• Where to for the A2 Milk and Afterpay share price, and US economic growth? Motley Fool CIO Scott Phillips on Nine’s Late News

    Scott Phillips on Nine New May 23 2021

    Motley Fool Australia Chief Investment Officer Scott Phillips joined Nine’s Late News on Sunday night to discuss the week ahead for investors, as well as broker upgrades for a2 Milk (ASX: A2M) and Afterpay (ASX: APT)

     

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  • 2 ASX shares that could be top buy and hold options

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    Arguably one of the best ways to generate wealth is to make long term investments. This is because investing for long periods allows you to benefit from compounding.

    Compounding is what happens when you earn interest on interest. It explains why a 10% return per annum will turn $10,000 into $11,000 in one year and then into $50,000 in 17 years.

    With that in mind, I have picked out two ASX shares that have been tipped to grow strongly over the long term. They are as follows:

    Breville Group Ltd (ASX: BRG)

    Breville is one of the world’s leading appliance manufacturers. As well as the eponymous Breville brand, it also has the Sage, Kambrook, and Baratza brands. It has been growing at a consistently solid rate for the last decade. This has been driven by the popularity of its brands in the ANZ market and internationally.

    This has continued in FY 2021, with Breville reporting a 28.8% increase in first half revenue to $711 million and a 29.2% increase in net profit after tax to $64.2 million. This was partly driven by favourable tailwinds brought about by COVID-19 such as working from home and more dining in. 

    The good news is that it still has a long runway for growth thanks to its international expansion and expanding product range.

    UBS is positive on the company. Its analysts are tipping Breville to deliver strong growth over the long term and currently have a buy rating and $35.70 price target on its shares.

    Xero Limited (ASX: XRO)

    Another buy and hold share to look at is Xero. It provides small and medium sized businesses with a cloud-based business and accounting solution. Xero has been growing strongly thanks to its international expansion, acquisitions, and the transition to the cloud.

    The good news is that these drivers are very much still in place and should be boosted further by its growing app ecosystem. If Xero can monetise this ecosystem and execute its international expansion successfully, it has the potential to underpin growth for a long time to come.

    Goldman Sachs is very positive on the company and has a buy rating and $153.00 price target on its shares.

    Responding to its recent full year results, Goldman commented: “Overall we view the FY21 result as a positive, with Xero showing earlier than expected subscriber traction across all of its key international markets, but without sacrificing unit economics. As a result, we believe the accelerated investment is more than justified, given the enormous TAM the company is targeting.”

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  • 2 ASX 200 shares that could be great for dividends

    A row a pink piggy banks ranging in size from small to big, indicating ASX share price and dividends growth CBA bank dividend increase

    There are some S&P/ASX 200 Index (ASX: XJO) shares that might be good options to consider for dividends.

    Businesses in the ASX 200 can be large enough to be leaders in their industry, generate reliable earnings and pay solid dividends.

    Rural Funds Group (ASX: RFF)

    Rural Funds is an agricultural real estate investment trust (REIT) that has a market capitalisation of $826 million.

    It has a farmland portfolio across different farm types including cattle, vineyards, almonds, macadamias and cropping (cotton and sugar).

    Rural Funds is one of the ASX 200 shares that have a stated distribution growth target. The ASX 200 dividend share wants to increase the distribution by 4% per annum.

    The income growth by the ASX 200 share is achieved through lease indexation, productivity improvements and conversion of assets to higher and better use.

    Rental indexation is either linked to CPI inflation, or there’s a fixed 2.5% annual increase. Some of the contracts have infrequent market reviews as well.

    Rural Funds’ adjusted net asset value (NAV) per unit has been steadily growing since it listed. It has increased from $1.22 to $2.01 at the time of the FY21 half-year result. The NAV growth reflects productivity and development gains.

    The ASX 200 dividend share says that it has existing earnings and balance sheet capacity to fund developments, whilst continuing to fund growing distributions.

    Rural Funds has forecast a 11.73 cents per unit distribution in FY22. That translates to a forward distribution yield of 4.8%.

    Amcor CDI (ASX: AMC)

    Amcor describes itself as a global leader in developing and producing high-quality, responsible packaging for a variety of food, beverage, pharmaceutical, medical-device, home and personal care and other products.

    It has 230 sites with 47,000 employees spread across 40 countries.

    The ASX 200 business is currently extracting synergies after going through its merger with Bemis in the US.

    Amcor continues to grow despite all of the impacts of COVID-19 on the global economy and its respective markets.

    In the nine months ending 31 March 2021, it reported earnings per share (EPS) growth of 63% to 43.8 cents. Adjusted EPS grew 16% on a comparable constant currency basis to 51.5 cents.

    In that quarterly update, it revealed a quarterly dividend that was higher than that prior corresponding period at 11.75 cents per share.

    It’s also going through a share buyback program, which boosts the per-share profit statistic. Approximately 2% of outstanding shares were repurchased in the year to date.

    The business recently increased its adjusted EPS growth in constant currency terms to a range of 14% to 15%, up from 10% to 14%.

    Amcor CEO Ron Delia said:

    Amcor has a clearly defined, consistent capital allocation framework which starts with strong annual free cash flow in excess of $1 billion and growing. We are actively investing in the future, expanding capacity in higher value segments and higher growth markets and increasingly using open innovation and now corporate venturing to identify new avenues of growth. Growth investments like these, along with continued strong execution, will enable continued momentum and reinforce our belief that the Amcor investment case has never been stronger.

    Using the last 12 months of dividends, Amcor has a dividend yield of 4.1%.

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  • 3 exciting small cap ASX shares to watch

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    At the small end of the Australian share market, there are a number of companies with the potential to grow materially in the future.

    Three standouts are listed below. Here’s why they should be on your watchlist:

    Mach7 Technologies Ltd (ASX: M7T)

    The first small cap ASX share to watch is Mach7. It is a medical imaging data management solutions provider that allows users to create a clear and complete view of the patient. Users then use this to help them inform diagnosis, reduce care delivery delays and costs, and improve patient outcomes.

    Thanks to the quality of this software and trends such as telehealth, demand for its offering is expected to grow strongly in the future. In respect to the latter, the company notes that telehealth services are creating a need for this type of technology. According to management, the company’s total addressable market is estimated to be US$2.75 billion. This gives it a long runway for growth over the next decade.

    Volpara Health Technologies Ltd (ASX: VHT)

    Another small cap ASX healthcare share to watch is Volpara. It is a healthcare technology company that provides software which leverages artificial intelligence imaging algorithms to help with the early detection of breast cancer. Its key solution is the VolparaEnterprise product, which is supported by add-on solutions such as VolparaDensity, VolparaDose, VolparaPressure, VolparaLive, and VolparaPositioning.

    Management estimates that its whole suite of products equates to US$10 per user, which is many times greater than its current ARPU of US$1.40. Combined with further market share gains, this could support significant revenue growth in the future. Positively, management is making great progress with this. It notes that some contracts during the last quarter were achieved with an ARPU of up to US$5.65.

    Whispir Ltd (ASX: WSP)

    A final small cap share to watch is Whispir. It is a cloud-based communications platform that uses cutting edge technology to bring all communications channels like email, text messaging and web chatting together in one easily accessible space. This helps businesses large and small to eradicate communication inefficiencies and redundancies so their staff and clients can connect in new and productive ways.

    Demand has been increasing strongly for its offering, leading to rapid recurring revenue growth in recent years. The good news, though, is that Whispir is still only scratching at the surface of its total addressable market (TAM). At the end of the third quarter, the company’s annualised recurring revenue stood at $50.3 million, which was up 20.3% over the prior corresponding period. This compares to its TAM of US$4.7 billion in the just United States market. 

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  • 2 high-yielding ASX dividend shares

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    There are some ASX dividend shares that have high trailing dividend yields.

    Some businesses don’t pay any dividend at all, such as Xero Limited (ASX: XRO) and A2 Milk Company Ltd (ASX: A2M).

    However, there are others that have relatively high dividend yields:

    Pengana Capital Group Ltd (ASX: PCG)

    Pengana is a funds management business. It operates a number of different investment strategies including Australian small caps, a multi-cap ASX strategy, global small caps, global multi caps, global private equity, sustainable investing and so on.

    Over the last 12 months Pengana has paid dividends totalling $0.09 per share. That translates to a trailing grossed-up dividend yield of 7.6%.

    The funds under management (FUM) increased by 15% during the six months to 31 December 2020, ending at $3.59 billion. This was predominately thanks to investment performance adding $463 million to the FUM total.

    Pengana’s FUM has steadily climbed during the second half of FY21. At the end of April 2021, it had risen to $3.77 billion.

    The ASX share explains that growth of its Australian FUM is limited due to market dynamics and capacity constraints. An aim over the last few years has been to increase its exposure to international investing. At the end of FY17 international FUM made up 32% of the total, at the end of December 2020 it was 53%.

    Pengana said that there’s “significant” further capacity in various international equity strategies, including Pengana Equity Trust Pvt (ASX: PE1).

    The fund manager also said that it has an opportunity to diversify further over time by adding new strategies.

    Pacific Current Group Ltd (ASX: PAC)

    Pacific Current is a business that takes investment stakes in global fund managers to help them grow with capital and expertise.

    Over the last 12 months, Pacific Current has paid dividends totalling $0.35 per share. That translates to a grossed-up dividend yield of around 9.1%.

    The ASX share has a portfolio of around 15 names. Some of its investments include Aether Investment Partners, Astarte Capital Partners, Carlisle Management, GQG Partners, Proterra Investment Partners and Victory Park Capital.

    In the quarter ending 31 March 2021, Pacific saw FUM controlled by boutique asset managers increase by 8.9%. Including the new investment in Astarte Capital Partners, total FUM increased 9.3%.

    During the latest quarter, Pacific saw “strong” inflows across the portfolio including GQG, ROC, Carlisle, Proterra and Victory Park.

    The Pacific Current CEO, Paul Greenwood, said:

    While GQG continued to post large FUM gains, we were again encouraged by the breadth of growth across the portfolio. As we emerge from the pandemic it appears that many of our portfolio companies are very well positioned to grow, and as a result we expect continued capital raising success in 2021 and 2022.

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  • This tech ETF has returned 30% for ASX investors in the past year

    share buyers, investors, happy investors

    The BetaShares Nasdaq 100 ETF (ASX: NDQ) has had a pretty decent week. Since 19 May, this exchange-traded fund (ETF) has put on a healthy 4.5%.

    And since the start of March, unitholders have enjoyed close to 20% in returns. But those robust numbers continue as we zoom out on the time scale.

    Over the past year, this Nasdaq 100 ETF has returned 30.8% to its investors. It has also managed to average 27.52% per annum over the past 3 years, and 26.35% per annum over the last 5. Since its inception in May 2015, investors have enjoyed a 21.57% return each year. These are the kinds of numbers to get anyone excited.

    So what does this ETF cover? And how does it manage these impressive returns?

    NDQ is an index fund at its core. It tracks the NASDAQ-100 (INDEXNASDAQ: NDX) index. This index is based on the US Nasdaq exchange, consisting of the top 100 companies by market capitalisation that list on the Nasdaq.

    Unlike Australia, the US share market consists of multiple exchanges. The two largest of these are the Nasdaq and the New York Stock Exchange (NYSE).

    What is the Nasdaq 100? 

    The Nasdaq has something of a reputation as the ‘cooler younger sibling’ of the NYSE. Whilst some of the US’s oldest companies, think names like Ford Motor Company (NYSE: F) and General Electric Company (NYSE: GE), list on the NYSE, many of the US’s younger, cooler companies instead flock to the Nasdaq.

    This gives this index a very heavy bias in favour of tech companies.

    Indeed, its largest holdings are none other than the mighty FAANG stocks. These consist of Facebook Inc (NASDAQ: FB), Amazon.com Inc (NASDAQ: AMZN), Apple Inc (NASDAQ: AAPL), Netflix Inc (NASDAQ: NFLX) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). You can throw Microsoft Corporation (NASDAQ: MSFT) in too. 

    Some other names on the Nasdaq 100 that don’t have the same kind of world-dominating name recognition include NVIDIA Corporation (NASDAQ: NVDA), PayPal Holdings Inc (NASDAQ: PYPL), Tesla Inc (NASDAQ: TSLA) and Adobe Inc (NASDAQ: ADBE). Well, almost not as much. 

    The NDQ ETF holds all of these companies and 90 others. 

    So where do these ASX-beating returns come from? Well, the performances of NDQ’s holdings. All of the FAANG stocks have had a spectacular few years. In the past 12 months alone, Apple shares are up 60.5%, Amazon is up 34% and Alphabet (C Class) has gained 70%. 

    Now, some might say that this stellar run can’t continue forever for US tech shares. But many of these companies continue to put out impressive earnings growth rates, despite their size.

    If any ASX investor feels their portfolio lacks exposure to US tech shares, this ETF could be an easy ASX solution. The NDQ ETF charges an annual management fee of 0.48%.

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  • Dug Technology (ASX:DUG) share price gains on carbon-free project

    A graphic featuring renewable energy sources such as wind, solar and battery power, indicating positive share prices growth in the ASX renewable sector

    Shares in Dug Technology Ltd (ASX: DUG) have lifted following news the company plans to build a high-performance computing (HPC) data campus powered entirely by renewable energy.

    The Dug Technology share price lifted after this afternoon’s announcement and was swapping hands for $1.08, 1.4% higher at the close of trade.

    Let’s take a closer look at the news driving the Dug Technology share price.

    HPC data centre powered by renewable energy

    Dug Technology announced that its carbon-free HPC data campus – to be located in Geraldton, Western Australia – will be a world-first and one of the largest HPC data centres globally.

    The campus will use Dug Technology’s immersion-cooling technology. The company said this could see its HPC data centre become one of the most energy-efficient on earth, utilised by clients working towards carbon-reduction and environmental, social, and governance (ESG) goals.

    Renewable power for the campus will come from solar and wind. Dug Technology is also looking into whether it can place a hydrogen battery system on site.

    The company plans to lease plans 45 hectares of land near Geraldton to build the project.

    Dug Technology said it chose Geraldton as it’s one of the world’s best up and coming renewable energy regions.

    High-speed fibre internet is available at the proposed site which means connection speeds from the mid-west township will be as good as those of a CBD location.

    The company stated its project has the full support of the Yamatji Nation Board and the project includes opportunities and training for the Yamatji people.

    The land Dug Technology plans to lease will soon be passed to the Yamatji Nation Trust as part of the Yamatji Nation Indigenous Land Use Agreement.

    The company’s board has approved a $5 million budget to build the HPC’s data hall. The funds will be taken from the company’s existing cash reserves.

    Construction of the HPC data campus is set to begin in the third quarter of this year, subject to approvals.

    Commentary from management

    Dug Technology’s CEO and founder Matt Lamont commented on the proposal, saying:

    As demand for HPC continues to grow exponentially around the world, we must invest in world-leading, carbon-free, cost-effective HPC solutions for our clients.

    We developed our award-winning DUG Cool immersion system to reduce the energy footprint of our data centres. Having the ability to utilise this technology at scale would solidify the Geraldton campus as the world standard in environmentally-friendly HPC.

    Dug Technology share price snapshot

    The Dug Technology share price has been floundering on the ASX lately.

    Currently, the company’s share price is down 10.7% year to date and has fallen 25.5% since this time last year.

    The company has a market capitalisation of around $106 million, with approximately 99 million shares outstanding.

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  • 3 ASX shares growing at a rapid rate

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    Are you interested in growth shares? Three to look closely at are listed below.

    All three have been growing strongly in recent years and look well-placed for more of the same during the 2020s. Here’s what you need to know about these ASX growth shares:

    Megaport Ltd (ASX: MP1)

    The first ASX growth share to look at is Megaport. It is an elasticity connectivity and network services company. The company utilises software defined networking (SDN) to allow customers to rapidly connect their network to other services across the Megaport Network. This means that services can be directly controlled by customers via mobile devices, their computer, or its open API.

    Demand has been strong, leading to Megaport growing at a rapid rate over the last few years. The good news is that this is continuing in FY 2021 thanks to the ongoing shift to the cloud. Last month it released its third quarter update and revealed an 8% quarter on quarter increase in monthly recurring revenue (MRR) to $6.8 million.

    Pushpay Holdings Group Ltd (ASX: PPH)

    Another growth share to look at is Pushpay. It is a leading donor management and community engagement platform provider for the faith sector. Pushpay has been growing at a rapid rate in recent years thanks to the accelerating digitisation of the church, the shift to a cashless society, and the overall quality of its offering.

    This strong form continued in FY 2021, with Pushpay recently reporting another impressive full year result. For the 12 months ended 31 March, Pushpay delivered a 40% increase in operating revenue to US$179.1 million and a 133% increase in EBITDAF to US$58.9 million. This was well-ahead of its original guidance, which was upgraded three times during the year. Positively, management is forecasting further growth in FY 2022 and is planning to expand into a new market.

    Temple & Webster Group Ltd (ASX: TPW)

    A third ASX growth share to look at is Temple & Webster. It is Australia’s leading online furniture and homewares retailer. Temple & Webster has been growing at a rapid rate in recent years but particularly during the pandemic. This was driven by the accelerating shift to online shopping.

    The good news is that online furniture shopping is still in its infancy in comparison to both other areas of the retail market and other Western markets. This bodes well for the future, especially given Temple & Webster’s leadership position. Management is now investing heavily to take advantage of the shift and cement its position as the market leader.

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  • EML Payments (ASX:EML) share price on watch after responding to ASX query

    shocked man looking at laptop with declining arrows in the background showing a falling share price

    The EML Payments Ltd (ASX: EML) share price might be one to watch on Wednesday.

    This follows the release of an announcement just before the market close today.

    What did EML release?

    This afternoon EML released a response to a series of questions from the ASX Ltd (ASX: ASX) relating to a recent announcement regarding its European operations.

    In case you missed it, last week the company revealed that the Central Bank of Ireland (CBI) has concerns over the company’s PFS Card Services (Ireland) (PCSIL) business in relation to Anti-Money Laundering/Counter Terrorism Financing compliance.

    Given that 27% of its total revenue is derived from this business and the CBI could take away its licence, the market panicked and the EML share price crashed significantly lower.

    What did it say today?

    The Australian share market regulator quizzed the company on the timing of the announcements and whether it had known about the concerns earlier.

    The response reveals that the Irish business received the letter from the CBI late in the evening on Thursday 13 May (Australian time) and then senior managers at EML met Friday morning to discuss the matter.

    However, unfortunately for any investors that bought shares on Friday 14 May, urgent legal advice wasn’t obtained until Friday evening (Australia time), meaning a trading halt wasn’t requested until Monday morning after the EML board met.

    EML explained:

    “PCSIL received the CBI’s letter at 11:12pm on Thursday evening, 13 May 2021 (Australian time). The letter was preceded by a call with the CBI at 10:00pm on Thursday evening, 13 May 2021 (Australian time). The call was attended by senior managers of PCSIL, including an executive director.”

    “EML’s Group Chief Risk Officer also attended the 10:00pm call and was sent a copy of the letter at 11:12pm. PCSIL’s executive director provided a copy of the letter to EML at 12:37am on Friday morning, 14 May 2021 (Australian time). The letter was provided as an attachment to a calendar invitation for a meeting to be held at 6:30am on Friday morning, 14 May 2021 (Australian time). The calendar invitation was sent to senior managers of EML, including EML’s Managing Director and Group CEO.”

    “The Board of EML was informed of, and provided with a copy of, the CBI’s letter on Saturday, 15 May 2021. The Board met on the morning of Monday, 17 May 2021, and the company requested a trading halt prior to the market opening while it considered the Information and prepared an ASX announcement.

    EML released its ASX announcement, lifting the trading halt, on the morning of Wednesday 19 May 2021 (Australian time), before trading on the ASX commenced.”

    No update has been provided in relation to its dealings with the central bank. Shareholders will have an anxious wait for that one.

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  • The Commonwealth Bank (ASX:CBA) bets big on Little Birdie

    ecommerce asx shares represented by woman shopping online

    The Commonwealth Bank of Australia (ASX: CBA) share price has inched closer to that elusive $100 a share milestone today. Fittingly, Australia’s largest bank is ‘flying’ to new heights after it placed a big bet on Melbourne start-up, Little Birdie.

    At the time of writing, the Commonwealth Bank share price is 0.88% higher to $99.63 a share.

    Setting records before even taking flight

    Little Birdie is the brainchild of successful e-commerce entrepreneurs, Gabby and Hezi Leibovich. After selling Catch Group to Wesfarmers (ASX: WES) for $200 million in 2019, the brothers got working on their next venture.

    The little company with big plans sees itself being the homepage for online shoppers. With over 70 million products to flick through, compare, and also share. But before Little Birdie has even launched, it’s setting new records.

    Significantly, the ASX’s biggest bank, Commonwealth Bank pledged $30 million into the e-commerce company’s latest funding round. That makes it the largest funding round for an Australian start-up before launching a product. As a result, Little Birdie is now valued at $130 million – with CBA taking a 23% stake.

    What’s in it for ASX’s Commonwealth Bank?

    The biggest Aussie bank isn’t just investing in Little Birdie, it’s bringing it on board. That’s right, in the not-too-distant future, 11 million CBA customers will open their mobile banking app and have Little Birdie right there – ready to go.

    Group Executive of retail banking, Angus Sullivan said:

    Leveraging CommBank’s Customer Engagement Engine, customers will have access to data-driven personalised offers that are exclusive to CommBank customers and based on their spending habits via the CommBank app.

    It will be interesting to see whether CommBank’s own buy now pay later (BNPL) installment offering will be directly embedded into Little Birdie on launch. Or, whether Klarna will make an appearance, considering the bank’s investment in the Swedish BNPL competitor.

    An official launch of Little Birdie is slated for mid-June. A positive reception on launch might just be the final nudge for the Commonwealth Bank share price to break $100.

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