The Newcrest Mining Ltd (ASX: NCM) share price is one to watch today after the Aussie gold miner’s latest quarterly report.

Why are Newcrest shares in focus?

Newcrest this morning provided its latest report for the period ended 31 March 2021 (Q3 2021). Notably, gold production was down 4% on the prior period to 512,424 ounces after planned shutdowns at its Cadia and Lihir sites. A 6% increase in production at the Telfer site helped offset some of these shutdowns.

The company reported an improved all-in sustaining cost (AISC) of $891 per ounce. That represented a $72 per ounce improvement on December 2020 quarter figures.

Newcrest managing director and CEO Sandeep Biswas was bullish on the quarter’s performance. Mr Biswas said, “Our world-class Cadia asset set a new record during the March quarter, reporting its lowest ever quarterly All-In Sustaining Cost of negative $160 per ounce”. Those Cadia numbers helped reduce the overall AISC margin by 7% to $854 per ounce.

The Newcrest Mining share price will be in focus as the Aussie miner remains on track to hit FY2021 guidance figures. Newcrest is targeting group production of 1,950,000 to 2,150,000 ounces of gold for the full year. For reference, Newcrest has now produced 1,550,990 ounces on a financial year-to-date basis.

Group copper production totalled 35,034 during the quarter, up marginally on December quarter numbers. The company is targeting full-year guidance of 135,000 to 155,000 tonnes of copper with 104,354 tonnes produced year to date.

The Newcrest Mining share price will be one ASX 200 share worth watching in early trade. Newcrest reported no “material disruption” to production or operations as a result of COVID-19. However, the company is still working to further strengthen controls as a precaution.

“We are very well positioned to fund our organic growth opportunities with a strong balance sheet and long-dated debt maturity profile”, Mr Biswas said.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 dips, NIB soars, Perenti rises
• ASX 200 flat: NIB update impresses, Altium upgraded
• Perenti (ASX:PRN) share price climbs on North American expansion plans

Motley Fool contributor Ken Hall 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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Investors need to pull out of Australian shares and shift their focus onto overseas opportunities.

That’s the advice from Nucleus Wealth chief strategist David Llewellyn-Smith, who said the global recovery out of COVID-19 is completely different from the global financial crisis and the dot-com bust.

“Those two crashes were led by the US and the recoveries led by China. This time around, the crisis was led by China and the recovery will be led by the US.”

The distinction is very important to investment returns in the coming cycle, according to Llewellyn-Smith.

“Moreover, these cyclical forces will further be buffeted by epochal shifts in structural forces shaping the global economy which have, if anything, changed even more dramatically in the past few years,” he said on a Nucleus blog post.

“What this means is that now is the time for investors to abandon Australia for global assets.”

Australia could have another ‘lost decade’

Llewellyn-Smith reckons punters need to stop worrying about the Reserve Bank increasing interest rates.

“Forget rate hikes, the RBA is more likely to have to cut,” he said.

“The major reason is China. Its accelerated cyclical slowing is focused upon steel-intensive growth. Iron ore prices will fall a long way as demand fades while supply returns… Normalisation and new supply from every corner of the earth will arrive, owing to the extreme price signal today.”

Falling commodity prices will have a domino effect on the Australian economy and its share markets.

“As iron ore tumbles, house prices stall, and the immigration drivers of growth in the last cycle fail to rematerialise, the Australian dollar will fall a long way,” said Llewellyn-Smith.

“If the RBA cuts, we could head into a circumstance akin to the late 1990s when Australian yields lagged the US by so far that the AUD fell below 50 cents.”

The strategist then fears that the country will have another “lost decade”.

“And it won’t end until the AUD falls much further and stays down for years to trigger a rebuild in long-forgotten tradable sectors.”

Flee Down Under for better growth

Aside from shares relating to renewable energy, the outlook is bleak for local companies.

“Once we get past the policy supports of the pandemic, most Australian assets have little growth underpinning to drive them forward,” said Llewellyn-Smith.

“Only bonds appear to have value because global markets have not yet differentiated our yields to match this gloomy outlook.”

But the growth forecast for some other developed nations is “very good in the short and medium-term”. 

“[Those nations will be] led by a revitalised progressive American liberalism with years ahead of exceptional growth,” Llewellyn-Smith said.

“The conclusion for investors is that offshore assets beckon with better returns and greater structural tailwinds. Further, the risks are also lower. Intermittent crises invariably result in a falling AUD, which cushions the downside from falling stock markets.”

More reading

• 4 healthcare share tips from a fundie with a health PhD
• Why the Infratil (ASX:IFT) share price is in focus
• 4 ASX shares to boom when inflation goes up: fundie
• Wesfarmers (ASX:WES) share price on watch as Bunnings buys Beaumont Tiles
• Here’s why the Austal (ASX:ASB) share price is in the spotlight today

Motley Fool contributor Tony Yoo 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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Ask A Fund Manager

In part 1 of our interview, Platinum Asset Management portfolio manager Dr Bianca Ogden took us through her journey from working in healthcare to finance. Now in part 2, she uses that insider knowledge to pick 2 underrated stocks plus 2 others that will continue to bathe in sunshine.

Overrated and underrated shares

The Motley Fool: What’s your most underrated healthcare share at the moment?

Dr Bianca Ogden: I’ve got several of them. So, there’s always some. 

There is a company in the US called Coherus Biosciences Inc. 

It’s a company that works in the biosimilar space. It has an approved product for a biosimilar that basically is taking share from one of the branded products that has come off patent. 

And it’s got sales, it’s got profits – it’s doing quite well. But people get a bit bored and just say, ‘Well, there’s price competition. And they will kind of lose out in the end’. But what this company has done is build a pipeline. 

It’s got a very interesting deal with a Chinese company called Junshi Bio. Essentially Coherus is the US arm now for Junshi. And I think over time, this company will have nice growth ahead of it.

But at the moment, the market doesn’t find that very interesting. It’s not a genomics company, it’s not a gene therapy company or proteomics company. It’s just a normal company that has built great commercial infrastructure. And it’s going to plug in different products now to utilise that commercial infrastructure.

I’ve got another one in China. There’s a company called CStone Pharmaceuticals. While other biotechs in China have done quite well, this one is kind of lagging – but it has a lot of interesting products to launch. Pfizer has a stake in it. So I kind of like it as it’s off people’s radar screen.

MF: What do you think is the most overrated stock at the moment?

BO: I tend not to have overrated stocks.

MF: Not even all the companies that are involved in COVID-19 vaccines – you wouldn’t say they’re overrated now?

BO: I own several of them. And to be honest, I think with mRNA, I think there is a different story to it as well. Yeah, I think there is a bit of excitement in that, but in the end, it’s long term… Although we have sold out of Moderna Inc (NASDAQ: MRNA), we still have BioNTech SE (NASDAQ: BNTX) and others in there.

So, no, I wouldn’t totally characterise that they’re [too] hot because in the end, we will all have to have at some stage in our life, mRNA vaccines.

MF: Is it fair to say that the COVID-19 vaccines really put mRNA technology into the mainstream consciousness?

BO: We’ve been owners of this technology for quite some time, for a couple of years. But yeah, I think in the mainstream it’s there [now].

I think we’re probably now trying to work out how big can this class be and where can it go? There’s a bit of work to go into it until we twiddle that all out. But yeah, I think it definitely is something that it has put itself on the map now as a modality, which is great.

MF: If the market closed tomorrow for 5 years, which stock would you want to hold?

BO: I would hold onto a company called Recursion Pharmaceuticals Inc. Recently listed. We have known this company for a little while.

That’s a company that really is trying to industrialise drug discovery. And for me, in the next 5 years that will be an interesting one to hold. They have their work cut out, but I think they’ve done quite an interesting job of putting automation into drug discovery.

MF: Did you manage to buy some during the initial public offering?

BO: Yes, we did. So, we kind of know the team there. [The IPO price] was $18.

I think if this company sets out what they want to do, the sky’s the limit. It is really to try to industrialise drug discovery, which we’re seeing gradually.

Looking back

MF: Which stock are you most proud of from a past purchase?

BO: Look, I think most proud of, I think is probably mRNA. Did I ever suspect it would happen that way? No. But it’s a classic example of how Platinum or how I do my work is I go where others don’t really want to go. 

I remember me telling someone how I was excited about mRNA [during] Moderna’s IPO and about BioNTech’s in 2018, 2019. They looked at me and thought I was absolutely nuts. 

But look, we always try and get to know the management. What do they do? And how has it evolved over time? What mistakes have they made? What have they learned? And we did exactly that. And these guys have absolutely come through with the goods.

That is quite exciting to see. And it gives you confidence because you just think that, ‘Well no, this is right how we do it’ – and ignore the crowds. 

MF: In pre-pandemic days, would you fly to the US often to meet with management?

BO: I like to go and see the scientists in their habitat… Often biotechs are quite small, where you go and make your coffee or tea with the CEO, and you chat and you get to know them.

What I find fascinating is when they make mistakes – things fail often in this industry – how do you motivate your scientists to keep going and to just dust yourself off to do the next thing? 

I think you only get to know that when you spend a bit of time and see what the office looks like. Do they have vampires when you walk in? Do they make their own tea? 

MF: Is there a move that you regret from the past? For example, a missed opportunity or buying a stock at the wrong timing or price.

BO: I think in this field, there are always missed opportunities… There’s so many great things happening.

MF: Yeah, you can’t buy everything, can you?

BO: No. And you have to put that past you. But one of the biggest regrets I have is that you never have enough [invested], never invested or backed yourself fully. Because as a human, you always have some doubts. So you always try to plan. 

I think one of the big things is biotechs can blow up. So you always are probably more cautious. But I think one of the things that I’ve learned over the years is, you’ve got to back yourself and you’ve just got to keep getting better at it. You can’t beat yourself up. 

For example, Daiichi Sankyo Co Ltd, we picked very early. Their division in oncology [was] really changing. We sold out too early, because we thought, ‘Look, we doubled our money. That’d be fine’.

Same with AstraZeneca plc (LON: AZN). So, over time you get better at it, but the big thing is you got to learn from it and you got to assess it and just work on it.

MF: To a lot of retail investors, they would see the biotech or even the healthcare sector as ‘high risk, high reward’. Is that a fair characterisation?

BO: I think if you don’t invest for the long-term, yeah, you can look at it that way. [Some] of my best investments have also been companies that had a setback.

Given my experience… I kind of know when to go back in and when to say, ‘Okay, they have a great R&D engine’. They can come up with the next [thing] – and it wasn’t their fault, it was just a normal setback during clinical trials. That’s what happens’.

And then you make your 300%, 400% return. So yeah, I can see that from the outside, but to me, no, I don’t really see the volatility. 

It’s never nice when something falls… But in the end, if there is a good foundation, good people and a plan B, these companies come good very quickly again.

More reading

• Why the CSL (ASX:CSL) share price has rebounded 13% since March
• Wesfarmers’ (ASX:WES) Bunnings open to hosting COVID vaccine hubs
• CSL (ASX:CSL) share price dips on latest AstraZeneca news
• CSL (ASX:CSL) share price wobbles on COVID vaccine news

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Moderna Inc. 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 Infratil Limited (ASX: IFT) share price is one to watch today after an acquisition update from the Kiwi infrastructure group.

Why is the Infratil share price in focus?

In its update, Infratil advised it will acquire between 50.1% and 60.1% of Pacific Radiology Group Limited (Pacific Radiology).

Pacific Radiology is a New Zealand-based comprehensive diagnostic imaging business with 46 clinics across the South Island and lower North Island, including more than 90 radiologists.

The Infratil share price will be one to watch as investors react to the latest acquisition news. The Pacific Radiology acquisition is conditional on counterparty consents to change of control in a “small number” of material contracts.

Infratil currently expects the acquisition to complete by 31 May 2021. The acquisition enterprise value of NZ$867 million implies an EV/EBITDA multiple of 12.6 to 13.3 times EBITDA.

What did management say?

Infratil CEO Jason Boyes said the Pacific Radiology acquisition would sit well with Infratil’s other “high performing, high-quality assets”, and built on its investment last year in Qscan Group, a leading diagnostic imaging business in Australia.

The purchase also confirms our continuing confidence in the New Zealand market and the thematics which are driving our capital allocation in communications and digital infrastructure, decarbonisation and aging populations.

We also see this as an opportunity to scale Infratil’s investment in Qscan Group and create a meaningful Australasian healthcare platform with potential synergies and adjacent opportunities.

Foolish takeaway

All eyes will be on the Infratil share price especially after slumping 2.4% lower in yesterday’s trade. The latest purchase adds to the group’s 2020 acquisition of Qscan.

Infratil announced that transaction’s completion on 22 December 2020. The Kiwi infrastructure group used A$289.6 million to purchase the 56.25% stake.

The Infratil share price is one to watch in early trade after the Kiwi infrastructure group’s latest acquisition announcement.

More reading

• 4 ASX shares to boom when inflation goes up: fundie
• Wesfarmers (ASX:WES) share price on watch as Bunnings buys Beaumont Tiles
• Here’s why the Austal (ASX:ASB) share price is in the spotlight today
• What to expect from the ANZ (ASX:ANZ) half year result
• Credit Corp (ASX:CCP) share price on watch following market update

Motley Fool contributor Ken Hall 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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Share markets have seen volatility this year due to one factor: the possibility of inflation as the world recovers from a COVID-19 recession.

Rising inflation could trigger interest rates to move up. And this would be a punch to the fortunes of many ASX shares that are currently valued as if near-zero rates would continue forever.

Fortunately, there are defensive stocks that are set to do well in a higher inflation world.

According to Pengana Capital chief investment officer Rhett Kessler, his fund has been focusing “laser-like” on businesses that have “hard assets”.

“It’s a company that has assets which provide it with the pricing power to pass on any input costs to their customers.”

There are 4 ways an organisation can achieve this nirvana, he said:

1. Long-term contractual arrangements with strong counterparties
2. Owning unique or scarce assets
3. Being the lowest-cost producer in the sector
4. Owning superior non-trivial intellectual property

Kessler’s fund, among its top 10 biggest holdings, owns several shares that meet one or more of this inflation-proof criteria.

Here are 4 of them, as he told a Pengana investor webinar last week:

CSL Limited (ASX: CSL) and Aristocrat Leisure Limited (ASX: ALL)

CSL is Pengana Australian fund’s 4th largest holding, while Aristocrat is 8th.

Kessler strongly rates the healthcare giant and the gaming provider for one massive reason.

“CSL and Aristocrat have really strong intellectual property that they’re able to monetise.”

CSL was up 0.98% on Wednesday to trade at $271.01 upon close. Aristocrat gained 1% for the day to end the session at $37.46.

Kessler is not the only one optimistic about these 2 ASX stocks.

Last week Citi rated CSL as a “buy” while putting on a price target of $310. The brokers there have high hopes for its plasma collection business as more Americans are vaccinated against the coronavirus.

Citi also rated Aristocrat as a “buy” while giving it a target of $40.60. Again, the reopening of US society is expected to lift demand for the company’s gambling machines.

Woolworths Group Ltd (ASX: WOW)

The supermarket giant is the 10th largest holding for Pengana.

According to Kessler, it is very easy to explain Woolies’ appeal in inflationary times.

“Woolworths will actually move the same amount of boxes in an inflationary environment, but for more money,” he said.

“So your absolute level of profitability should go up.”

Already there are plenty of signs that grocery bills are going up, with international prices for staples like corn, wheat and soybeans all shooting up.

Last week, Goldman Sachs agreed with Kessler, rating Woolies as a “buy” with a price target of $43.60. It ended Wednesday at $41.41.

Telstra Corporation Ltd (ASX: TLS)

The telecommunications giant is Pengana’s largest holding “by quite a long way”.

“We have it as just under 8% of our portfolio,” said Kessler.

And no wonder, as it meets multiple of Kessler’s criteria for holding “hard assets”.

“Its businesses are unique assets and are the lowest-cost producer,” he said.

“And a really nice chunk of it – 25 cents in every dollar – is actually an inflation-protected business, which is that it gets an income stream from the NBN, which is linked to inflation.”

Telstra closed Wednesday 0.59%, trading at $3.40.

Ord Minnett brokers also love the telco, currently rating the stock as a “buy” with a target of $4.05.

Of course, Telstra’s other advantage is the potential for nice dividends.

“A prospective dividend yield of 5% is certainly not to be sneezed at,” Kessler said.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Should CSL (ASX:CSL) be your next dividend share?
• 2 fantastic blue chip ASX 200 shares for your portfolio
• Here’s an ASX telco share tipped to rise 40%
• These ASX dividend shares have attractive fully franked yields

Tony Yoo owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Woolworths 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 Wesfarmers Ltd (ASX: WES) share price will be one to watch when trading resumes this morning. At close of trade yesterday, shares in the retailing conglomerate were selling for $55.20 – up 1.1% on the previous day. By comparison, the S&P/ASX 200 Index (ASX: XJO) finished the day 0.44% higher.

The company comes into focus as its largest subsidiary, Bunnings, announced it is acquiring privately owned Beaumont Tiles.

Let’s take a closer look at the announcement.

Bunnings buying Beaumont

Late yesterday, Wesfarmers announced that Bunnings Group has entered into an agreement to purchase Beaumont Tiles for an undisclosed amount. The deal is still subject to “a number of conditions, including regulatory approval.”

The purchase marks the latest move by Wesfarmers to diversify its business and consolidate its hold on the trade and construction market.

Wesfarmers says Beaumont will remain “separate and distinct” to the Bunnings Warehouse brand, just like Adelaide Tools, which the subsidiary purchased in April 2020.

In its statement, Wesfarmers said the purchase of Beaumont will allow the company to expand into further market segments.

“Beaumont Tiles services both trade and consumer customers and has a specialised product and service capability that is not able to be offered through the Bunnings Warehouse format,” Bunnings managing director Mike Schneider said. Mr Schneider also said Bunnings will continue to invest in the future growth of Beaumont.

Beaumont Tiles executive chair Bob Beaumont commented that the executive team is happy to sell. He said:

After 53 years dedicated to a business that my dad started in South Australia, it’s time to retire. I knew that it would never be an easy thing to do, and it’s been a tough decision, but the board and I recognised the need for us to make way for a younger team.

What made the decision easier, was knowing the brand and business we worked so hard to build from scratch would be placed in the best possible position for on-going success and growth and I’m really thrilled at the outcome for Beaumont. Our family signed a contract to sell the business to Bunnings, as they understand our brand and culture, and will look after our extended Beaumont family including our franchisees and our teams.

Other recent news

Aside from Bunnings, Wesfarmers owns a number of other major retailers including Kmart, Target, and Officeworks.

Wesfarmers recently gave a presentation on the future of Kmart. In it, the company said it plans to make Kmart the focal point of the group, whilst simplifying the Target business and reducing costs. Wesfarmers has already begun the process of converting Target-branded stores to Kmart.

As well, some top brokers believe the Wesfarmers share price is currently a good deal, despite its 33.25 price-to-earnings (P/E) ratio.

In other news outside of the ASX, Bunnings recently said it was ready, willing, and able to host mass vaccination sites at its warehouses.

Wesfarmers share price snapshot

Over the past 12 months, Wesfarmers shares have increased by 46.3%. At its current level, the Wesfarmers share price is only just off its all-time high of $56.40, which it achieved earlier this year.

Wesfarmers has a market capitalisation of around $62 billion.

More reading

• 2 quality ASX dividend shares for May
• What’s going on with the Wesfarmers (ASX:WES) share price today?
• Top brokers name 3 ASX dividend shares to buy today
• 2 strong ASX 200 shares offering good income
• 2 high quality ASX shares for your retirement portfolio

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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 Austal Limited (ASX: ASB) share price could be on the move this morning after the company announced an update on its joint venture program.

At Wednesday’s market close, the shipbuilder’s shares finished the day at $2.45.

What did Austal announce?

In a statement to the ASX, Austal advised it’s in discussions to sell its shareholding in Aulong Shipbuilding Co Ltd.

Established in June 2016, Aulong is a joint venture company focused on pursuing Chinese commercial and non-military vessel opportunities. It’s operated by Austal and Guangdong Jianglong Shipbuilding Company (Jianglong Shipbuilding) of Zhuhai, China. Austal owns a 40% stake in Aulong, with the remaining 60% interest held by Jianglong Shipbuilding.

Austal stated that its currently in talks to sell its ownership in Aulong to Jianglong Shipbuilding. A letter of intent has been executed targeting completion of negotiations by 31 October 2021.

The company highlighted that it has licenced a number of commercial aluminium vessel designs for marketing throughout mainland China. With construction at Jianglong Shipbuilding’s facilities in the Guangdong province, the ships are supported by local shipbuilding infrastructure and expertise. Close to 1,000 employees work across two shipyards at the site, running the joint venture.

Austal noted it will provide further updates to shareholders when more information about the divestment becomes available.

How has the Austal share price performed?

Austal designs and manufactures high performance vessels for commercial and defence customers worldwide. Most notably, Austal builds and services warships for the Australian Royal Navy and the United States Navy.

Over the last 6 months, the Austal share price has significantly dropped amid worrisome media speculation around the company. Its shares sunk from $3.50 to around $2.70, reflecting a 20% fall. To date, Austal shares have moved in circles, most likely frustrating investors.

Based on the current share price, Austal presides a market capitalisation of roughly $880 million, with 359 million shares outstanding.

More reading

• ASX 200 shares thrown in the bargain bin: Here’s 3 ideas
• The War in Afghanistan is ending. Which ASX companies supply our military?

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. 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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Over the next couple of weeks, the big four banks will be handing in their latest report cards. Ahead of their releases, I thought I would take a look to see what the market is expecting from them.

On this occasion, I’m going to look at the Australia and New Zealand Banking GrpLtd (ASX: ANZ) half year result.

What is expected from ANZ in the first half?

ANZ Bank will be releasing its half year results on Wednesday 5 May.

According to a note out of Goldman Sachs, its analysts are expecting the banking giant to report first half cash earnings (pre-one offs) of $3,073 million. This will be a massive 117% increase on the prior corresponding period, which of course was impacted by COVID-19.

The broker is expecting this to allow the ANZ board to declare a fully franked interim dividend of 60 cents per share.

What else should you look out for?

Goldman has named three key things to look out for with ANZ’s results next week.

One of those is its margins. The broker notes that ANZ’s first quarter net interest margin (NIM) was 1.62%, up 5 basis points from the second half average of FY 2020. It expects this to have carried over into the second quarter.

“Management expects the 1H21E NIM to be up slightly on the 1.59% delivered in 2H20 driven by further upside from TD pricing and mix benefits, offset by ongoing asset competition. This is consistent with our detailed analysis which quantifies the scope for sector NIM upside in the near term. Accordingly, we forecast 1H21E NIM of 1.62% which is up 5bp vs 2H20 and will be paying attention to the NIM drivers at the result particularly on funding.”

Asset quality will be another key focus for Goldman Sachs. It is forecasting a notable drop in the bank’s bad and doubtful debts during the half.

“ANZ reported a 1Q21 bad debt benefit of A$150 mn which significantly outperformed what was implied by our prior 1H21E bad debt forecast. This comprised an individually assessed provision (IP) charge of A$23 mn and a collective provision (CP) release of A$173 mn. While management expects IPs to rise as government and bank support fell away post Mar-21, it sees ANZ as well-placed given strong CP coverage, its large Institutional exposures being in strong shape and the de-risking of its Institutional book over recent years. We currently forecast a moderation of 1H21E BDDs/TL to 8bp from 35bp in the previous half and will be keeping a close eye on commentary around underlying asset quality.”

Finally, the broker has suggested that ANZ’s expenses could decline during the first half of FY 2021 and will be looking for a 0.6% reduction.

“Expenses were flat in the quarter on the 2H20 average, and we think the 1Q21 run-rate is broadly consistent with the A$8.4-8.5 bn FY21E cost base (ex-notable items) implied by comments made by management at the 2H20 result (here). While ANZ expects investment spend to be >A$1.8 bn in FY21E (c. 75% of that to be expensed), it believes longer-term investment spend should settle at c. A$1.5 bn. We are forecasting 1H21E expense growth of -0.6% hoh and will be looking for details management can provide on how its c.A$8 bn cost target could be achieved.”

Is the ANZ share price in the buy zone?

Goldman Sachs is positive on ANZ and has a buy rating and $29.24 price target on its shares.

However, with the ANZ share price currently trading at $29.10, the near term upside is limited based on this price target.

More reading

• 2 highly rated ASX dividend shares
• 2 quality ASX dividend shares for May
• ASX bank shares best placed to ride the $1bn+ provisioning profit boost this reporting season
• What could APRA’s climate guidance mean for ASX bank shares?
• Is the Commonwealth Bank (ASX:CBA) share price a buy at $90?

Motley Fool contributor James Mickleboro 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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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Kate O’Brien owns shares of Apple and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. 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 Credit Corp Group Limited (ASX: CCP) share price will be one to watch this morning.

This follows the release of a trading update by the debt receivables company this morning.

How is Credit Corp performing?

According to the release, Credit Corp continues to be very competitive in all its debt buying markets. This left it with a purchasing pipeline of $290 million contracted at the end of March.

As a result, it remains on target to achieve its FY 2021 purchasing guidance of $310 million to $330 million.

Another positive was that the acquisition of the Collection House book is performing to expectations. And while there has been some softening in collections since COVID-19 stimulus has been withdrawn, this has been within expectations.

Pleasingly, the company notes that it still has the capacity to increase investment as opportunities arise. As things stand, it has cash and undrawn lines of ~$400 million.

FY 2021 guidance

Looking ahead the company is on track to achieve or surpass all of the upgraded guidance given in February.

Purchase debt ledger investments guidance remains in the range of $310 million to $330 million and its net profit after tax guidance remains $85 million to $90 million. The latter compares to FY 2020’s underlying net profit after tax of $79.6 million.

Net lending, however, is now expected to be $10 million to $20 million. This compares to previous guidance of $5 million to $10 million.

Is the Credit Corp share price in the buy zone?

While brokers haven’t responded to this update as of yet, one broker that was already positive on the company is Macquarie.

According to a note from last month, the broker has an outperform rating and $34.80 price target.

Based on the latest Credit Corp share price, this price target implies potential upside of almost 17% over the next 12 months.

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Motley Fool contributor James Mickleboro 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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