The BHP Group Ltd (ASX: BHP) share price is climbing, up 2% in morning trade.

BHP’s share price gain comes as the wider S&P/ASX 200 Index (ASX: XJO) is also climbing strongly, up more than 1%.

But the company may be getting an added lift after news broke that it’s reportedly considering pulling the plug on its oil and gas ventures.

Amongst the largest companies on the ASX 200, the mining and resource giant has been pumping oil and gas from the ground for more than 50 years.

But with rising environmental, social and corporate governance (ESG) concerns among global investors and the long-term outlook for oil demand cloudy, BHP may be ready to turn off the crude taps…for a price.

Why BHP may sell its oil and gas assets

These days, the profits from BHP’s petroleum segment only account for about 6% of its total profits, according to RBC Capital Markets’ forecast. Iron ore makes up the lion’s share of profits, some 72%. Copper makes up most of the rest at 21%, with coal providing a slender 1% of profits.

Quoting people familiar with the matter who asked not to be identified, Bloomberg reports, “The world’s biggest miner is reviewing its petroleum business and considering options including a trade sale… BHP wants to exit while it can still get a good price for the assets, aiming to repeat a 2018 sale of its shale business to BP Plc for $10.4 billion”.

The petroleum segement is expected to earn more than US$2 billion (AU$2.7 billion) this year.

According to RBC Capital Markets analyst Tyler Broda (quoted by Bloomberg):

BHP is an outlier in the mining sector for its petroleum business and this is often cited in our investors discussions as a point of detraction. With rising ESG pressures facing the industry, but also as this business potentially enters into a re-investment phase, we can see why management might be contemplating an exit.

Broda values BHP’s petroleum business at some US$14.3 billion.

Peak oil may be here sooner than expected

BHP may be getting on the front foot with its reported petroleum asset sale plans.

A new reported from BloombergNEF, its energy data and analysis firm, states that, “Demand for gasoline and diesel to fuel cars and trucks will peak in 2027 – four years earlier than expected – as more fuel-efficient autos and increasing adoption of electric vehicles curb global consumption.”

According to the report:

Policy makers are driving the automotive market toward low-carbon options and improved fuel efficiency. Automakers and large fleet operators are also, in turn, aiming for long-term decarbonization. Fuel producers with exposure to markets like the US or Europe are poised to see sales of diesel and gasoline decline significantly from current levels over the next decade.

If oil demand is close to peaking, then BHP’s share price may benefit longer term from the company’s reported plans to get out of the oil and gas game.

BHP share price snap shot

Over the past 12 months BHP’s share price is up 29%, outpacing the 19% gains posted by the ASX 200 over that same time.

Year-to-date the BHP share price has gained 18%.

BHP pays a 4.1% dividend yield, fully franked.

The post BHP (ASX:BHP) share price climbing as miner considers selling oil assets appeared first on The Motley Fool Australia.

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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.

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With the S&P/ASX 200 Index (ASX: XJO) climbing to all-time highs in recent weeks, it’s harder than ever to find underpriced shares to buy.

But Airlie Funds Management investment analyst Will Granger has a strategy to make hunting for cheapies that little bit easier.

“One of the common scenarios in which we find ‘undervalued quality’ is when a great business sits within an otherwise average sector, as industry peers tend to be priced off similar multiples,” he said on the company blog.

As such, he’s turned to the real estate investment trust (REIT) sector.

“This sector, while ‘defensive’, generates an average return on equity (ROE) only in line with the broader market — at around 12%.”

And Granger reckons he’s hit the jackpot, finding a high-quality gem within that industry.

Charter Hall’s pivot into funds management 

Charter Hall Group (ASX: CHC), according to Granger, has pivoted from an old-school direct-investment REIT into more of a property funds management business.

This has triggered outperformance over its ASX real estate peers.

“One of the ASX’s top performers over the past decade has been Charter Hall (CHC), which has delivered a total shareholder return of 19% per annum since listing in 2005,” said Granger.

“The company’s funds under management (FUM) have grown at a 17% compound annual growth rate (CAGR) over the decade, and now sit at over $52 billion.”

The great news for current buyers of the ASX share is that Charter Hall’s transition is now at a point where it will “drive very strong outcomes for shareholders”.

“Scale begets scale. Charter Hall [is] one of only a handful of managers that can compete for assets greater than $1 billion in value,” Granger said.

“Wholesale capital is relatively ‘sticky’ with ~7yrs between redemption windows. This means investors can’t simply pull their money out at once, enhancing the stability of earnings.”

The property assets themselves have some of the country’s most stable tenants.

“Government account[s] for 12.5% of rental income, Woolworths Group Ltd (ASX: WOW) 6.4%, Wesfarmers Ltd (ASX: WES) 5.9%, and Coles Group Ltd (ASX: COL) 5.2%.”

Another advantage of a bigger focus on funds management is that Charter Hall is now less capital-intensive.

“For each additional dollar of FUM added to the business, the capital investment required for that dollar of FUM has fallen by ~30% in just 3 years,” said Granger.

“As a result, Charter Hall’s incremental return on equity has increased dramatically. We estimate Charter Hall’s incremental return on equity, normalised for any large one-off performance fees, to be greater than 25%.”

Charter Hall stock price looks ripe for the picking

Although Charter Hall shares currently trade at almost 35 times the price-to-earnings ratio, the forward valuation looks cheap, according to Granger.

“We estimate Charter Hall is trading on a PE multiple of 24x FY22 underlying earnings, which is in line with the ASX 200’s PE multiple excluding resources and banks,” he said.

“This is despite the business generating roughly double the average market ROE. Given the company’s strong earnings momentum, high quality of earnings, and above-market returns profile, we see this business as a great example of undervalued quality.”

Early on Wednesday morning, Charter Hall shares were trading at $15.46. They have risen 1.26% for the year, but a whopping 49.1% in the past 12 months.

The post This ASX share doubled market returns but is still cheap: expert appeared first on The Motley Fool Australia.

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• Why the Charter Hall (ASX:CHC) share price is moving higher

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

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The South32 Ltd (ASX: S32) share price is on the rise in early morning trade after the company made three announcements this morning.

The metals and mining company first released a mineral resource update from its Hermosa Project. Then it announced it will face a US$728 million pre-tax impairment charge for its Illawarra Metallurgical Coal operations. Finally, South32 released a report detailing its activities over the recent quarter.

Right now, the South32 share price is $2.88 – 2.49% higher than its closing price yesterday.

Let’s start by taking a look at South32’s quarterly report.

The news driving the South32 share price

Quarterly report

Perhaps the most notable news to influence the South32 share price today is its quarterly report.

South32 has reported that Worsley Alumina, Brazil Alumina, and Australia Manganese all saw record annual production in the 2021 financial year.

Additionally, South African Manganese and Illawarra Metallurgical Coal saw respective annual production increases of 21% and 9% when compared to the 2020 financial year. Cannington saw its zinc production increase by 14% over the 12 months ended 30 June.

Additionally, Cerro Matoso saw its nickel production lift 54% in the fourth quarter of the 2021 financial year.

The company’s production of energy coal and payable nickel have dropped 19% and 16% respectively over the 12 months ended 30 June.

At the same time, its production of payable lead and silver have increased 19% and 16% respectively.

The company also benefited from higher realised prices of aluminium, domestic coal, nickel, silver, and lead. While the prices of metallurgical coal and energy coal dropped 21% and 22% respectively.

Over the quarter just been, South32 has completed its divestment of South Africa Energy Coal. It also purchased 172 million of its own shares as part of an on-market buyback.

Impairment charge

Potentially weighing on the South32 share price this morning is its announcement that its full year results for the 2021 financial year will include a pre-tax impairment charge of US$728 million.

The company says the charge is due to the impact of the New South Wales Independent Planning Commission’s refusal to approve South32’s application for Illawarra Metallurgical Coal’s Dendrobium Next Domain life extension project.

South32 is now considering its next move. That could be taking the project to the Land and Environment Court of New South Wales or submitting an alternative mine plan to the NSW Minister for Planning and Public Spaces.

The company expects to have more news on the project before the end of year.

Updated mineral resource estimate

The final news that’s likely driving the South32 share price this morning is regarding its Hermosa Project.

The company has reported an update to the Arizona-based project’s mineral resource estimate.

The updated estimate is 138 million tonnes, constituting an average of 3.82% zinc, 4.25% lead, and 81 grams per tonne of silver. Those figures equal a contained 5.3 million tonnes of zinc, 5.9 million tonnes of lead, and 360 ounces of silver.

That’s greater amounts of zinc, lead, and silver than the project’s previous mineral estimate.

However, the update has brought a 17% decrease to the estimated tonnage.

Additionally, it has reported a reduction to the estimated net smelter return cut-off grade of US$80 per dry metric tonne.

The project’s pre-feasibility study was due to be released last month but it has been delayed due to COVID-19 restrictions.

South32 share price snapshot

The South32 share price has been performing well lately.

Its shares have gained 16.6% since the beginning of 2021. They’re also 30% higher than they were this time last year.

The company has a market capitalisation of around $13.3 billion, with approximately 4.6 billion shares outstanding.

The post Here’s why the South32 (ASX:S32) share price is up today appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. 

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

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The Altium Limited (ASX: ALU) share price has come under pressure on Wednesday.

In early trade, the electronic design software company’s shares were down as much as 5% to $32.75.

The Altium share price has recovered slightly but remains down 2.5% to $33.70 at the time of writing.

Why is the Altium share price under pressure?

Investors have been selling down the Altium share price after Autodesk confirmed that it had ended takeover talks.

And while Autodesk actually announced this yesterday (Australian time), only today does it appear to have caught the eye of investors.

What has been happening?

Last month Autodesk tabled a ~$5 billion or $38.50 per share offer to acquire the company.  This was swiftly rejected by the Altium board on the belief that it undervalues its prospects.

The Altium board believes the company is well-positioned to achieve its bold growth targets over the coming years. It is aiming to more than double its revenue to US$500 million and grow its subscribers to 100,000 by 2025.

It explained: “Altium’s strong track record of setting ambitious long-term goals and achieving them, gives the Altium Board confidence in the Company’s ability to pursue its transformative strategy for the electronics industry and to achieve its 2025 financial goals. Having successfully pivoted to the cloud, Altium is now well positioned to pursue market dominance and industry transformation. The adoption of Altium’s cloud platform is transforming Altium’s business model from maintenance based subscription to capability-based SaaS subscription.”

What’s the latest?

The latest is that Autodesk has confirmed that it has ended talks with Altium.

The 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 that Autodesk would return with a better offer, which until recently had kept the Altium share price trading close to the original takeover approach. However, with Autodesk signalling that takeover talks are over, Altium shares are now losing support and under significant pressure.

So much so, the Altium share price is down 10% over the last five days.

The post Why the Altium (ASX:ALU) share price is sinking 5% on Wednesday 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. owns shares of and has recommended Altium. The Motley Fool Australia owns shares of and has recommended Altium. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Zoom Video Communications (NASDAQ: ZM) announced last Sunday a definitive agreement to acquire the contact-center specialist Five9 (NASDAQ: FIVN) in a $14.7 billion all-stock transaction.

Should investors welcome such a large deal? Let’s take a closer look.

Not a surprise

Zoom’s foray into contact centers shouldn’t surprise investors. During the company’s latest earnings call, CEO Eric Yuan had commented on potential new developments in the contact center arena. Indeed, the company can develop synergies and cross-selling opportunities with call-center capabilities it can offer to enterprise customers.

So far, Zoom had been partnering with various contact-center vendors, including Five9, to enhance its services, allowing enterprises to better manage communications with their customers.

In contrast with legacy on-premises solutions that require clients to host and manage their own call-center infrastructure, Five9 provides those capabilities via the cloud. That gives users much more flexibility to manage and scale this part of their business. And because it’s hosted in the cloud, Five9’s offering is a natural complement to Zoom’s platform.

During a conference call in March, Yuan even highlighted the seamless combination between Five9 and Zoom’s cloud-based products, so this deal makes sense. Zoom can now provide customers with an integrated solution.

In addition, the acquisition will expand Zoom’s addressable market from $62 billion to at least $86 billion, according to management. While you should take these exact estimates with a grain of salt, it’s clear Zoom’s growth opportunities will be expanding further.

About that price tag …

However, with a $14.7 billion price tag that amounts to about 31 times Five9’s trailing-12-month revenue, did Zoom pay too much?

Granted, Five9 recently reported impressive results. For instance, revenue increased 45% year over year to $138 million during the first quarter as enterprises have been migrating their legacy on-premises contact centers to the cloud. And management raised its full-year revenue outlook to $550 million (at the midpoint), which corresponds to 26% growth over 2020.

But the agreed-upon deal is already pricing in these kinds of results over many years. In addition, with increased investments to fuel its growth, Five9 recorded a net loss of $12.3 million during the last quarter, compared to $7.4 million in the prior-year period.

Interestingly, Zoom didn’t leverage its rock-solid balance sheet to finance the transaction (by the end of its fiscal 2022 first quarter, it had accumulated $4.7 billion of cash and equivalents). Instead, the companies agreed to an all-stock deal, which is a smart choice for Zoom as it takes advantage of the strong currency its stock represents.

Indeed, thanks to the company’s phenomenal performance over the last several quarters, boosted by the need for remote communications during coronavirus-induced lockdowns, Zoom stock is up more than 400% since the beginning of last year. It currently trades at a similarly high price-to-sales ratio of 32.

Looking forward

It remains to be seen how this combination will play out with Five9 and Zoom’s existing partners. In a blog post, Yuan said Zoom will still support other contact-center solutions, and I don’t see any difficulty here.

In contrast, the integration of Five9’s products with other communication platforms may be at risk as competitors might want to avoid fueling Zoom’s growth. For instance, Microsoft could prioritize the support of other contact-center providers for its Microsoft Teams platform.

In any case, considering Zoom’s history of strong execution, investors should welcome the deal, which is expected to close during the first half of next year (subject to various approval by shareholders and regulators). The combination should offer a sizable boost to Zoom’s long-term growth potential.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should investors welcome Zoom’s $14.7 billion deal? appeared first on The Motley Fool Australia.

More reading

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Herve Blandin 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 Zoom Video Communications. The Motley Fool Australia has recommended Zoom Video Communications. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Australian Strategic Mtrls (Hldngs) Ltd (ASX: ASM) share price is surging on Wednesday, up 16.76% to $8.64.

The ASM share price entered into a trading halt on Monday, pending a “material investment into the Company’s Dubbo Project”.

On Tuesday, the company revealed a major framework agreement with a consortium of South Korean investors to fund the development of Dubbo.

What’s driving the ASM share price?

The ASM share price is rallying to record highs after the company entered into a conditional exclusive framework agreement with a consortium of South Korean investors to subscribe for a 20% equity interest stake for US$250 million (A$340 million).

Included in the agreement is the provision for a ten-year offtake agreement for up to 2,800 tonnes per annum (tpa) of neodymium-iron-boron alloy from ASM’s Korean Metals Plant.

The investing partnership will see three respected South Korean private equity firms, Cerritos Holdings Co. Ltd, Kamur Partners LLC and ACE Equity Partners LLC, establish a consortium fund to acquire the 20% stake in ASM.

Alongside private equity investors, the consortium is also expected to include strategic investment from major Korean industrial companies.

What’s the funding for?

According to today’s announcement, the funds will be used to progress the development of the Dubbo Project.

ASM has described the Dubbo Project as a “large in-ground polymetallic resource of rare earths, zirconium, niobium, hafnium, tantalum and yttrium”.

As it stands, the project has “all major approvals and licences in place” and is “ready for construction, subject to financing”.

ASM said that today’s framework agreement “represents an important contribution of financial support for the Dubbo Project”.

In addition, on 28 June, the company received conditional finance support from Export Finance Australia for $200 million of debt funding. The additional funding announcement helped push the ASM share price 2.6% higher on the day.

What did management say?

ASM Managing Director David Woodall hailed the milestone:

In opening a financing pathway for the Dubbo Project, this Agreement heralds an exciting new phase in ASM’s growth and puts us one step closer to executing our ‘mine to metal’ strategy.

We are delighted our new South Korean partners have recognised the mutual value of the strategic investment opportunity represented by our integrated manufacturing capability that offers a new, cleaner source of critical metals and alloys to a rapidly expanding market. Cementing our ties with South Korea’s advanced manufacturing sector represents an incredible opportunity to create value from our Dubbo Project

ASM share price joins the $1 billion club

If the ASM share price can hold current levels, the company will hit a $1 billion valuation for the first time on record.

The ASM share price has rallied an extraordinary 107% from $4.17 on 24 March to a record high of $8.68 on Wednesday.

From a year-to-date perspective, the company’s shares are up 34%.

The post Australian Strategic Materials (ASX:ASM) share price is surging 16% appeared first on The Motley Fool Australia.

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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 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.

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The BHP Group Ltd (ASX: BHP) share price has rallied 8% in the past month, bouncing off a 2-month low of $45.61 on 21 June to trade at $50.19 early Wednesday morning.

Shares in the iron ore major continue to move in a volatile fashion, sliding to short-term lows before quickly bouncing back to all-time highs.

BHP share price tumbles despite upbeat quarterly update

Looking at the recent performance of the iron ore major, the BHP share price has tumbled 5.07% this week after a record close of $51.87 on Friday.

This weakness was overshadowed by a sharp selloff in the broader market, with major indices such as the Dow Jones Industrial Average and S&P/ASX 200 Index (ASX: XJO) sliding a respective 2.99% and 1.31% during Monday and Tuesday trading sessions.

The US market has faltered under increasing concerns of a resurgence in COVID-19 cases and the delta variant.

Despite a disappointing week on the ASX so far, BHP has released its fair share of positive news.

On Tuesday, the company released its fourth-quarter and full-year update, citing production that was in line with guidance and strong pricing for its commodities.

Overall, BHP CEO Mike Henry said the company was “in great shape”.

Our operations are performing well, we continue our track record of disciplined capital allocation, and our portfolio is positively leveraged to the megatrends of decarbonisation, electrification and population growth.

Iron ore prices hold up despite weak outlook

Looking ahead for the BHP share price, there are consensus expectations that iron ore prices will weaken in the medium to long term.

A June quarterly report from the Australian Government’s commodity forecaster, Office of the Chief Economist (OCE) said that:

Prices are forecast to average around US$150 a tonne in 2021, before falling to below US$100 a tonne by the end of 2022, as Brazilian supply recovers and Chinese steel production softens

The last time iron ore was trading at US$100 a tonne was back in June 2020 when BHP shares were fetching around $35 a share.

Despite increasing expectations of moderating prices, iron ore has remained well above the US$200 level.

The post The BHP (ASX:BHP) share price is up 8% in the past month. Here’s why appeared first on The Motley Fool Australia.

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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 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.

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The AMP Ltd (ASX: AMP) share price is having a year to forget.

Over the past 12 months, shares in the financial institution have fallen nearly 40%. The S&P/ASX 200 Index (ASX: XJO) is up about 21% in the same time period – a gigantic 61 percentage points reversal against the beleaguered company.

Here we will take a look at some of the biggest stories that have affected the AMP share price.

The AMP share price over the last year

Controversies

AMP has been embroiled in much controversy over the last 52 weeks. It started on the tail end of the Hayne Royal Commission findings into the banking sector. AMP came in for scathing criticism for its conduct – including alleged deductions of service fees and premiums from deceased customers.

Criminal proceedings were brought against the bank for allegedly deducting fees for financial advice to customers who did not receive said advice. These were recently dropped by ASIC.

When the public’s ire looked like it was fading, it rallied again when reports of sexual misconduct at senior levels of the company were made public.

Boe Pahari was promoted to Chief Executive of AMP Capital, despite the board being made aware of several allegations of sexual misconduct against him. Initially deciding not to fire anyone, the company did an about-face and removed Pahari from his role. The Chair, David Murray, also resigned in the wake of the scandal.

Pahari received a $1 million bonus for his 53 days in the role.

The reputational damage, plus serious questions over AMP’s governance structures, could have caused the massive decline in the AMP share price.

Aborted takeover bid and split with AMP Capital

In October 2020, Ares Management Corp (NYSE: ARES) approached AMP with an offer to buy 100% of the company at $1.85 per share – note this is 75% higher than its current market price.

Despite drawn-out negotiations, the takeover did not eventuate. A new joint venture between the companies was proposed in February in its place. Ares would take over 60% of its private markets business for $2.3 billion. The deal fell through one month later, delivering another blow to the AMP share price. Eventually, AMP decided to demerge its private markets business with a float on the ASX.

Financial performance

During this time, which also saw the departure of its CEO one week after denying he would leave, the company underperformed financially.

At the end of July last year, AMP downgraded its profit expectations for FY20 due to a range of factors, such as market volatility and a credit downgrade.

Its half-year performance for FY21 wasn’t much better. The AMP share price dropped 9% when it announced a 33% decline in net profits after tax for the 6 months ending 31 December.

Foolish takeaway

Obviously, it has not been a good 12 months for AMP shareholders. The company’s share price continues to break 52-week lows, seemingly every trading day. Only yesterday it hit another low of $1.05 per share.

It’s been a year to forget for many – doubly so for those invested in the AMP share price.

The post The AMP share price is trailing the ASX 200 by 60% over the past year appeared first on The Motley Fool Australia.

More reading

• AMP (ASX:AMP) share price slides as ASIC ends criminal proceedings
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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.

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Experts are warning of more pain for the Australian dollar after its big crash, but that’s good news for ASX 200 shares.

The Aussie is currently sitting at around US73.3 cents, its lowest since November last year. Forecasters are predicting it could fall below US70 cents in the coming months, reported the Australian Financial Review.

That would be a good outcome for the S&P/ASX 200 Index (Index:^AXJO) as our bigger companies tend to exporters.

ASX 200 shares benefiting from a battered Aussie dollar

This means a material portion of their revenue is generated in US dollars. The exchange rate will give these ASX 200 shares a boost when they convert these sales into Australian dollars.

Some notable ASX 200 shares with large US dollar exposure include the James Hardie Industries plc (ASX: JHX) share price, Aristocrat Leisure Limited (ASX: ALL) share price and Resmed CDI (ASX: RMD) share price – just to name a few.

ASX 200 mining shares to also get a boost

ASX mining shares are also in this category as commodities are bought and sold in US dollars – notwithstanding the inverse correlation between commodity prices and the greenback. After all, prices of many commodities are hovering at multi-year, if not record highs.

ASX miners with large domestic operations like the Fortescue Metals Group Limited (ASX: FMG) share price and Newcrest Mining Ltd (ASX: NCM) share price are even better placed. This is because their cost base is largely denominated in the weaker local currency.

ASX shares at the sharp end of the exchange rate

But a retreating Aussie will also create losers. These tend to be ASX small cap shares as the group are net importers of goods and services. Their margins could get squeezed as their costs rise and they are unable to pass on the increases to consumers.

ASX investors worried about inflation will also have a new reason to fret. A falling Aussie will add to inflationary pressure at a time when markets are alive to this threat on share valuations.

What’s causing the Australian dollar to lose ground?

So why is the Aussie battler looking so battered and bruised? The expanding lockdowns of our big cities due to the more transmittable delta-variant of COVID-19 is to blame.

The Reserve Bank of Australia may not be able to taper its quantitative easing (QE) program as quickly as the market expects in light of this economic blow.

QE refers to the buying of bonds and other assets by the central bank. This increases liquidity in our financial system to stimulate growth, but it depresses the currency.

Hit by growth jitters

Currency traders are also abandoning currencies like ours that’s linked to global growth as other countries in Asia and Europe struggle to contain the delta virus.

It was only a month ago that forecasters were convinced the Aussie was going to crack US80 cents a share, noted the AFR.

But as they say, one month is a long time in markets.

The post Forecast crash in Aussie dollar to under US70 cents to boost these ASX 200 shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Brendon Lau owns shares of Aristocrat Leisure Ltd., Fortescue Metals Group Limited, James Hardie Industries plc, and Newcrest Mining Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ResMed. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Kogan.com Ltd (ASX: KGN) share price is storming higher on Wednesday morning.

In early trade, the ecommerce company’s shares are up 5% to $12.35.

Why is the Kogan share price rising?

Investors have been bidding the Kogan share price higher after it released a business update which revealed an improvement in its performance.

It advised: “Following the Company’s continued focus on improving customer value, trading performance in June 2021 saw an acceleration in the delivered Gross Sales, Gross Profit and Adjusted EBITDA , ahead of the performance in April and May 2021.”

According to the release, Kogan achieved gross sales of $1,177.7 million in FY 2021. This was an increase of 52.5% on the prior corresponding period. This figure was boosted by the acquisition of Mighty Ape, which added $80.3 million of gross sales. Excluding Mighty Ape, Kogan’s gross sales would have been up 42.1% year on year to $1,097.4 million.

This strong top line growth was driven by the shift online and a solid increase in active customers. The release reveals that active customers grew by more than 46% over the 12 months to 3,207,000 for Kogan.com. Whereas the Mighty Ape business had 764,000 active customers at the end of the financial year.

Softer profit growth

Things weren’t quite as positive for its operating profits due to its significant inventory issues in the second half.

Kogan reported adjusted EBITDA of $61.1 million for FY 2021, up 23.1% year on year. This is a sharp slowdown on the adjusted EBITDA growth rate of 184.4% it reported in the first half.

Once again, the acquisition of Mighty Ape was a boost. Excluding Mighty Ape’s operating profit of $6.9 million, Kogan’s adjusted EBITDA would have been up 9.2% year on year to $54.2 million.

Inventory issues

Potentially giving the Kogan share price an extra boost today was an update on the inventory issues it has been facing. Positively, it revealed that it ended the period with its inventory in a much better position.

Commenting on the issues, it said: “The Company utilises data and analytics in forecasting its operations to enable the delivery of the right products to customers at the right time. Given the turbulent trading and social environment over the last year, forecasting consumer needs has been harder than ever for the Company.”

“The Company took the view late last year that the levels of demand during the first half of FY21 would likely continue into the second half, and potentially grow further still. The Company invested in inventory and operational capacity to be able to fulfil that growth. As is now clear, the Company’s expectations weren’t accurate and as a result the Company purchased too much stock. This led the Company to focus on strong promotions to bring inventory to the right level for the relative size of business, and this promotional activity combined with high warehousing costs has impacted financial performance in the second half,” management added.

Positively, these issues appear to be behind the company now, thanks potentially to recent lockdowns which sent consumers back online again.

“Following the end of the second half, the Company can now say that the efforts to bring down levels of inventory have come a very long way, and inventory is approaching the right level for the business. The Company expects improved efficiency moving forward,” it concluded.

Where next for its shares?

Given that the Kogan share price has rebounded strongly during the recent lockdowns, the market may have already priced in some of this improvement. This could potentially hold back the Kogan share price somewhat on Wednesday.

The post Kogan (ASX:KGN) share price up 5% on business update appeared first on The Motley Fool Australia.

More reading

• 2 highly rated ASX 200 growth shares that could be buys
• Kogan (ASX:KGN) share price jumps 6% in a week
• These are the 10 most shorted ASX shares
• 3 reasons why the Kogan (ASX:KGN) share price could be a buy
• These are the 10 most shorted shares on the ASX

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

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