The Dragontail Systems Ltd (ASX: DTS) share price has delivered an outstanding performance for shareholders today.

At the market close, the restaurant-focused technology company’s shares were up 24.3% trading at 23 cents.

Tantalising offer ignites Dragontail share price

Investors have really sunk their teeth into the Dragontail share price today after notifying the market of its entry into a scheme implementation agreement.

The agreement is with Yum! Connect Australia, which is an entity controlled by Yum! Brands Inc (NYSE: YUM). The real spicy part of the agreement is Yum! Brands will acquire 100% of the ASX-listed small-cap for $93.5 million.

Based on the agreed terms, shareholders will be entitled to receive 23.5 cents per share once all conditions are satisfied. The offer represents a 30.5% premium over Dragontail’s closing price on Wednesday.

If you’re unaware, Yum! Brands operates fast food brands globally – including KFC, Pizza Hut and Taco Bell. Its market capitalisation is in excess of US$35 billion, which roughly equates to the same size as five Domino’s Pizza Enterprises Ltd (ASX: DMP).

Will Dominos burn Dragontail?

Dragontail being acquired might have been good for its share price, but it could make partnerships messy. The company’s quality control system is used by Dominos, known as the pizza checker.

As you might know, Dominos and Pizza Hut (operated by Yum! Brands) are in competition with each other… Awkward! At this stage, it is unknown what Dominos will do now that its quality control system might be owned by a rival.

Where to next?

If the buyout is approved, the company intends to dispatch a scheme booklet to shareholders around July 2021 to vote on approving the proposal.

Dragontail shareholders must be pleased with their investment over the past year. Accounting for today’s gain, the Dragontail share price has returned 109% in the last year. Far exceeding the 23% from the S&P/ASX 200 Index (ASX: XJO).

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The Emerge Gaming Ltd (ASX: EM1) share price closed up a very healthy 33.33% today at 4 cents a share. That comes after Emerge shares closed at 3.1 cents a share yesterday and opened at 3.6 cents this morning.

This latest move somewhat reverses a downward trend that Emerge shares have been in over the past 7 months or so.

The company spiked in value last October, shooting from around 4 cents a share on 9 October to a high of 19 cents by 23 October. That was a gain of roughly 250%.

But a run of poorly-received developments in the months since cramped investors’ enthusiasm for this gaming company. Despite today’s share price move, Emerge Gaming is now down around 70% from those highs.

Back in early December 2020, the company crashed close to 50% in one day after just 25,000 gamers signed up for its Miggster platform. The was despite the company recording more than 6 million pre-registrations for the platform. Last Friday, Emerge incidentally announced that Miggster was now up to 500,000 subscribers.

So what’s going on with Emerge today?

In a before market release this morning, Emerge announced that it can now boast more than one million subscribers in its overall “community”, a number it has previously told investors (last month) it was aiming for.  

Here’s some of what Emerge CEO Gregory stevens said of this milestone:

Emerge Gaming (EM1) is pursuing a growth strategy to increase subscribers, revenue and shareholder value, after proving out our Competitive Social Gaming product. We are delighted to achieve the milestone of a 1 million subscriber community in 10 months. The competitive social gaming platforms operated by Emerge continue to demonstrate growth in new subscribers daily. As we drive growth in new subscribers through the current scaling phase of our growth strategy, we are developing exciting new products, features and Go-to-Market channels.

Additionally, Emerge Gaming also announced a new “social gaming show” called ‘Social Gaming & Coconuts’.

The show will reportedly debut on 2 June on the GINX Esports TV channel in Europe. It will be a weekly show, with episodes consisting of 24 minutes.

The partnership between Emerge and GINX Esports is for 6 months. It will result in Emerge providing the show to GINX in a license-free capacity, whilst Emerge can “commercialise the show’s content” for revenue generation.

Investors seem to approve of these announcements today. On today’s share price, Emerge Gaming has a market capitalisation of $42.91 million.

More reading

• 4 ASX 200 resource shares poised to deliver: AMP Capital
• Dragontail Systems (ASX:DTS) share price soars on Yum! Brands buyout
• Why the EcoGraf (ASX:EGR) share price powered ahead today
• 2 growing small cap ASX shares to watch closely
• Is the Telstra (ASX:TLS) dividend still safe from a cut?

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The EcoGraf Ltd (ASX: EGR) share price rose today after the company announced progress on its upcoming battery anode material facility.

At market close, the graphite producer’s shares finished the day at 63.5 cents, up 0.79%. It’s worth noting that at one point, the company’s shares reached an intraday high of 66 cents, up 7%, before investors took profit off the table.

Quick take on EcoGraf

Based in Australia, EcoGraf is engaged in the exploration and development of graphite and nickel projects in Tanzania. The company uses innovative technologies to recover graphite from recycled batteries, thus reducing waste and environmental impact.

EcoGraf’s battery facility update

According to its release, EcoGraf reported that pre-construction locked-cycle testing has been completed by GR Engineering Services Ltd (ASX: GNG). The program aimed to provide data for detailed engineering design of EcoGraf’s new battery graphite facility in Western Australia.

The state-of-the-art processing facility, when constructed, will produce battery anode material products that will be treated through the company’s patented purification technology, which eliminates the use of toxic hydrofluoric acid (HF).

EcoGraf’s eco-friendly process comes at a time when world governments have adopted new environmental, social and governance frameworks to help transition into cleaner energy.

EcoGraf stated that a total of six cycles were completed, processing spherical graphite through its HFfree purification flowsheet. This was conducted to mimic operational conditions and obtain final data for construction of the facility.

The company reported the testing achieved purities of 99.97% for the carbon product, highlighting the effectiveness of its HFfree purification process. However, the company is aiming to exceed carbon purity targets, which will lead to lower production costs.

GR Engineering Services manager of engineering Ryan Kriedemann commented:

The results of the locked-cycle testing were very encouraging and confirmed that the EcoGraf HFfree process effectively removes impurities from flake graphite feedstock to deliver high purity battery anode material. Mass balance analysis data was also very good and so we’ll evaluate the potential to reduce the level of reagent used in the EcoGraf process, which will deliver operational efficiency benefits for the new facility.

The EcoGraf share price has accelerated by more than 650% over the past 12 months.

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• Here’s why the EcoGraf (ASX:EGR) share price is storming 11% higher

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Because I’m a fan of small cap shares, I feel quite lucky to have a large number to choose from on the Australian share market.

Two small cap ASX shares that could have bright futures are listed below. Here’s what you need to know about them:

Booktopia Group Ltd (ASX: BKG)

The first small cap to watch is Booktopia. It is an online book retailer which has impressed since its IPO late last year. Booktopia was supposed to struggle when Amazon launched in Australia, but that simply hasn’t been the case.

For example, during the first half of FY 2021, the company shipped a total of 4.2 million units for the six months. This was up 40% on the prior corresponding period and led to Booktopia reporting a 51.1% increase in revenue to $112.6 million and a 502.3% jump in underlying EBITDA to $8 million.

Analysts at Morgans appear confident there will be more of the same in the future. Morgans is tipping further market share gains and scale benefits. In light of this, it has an add rating and $3.53 price target on its shares.

Doctor Care Anywhere Ltd (ASX: DOC)

Another small cap to watch is Doctor Care Anywhere. It is a growing UK-based telehealth company that is aiming to deliver high-quality, effective, and efficient care to its patients.

Due partly to the pandemic accelerating the adoption of telehealth services, Doctor Care Anywhere is another company growing quickly.

For example, last month Doctor Care Anywhere released its first quarter update and revealed a 16.5% increase in unaudited underlying revenue to 4.4 million pounds (A$6.87 million). The company also reported a 14.7% increase in sign-ups to the platform to 500,000 and a 21.9% increase in consultations delivered to 90,500.

Bell Potter is positive on its prospects. The broker currently has a buy rating and $1.95 price target on the company’s shares.

More reading

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• Top brokers name 3 ASX shares to buy next week

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Telstra Corporation Ltd (ASX: TLS) shareholders might be forgiven for being a little nervous about their dividends. After all, Telstra used to be regarded as one of, if not the best, ASX dividend shares on the market. That’s the reputation a couple of decades offering a fully franked, ~7% dividend yield can build.

However, that all came crashing down in 2017. That’s when the ASX telco slashed its annual dividend from 31 cents per share to 22 cents per share. It hit investors again in 2019, reducing the 22 cents per year to 16 cents. That remains the annual payout Telstra shareholders have been receiving to date.

Last October, Telstra promised to keep this dividend steady at 16 cents in 2021 and perhaps beyond. Here’s some of what Telstra CEO John Mullen said at the time:

The board is acutely aware of the importance of the dividend to shareholders, and we understand the nervousness from some that COVID and other pressures may force Telstra to again cut its dividend… The board clearly understands the importance of the dividend and if necessary is prepared to temporarily exceed our capital management framework principle of paying an ordinary dividend of 70-90% of underlying earnings to maintain a 16c dividend.

Well, so far so good. In March, Telstra paid out another dividend of 8 cents per share, keeping to this commitment.

Does AT&T spell trouble for Telstra shares?

But a piece of news out of the United States might be getting investors worried about Telstra’s dividend of late. AT&T Inc (NYSE: T) is one of the largest telcos in the US. It bears many semblances to Telstra, given its old role as a monopolistic telephony service provider.

Recently, AT&T announced a big restructuring, which will include a large dividend cut. It will end AT&T’s dividend aristocrat status on US markets. Until now, the company had raised its dividend every single year for 36 years.

Could this be a canary in the coalmine for Telstra?

Well, the company doesn’t think so. In February, Telstra delivered its results for the first half of FY2021. It discussed its dividend further at that time. Here’s some of what the company said:

Our aspiration [is] for mid to high single digit growth in Underlying EBITDA for FY22 and for Underlying EBITDA to be in the range of $7.5–8.5b in FY23. This range is important to support a 16c dividend inside our dividend payout ratio and to deliver a ROIC of around 8%. We know how important this dividend is to our shareholders and that is why and the board expects to pay a total dividend for FY21 of 16c per share including an interim dividend of 8c per share. 

So, in other words, Telstra remains committed to its current dividend, which it thinks it can afford if sufficient earnings growth is achieved (which the company evidently thinks it can hit). If this proves to be the case, it’s good news for Telstra’s dividend-conscious investors.

On the current share price of $3.45, Telstra’s dividend is worth a yield of 4.64%. Or 6.63% grossed-up with Telstra’s full franking.

More reading

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• Could the Telstra (ASX:TLS) share price be worth looking at for its FY21 dividend yield?
• ASX shares in this sector are pushing towards 52-week highs
• TPG (ASX:TPG) shares whacked by cyberattack

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Having recently been beaten, battered and bruised, smaller tech shares had a well deserved day in the sun on Thursday, with the S&P/ASX All Technology Index (ASX: XTX) handily out-pacing the S&P/ASX 200 Index (ASX: XJO).

Could the resurgence have anything to do with the latest COVID-19 outbreak in Melbourne, with  ‘stay at home’ shares being beneficiaries again? 

Market movers

The Alcidion Group Ltd (ASX: ALC) share price hit an all-time high on Thursday, jumping 4 cents or 9.8% higher to 45 cents at the time of writing, and is now up an impressive 242% for Motley Fool Hidden Gems members since it was first recommended as a buy in May 2019.

In late April the provider of healthcare analytics software reported continued strong organic sales growth in the UK, Australia and New Zealand, with revenue for the first three quarters of FY21 surpassing revenue for the full year of FY20. 

The Hidden Gems team recently reiterated Alcidion as a buy, saying the company has “proven technology and product that is increasingly appealing to hospitals and allied health professionals, and still has a lot of market share to claim.”

The Costa Group Holdings Ltd (ASX: CGC) share price slumped 23% to $3.39 after the horticulture company warned that growth for the first half of 2021 is expected to be only marginally ahead of the comparable period. 

Costa is seeing mixed performances from its domestic operations, with berries looking strong, but mushrooms, citrus and tomato operations facing near term production and/or pricing pressures. When it comes to agriculture, as the old saying goes, it never rains but it pours.

Perhaps pre-empting such an event, the team at Motley Fool Share Advisor recently downgraded Costa to a hold, citing concerns about valuation and the volatility of its growing products. 

Having recently fallen to a 10-month low, the Whispir Ltd (ASX: WSP) share price jumped 9% higher on Wednesday and another 6.6% today after an article in The Australian mentioned a potential partnership with Chemist Warehouse. According to The Australian, Chemist Warehouse is reportedly set to link with Whispir as it looks to roll out an e-prescription service.

Whispir is a software-as-a-service (SaaS) communications workflow platform provider. As with many similar companies, its share price has been on the nose in recent times as tech shares across the board have taken a beating. 

Shaken but not stirred, Whispir remains an active buy recommendation across six different Motley Fool services. 

Stock of the Week

Our newest feature continues apace, with Motley Fool Chief Investment Officer Scott Phillips joined by Director of Research Kevin Gandiya to deep dive into our Stock of the Week, Netwealth Group Ltd (ASX: NWL).

Netwealth is a leading specialist platform provider and one of Australia’s fastest growing wealth management businesses. Senior Motley Fool Analyst Ryan Newman recently added it to the real money Motley Fool Pro 2.0 portfolio, saying its solid management team is overseeing strong and consistent market share growth. Click here to see Scott and Kevin’s take on Netwealth. 

Thought of the day

Shares can ‘only’ fall 100%. But they can rise 300%, 1,000% or 5,000%, gains that will absolutely wipe out many losers in your portfolio. The catch is such astronomical returns will take many years, require you holding on during periods of extreme volatility, and need you to avoid the urge to sell a great company simply to lock in a profit.  

More reading

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• ASX 200 flat: Costa crashes & Fisher & Paykel Healthcare tumbles
• Costa (ASX:CGC) share price crashes 23% on AGM update
• Could this be why the Whispir (ASX:WSP) share price is up 9% today?

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If you’re looking for blue chip ASX 200 shares to buy, then you might want to look at the ones listed below.

These shares have strong market positions, robust business models, and positive long term growth potential. Here’s why they have been rated as buys:

ResMed Inc. (ASX: RMD)

The first blue chip ASX 200 share to look at is ResMed. It is one of the world’s leading medical device companies with a focus on the sleep treatment market.

ResMed’s digital health technologies and cloud-connected medical devices transform care for people with sleep apnoea, COPD, and other chronic diseases. In addition to this, its comprehensive out-of-hospital software platforms support caregivers who help people stay healthy in the home or care setting of their choice.

Combined, this is improving the quality of life of sufferers, reducing the impact of chronic disease, and lowering costs for consumers and healthcare systems.

With education around sleep disorders increasing, more and more sufferers are seeking treatment options. This puts ResMed in a great position to benefit, which should be supported by the structural shift to home healthcare.

Credit Suisse is positive on the company and currently has an outperform rating and $29.50 price target on its shares.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is the conglomerate that owns and operates a diverse group of businesses across several sectors. This includes Bunnings, Catch, Covalent Lithium, Kmart, Officeworks, and Target. Collectively, these businesses are in fine form in FY 2021, supporting strong sales, profit, and dividend growth.

The company is also generating strong free cash flow, which is adding to its acquisition firepower.

In respect to that, according to a recent note out of Goldman Sachs, its analysts believe Wesfarmers has over $8 billion in excess of credit requirements, prior to the Mt Holland development. It feels this gives it a lot of options when it comes to making value accretive acquisitions.

It is partly because of this that Goldman currently has a buy rating and $59.70 price target on the company’s shares.

More reading

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The Carpentaria Resources Ltd (ASX: CAP) share price has rocketed today after the company provided an update about its flagship project.

Near the close of trading, the mineral exploration company’s shares are swapping hands for 15 cents apiece, up 20%.

This comes after a statement to the ASX about its Hawsons Iron Project in New South Wales.

What did Carpentaria announce?

Investors are pushing the Carpentaria share price higher following the news of potential development partners stepping up.

In today’s update, Carpentaria advised it has received significant interest in relation to its product offtake for the Hawsons Project.

This follows the company’s recent acquisition of its flagship project from Pure Metals.

According to Carpentaria, the Hawsons project, near Broken Hill, has been identified by independent analysts as the world’s leading undeveloped high-quality iron ore concentrate and pellet feed project.

A pre-feasibility study completed in 2017 revealed the open pit mine had a probable magnetite iron ore reserve of 755 million tonnes.

Carpentaria has a 68.69% interest in the project, with the remaining 31.31% owned by Pure Metals.

Pleasingly, both national and international third parties have signalled their interest to be a preferred offtake partner. Carpentaria said it had begun the process of selecting its development partner for the project.

Furthermore, Carpentaria noted that negotiations with Mitsui & Co. Ltd have restarted, along with other interested parties.

Carpentaria executive chair, Mr Bryan Granzien commented:

Carpentaria has a clear path to development and production and will select its development partners based on a number of criteria.

A key aim is to unlock the full value of the Hawsons Iron Project, as efficiently and cost-effectively as possible, to the benefit of Carpentaria shareholders

How has the Carpentaria share price performed?

Carpentaria shares have performed particularly well since the acquisition announcement in May. While there was not much movement in the 12 months prior, the Carpentaria share price has jumped close to 600%.

On valuation grounds, Carpentaria commands a market capitalisation of about $76 million, with more than 475 million shares on its registry.

More reading

• Here’s why the Carpentaria (ASX:CAP) share price is sliding 9% today
• Why the Carpentaria (ASX:CAP) share price is rocketing 54% today

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The Ramsay Health Care Limited (ASX: RHC) share price was out of form on Thursday.

The private hospital operator’s shares fell 3.5% to $62.30.

Why did the Ramsay share price tumble?

The Ramsay share price came under pressure on Thursday after the market responded cautiously to the announcement of a new acquisition.

After the market close on Wednesday, Ramsay announced that it had made an offer of 1 billion pounds (A$1,822 million) to acquire 100% of Spire Healthcare. It is a London Stock Exchange-listed independent hospital group in the United Kingdom with a focus on the private patient market. It is also a leading provider of high-acuity care.

The Spire Board is unanimously recommending its shareholders vote in favour of the scheme. It also notes that major shareholders and directors, accounting for 30.4% of its shares, have made irrevocable undertakings to vote in its favour.

Management believes the acquisition will be transformational for Ramsay’s UK business. It also expects to deliver benefits of at least 26 million pounds per annum from procurement savings, improved capacity utilisation, and cessation of UK listing costs. This is forecast to result in high single digit earnings per share accretion in FY 2024.

What was the response?

One leading broker that gave the acquisition a lukewarm response was Citi. In response to the news, the broker has held firm with its neutral rating and $67.00 price target.

Citi notes that the deal will increase its market share in the UK to 25% and is expected to generate decent synergies. However, the broker has some doubts over whether those synergies will be realised.

Commenting on the acquisition, Citi said: “Guiding to high single digit EPS accretion in FY24 Ramsay Healthcare has announced that it has bid 240p per share for Spire Healthcare Group, a 24% premium to the last close in an agreed deal. This values the equity of Spire at ~£1bn (A$1.822bn) and the EV post AASB16 at £2.064bn.”

“The combined group would have ~25% of the UK private hospital market, with Spire currently having ~17% market share (~£1bn revenue in CY19) and RHC ~8% market share (~£540m revenue in FY19).”

“In CY19, Spire reported EBIT of £98m and RHC said its CY19 (pre-exceptional items) EBIT was £42m (but reported £26m in FY19). The company is forecasting “at least” £26m in synergies for the combined group, which seems reasonable on a combined revenue of ~£1.5b, although when Ramsay acquired Capio it made similar statements, and it is not obvious that those synergies have been realised (although in a different market).”

More reading

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• ASX 200 drops, ALS jumps, Fletcher Building rises

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Retail giant Mosaic Brands Ltd (ASX: MOZ) has paid a $630,000 penalty after admitting to making misleading claims on advertising for hand sanitisers and face masks.

Mosaic runs more than 1200 clothing stores across Australia under brands such as Katies, Millers, Rivers, Noni B, Autograph and Rockmans.

The Australian Competition and Consumer Commission (ACCC) announced Thursday that the company had confessed to breaching Australian Consumer Law (ACL) with misleading advertising for its “Health Essential” hand sanitisers and protective masks.

The alleged offences occurred at the height of the first wave of COVID-19 in Australia between March and June 2020.

NoniB’s sanitiser claimed 70% alcohol content, Millers’ sanitiser claims 75% and another sold online claimed they were “WHO-approved”. None of these claims were true.

“Independent testing of the hand sanitisers commissioned by the ACCC found that one of the sanitisers tested contained an alcohol content of 17% and another had an alcohol content of 58%,” said ACCC deputy chair Delia Rickard.

“This was also below the minimum 60% alcohol concentration recommended by Australian health authorities.”

Mosaic also advertised its KN95 Kids Safety Masks as “CE/FDA certified” and that KN95 Adult Face Masks were “non-refundable”. Both these claims were false.

“Our investigation also found that Mosaic Brands’ Kids KN95 mask was not certified by European and US standard authorities as they had advertised,” said Rickard.

Mosaic did not respond to The Motley Fool’s request for comment. The Mosaic share price was down 1.47% on Thursday afternoon, to trade at 67 cents.

Mosaic’s ‘outrageous’ ads designed to ‘make a quick buck’

Consumer advocacy body Choice originally tipped off the ACCC to investigate Mosaic.

According to Choice campaigner Dean Price, the company is now paying the price for misleading the public at the height of health fears.

“It’s never ok to make a quick buck by misleading people and Mosaic Brand’s actions were particularly outrageous when people were doing their best to protect themselves from a deadly pandemic,” he said.

“This action by the ACCC is a win for people and a reminder to businesses that they cannot get away with misleading consumers.”

Mosaic would have got away with it if it weren’t for the actions of one person.

“A supporter tipped us off that they didn’t think the hand sanitiser they bought from Mosaic Brands was up to scratch,” Price said.

“Independent testing that was funded by Choice supporters confirmed their suspicion and led us to make a formal complaint to the ACCC.”

Refunds for customers

In addition to paying the fine, Mosaic has entered a court-enforceable undertaking that it would refund customers who bought the affected COVID protective gear.

The company will identify and contact customers who bought the products to offer a refund — even those who previously were refused.

The undertaking also compels Mosaic to execute a 3-year program of ACL compliance.

More reading

• Mosaic Brands (ASX:MOZ) share price rockets 21% on business update

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