The Woolworths Group Ltd (ASX: WOW) share price has gained 2.23% since the beginning of this week, despite no price sensitive news being released by the company.

However, Woolworths has announced it’s providing $4 million of funding to small business accelerator Seedlab Australia. Seedlab will help small producers grow their businesses to get ready for retail distribution.

The Woolworths share price finished today’s session trading for $38.93. That’s 1.12% higher than its previous close and its highest closing price of all time.

Let’s take a closer look at the latest news from Woolworths.

Woolworths funds small business

On Monday, Woolworths announced that it will be supporting 700 small businesses over the next 2 years.

The news didn’t noticeably affect the Woolworths share price.

Seedlab will focus on start-ups making products in high-growth categories. These categories include artisan foods, health and wellness products, and sustainable products.

Seedlab’s founder Dr Hazel MacTavish-West commented on the injection of $4 million:

We’re thrilled to partner with Woolworths to launch Seedlab Australia and support emerging businesses with the knowledge they need to build distribution and reach their goals. 

It’s wonderful to see Australia’s largest supermarket invest in the industry pipeline to create opportunities for Australian food and drink businesses through our program.

Woolworths’ director of buying Paul Harker also commented:

Investing in small businesses is crucial to a thriving Australian food and manufacturing industry…

Seedlab Australia will support pioneering businesses to grow and navigate what it takes to be retail ready and help us bring innovative new locally-made products to our customers. 

Seedlab’s support will come at no cost to small businesses. It will offer owners live and online learning, advice, and chances to network.

Woolworths share price snapshot

This week’s gains have added to the solid performance of the Woolworths share price.

Shares in Woolworths have gained 12% year to date. They have also gained 12.4% since this time last year.

The post Woolworths (ASX:WOW) share price rises amid $4m start-up support appeared first on The Motley Fool Australia.

More reading

• Woolworths (ASX:WOW) share price outperforms following digital wallet launch
• I’m investing for my kids. Any advice?
• ASX 200 Weekly Wrap: ASX shakes off lockdowns to rise higher
• Here’s why the Woolworths (ASX:WOW) share price is up 10% since May
• Woolworths (ASX: WOW) share price up amid new ‘dark store’ plans

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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3itSfAN

The Blackmores Limited (ASX: BKL) share price has been a strong performer over the last couple of weeks.

During this time, the health supplements company’s shares have gained 9%.

Can the Blackmores share price go higher?

Unfortunately, one leading broker doesn’t believe the Blackmores share price can go higher. In fact, the broker believes its shares are severely overvalued at the current level.

According to a note out of Citi, its analysts have retained their sell rating and $55.50 price target on its shares.

Based on the current Blackmores share price of $76.94, this implies potential downside of 28% over the next 12 months.

What did Citi say?

Citi is bearish on Blackmores due to its belief that its key ANZ business will underperform over the medium term.

This is due partly to elevated competition, a softer than expected recovery in the pharmacy channel, a subdued flu season, and delays with the vaccine rollout. Citi also has concerns over supply chain issues and a direct to consumer (DTC) focus.

Citi commented: “We see ANZ, which we estimate represents over half of Blackmores FY21e EBIT, continuing to underperform over the short to medium term. Our concerns are i) competition remains elevated, ii) the pharmacy channel could take longer to recover due to a slower than expected vaccination program, iii) the CY21 cold and flu season could remain subdued due to Covid restrictions and health concerns limiting social interactions, iv) supply chain pressures may be leading to out-of-stocks and v) increasing focus on digital and DTC could increase channel conflict.”

Is anyone more positive?

One broker that is a touch more positive is Credit Suisse. It currently has a neutral rating and $77.00 price target on its shares. This is broadly in line with where the Blackmores share price trades today.

Though, Credit Suisse acknowledges that recent takeover speculation means there is upside risk to its price target.

The post The Blackmores (ASX:BKL) share price is up 9% in two weeks: Can it go higher? appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: Afterpay & Zip sink, Orocobre rises on broker upgrade

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 owns shares of and has recommended Blackmores Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3iA5HTy

The Flight Centre Travel Group Ltd (ASX: FLT) share price has added 1.68% on Wednesday to $14.55, near to breakeven for the week.

The resurgence of COVID-19 cases and emerging Delta variant, both in Australia and globally, has weighed in on sentiment for airline and travel shares this week.

A sharp sell-off on Monday night saw high-profile American airline shares such as Boeing, United Airlines and American Airlines slide between 4% and 5.5%.

This led to the Flight Centre share price briefly sliding to a six-month low of $14.13 on Tuesday.

Many states, including Victoria, New South Wales and South Australia, have imposed various lockdown measures. So what’s going with the Flight Centre share price?

A light at the end of the tunnel?

The Reserve Bank of Australia (RBA) released its July monetary policy meeting minutes on Tuesday, with the board saying:

As vaccinations had increased and hospitalisations remained at low levels, population mobility had recovered considerably in many countries, including in the North Atlantic, where stringent restrictions that had been in place earlier in the year had been relaxed.

This relaxation of containment measures had expanded opportunities for the consumption of discretionary services, including contact-intensive activities such as dining out and domestic air travel. There had been a tentative restart to international tourism in some countries, particularly within Europe.

The RBA noted that the “Australian economy was transitioning from recovery to expansion”. This is despite many major cities entering lockdown in the last week or two.

“As observed following earlier lockdowns, spending was expected to rebound when containment measures were eased.”

Flight Centre share price struggles to hold intraday highs

The Flight Centre share price was 3.21% higher around lunch time, hitting an intraday high of $14.79.

Unfortunately, it couldn’t hold onto these gains, closing 1.68% higher at $14.55.

Interestingly, the US Global Jets exchange-traded fund (ETF) rallied 5.05% on Tuesday night.

The ETF is an index of global companies including airlines, manufacturers, airports and terminal services.

The ETF has a small allocation (1.85%) in ASX-listed air travel shares.

The post The Flight Centre (ASX:FLT) share price is up today, despite lockdowns appeared first on The Motley Fool Australia.

More reading

• What happened on the US stock market overnight and how could it impact ASX shares?
• Here’s why the Flight Centre (ASX: FLT) share price is down 5% in the last week
• These are the 10 most shorted ASX shares
• Fund manager sees Webjet (ASX:WEB) share price as ‘golden’ opportunity
• Broker says Webjet (ASX:WEB) share price weakness is a buying opportunity

Motley Fool contributor Kerry Sun 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/36P4ulR

The Lithium Australia NL (ASX: LIT) share price advanced today following the company’s admission into the Global Battery Alliance.

At market close, the Lithium Australia shares price is fetching for 12 cents, up 6.36%. In comparison, the All Ordinaries Index (ASX: XAO) is sitting at 7,595 points, 0.9% higher.

Lithium Australia enters Global Battery Alliance club

Investors are driving Lithium Australia shares higher after the company announced it has advanced its ESG strategy. The term ESG refers to the environmental, social & corporate governance (ESG) which sets a standard for a company’s operations.

In today’s statement to the ASX, Lithium Australia advised it has joined the Global Battery Alliance. This brings together leading entities in the battery value chain such as manufacturers, governments, international organisations, NGO’s and academics. All of which are committed to actively reducing emissions, and providing sustainable development for lithium batteries.

Lithium Australia will directly benefit from becoming a member, as it aims to achieve its own ESG objectives. This includes accelerating the deployment of batteries worldwide while lowering the environmental impact and negating barriers to a circular battery economy.

Becoming a start-up member of Global Battery Alliance allows participation in group meetings and engaging in specific workstreams.

The organisation notes, “By 2030, batteries could enable 30% of the required reductions in carbon emissions in the transport and power sectors and provide 600 million people with access to electricity, as well as create 10 million safe and sustainable jobs around the world. To realise this potential, the battery value chain will have to expand by 19 times over the next decade.”

“Action is needed in the supply chain to establish sustainable market conditions and accelerate battery deployment in support of this vision.”

Management commentary

Lithium Australia managing director, Adrian Griffin commented:

The Company’s admission to the GBA is testament to the ESG values upon which it has built its business model. Both the Company and the GBA have a core objective: that of creating an ethical, sustainable and circular battery economy.

Pleasingly, Lithium Australia owns 90% of Envirostream Australia, which is the country’s only mixed-battery recycler. The subsidiary will benefit directly from the membership, having access to experts and major industry participants in battery recycling globally.

In addition, Lithium Australia’s 100% owned VSPC will also gain an advantage as a producer of advanced cathode powders for lithium-ion batteries.

About the Lithium Australia share price

Over the last 12 months, Lithium Australia shares have jumped by more than 120%, and are up almost 80% year-to-date. The Lithium Australia share price has moved sideways since March 2021, however.

Lithium Australia presides a market capitalisation of roughly $107 million, with approximately 911 million shares on its registry.

The post Lithium Australia (ASX:LIT) share price powers 6% on new membership appeared first on The Motley Fool Australia.

More reading

• Lithium Australia (ASX:LIT) share price gains 9% on cathode powder win
• Lithium Australia (ASX:LIT) share price surges 10% on joint venture update

Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3eHIuOb

The Peak Resources Ltd. (ASX: PEK) share price was placed in a trading halt at the commencement of trade today.

Prior to the announcement, Peak shares finished yesterday 2% in the red from the previous close at 9.1 cents.

Let’s take a look at what the announcement entails.

A quick recall on Peak Resources

Peak Resources is in the business of exploration and evaluation of mineral licences.

Its primary focus is on the production of rare earth elements. These are used in the production of low-carbon technology, like electric vehicles and wind turbines.

Peak’s focus on rare earths is concentrated in a project located in southern Tanzania.

At the time of writing, Peak has a market capitalisation of $148 million.

What did Peak announce today?

ASX Ltd confirmed Peak’s request for a trading halt in an announcement this morning. It stated:

Unless the ASX decides otherwise, the [Peak Resources] securities will remain in trading halt until the earlier of the commencement of normal trading on Friday, 23 July 2021, or when the announcement is released to the market”.

Peak stated its request for the trading halt stems from an update on the special mining licence at its Ngualla Rare Earth project in Tanzania.

The Ngualla project is based on one of the largest and highest grade undeveloped neodymium praseodymium (NdPr) deposits in the world.

Peak has held ongoing discussions with the Tanzanian Minister for minerals as to the progress of its special mining application over the past 18 months.

From the release, investors can expect movement in this story over the next two days.

Regarding the project, Peak Resources managing director, Bardin Davis stated in a report from Mining Technology on 14 July:

It [Ngualla] has ore reserves with a grade of 4.8% that support an initial mine life of 26 years. The intention is to produce a high grade concentrate at Ngualla with a rare earth oxide grade of around 45%, which will then be shipped to our Teesside Rare Earth Refinery in the UK.

Today’s pause marks the fourth trading halt for the company in the last 18 months. At least two of these halts are directly related to developments in the Ngualla story.

As mentioned by ASX, investors can expect the halt to remain until this Friday at the latest.

Peak Resources share price snapshot

The Peak Resources share price has posted a year to date return of 36%, extending the previous 12 month’s return of 314%.

These returns have outpaced the S&P / ASX 200 Index (ASX: XJO)’s return of ~20% over the previous year.

The post Why is the Peak Resources (ASX:PEK) share price halted today? appeared first on The Motley Fool Australia.

More reading

• What a Wednesday! Wesfarmers (ASX:WES) share price hits new all-time high
• Here are 3 top trading ASX 200 shares this Wednesday
• Why Altium, Beach, Domino’s, & Piedmont Lithium are tumbling lower
• Should you buy BHP (ASX:BHP) shares for its dividend in July?
• Top broker delivers verdict on Santos (ASX:STO) merger with Oil Search (ASX:OSH)

The author Zach Bristow has no positions 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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/2Uwk4Ao

The S&P/ASX 200 Index (ASX: XJO) is having a great day so far this Wednesday. The ASX 200 is currently up a hefty 0.9% to 7,317 points. Happy hump day! One ASX 200 blue chip share is doing even better though. That would be the giant industrial conglomerate Wesfarmers Ltd (ASX: WES). At the time of writing, the Wesfarmers share price is up a very healthy 2.66% to $61.47 a share.

But wait, there’s more. Earlier today, Wesfarmers managed to hit $61.70 a share. That’s a new 52-week, and all-time high for the company.

Wesfarmers shares are now up 19.65% year to date in 2021 so far, as well as 31.4% over the past 12 months.

What a Wednesday for Wesfarmers!

So why are Wesfarmers shares trading so well today? Well, it isn’t to do with anything that’s come out from the company itself. But there have been a number of recent developments that may be fuelling this fire.

Lithium is hot property on the ASX at the present time. Lithium shares like Pilbara Minerals Ltd (ASX: PLS) have had an incredible year of performance. But Wesfarmers has exposure to this space too. Last Friday, it announced that it had received ministerial approval for its Mt Holland lithium project, the last major impediment to the project coming online. This is one reason which might be feeding into Wesfarmers shares today.

Investors also seem to be charmed by the recent announcement that Wesfarmers is attempting to acquire Priceline Pharmacy-owner Australian Pharmaceutical Industries Ltd (ASX: API). Since that announcement on 12 July, Wesfarmers shares are up almost 6%.

Finally, the recent expansion of COVID-induced lockdowns across the country has concentrated attention back on both ‘pandemic winners’ and ‘pandemic losers’. Wesfarmers managed to put itself firmly in the former basket last year, when its Officeworks and Bunnings retail chains experienced strong sales growth during lockdowns. It’s possible investors are remembering this fact, now that lockdowns are unfortunately back with us.

It’s possible that a combination of these factors is what has pushed the Wesfarmers share price to its new all-time high today.

Are Wesfarmers shares still buy at all-time highs?

Wesfarmers is well regarded in the ASX community for its decades of impressive performance. But will the good times continue to roll at these new share price heights?

One broker who doesn’t think there’s too much upside left in the tank is Citi. As my Fool colleague James revealed earlier this week, Citi currently has a ‘sell’ rating on Wesfarmers shares, with a 12-month share price target of $45 a share. He revealed that Citi was pretty blasé about the API acquisition, and expects Wesfarmers will need to continue to make acquisitions to “boost its post-pandemic growth”.

The post What a Wednesday! Wesfarmers (ASX:WES) share price hits new all-time high appeared first on The Motley Fool Australia.

More reading

• Lockdowns hurt, ASX falls, Wesfarmers climbs, and the Aussie set to fall? Scott Phillips on Nine’s Late News
• Why the Wesfarmers (ASX:WES) share price just hit a new all-time high
• ASX 200 Weekly Wrap: ASX shakes off lockdowns to rise higher
• Top brokers name 3 ASX shares to sell next week
• Wesfarmers (ASX:WES) share price not hampered by news of class action

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3ziizVd

The S&P/ASX 200 Index (ASX: XJO) is having a top day on the markets today. At the time of writing, the ASX 200 is up a healthy 0.95% to 7,320 points. But let’s dig into some of the top trading ASX 200 shares today in terms of trading volume.

3 top trading ASX 200 shares on Wednesday

Zip Co Ltd (ASX: Z1P)

Zip Co is our first ASX 200 share to check out today. So far this Wednesday, 8.25 million Zip shares have traded hands. That’s despite no official major news or announcements out of the company today.

Saying that, the Zip share price is currently up a market-beating 2.63% today to $7.60 a share. We have also seen some volatility in the Zip share price with a high of $7.59 and a low of $7.41 just today. It’s probably a combination of these factors that have resulted in such a large trading volume for Zip shares.

Boral Limited (ASX: BLD)

ASX 200 construction materials company Boral is another share that’s moving around the market this Wednesday. So far today, 16.45 million Boral shares have swapped hands.

Again, there has been no major news or announcements. But Boral has been recently embroiled in a takeover saga with Seven Group Holdings Ltd (ASX: SVW). Seven has now amassed more than 50% of all Boral shares, so this might still be adding to trading volumes today.

Oil Search Ltd (ASX: OSH)

ASX energy share Oil Search is once again the most traded ASX 200 share on the markets today, with a substantial 17.26 million shares finding new homes. After rising around 6% yesterday, Oil Search is up another 3.85% today.

This is probably an ongoing response to the revelation yesterday that fellow energy company Santos Ltd (ASX: STO) has proposed a merger between the two companies. This would see Oil Search shareholders receive 0.589 in Santos shares for every Oil Search share held.

Oil Search rejected this advancement but with all of these impressive gains, perhaps investors seem to think more offers right be coming their way.

The post Here are 3 top trading ASX 200 shares this Wednesday appeared first on The Motley Fool Australia.

More reading

• Top broker delivers verdict on Santos (ASX:STO) merger with Oil Search (ASX:OSH)
• The Zip (ASX:Z1P) share price is the best performing BNPL of 2021
• Why Credit Corp, Oil Search, Pilbara Minerals, & PointsBet are charging higher
• Cimic (ASX:CIM) share price races 5% higher on financial result
• Macquarie picks the best ASX shares to buy for the August reporting season

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended ZIPCOLTD 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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3kJo4rV

The S&P/ASX 200 Index (ASX: XJO) has followed the lead of US markets and is on course to record a solid gain. At the time of writing, the benchmark index is up 1% to 7,323.1 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are tumbling lower:

Altium Limited (ASX: ALU)

The Altium share price is down 5% to $32.86. Investors have been selling the electronic design software platform provider’s shares after Autodesk walked away from takeover talks. The US software giant told Reuters: “We are not commenting on matters with Altium but can confirm that acquisition discussions have ceased at this time.” Investors appear to have been hoping Autodesk would return with an improved offer after Altium rejected its original $38.50 per share proposal.

Beach Energy Ltd (ASX: BPT)

The Beach share price has fallen 2% to $1.22. This is despite the release of a full year update which reveals that Beach has achieved its FY 2021 guidance. Beach reported production of 25.6 MMboe for the year, compared to its guidance of 25.2 MMboe to 25.7 MMboe. Furthermore, operating earnings are expected at the high end of its $850 million to $900 million guidance range and costs are forecast to be at the low end of its range. The market appears to have been expecting an even stronger result.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The Domino’s share price is down 3% to $117.80. Investors have been selling the pizza chain operator’s shares after analysts at Macquarie downgraded them to an underperform rating and trimmed the price target on them to $103.50. While the broker is positive on the long term, it suspects that FY 2022 could be a reasonably tough year.

Piedmont Lithium Inc (ASX: PLL)

The Piedmont Lithium share price crashed 21% lower to 68.5 cents before being placed in a trading halt. Investors were selling the lithium explorer’s shares amid reports that the company has not applied for a state mining permit or a necessary zoning variance in Gaston County. The report also suggests that officials may block the project due to environmental concerns.

The post Why Altium, Beach, Domino’s, & Piedmont Lithium are tumbling lower appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: Kogan FY 2021 update, Altium sinks
• Piedmont Lithium (ASX:PLL) share price opens 20% down on Wednesday
• The Beach Energy (ASX:BPT) share price wobbles after quarterly update
• Why the Altium (ASX:ALU) share price is sinking 5% on Wednesday
• 5 things to watch on the ASX 200 on Wednesday

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. owns shares of and has recommended Altium and Piedmont Lithium Inc. The Motley Fool Australia owns shares of and has recommended Altium. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

from The Motley Fool Australia https://ift.tt/2W4ay85

One of the most popular shares in the resources sector is BHP Group Ltd (ASX: BHP).

This is due to the Big Australian’s world class operations and its generous dividend policy.

In light of the latter, I thought I would take a look to see what analysts are saying about the BHP dividend in July.

Should you buy BHP shares for its dividend in July?

One leading broker that believes BHP shares are trading at an attractive level for investors is Goldman Sachs.

According to a note, its analysts have responded to its FY 2021 production update by retaining their buy rating and lifting their price target slightly to $57.70.

Goldman is forecasting dividends per share of 289 US cents in FY 2021, 446 US cents in FY 2022, and then 400 US cents in FY 2023.

Based on the current BHP share price and the latest exchange rates, this will mean fully franked yields of 8%, 12.3%, and 11%, respectively, over the coming years.

Goldman commented: “We forecast a c. 40% increase in EBITDA (60-70% margins) and 55% increase in FCF in FY22 (equating to c. 15% FCF yield), driven by our positive view on iron ore, met coal, copper and oil prices. We forecast a dividend yield of 11-12% in FY22 & FY23. We forecast a final dividend of US$1.88/sh (85% payout) in August.”

What else is being said about the BHP dividend?

Goldman Sachs isn’t the only broker that expects a big BHP dividend in FY 2021.

According to a note out of Macquarie, its analysts are forecasting dividends of $3.72 per share in FY 2021 and then $3.61 in FY 2022. Based on the current BHP share price, this will mean fully franked yields of 7.4% and 7.2%, respectively.

This morning Macquarie put an outperform rating and $60.00 price target on BHP shares. This implies potential upside of approximately 20% over the next 12 months excluding dividends.

The post Should you buy BHP (ASX:BHP) shares for its dividend in July? appeared first on The Motley Fool Australia.

More reading

• Macquarie picks the best ASX shares to buy for the August reporting season
• BHP (ASX:BHP) share price climbing as miner considers selling oil assets
• The BHP (ASX:BHP) share price is up 8% in the past month. Here’s why
• Why BHP, HUB24, Qantas, & Santos shares are dropping today
• Why the BHP (ASX:BHP) share price is down 4% this week

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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/2VZpdBj

The Oil Search Ltd (ASX: OSH) share price continues to rocket following Santos Ltd (ASX: STO) merger bid.

The Oil Search share price jumped 4.6% to $4.08 in after lunch trade. This makes it the second best performer on the S&P/ASX 200 Index (Index:^AXJO) after the Pilbara Minerals Ltd (ASX: PLS) share price.

In contrast, the ASX 200 added 1.1% and the Santos share price gained 2.5% $6.65.

Oil Search share price further out of reach

The outperformance of the Oil Search share price is making it harder for Santos to win over its target with its all-scrip deal. The Santos share price has dipped 2.6% since it confirmed it had submitted a non-binding offer to Oil Search.

On the other hand, the Oil Search share price has surged nearly 11%. The market is betting that Santos will have to up the ante if it’s serious about consummating the merger.

Santos is offering to swap 0.589 of its shares for each Oil Search share. Based on the current Santos share price, the offer works out to $3.92 for the Oil Search share price.

Logical to merge Santos with Oil Search

Most experts believe the merger between the two that will create the biggest oil and gas company on the ASX makes sense. This includes UBS.

“We are supportive of the strategic rationale to merge and believe the proposed merger would be both value and FCF accretive,” said the broker.

“However, to reach a mutually agreeable all-scrip deal, STO’s share price would need to lift from the 20 July close ($6.49/sh) and/or STO may need to offer a higher scrip ratio, in our view.

“We estimate that STO could increase the scrip ratio up to 0.60 beyond which the merger economics would become value dilutive to STO shareholders.”

Santos under pressure to up its offer

Morgan Stanley also feels that Santos looks like a bit of a scrooge. The broker noted that the offer price is good for Santos but not for Oil Search, reported the Australian Financial Review.

“On our valuation, the indicative ratio should be closer to 60% Santos and 40% Oil Search shareholders,” said Morgan Stanley.

Better than even chance of Santos-Oil Search merger

While Oil Search is discouraging shareholders from taking the bid seriously, it recognises the strategic logic of merging the two ASX shares.

It’s more the price that Oil Search is scoffing at as the offer only offers around a 6.8% premium to its shareholders.

That’s not much of a takeover premium, although Oil Search missteps has given its suitor a stronger hand.

Oil Search just lost its chief executive under controversial circumstances and its chairman has been criticised for his handling of the M&A disclosure.

Given that Oil Search is looking like a wounded duck, the odds are in favour that a merger will proceed assuming regulatory clearances are not an issue.

The post Top broker delivers verdict on Santos (ASX:STO) merger with Oil Search (ASX:OSH) appeared first on The Motley Fool Australia.

More reading

• Why Credit Corp, Oil Search, Pilbara Minerals, & PointsBet are charging higher
• Cimic (ASX:CIM) share price races 5% higher on financial result
• Macquarie picks the best ASX shares to buy for the August reporting season
• Oil Search, Zip, JB Hi-Fi share prices jump, Aussie predicted to hit US$0.70, Scott Phillips on Nine’s Late News
• ASX 200 midday update: Kogan FY 2021 update, Altium sinks

Motley Fool contributor Brendon Lau owns shares of Santos Limited. Connect with me on Twitter @brenlau.

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 Bruce Jackson.

from The Motley Fool Australia https://ift.tt/3zmU9tw