Stock Pick

  • ASX construction shares feel impacts of COVID-19 shutdowns

    Building material shares

    The Australian building industry is feeling the combined effects of the summer bushfires and coronavirus. While construction has continued to operate as an essential business throughout COVID-19, disruptions have been inevitable. ASX building suppliers such as Boral Limited (ASX: BLD) and CSR Limited (ASX: CSR) are feeling the effects. 

    Boral experiences disruptions 

    Boral has continued to operate and supply customers in most jurisdictions, albeit with additional health and safety measures in place. In some jurisdictions, however, stricter mandates have resulted in temporary closures and substantial disruption. 

    This morning, Boral reported that for the 4 months ended April 2020, Australian concrete volumes were down 16% and revenue down 6% compared to the prior corresponding period (pcp).

    In the North American division, around 25% of the workforce has been placed on furlough. 4 operations are in full or partial shutdown as a result of government mandates and around 70% of building product plants have been impacted. 

    For the 4 months from January to April 2020, revenue for Boral North America decreased by around 5% on the pcp. Production volumes across the roofing, stone, and fly ash businesses were also down. CEO Mike Kane said, “the impacts of COVID-19 measures on our people and our markets have been significant and will be for some time.”

    Debt financing extended to maintain liquidity

    Boral has extended its debt facilities with a new US Private Placement note of US$200 million. It has also secured new loan facilities of A$365 million and approved an extension of US$665 million in existing facilities. This has increased Boral’s liquidity and extended its debt maturity. 

    The company is taking action to preserve cash through shift reductions and temporary plant closures to align production with current and expected lower levels of activity. Capital expenditure has been reduced by 15% to 20% to ~$330 million in FY20. 

    CSR sees declining revenues 

    Earlier this week, CSR reported a 5% reduction in revenue for the full year ended March 2020. Net profit after tax (NPAT) from continuing operations fell 10% to $125 million, although total NPAT rose 61%. This was because total NPAT in the previous year was impacted by impairment charges relating to the Viridian Glass business. 

    CSR reports it hasn’t experienced a significant drop in activity since the end of March, although building product revenue was down 3% compared to the pcp. CSR nonetheless anticipates there will be an impact on activity in key markets this year. The company has declined to provide earnings guidance due to the uncertainty from COVID-19. 

    Foolish takeaway

    The construction sector may see a pullback this year as economic contraction takes hold. This will put pressure on sales for ASX construction shares like CSR and Boral until building markets recover.  

    While ASX construction shares may face some near-term headwinds, be sure to check out the report below for an ASX share we Fools like the look of right now.

    One “All In” ASX Buy Alert, that could be one of our greatest discoveries

    Investing expert Scott Phillips has just named what he believes is the #1 Top “Buy Alert” after stumbling upon a little-owned opportunity he believes could be one of the greatest discoveries of his 25 years as a professional investor.

    This under-the-radar ASX recommendation is virtually unknown among individual investors, and no wonder.

    What it offers is an utterly unique strategy to position yourself to potentially profit alongside some of the world’s biggest and most powerful tech companies.

    Potential returns of 1X, 2X and even 3X are all in play. Best of all, you could hold onto this little-known equity for DECADES to come

    Simply click here to see how you can find out the name of this ‘all in’ buy alert… before the next stock market rally.

    Find out the name of Scott’s ‘All in’ Buy Alert

    Returns as of 6/5/2020

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

    The post ASX construction shares feel impacts of COVID-19 shutdowns appeared first on Motley Fool Australia.

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  • Where growth, income, and value investors can invest $5,000 today

    where to invest

    If you’re looking to invest $5,000 into the Australian share market, then one of the shares listed below could be worth considering whether you’re looking for growth, income, or value.

    Here’s why I think investors should buy these ASX shares:

    Accent Group Ltd (ASX: AX1)

    I think Accent could be a great option for value investors. Although the retail sector is having a very tough time and trading conditions are unlikely to improve quickly, I still think this footwear retailer could prove to be a bargain buy. While its earnings will almost certainly decline this year, I expect a rebound of sorts in FY 2021 before a full recovery a year later. Based on a recent note out of Morgan Stanley, it expects earnings per share of 7 cents in FY 2020 and then 8 cents in FY 2021. Based on the latter, its shares are currently changing hands at just 13x FY 2021 earnings.

    Dicker Data Ltd (ASX: DDR)

    If you’re an income investor you might want to consider investing $5,000 into Dicker Data’s shares. The wholesale distributor of computer hardware and software has been growing its earnings and dividends at a consistently strong rate for many years. The good news is that this trend has continued during the pandemic. Last month the company released its first quarter update and revealed a 36.3% increase in profit before tax to $18.4 million. Management also advised that it intends to increase its dividend by 31% in FY 2020 to 35.5 cents per share. This represents a 5.1% fully franked dividend yield.

    Xero Limited (ASX: XRO)

    Xero could be a good long term option for growth investors. Earlier this week the cloud-based business and accounting software provider released its full year results and revealed a 30% increase in operating revenue to NZ$718.2 million. Things were even better further down the income statement, with its margin expansion leading to a 52% increase in EBITDA to NZ$139.17 million. While FY 2021 is likely to be impacted by the pandemic and could stifle its growth somewhat, I believe its long term outlook is as positive as ever. Xero has a significant global market opportunity and, thanks to the quality and stickiness of its product, I expect it to capture a big slice of it.  

    And here are five dirt cheap shares which combined offer a mix of growth, income, and value as well. They all look like great options to buy after the market crash.

    5 cheap stocks that could be the biggest winners of the stock market crash

    Investing expert Scott Phillips has just named what he believes are the 5 cheapest and best stocks to buy right now.

    Courtesy of the crashing stock market, these 5 companies are suddenly trading at significant discounts to their recent highs… creating what could be incredible opportunities for bargain-hungry investors.

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    See the 5 stocks

    Returns as of 7/4/2020

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    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of Xero. The Motley Fool Australia has recommended Accent Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post Where growth, income, and value investors can invest $5,000 today appeared first on Motley Fool Australia.

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  • PPP Loans Under $2 Million Get A Significant Waiver From SBA

    PPP Loans Under $2 Million Get A Significant Waiver From SBAIf your company received a loan of less than $2 million under the Paycheck Protection Program, the new message from the Small Business Administration is that you're OK.In an addition to its lengthy list of FAQs, the SBA said Wednesday that all loans granted under that dollar threshold will be viewed as having met the "good faith" standard necessary under the PPP.The clarification comes after Treasury Secretary Steve Mnuchin said in April that the SBA would be reviewing PPP recipients who received more than $2 million to be sure that they needed those funds given their large size. In particular, public companies that received the funds have been ordered to give them back. The sole known public transportation company that received one, Evo Transportation & Energy Services, had not indicated by Thursday whether it was returning its $10 million. (It had disclosed the receipt of the loan in an 8-K filing with the Securities & Exchange Commision in late April. No subsequent 8-K filing announcing the return of the funds has been filed)."Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith," the SBA said in its updated FAQs.Statistics released by the SBA for round 2 of the PPP, which began April 27, showed that just over 19% of the loans were over the $2 million cutoff, which means more than 80% don't need to worry about the certification.The law firm of Scopelitis Garvin Light Hanson Feary sent out a notice on the change, laying out the concern that some smaller borrowers under the PPP faced. "Many PPP borrowers have been struggling with the new SBA mandate that borrowers revisit their loan application certification that ‘[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant,'" Scopelitis said in its Law Alert. The law firm noted that the mandate was not part of the original CARES Act that set up PPP, but was handed down later "in response to much negative publicity surrounding high profile borrowers."The $2 million threshold and the need to certify the need for those funds if a company got more than that is leading some loan recipients to give back the money. The deadline for doing that without triggering a "good faith" investigation was Thursday but has been pushed back to Monday."SBA has determined that this safe harbor is appropriate because borrowers with loans below [the $2 million] threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans," the SBA said in its FAQs. "This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees."The SBA also said the sheer number of loans under $2 million would be difficult to investigate for their good faith certification given the stretched resources at the agency. "This approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns," the agency said.(There already has been discovery of potential PPP fraud involving a trucking company).   Through last Friday, the SBA had approved 2,571,167 loans under phase 2 of the PPP, disbursing approximately $188.9 billion. Companies with less than $10 billion in assets got 32% of the disbursed loans, while companies with more than $50 billion got 53%. The tranche between those two got 15%.See more from Benzinga * US Airlines Aim To Keep It Clean During COVID-19 * Today's Pickup: COVID-19 Gives Smaller e-Commerce Firms A Chance Against Amazon * Largest East Coast Retail Grocery Group Taps Americold For New Frozen Facilities(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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