Shares in Bapcor Ltd (ASX: BAP) have slipped slightly in early trade after the company gave the market a glimpse into its next 5 years of operation. The Bapcor share price is down 0.72%, trading at $8.28 at the time of writing.

Bapcor released the outline of its latest 5-year strategy to the ASX today after its investor day event was cancelled due to COVID-19.

The company provides vehicle parts, accessories, equipment, and services through brands including Autobarn, Autopro, Midas, and Burson.

Bapcor’s 5-year goals

If Bapcor’s 5-year strategy is successfully carried out, the company will increase its presence in Australia, New Zealand, and Asia, and optimise several factors of its business.

New stores

Bapcor wants to open more than 694 new stores over the next 5 years.

Of those, 60 would be “trade focused” and supply parts to workshops in Australia and New Zealand, while 41 would be selling parts for light and heavy commercial vehicles.

The company also aims to open 77 new Autobarn stores, and 96 new Autopro stores.

It plans to open 395 workshops in Australia and another 31 in New Zealand.

Finally, in 5 years’ time, Bapcor hopes to have at least 60 stores in Thailand, building on the 6 stores it currently operates in that country.

Asian expansion

In March, Bapcor announced it was to acquire 25% of Tye Soon. It expects this acquisition to help its planned expansion in Asia.

Over the next 5 years Bapcor wants to increase turnover at its Thailand stores from $4 million to $100 million annually.

It also plans to grow its total Asian turnover to $500 million annually.

Currently, Bapcor and Tye Soon bring in a combined $204 million from Asian markets each year.

Supply chain, technology, ESG, and own brand targets

To optimise its business, Bapcor will be consolidating the work of its 13 Victorian distribution centres into 1 entity.

The new distribution centre will use “state of the art” technology to maximise its efficiency.

Bapcor will then replicate its consolidation process in Queensland, where it currently has 7 distribution centres.

Additionally, the company is focusing on increasing its own brands’ sales targets in all its business segments.

It’s also upgrading many of its business-to-business and business-to-customer e-commerce platforms, its point-of-sale system, and its workshops’ support system.

Finally, the company is prioritising environmental, social, and governance (ESG) strategies. One of its ESG strategies is to be a focus on employee training.

Bapcor share price snapshot

2021 has been good for the Bapcor share price, which has gained 6% year to date.

It’s also 42% higher than it was this time last year.

The company has a market capitalisation of around $2.8 billion, with approximately 339 million shares outstanding.

The post What’s happening with the Bapcor (ASX:BAP) share price 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 owns shares of and has recommended Bapcor. 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 Nitro Software Ltd (ASX: NTO) share price is on the move today after the company announced an acquisition.

Prior to market open, shares in the document productivity company were $3.36 apiece. In early trade, the Nitro Software share price is trading 2.38% higher at $3.44.

The deal marks Nitro’s first acquisition since its ASX initial public offering (IPO) in December 2019. Let’s take a closer look at the details.

Nitro Software share price gets a boost

Investors are driving up the Nitro Software share price after the company announced its first acquisition since joining the ASX ranks.

According to its release, Nitro has entered an agreement to acquire the PDFpen technology from US-based Smile Inc for $6 million in cash. Smile was founded in 2003 and develops productivity software for Mac, Windows, Chrome, iPhone, and iPad.

PDFpen specifically is a market-leading suite of PDF productivity applications for Mac, iPhone, and iPad. The technology brings document viewing, reviewing, collaboration, form filling, search, redacting, and export tools to the user’s fingertips.

While Nitro’s eSigning feature is already available on any device with a web browser, the acquisition brings native PDF productivity support to Apple product users.

Payment for the acquisition will be funded from Nitro Software’s existing cash reserves. The company’s cash balance stood at $41.8 million at the end of March 2021.

CEO commentary

Additionally, the company stated the expansion of its platform comes at a critical time for customers. The work from home tailwinds driven by COVID-19 has accelerated the digital transformation, including the use of Mac and mobile devices.

The acquisition of PDFpen means Nitro’s suite extends to virtually every device and operating system.

Nitro Co-founder and chief executive officer Sam Chandler stated:

As the first acquisition since our IPO, PDFpen marks a significant strategic milestone for Nitro. The addition of Mac and mobile capabilities to our platform better enables us to serve businesses and individuals on any device or operating system at a time when digital transformation has never been more relevant or more urgent for organisations around the world. It represents a major advance in Nitro’s vision to make document productivity easy, powerful and available to all.

The transaction is subject to customary closing conditions. If all goes to plan, these will be met on or before 9 July 2021. Nitro hinted that its significant cash reserves allow it to pursue further targets if they arise.

Outlook reaffirmed

In other news possibly boosting the Nitro share price today, the company took the opportunity to also reaffirm its FY21 guidance.

Nitro still anticipates ending annual recurring revenue to be between $39 million and $42 million. Revenue is expected to range between $45 million and $49 million. Meanwhile operating earnings before interest, tax, depreciation, and amortisation (EBITDA) is slated to be a loss between $11 million and $13 million.

The Nitro Software share price has returned around 128% over the past 12 months.

The post Nitro Software (ASX:NTO) share price lifts following acquisition appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler owns shares of Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple and Nitro Software 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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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.

According to The Verge, nearly 20% of Facebook‘s (NASDAQ: FB) employees are working exclusively on virtual reality (VR) and augmented reality (AR). Plus, the company has been acquiring small VR studios for years, most recently BigBox VR (creator of Population: One, the Fortnite of VR) and Unit 2 Games (creator of Craya, a Roblox-esque VR gaming platform), for undisclosed sums. 

These continuous investments in talent and studio acquisitions may seem steep for a business segment that accounts for less than 3% of Facebook’s top line. But Mark Zuckerberg’s ambitious vision for VR is powering a shopping spree that likely won’t stop anytime soon. Is Facebook ahead of the game, or will its Oculus VR venture fail to move the needle?

The future of VR gaming

Zuckerberg has been talking up VR more than usual lately, partly thanks to accelerated adoption of the Oculus Quest 2 VR headset (according to Facebook — but the company does not explicitly report figures for sold VR hardware). The CEO’s first major talking point in Facebook’s latest earnings report was VR and AR, predicting “augmented and virtual reality to unlock a massive amount of value, both in people’s lives and the economy overall.”

His excitement about the technology is not unwarranted — Fortune Business Insights forecasts that the global market for VR gaming will reach $45.2 billion by 2027 (from $5.1 billion in 2019). This translates to a compounded annual growth rate (CAGR) of 31.8%, compared to a CAGR of only 5.3% for the overall gaming console market over the same forecast period.  

How Facebook got ahead

Facebook’s strategy for VR gaming domination starts with laying a solid foundation of technology and developer talent. In classic Facebook fashion, its primary tactic has been acquiring existing VR hardware and software companies.

Since acquiring Oculus VR for $2 billion in 2014, the company has made significant progress in improving its VR hardware to better suit customers’ needs. The current Oculus Quest 2 is a stand-alone headset (i.e., no wires to trip on or tangle up while playing) and requires no external device (such as a console or PC). Conversely, Sony‘s (NYSE: SONY) wired PlayStation VR headset requires a PlayStation console. The Quest 2’s wireless, low-hardware conveniences combined with its lower price point relative to any other major headset on the market give Facebook a competitive edge when it comes to hardware.  

But even the best VR headset is useless without great games, making Facebook’s VR studio acquisitions crucial to building up its VR ecosystem. By acquiring small yet high-performing studios, Facebook is securing revenue from already-popular VR games on Oculus and retaining top software developers to create exclusive content within the Oculus platform. Considering the company’s standard four-year stock option vesting schedule, it’s unlikely that developers from studios like BigBox or Unit 2 will jump ship to work for a competitor anytime soon.

Why it’ll stay ahead

If you know Facebook’s business model, you’re probably wondering when ads come into play. The company has announced that it will begin testing ads in select games on the Oculus platform, but it’s still up in the air what exactly the ad experience will look like once testing begins — and how VR gamers will react. 

If the company can manage to integrate ads without breaking the immersive gaming experience, it will help developers earn more revenue (thus, attracting more developers to the Oculus platform) and could even make games more realistic. For example, real ads appearing on in-game TV screens and billboards would not break players’ immersion in their gaming world, while still driving revenue for developers and Facebook.

Beyond attracting developers for top-tier content, Facebook has a unique edge in attracting consumers as well — its massive social networking user base. No other VR headset can offer such easy accessibility (low price point with no required console purchase) and such a high potential for network effects.

For example, it would be much easier for a friend to influence you to purchase a $300 all-in-one VR headset than a PlayStation console and headset, which would total more than twice the cost of the Quest 2. Don’t get me wrong — Sony is a leading competitor in the VR gaming space and has shipped the most VR hardware units to date, but the company’s network effects are arguably limited to existing PlayStation owners (about 15.7 million monthly active users, between the PS4 and the PS5).  

Facebook’s 2.8 billion monthly active users have much more potential to add value to the Oculus platform by sheer volume of players, especially when it comes to popular social VR games like Population: One, Craya, and Beat Saber Multiplayer (developed by yet another Facebook-acquired studio, Beat Games). Social gaming experiences are inherently more valuable with more players.

While some VR multiplayer games are cross-platform (i.e., an Oculus player can game with a PS VR player), Facebook will likely tighten up its exclusive content offerings to attract and retain players. As long as the company rolls out ad content in a way that feels relatively organic to Oculus players, Facebook is set up for success in rapidly gaining market share in VR gaming.

What to watch for

While Facebook’s VR gaming revenue isn’t reported explicitly (yet), the company’s “other revenue” business segment is primarily Oculus. In Facebook’s first-quarter 2021 earnings report, this segment grew 146% year over year to $732 million, implying an impressive growth rate for the company’s VR business. Further, the Quest 2 has become the most used VR headset on popular gaming platform Steam, and by many estimates the Quest 2 is selling at least twice as fast as PlayStation VR, despite lagging behind in current overall market share.  

Keep an eye on this “other revenue” segment in future earnings reports, as well as any hard figures reported by the company on VR gaming revenue. More cautious investors may also want to wait for Facebook to complete its in-game ad testing process before investing based on the company’s growth potential in VR. It is undoubtedly a risk to user growth if ad content is not executed smoothly.

It’s impossible to dive into every point in Facebook’s value and growth story in one sitting, but the stock seems fairly valued given its growth potential — FB is even rated “undervalued” by Morningstar. The company’s wide economic moat in social gaming is unmatched thanks to a massive user base and vast user data, and these competitive advantages can easily translate to driving profits and market share for its VR gaming business.

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

The post How Facebook is quietly preparing to dominate virtual reality appeared first on The Motley Fool Australia.

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Taylor Weldon has no position in any of the stocks mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Facebook. The Motley Fool Australia has recommended Facebook. 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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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.

Do you want to retire rich, but don’t want to make doing so a complicated affair? The two goals seem mutually exclusive. That is to say, if you want to build a million-dollar nest egg on average earnings, it’s going to require a lot of complex investing strategies, and plenty of effort. That’s how the proverbial “big guys” do it, right? If it’s simple, it’s got to be subpar.

Except that’s not actually the case. When it comes to building a small fortune from just what’s left over after paying all your monthly bills, simpler probably is better in terms of producing top returns. And it doesn’t get any easier than just buying and holding the S&P 500 Index (SNPINDEX: ^GSPC), or an investable equivalent like the SPDR S&P 500 ETF Trust (NYSEMKT: SPY).

Start by playing the odds

The exact figure has never been verified because it’s impossible to track. But it’s been estimated by plenty of market insiders that at least 80% of day traders end up losing money, and quickly. The actual number might be even higher.

The thing is, it’s not as if the professionals are faring much better with their longer-term stock-picking tactics. In its most recent review of the data, Standard & Poor’s found that over the course of the past 20 years, roughly nine out of ten mutual funds focused on U.S. stocks underperformed the S&P 500 index.

International funds and small-cap funds fared slightly better, but only slightly. Granted, these folks aren’t losing money. They’re just not keeping pace with the market. You still would have been better served buying an international index or small-cap index fund, though.

And if you’re thinking you’ll just delegate your gains-making duties to hedge funds, think again. Despite the hype (often self-congratulatory) and occasional stroke of luck, as a whole they don’t do significantly better than traditional mutual funds. You’d have to pick the right one at the right time, and cash out at the right time, too. That isn’t easy.

Now embrace the bigger message: Picking stocks that consistently outperform the broad market is just hard to do.

Crunching the numbers

OK, so we’ve established that actively managed portfolios aren’t as good a bet as passively managed portfolios. The question remains, though: Can an index fund based on the S&P 500 make you a millionaire?

Coming up with answer requires making some assumptions, but none of our assumptions are out of line or out of the ordinary.

For our hypothetical scenario, let’s assume a 25-year-old investor intends to work for 40 years, retiring at 65. Let’s also assume this individual socks away $500 per month (ideally in a tax-deferred retirement account) every month in that 40-year career. Sure, this might be tough at first, but as this person ages, pay raises make this monthly contribution easier. Lastly, let’s assume the S&P 500 continues driving an average gain of around 10% per year, knowing that some years will be better than others. Given these parameters, even starting without any up-front capital, this individual should end this 40-year time span with around $2 million.

But you only want to work 30 years? Or you can only come up with $250 per month? That’s OK, too.

In the first of these two scenarios, using the same parameters as above except for the number of years that you contribute $500 a month, you’ll still end that 30-year span with nearly $600,000.

In the second scenario, you’ll wind up with roughly $1 million contributing $250 a month for 40 years.

Or, if you only wanted to work for 30 years and could only contribute $250 per month to the effort, you’d still end that three-decade stretch with around $300,000. Not too shabby. Most people will start their retirement with much, much less.

Doing the simple can be difficult

Some are surprised to learn they can become millionaires even with average incomes and small contributions, but they just need to clear the mental hurdle that prevents a lot of people from even trying in the first place. Perhaps even more surprising is that it can be done with the simplest and most accessible of investing instruments: S&P 500-based funds.

That said, don’t confuse simple with easy. It’s simple to regularly buy into an index fund or exchange-traded fund. It’s challenging, however, to do so faithfully when money gets tight or it feels like stocks might never recover from a bear market. That’s when discipline and consistency matter the most.

Oh, and even if you don’t take the index-fund route and opt to pick your own stocks to grow your wealth, that’s OK, too. Even if the 25-year-old discussed above only earns an average of 8% per year by trading individual stocks, that 40-year stretch will result in a nest egg worth about $1 million. Doing something is still better than nothing!

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

The post Is the S&P 500 all you need to retire a millionaire? appeared first on The Motley Fool Australia.

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James Brumley 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.

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

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The Metcash Limited (ASX: MTS) share price is on the move this morning following the release of its full year results.

At the time of writing, the wholesale distributor’s shares are up 3% to $3.77.

How did Metcash perform in FY 2021?

For the 12 months ended 30 April, Metcash reported a 9.9% increase in revenue to $14.3 billion. This was driven by a 3.1% increase in Food sales, a 19.2% jump in Liquor sales, and a 24.7% lift in Hardware sales.

Things were even better for its earnings thanks to margin expansion. This saw underlying group earnings before interest and tax (EBIT) increase 19.9% to $401.4 million and underlying profit after tax jump 27.1% to $252.7 million.

Also growing strongly was its operating cashflow, which came in at $475.5 million. This was more than quadruple the $117.5 million it reported a year earlier. This strong cashflow generation allowed the company to declare a full year fully franked 17.5 cents per share dividend, up 40% on the prior corresponding period.

In addition to this, the company has lifted its target dividend payout ratio from 60% to 70% of underlying net profit after tax and announced a $175 million off-market share buy-back.

How does this compare to expectations?

Although this was undoubtedly a strong 12 months, Metcash appears to have delivered a profit result a touch short of the market’s expectations.

According to a note out of Goldman Sachs, its analysts were expecting the company to record an 8.2% increase in revenue to $14,088 million and an underlying EBIT of $432.3 million. The latter compares to its actual underlying EBIT of $401.4 million.

Nevertheless, judging by the Metcash share price reaction today, investors don’t appear to be concerned by this.

What were the drivers of its growth?

Metcash CEO, Jeff Adams, revealed that the record sales result was driven by strong performances across all pillars, supported by its MFuture growth initiative.

He commented: “The early success of our MFuture initiatives laid the foundations for a very successful year for Metcash and our independent retailers, with their improved competitiveness being a key factor in the retention of new and returning customers gained though COVID. This, together with the continuation of an increased preference for local neighbourhood shopping and the migration from cities to regional areas, has driven strong sales growth across our independent retail networks, significantly improving their overall health.”

“From an earnings perspective, strong growth was achieved in all Pillars, with Liquor and Hardware standouts delivering EBIT growth of ~22% and ~62% respectively, and contributing to an improvement in the Group’s operating leverage. Our Food pillar also performed well, delivering much higher underlying earnings while continuing to support its retail customers through a challenging environment,” he added.

Total Tools investment

Potentially giving the Metcash share price a lift today was news that it is increasing its investment in the Total Tools business.

The release explains that Metcash has increased its ownership in Total Tools from 70% to 85% for an acquisition cost of $59.4 million.

Management notes that Total Tools has a history of strong performance, which has continued since Metcash acquired its 70% stake in September last year. For the eight months ended 30 April, the business contributed EBIT of $24 million.

Outlook

Metcash revealed that it has continued to benefit from the shift in consumer behaviour with strong sales in the first eight weeks of FY 2022. Food sales are up 13.7% over the period, Liquor sales have increased 26%, and Hardware sales have jumped 29.1%.

However, it has warned that there continues to be some uncertainty over the potential impact of any future COVID-related trading restrictions or changes in consumer behaviour. As a result, no guidance has been provided for the year ahead.

The post Metcash (ASX:MTS) share price charges higher after reporting FY 2021 profit surge 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. 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 Costa Group Holdings Ltd (ASX: CGC) share price has returned from its trading halt and is tumbling lower.

In early trade, the horticulture company’s shares are down 4% to $3.26.

Why is the Costa share price tumbling lower?

The catalyst for the weakness in the Costa share price this morning has been the completion of an institutional entitlement offer which was launched to raise funds for a major acquisition.

According to the release, the institutional entitlement offer was successfully completed, raising approximately $114 million. Management notes that it was strongly supported by eligible Costa institutional shareholders, who took up approximately 90% of their entitlements.

Furthermore, and institutional shortfall bookbuild was undertaken with a clearing price of $3.30 per new share, representing a $0.30 premium to the offer price of $3.00 per new share. The offer price was an 11.8% discount to its last close price.

Costa will now push on its with retail entitlement offer, which is aiming to bring the total funds raised to $190 million.

Why is Costa raising funds?

Costa is raising funds to acquire the business and assets of 2PH Farms for $200 million in cash.

Queensland-based 2PH Farms is the largest citrus grower in northern Australia. It has farming operations in Central Queensland, with a main growing location at Emerald and a smaller location at Dimbulah.

Management notes that 2PH is expected to generate ~$29 million in EBITDA-S in calendar year 2021 on a pro forma basis. This will make it around 10% earnings per share accretive on a pro forma basis in 2021, excluding future plantings and potential synergy benefits.

Costa’s CEO and Managing Director, Sean Hallahan, said: “The acquisition of 2PH provides Costa a larger and stronger citrus business with an attractive growth profile. 2PH will complement and enhance our production footprint, our variety offering and market opportunities, both export and domestic. We are delighted to take ownership of 2PH and look forward to supporting its continued success and its globally recognised brand and reputation for quality citrus varieties.”

The post Why the Costa (ASX:CGC) share price is down 4% today 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. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. 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) at all-time highs, it can be a struggle to find bargains.

Sure, there are plenty of quality companies, but are they all fully priced for their potential?

According to four experts, there are still 3 stocks that look like they have plenty of upsides this year.

Nextdc Ltd (ASX: NXT)

The data centre provider’s share price has never really taken off consistently in the way its fans would like.

But with the COVID-19 pandemic pushing up demand for computing infrastructure, NextDC shares have gone up more than 23% in the past year. Nothing to sneeze at.

And they’ve gained 240% in the past 5 years, which is pretty handsome growth.

Morgans head of Asian desk, Raymond Chan, is betting that the coming quarter might see another spike up.

“It’s all eyes on… how many of the optional [client] contracts are exercised in the next 3 months,” he told SwitzerTV Investing.

“Because those contracts are issued to a number of big players, like Alphabet Inc (NASDAQ: GOOGL), Salesforce.com Inc (NYSE: CRM).”

Chan said June is usually the time when client renewals are announced, but he suspects that’s delayed this year due to the pandemic.

“That [delay] may impact the share price, but if we see some contract wins that will be a catalyst for NextDC to move to the next level.”

United Malt Group Ltd (ASX: UMG)

One decidedly low-tech stock compared to NextDC is United Malt, which produces malt for alcoholic drink producers.

Wilson Asset Management portfolio managers Matthew Haupt, Catriona Burns and Oscar Oberg reckon this is a major post-COVID recovery play.

“We remain positive on agricultural stocks and have transitioned more into those set to benefit from tailwinds in the re-opening trade,” they wrote in a memo to clients.

“[United] is the world’s fourth-largest commercial maltster, operating as a network of companies spanning North America, the UK and Australia. It also operates an international distribution business, providing a full-service offering for craft brewers and distillers.”

The business’ big markets of North America and Britain had been hit hard by drinkers not going out to the pub in the past 18 months.

“Now, the company stands to benefit from increased patronage in restaurants and pubs, as the US and UK economies recover and reopen,” the memo read.

“United Malt Group also has a series of initiatives to support growth, including an upgrade and expansion of its malting capacity in the UK and investment in a bespoke craft warehouse and distribution centre in Victoria.”

United shares are up almost 9% this year, trading at $4.51 on Friday afternoon.

Wilson funds WAM Capital Limited (ASX: WAM), WAM Research Limited (ASX: WAX) and WAM Leaders Ltd (ASX: WLE) currently hold United Malt.

Computershare Ltd (ASX: CPU)

The Motley Fool reported last week how the share registry provider was perfectly placed to profit from rising interest rates.

It works like this: Computershare temporarily holds dividends and acquisition proceeds that are headed to shareholders. This pool of funds earns short-term interest.

This money-spinner has been struggling the past 18 months with near-zero rates in Australia.

Chan agreed that this situation would turn around soon.

“I would see Computershare as an interesting stock as an inflation hedge,” he said.

“Computershare is one of the few that can leverage on the upside of rising interest rates… You can imagine in the future if the interest rates continue to go back up because of inflation, it will earn more money.”

Many investors have already locked into Computershare stocks, with the price going up almost 19% this year and nearly 33% in the past 12 months.

But Chan reckons the porridge is still just right.

“The PE [ratio] is not too low, but certainly not too high — around 22 times at the moment.”

The post 3 ASX shares ready to go off this year: experts appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tony Yoo owns shares of Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), and Salesforce.com. The Motley Fool Australia has recommended Alphabet (A shares) and Alphabet (C shares). 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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A fresh wave of COVID-19 has seen Australia’s two largest cities shut down over the last few weeks.

So it’s still an uncertain time to be in the transport business.

However, does this mean the industry only has upside from here as the world emerges from its pandemic slumber?

Three stock experts recently weighed in, picking out 2 quality ASX shares they believe investors could consider.

Sydney Airport Holdings Pty Ltd (ASX: SYD)

The monopoly airport in Sydney has caught the eye of multiple fund managers.

TMS Capital portfolio manager Ben Clark said this ASX transport share is “a cracking buy”.

“Whether it’s 2022 or 2023, it will recover, and I think actually travel will overshoot on the upside to where the passenger numbers would have been if not for COVID,” he told Livewire.

“And then the other thing I think is that we’re all probably going to need to spend a bit more time in airports as travel ramps back up. There’s probably some new revenue streams — maybe doing testing before we get on flights, etc.”

Sydney Airport shares were up 1.38% on Friday to finish the day on $5.86. The stock is down 8.58% this year.

Wavestone Capital portfolio manager Catherine Allfrey agreed that it was inevitable the airport would come roaring back.

“We’re prepared to wait that out with a company like Sydney Airport, which we see as a monopoly asset here in Sydney,” she told Livewire.

“It’s an iconic asset and those tourists will come back and again, that company will thrive. So that’s one company that we think in terms of a long-term trend will be a beneficiary.”

Clark said the unknown of precisely when travel would truly be back was causing “a great price opportunity”.

“So you need to buy it while the uncertainty reigns.”

Atlas Arteria Group (ASX: ALX)

Another company spun out of Macquarie Group Ltd (ASX: MQG), Atlas Arteria owns and runs toll roads in the US and Europe.

Watermark Funds Management chief investment officer Justin Braitling rates it a “strong buy”.

“These European infrastructure assets have recovered nicely. Traffic flyers will normalise,” he told Livewire.

“It’s on a 6% yield and, unlike a lot of other infrastructure plays, the dividend should increase nicely in the years ahead.”

Clark observed that road traffic in France has been “resilient”, currently running at 75% of pre-pandemic levels.

“The major asset these guys own is the highway that connects Paris to Lyon,” he said.

“France is opening up. Tourism is really starting to kick off again in Europe, albeit in fits and spurts.”

Like Sydney Airport, Clark said that the Atlas Arteria share price is selling for “a big discount to where it was”. 

“Also a lot of the debt is now fixed, whereas the tolls are linked to inflation. So this is probably one of those players that actually could do okay in an inflationary environment.”

The post ‘Cracking buy’: Experts pick 2 enticing ASX transport shares appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo owns shares of Macquarie Group Limited and Sydney Airport Holdings Limited. 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 Macquarie Group 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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While small cap ASX share carry more risk than their larger rivals, the potential returns on offer makes it worth considering including one or two in a balanced portfolio if your risk profile allows.

But which small cap shares should you be looking at? Two that could be worth getting better acquainted with are listed below. Here’s why:

Avita Medical Ltd (ASX: AVH)

The first small cap to look at is Avita Medical. It is a global regenerative medicine company best known for its Recell system. This is a spray-on skin treatment used for burns victims.

However, Avita isn’t settling for this and is seeking to expand the use of the Recell system. It is aiming to treat vitiligo and is working on a project with Houston Methodist Research Institute on reversing cellular ageing.

While demand for the Recell system softened during the pandemic due to lower burn incidents, the reopening of the US economy has let to demand picking up. So much so, the company recently upgraded its FY 2021 guidance.

This went down well with analysts at Bell Potter. Last week the broker retained its speculative buy rating and $9.80 price target on its shares. This compares to the latest Avita Medical share price of $5.80.

Booktopia Group Ltd (ASX: BKG)

Another small cap to look at is Booktopia. It is the largest Australian-owned online book retailer by market share. At the last count, the company was selling one item every 4.7 seconds, shipping a total of 6.5 million items during FY 2020.

Pleasingly, the company has built on this materially in FY 2021 thanks to the shift to online shopping and its new distribution centre. For example, in the first half, the company shipped a total of 4.2 million units during the six months. This was up 40% on the prior corresponding period and underpinned a 51.1% increase in revenue to $112.6 million and a 502.3% jump in underlying EBITDA to $8 million.

One broker that is tipping further strong growth in the future is Morgans. Its analysts believe Booktopia is well-placed to win market share and realise further scale benefits.

The broker has an add rating and $3.54 price target on the company’s shares. This compares favourably to the current Booktopia share price of $2.57.

The post Why analysts rate these small cap ASX shares as buys 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 Avita Medical Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Booktopia Group Limited. The Motley Fool Australia has recommended Avita Medical 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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New Zealand-based tech company Ikegps Group Ltd (ASX: IKE) might still be flying under the radar for many investors. But with this ASX tech share shooting up by more than 65% in the past year, the company may now be starting to attract some attention.

At Friday’s close, Ikegps shares were trading at $1.095, not far off the 52-week high of $1.24 they briefly hit last November.

Company background

Ikegps is a niche company specialising in software and hardware measurement tools. It uses laser technology to capture geospatial data, including an object’s height, width and distance. At first glance, this might seem like too specialised a product offering to be profitable, but this sort of technology is crucial to the design and implementation of large infrastructure and utility projects.

In fact, Ikegps already has contracts with a number of US telecommunications giants, including AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). The company’s measurement technology helps these customers build and maintain their networks.

Recent financials

Ikegps released its FY21 report earlier this month (covering the 12 months ending 31 March 2021). Business headwinds stemming from the COVID-19 pandemic meant that revenues declined slightly year on year – from NZ$9.8 million in FY20 to NZ$9.3 million in FY21. Gross margin also declined, from NZ$6.9 million in FY20 to NZ$5.9 million in FY21, and the company blew out its net operating loss after tax from NZ$6.1 million to NZ$7.4 million.

Despite the subdued financial performance, Ikegps claimed it has laid a solid foundation for growth, citing a strong sales pipeline, healthy balance sheet, and a wide-ranging product suite. And there were some silver linings buried in the financial results. Ikegps closed a record number of new contracts in the fourth quarter of FY21, and that momentum seems to have carried over into the first few months of FY22.

Ikegps closed contracts worth a total of NZ$5.4 million in the last quarter of FY21, with most of that revenue expected to be recognised during FY22. In the first eight weeks of FY22, Ikegps closed contracts worth a further NZ$3.4 million, meaning it is almost on track to deliver back-to-back record quarters.

Other news

Last Wednesday, the company announced another set of material contract wins. Ikegps extended an agreement with an engineering company involved in the development of telecommunications infrastructure, and also signed a new contract supporting a separate network project in the US. Ikegps will be hoping that the recent contract wins are the first signs of a sustained increase in demand from North America as their economy emerges from the pandemic.

Ikegps share price snapshot

As well as its impressive gains over the past 12 months, the Ikegps share price has also rallied by more than 19% over the past month. Based on its current valuation, this ASX tech share has a market capitalisation of around $146 million.

The post This under-the-radar ASX tech share has gained 65% in the last 12 months appeared first on The Motley Fool Australia.

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Motley Fool contributor Rhys Brock 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 ikeGPS Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Verizon Communications. The Motley Fool Australia has recommended ikeGPS Group 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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