forecasting dividends per share of 8 cents in FY 2022 and then 9 cents in FY 2023. Based on the current HomeCo Daily Needs share price of $1.31, this will mean yields of 6.1% and 6.8%, respectively.

The post Analysts name 2 high yield ASX dividend shares to buy now appeared first on The Motley Fool Australia.

More reading

• 2 buy-rated ASX dividend shares for income: experts
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• 2 ASX dividend shares analysts have named as buys for income investors
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• Beat inflation with these ASX dividend shares that analysts rate as buys

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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You may be wondering why the Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price is backtracking today.

At the time of writing, the company’s shares are down 3.33% to $25.87.

Shareholders lock in the ANZ interim dividend

With the earning seasons wrapped up for some of the major banks, ANZ is trading ex-dividend.

This comes after the banking giant released its half-year scorecard on 4 May, reporting growth across key financial metrics.

The board opted to slightly increase its upcoming interim dividend by 2.9% over the prior corresponding period.

Typically, one business day before the record date, the ex-dividend date, is when investors must have purchased shares. If the investor does not buy ANZ shares before this date, the dividend will go to the seller.

When can shareholders expect to be paid?

For those eligible for ANZ’s interim dividend, shareholders will receive a payment of 72 cents per share on 1 July. The dividend is fully franked at a corporate tax rate of 30%, which means investors will receive tax credits from this.

In addition, investors can elect for the dividend reinvestment plan (DRP), which will add a portion of shares to their portfolio instead. This will be based on a 10-day volume-weighted average price from 13 May to 26 May.

There is no DRP discount rate and the last election date for shareholders to opt in is 11 May.

Under the company’s capital management framework, there is typically a 60% to 65% targeted dividend payout ratio.

ANZ share price summary

Since the beginning of 2022, ANZ shares have lost 6% on the back of weakened investor sentiment. The S&P/ASX 200 Index (ASX: XJO) is also down around 4% over the same timeframe.

ANZ shares reached a 52-week low of $24.65 in March, before sharply rebounding in the weeks following.

Based on today’s price, ANZ commands a market capitalisation of roughly $72.2 billion, and has a trailing dividend yield of 5.5%.

The post Why is the ANZ share price sliding on Monday? appeared first on The Motley Fool Australia.

More reading

• Is the NAB share price a buy amid this volatility?
• Is it too late to buy big bank ASX shares?
• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to buy next week
• These were the best performers on the ASX 200 last week

Motley Fool contributor Aaron Teboneras 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 AVZ Minerals Ltd (ASX: AVZ) share price won’t be going anywhere on Monday.

This morning the lithium developer requested a trading halt prior to the market open.

Why is the AVZ share price halted?

This morning the AVZ share price was placed in a trading halt until the earlier of Wednesday or the release of an announcement. The company’s request states:

AVZ Minerals Limited requests that a trading halt be placed on the Company’s securities effective immediately, pending the release of an announcement in relation to it’s (sic) mining and exploration rights for the Manono Lithium and Tin Project.

What does this mean?

Judging by the request, it appears as though AVZ intends to address concerns about its ownership of the Manono Lithium and Tin Project in the Democratic Republic of the Congo.

Last week, the company announced that its 75%-owned Dathcom Mining SA business has received a mining licence for the Manono Lithium and Tin Project. The remaining 25% of Dathcom is currently owned by La Congolaise D’Exploitation Miniere SA (Cominiere).

Following the granting of the mining licence, Cominiere will cede 10% of its interest to the Democratic Republic of the Congo Government, with AVZ believing it has the rights to acquire the other 15%.

However, Cominiere has decided to transfer this 15% interest to China’s Jin Cheng Mining Company, preventing AVZ from acquiring the stake. AVZ doesn’t believe this is lawful and intends to fight the claim.

In addition, AVZ has previously signed away a 24% stake in Dathcom to Suzhou CATH Energy Technologies in exchange for a US$240 million investment to develop the Manono Project. This deal has not been finalised and remains subject to a final investment decision, among other items.

This means that AVZ could potentially end up owning as little as 51% of the project if things don’t go its way.

All in all, this has created significant uncertainty for investors and explains why the AVZ share price was sold off last week.

All eyes, therefore, will be on AVZ shares when the company releases its announcement in the coming days.

The post Why is the AVZ share price halted today? appeared first on The Motley Fool Australia.

More reading

• These were the worst performers on the ASX 200 last week
• Which ASX 200 mining shares were the worst-performing on Friday?
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Why is the AVZ Minerals share price sliding 7% on Friday?
• These 3 ASX 200 shares are topping the share market’s volume charts on Thursday

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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S&P/ASX 200 Index (ASX: XJO) travel shares took some of the steepest falls in the early months of the global pandemic as domestic and international travel ground to a halt.

The Qantas Airways Limited (ASX: QAN) share price, for example, cratered 64% from 21 February through to 20 March 2020.

Travel agencies were smashed too, as witnessed by the 75% fall in the Flight Centre Travel Group Ltd (ASX: FLT) during that same tumultuous month.

Then there’s Webjet Limited (ASX: WEB), whose shares dropped 72%.

And the Corporate Travel Management Ltd (ASX: CTD) share price, which fell 75% from 17 January through to 20 March 2020.

Ouch.

ASX 200 travel shares bounce back on recovery

As you’d expect, ASX 200 travel shares were also some of the strongest beneficiaries of the gradual recovery in domestic and international travel.

First, they leapt higher on news of the vaccines in November 2020. And since then they’ve continued to march higher, albeit with significant volatility.

Over the past 12 months, the Qantas share price has gained 17%; the Webjet share price is up 19%; Corporate Travel Management’s shares have gained 32%; and the Flight Centre share price is up 34%.

For some context, the ASX 200 is trading right about the same level it was at 12 months ago.

Are these companies fairly valued now?

With those gains behind them, are ASX 200 travel shares already fully valued?

For some insight into that question, we turn to Neil Margolis, lead portfolio manager at Merlon Capital Partners, courtesy of the Australian Financial Review.

According to Margolis:

While pent-up demand might result in super-profits for travel stocks, most of this is already reflected in the share prices. To illustrate this, the trio of booking agencies, Flight Centre, Corporate Travel and Webjet have a combined market value of over $10 billion, or 30 times consensus earnings for 2023. This compares to a combined value of only $8 billion before the pandemic, when actual earnings were 20% higher.

Remember the massive share price losses we covered up top? Margolis highlights how that hit the valuations of these top ASX 200 travel shares.

“To illustrate extreme market sentiment at work, they were valued at a mere $2 billion during the pandemic lows, which was when we participated in the Flight Centre and Webjet capital raisings.”

But he cautions about investing in stocks like ASX 200 travel shares based on unsustainable earnings surges.

“While they might surprise on earnings, we only pay for sustainable earnings – not peak earnings – and these companies also face risks from online competition,” he said.

As for Qantas?

According to Margolis (quoted by the AFR):

We do own Qantas after investing during the Sydney lockdowns last year, and while it has rallied strongly, the market valuation is still (just) below pre-pandemic levels and there is potential for permanent market share gains and cost efficiencies.

While we recognise Qantas’ strong domestic and loyalty market position, we do remain sceptical that the airline industry will ever change from being capital intensive and cut-throat.

The post Are ASX 200 travel shares already fully valued in May? appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• Top brokers name 3 ASX shares to sell next week
• Grounded! Why the Qantas share price is tanking 4% today
• 2 top ASX growth shares Goldman Sachs rates as buys
• Is the Webjet share price now a buy amid ‘strong’ travel demand?

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 Corporate Travel Management Limited, 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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The two ASX dividend shares in this article are businesses that aim to provide investors with dividend income. But could they be smart ideas to consider today?

There has been a lot of volatility on the ASX share market in recent months, amid the Russian invasion of Ukraine and market focus on inflation and interest rates.

Adairs Ltd (ASX: ADH)

Adairs is a homewares and furniture retailer. It sells products through three different brands – Adairs, Mocka, and Focus on Furniture.

According to CommSec, the current Adairs share price is valued at 7x FY23’s estimated earnings with a projected FY23 grossed-up dividend yield of 14.3%.

FY22 has seen the business hampered by COVID-19 – store closures had an estimated group earnings before interest and tax (EBIT) impact of $18 million to $20 million.

The ASX dividend share has a number of different strategies to grow profit into the future.

One tactic is to expand its floor area, which has a direct link to sales according to Adairs. In the first half of FY22, it opened two new homemaker stores and upsized four stores. Larger stores make more profit for the business. Adairs’ floorspace expanded by 8.6% in the previous 12 months.

Another plan is to grow its membership base, called Linen Lovers. In its FY22 half-year result Adairs said its membership rose by 10% in the prior 12 months.

Online sales growth is a focus for the business to be a leading omnichannel retailer. Total online sales for the half were 185% higher than in FY20. Online sales made up 43% of total group sales.

Adairs recently acquired Focus on Furniture. The ASX dividend share is transitioning to a new national distribution centre, which will make the business more efficient and save on annual expenses.

Brickworks Limited (ASX: BKW)

Brickworks is a diversified building products manufacturer. It provides several different product types including bricks, paving, precast, roofing and cement.

However, management points to two other assets that help provide the cash flow to fund a dividend that hasn’t been cut in over 45 years. Indeed, management is proud of the company’s history of paying and growing dividends.

The two other assets it owns are the investment in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares and a 50% share of an industrial property trust.

It owns 26.1% of the investment conglomerate that owns names in the portfolio like TPG Telecom Ltd (ASX: TPG), Tuas Ltd (ASX: TUA), New Hope Corporation Limited (ASX: NHC), Macquarie Group Ltd (ASX: MQG) and Commonwealth Bank of Australia (ASX: CBA).

Soul Pattinson is invested in a number of sectors including resources, telecommunications, banking, agriculture and financial services.

Regarding the industrial property trust, Brickworks says that it’s seeing unprecedented demand for its industrial property facilities. So, it is building properties “at pace” to keep up with demand.

As properties are completed, the rental income grows for the ASX dividend share. Brickworks points to land that can enable years of further development and growth.

At the current Brickworks share price, the estimate on CommSec shows the business trading with a FY23 grossed-up dividend yield of 4%.

The post Are these 2 ASX dividend shares buys in May 2022? appeared first on The Motley Fool Australia.

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• Analysts name 2 inflation-beating ASX dividend shares to buy
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• 2 cheap ASX shares to buy in May: Experts
• 4 reasons it could be time to look at the Brickworks share price
• Top fund manager reveals 2 undervalued ASX shares to buy

Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ADAIRS FPO, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended ADAIRS FPO, Brickworks, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Macquarie Group Limited and TPG Telecom 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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Once a week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) takes the crown on the most shorted list for another week after its short interest rose to 17.1%. The market remains incredibly divided on the travel sector recovery with some companies predicting growth on 2019’s numbers and others predicting declines in 2022.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest rise to 13.6%. Short sellers will have been pleased to see this betting technology company’s shares crash to a two-year low last week. Loss-making tech shares are out of favour with the market right now.
• Nanosonics Ltd (ASX: NAN) has short interest of 12.4%, which is up week on week. This medical device company’s shares have been sold off this year due to uncertainty caused by a major change to its sales model in the United States.
• Kogan.com Ltd (ASX: KGN) has seen its short interest climb again to 10.3%. This ecommerce company continues to be a target of short sellers due to its poor sales performance, strong competition, margin pressures, and its dire inventory management.
• Polynovo Ltd (ASX: PNV) has seen its short interest remain flat at 10%. Valuation concerns have been weighing on this medical device company’s shares. Though, clearly a couple of insiders don’t agree that PolyNovo’s shares are overvalued. Last week the company reported some major insider buying.
• EML Payments Ltd (ASX: EML) has seen its short interest jump to 10%. Short sellers have increased their positions in this payments company after it downgraded its profit guidance following a tough third quarter.
• Webjet Limited (ASX: WEB) has short interest of 9.3%, which is down week on week once again. As with Flight Centre, mixed messages out of the travel sector appear to have short sellers believing that the market is too bullish on the sector recovery.
• AMA Group Ltd (ASX: AMA) has 8.9% of its shares held short, which is up week on week. Short sellers aren’t giving up on this smash repair company despite its shares hitting a two-year low last week. Its high debt load and dwindling cash balance are weighing heavily on sentiment.
• Appen Ltd (ASX: APX) has returned to the top ten after its short interest rose to 8.9%. Concerns over softening demand for its services and a lack of guidance for FY 2022 appear to have attracted short sellers.
• Zip Co Ltd (ASX: Z1P) has seen its short interest fall to 8.25%. This buy now pay later provider’s shares have fallen out of favour with investors amid slowing growth and rising costs.

The post These are the 10 most shorted ASX shares appeared first on The Motley Fool Australia.

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• PolyNovo share price jumps despite the market selloff amid heavy insider buying

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 Appen Ltd, Betmakers Technology Group Ltd, EML Payments, Kogan.com ltd, Nanosonics Limited, and POLYNOVO FPO. The Motley Fool Australia has positions in and has recommended EML Payments, Kogan.com ltd, and Nanosonics Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd, 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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The AUB Group Ltd (ASX: AUB) share price won’t be trading till tomorrow as it undertakes a capital raise to fund an $880 million acquisition.

The insurance broker called for the trading halt and announced the takeover of Tysers. The London-based target is the sixth-largest wholesale broker in the Lloyd’s marketplace with $3.6 billion in annual gross premiums.

The cash and scrip offer will be partly funded through a fully underwritten $350 million equity raising. The raising is made up of a $71 million share placement to institutional investors.

The balance will come via a 1-for-5.2 pro rata accelerated non-renounceable entitlement offer to existing shareholders.

AUB shares on watch as it undertakes cash-scrip acquisition

Tysers owners, Odyssey Investment Partners, will be given $176 million worth of AUB shares as part of the transaction. The shares will be escrowed for 24-months.

AUB will also take on a new $675 million new debt facility to replace its existing $250 million facility. This will leave the company with $74 million in unused debt post the acquisition.

Strategic rationale

Management says that the acquisition is consistent with its strategy to expand its international offering, build economies of scale and capture more of the brokering value chain.

AUB added that Tysers will strengthen its competitive position. The target’s specialist capabilities will enable AUB to design and offer market-leading products for AUB’s broker and agency network and to enhance the ability to establish new agencies and secure Lloyd’s binders.

AUB acquisition could hit $1.06 billion

The $880 million offer price could go up by another $176 million (earnout) if Tyser hits certain targets. But ignoring the earnout, the price tag for Tysers reflects a circa 12 times enterprise value to FY22 pro forma earnings before interest, tax, depreciation and amortisation (EBITDA).

However, if you include the forecast annual run-rate synergies from the merger of around $25 million, the multiple drops to around 9 times.

In other words, AUB believes the acquisition will lift its underlying earnings per share by 30% with the synergies.

The synergy assumptions are made up for cost savings and improving margins on current premiums to be fully realised after 18 months.

On sale of assets

In the wake of the acquisition, AUB intends to sell a 50% stake in Tysers’ UK Retail division to PSC Insurance Group Ltd (ASX: PSI). PSC, a 50/50 joint venture partner with AUB, will purchase the asset on the same multiples and commercial terms.

“Lloyd’s is the largest insurance market in the world. Tysers provides AUB Group the ability to access a diverse range of risks and insurance types for our clients and broker networks in Australia and New Zealand whilst also gaining the capability to accelerate the establishment of new agencies in these markets,” said AUB chief executive Mike Emmett.

“Clive Buesnel, Tysers CEO, is a highly respected insurance executive in the Lloyds and London market, and we are delighted to welcome him and the Tysers team to the AUB family as we embark on a new chapter for both AUB Group and Tysers.”  

The post AUB share price halted amid $880 million acquisition appeared first on The Motley Fool Australia.

More reading

• 2 ASX shares that were dogs last month but good to buy now: expert

Motley Fool contributor Brendon Lau 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 PSC Insurance Group. The Motley Fool Australia has recommended Austbrokers Holdings Limited and PSC Insurance 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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