ASX travel shares are the talk of the town with the world starting to open up again.

But most stocks in that sector already have high valuations that have post-COVID recovery built in.

That’s despite some, like Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB), having to raise massive capital and debt just to survive.

But one fund manager has called out one ASX travel share he believes is in a better position now than before the pandemic.

Time for adventure

Australian adventure tourism provider Experience Co Ltd (ASX: EXP) intrigues Forager Funds senior analyst Alex Shevelev with its potential.

The company supplies experiences like sky-diving, rafting, canyoning, kayaking, helicopter and boat tours, snorkeling and diving, and hot air ballooning.  

Shevelev said the business went off the rails a tad before the coronavirus pandemic arrived.

“We had a management team that went on an acquisition spree in far north Queensland,” he told a Forager video.

“A lot of those investments have had to be curtailed by the current management team, and they’ve [now] really got the business in good shape.”

The Experience Co share price has remained flat since the start of the year, when it was trading for 24 cents. On Tuesday, the stock dropped 1.82% to sit at 27 cents at market close.

That’s now roughly the same level as just before the COVID market crash in March 2020.

With the vaccine rollout bungled in Australia, Shevelev anticipated the world outside of New Zealanders could start arriving in Australia next year.

“The willingness of travellers to come to Australia will be a factor, but really that should start to restart sometime in 2022 and should give those businesses a cleaner 2023 financial year.”

Despite the delays in inbound international tourism, Shevelev liked what the Experience Co executive was currently doing.

“They’ve got a focused plan and a strategy to recover again to earnings that were higher than pre-COVID.”

An intriguing Kiwi business

Shevelev also mentioned New Zealand company Tourism Holdings Ltd as another travel share with huge post-pandemic potential. In fact, the stock is Forager’s biggest travel holding currently.

From mid-2018 to the COVID-19 crash, its shares tumbled from NZ$6.76 to NZ$2.49.

According to Shevelev, there was one massive factor in its misfortunes.

“The US business was unable to sell the vehicles at quite the prices that they wanted because of an oversupply of vehicles.”

After the pandemic arrived, people wanted to avoid public transport. Countries like Australia and the US saw demand for second-hand cars surge.

“A lot of people had sought second-hand vehicles in the US – and that market really cleared up,” he said.

“It has an excellent management team. The business is really primed to actually take share and to recover to better levels of earnings than was expected prior [to COVID] because… they’ve really taken advantage of the downturn.”

More reading

• Experience Co (ASX:EXP) share price jumps 6% on latest update

Motley Fool contributor Tony Yoo owns shares of Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of EXPERNCECO FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s one ASX travel share now stronger than before COVID appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3eTfnH4

The Incitec Pivot Ltd (ASX: IPL) share price will be in focus this morning. This comes after the company announced an off-take agreement with Perdaman Chemicals and Fertilisers Pty Ltd (Perdaman).

The Incitec share price was trading at $2.65 at the market close yesterday.

What did Incitec Pivot announce?

This morning, Incitec Pivot advised its wholly-owned subsidiary Incitec Fertilisers has entered into an off-take agreement with Perdaman to receive granular urea fertiliser. The 20-year agreement will see up to 2.3 million tonnes per year of urea from Perdaman’s proposed urea plant at Karratha in Western Australia.

The agreement is subject to several requirements before the deal is formally executed. Incitec noted that the most important condition was on Perdaman securing finance to build its new plant.

Should everything go to plan, the offtake agreement will provide Incitec with a long-term domestic supply of urea. This will enable the company to target Australian consumption as well as expand sales into global markets.

Incitec Pivot managing director and CEO Jeanne Johns commented:

The investment by Perdaman in a new, world-scale plant will make it one of the most energy efficient plants in the world utilising low emissions technology.

We are pleased to support such a significant domestic manufacturing project that will use Australian gas to produce urea fertiliser, essential for our Australian and international agricultural markets.

More on Perdaman

Founded in 2006, Perdaman is a West Australian-based multinational group that specialises in a range of markets. This includes fertiliser production to help farmers produce crops, ownership and management of shopping centres, production and distribution of pharmaceuticals, recruitment services and advanced energy solutions.

Its chemicals and fertilisers business focuses on the production of urea, the most commonly traded nitrogenous fertiliser. Urea is non-toxic and contains safe, high nitrogen content that can be easily transported and stored.

Incitec share price review

In 2021, Incitec shares have lifted to record a gain of 16%. The company share price reached a 52-week high of $2.98 in late March.

On valuation grounds, Incitec Pivot commands a market capitalisation of around $5.1 billion, with close to 2 billion shares outstanding.

More reading

• Looming grocery price shock to impact on these ASX shares
• ASX 200 Weekly Wrap: ASX sees 7,000 points once more
• These were the worst performing ASX 200 shares last week
• Top brokers name 3 ASX shares to buy today
• Why 88 Energy, Chorus, Incitec Pivot, & Santos shares are sinking

Motley Fool contributor Aaron Teboneras 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.

The post Why the Incitec (ASX:IPL) share price is in the spotlight today appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/33gbd6Q

The Coles Group Ltd (ASX: COL) share price looks very compelling right now for a number of reasons.

Coles is the one of the biggest supermarket businesses in Australia along with Woolworths Group Ltd (ASX: WOW).

Why is the Coles share price a good one to think about?

Dividend yield

The supermarket industry is not a high-growth area. So, the dividend forms an important part of the returns.

Coles pays out an attractive amount of its profit each year as a dividend to investors.

At the current Coles share price, it offers a grossed-up dividend yield of 5.25%.

That dividend yield is after a solid increase to the FY21 half year dividend of 10% to 33 cents per share. That compares to the earnings per share (EPS) of 42 cents. Coles has an annual target dividend payout ratio of 80% to 90%.

Strong e-commerce sales

Whilst other ASX shares in the e-commerce space have captured more of the investor attention, like Redbubble Ltd (ASX: RBL) and Kogan.com Ltd (ASX: KGN), Coles has itself generated a lot of e-commerce growth.

In the FY21 half-year result it reported that e-commerce sales to household consumers went up by 61%. It has made strategic investments into the user experience and capacity, leading to significant improvements in ‘perfect order rate’ and customer satisfaction. E-commerce sales contributed $1 billion of sales revenue for the half.

Online is a category that Coles can continue to grow in over the long-term. Its online penetration is still relatively low but growing.

Smarter selling and improved offering

Coles is going through a bit of a transformation phase to be more efficient as a business and more attractive for customers.

In terms of costs, it’s looking like it’s on track to deliver cost savings of more than $250 million in FY21.

Coles is trying to improve its end to end flow of fresh goods to store with a more efficient supply chain providing greater shelf life for customers.

The supermarket business is looking to protect profit with “dynamic” markdowns (such as using artificial intelligence to optimise markdowns in meat) and loss prevention (such as entry gates and public view monitors).

One of the main things that it’s looking to improve is its own brand product range and market share. This can lead to lower costs for customers (and better loyalty) as well as better margins for Coles.

It’s also making progress on both of its Ocado and Witron automation projects.

What about the Coles share price valuation?

Coles is now cycling against the strong COVID sales of March and April a year ago in 2020. It recently reported its third quarter sales in FY21 were down 5.1% year on year. However, in the first four weeks of the fourth quarter, sales were up 4%.

The Coles share price went through a dip after reporting its FY21 half-year result. Thanks to that decline, the Coles share price is now valued at 22x FY21’s estimated earnings according to Commsec.

More reading

• 2 buy-rated ASX dividend shares for income investors
• 3 reasons why Coles (ASX:COL) is a top ASX dividend share
• Vicinity (ASX:VCX) sees improvements as it struggles back to COVID-normal
• 2 of the best ASX 200 blue chip shares to buy today
• ASX 200 Weekly Wrap: Shares have average week but a great month

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

The post 3 reasons why the Coles share price could be a buy appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2QLCQ57

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.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Twilio (NYSE: TWLO) are both very important tech companies, but most people might only recognize the former even exists.

Alphabet, the parent company of Google, is the highly visible leader of multiple markets. Google is the world’s top search engine, Gmail is the largest email platform, and Chrome is the most popular web browser. Android is also the leading mobile operating system, and YouTube is the world’s largest streaming video platform with more than 2 billion logged-in monthly users.

Twilio’s cloud-based platform operates behind the scenes by processing text messages, calls, and other communication services within mobile apps. Outsourcing those features to Twilio is generally cheaper, less time-consuming, and easier to scale than creating those features from scratch. Companies like Lyft, Airbnb, and MercadoLibre all use Twilio’s services.

Alphabet’s stock price rallied nearly 130% over the past three years as the growth of its core advertising business supported the expansion of its sprawling digital ecosystem. Yet Twilio’s stock price skyrocketed over 720% as its streamlined communications tools locked in more mobile apps.

Twilio generated more explosive gains than Alphabet, but can it maintain that momentum and remain a better investment over the next few years? Let’s take a fresh look at both companies and see if we can find an answer.

How fast is Alphabet growing?

Alphabet generated 80% of its revenue from Google’s advertising business last year. Its ad growth decelerated in the first half of the year as the coronavirus pandemic spread, but it partly offset that slowdown with the growth of Google Cloud, which benefited from robust demand for cloud services throughout the crisis. Google’s advertising business recovered in the second half of the year as more businesses reopened.

Alphabet’s revenue rose 13% to $182.5 billion in 2020 as its net income increased 17% to $40.3 billion. Its full-year operating margin expanded, from 21% to 23%, as it reined in its spending.

In the first quarter of 2021, Alphabet’s revenue rose another 34% year over year as its advertising business recovered against easy comparisons to the previous year. Google’s total ad revenues increased 32% to $44.7 billion as Google Cloud’s revenue grew 46% to $4.05 billion.

Its operating margin expanded again, from 19% to 30%, and its net income surged 162% to $17.9 billion. Wall Street expects its revenue and earnings to rise 30% and 51%, respectively, this year.

Alphabet’s future looks bright, but there are still a few challenges ahead. It still faces regulatory challenges in several markets, tough competition in the advertising market from Facebook, Amazon, and other platforms; and it still trails far behind Amazon Web Services (AWS) and Microsoft Azure in the cloud infrastructure market. Apple‘s latest privacy changes to iOS could also affect its targeted ad sales.

How fast is Twilio growing?

Twilio’s revenue rose 55% to $1.76 billion in 2020. It posted a full-year net expansion rate of 137%, which means its existing customers spent 37% more money on its services.

However, Twilio’s net loss still widened from $307 million to $491 million. On a non-GAAP basis, which excludes its stock-based compensation and acquisition-related expenses, its net income rose 62% to $35.9 million.

Twilio will post its first-quarter earnings on Wednesday, May 5, and it previously guided for 44%-47% year-over-year revenue growth. Analysts expect its revenue to rise 39% for the full year, but for its non-GAAP earnings to dip into the red again as it ramps up its spending and faces three major challenges.

First, new A2P (application to person) fees from carriers, which are charged whenever an app accesses the SMS network, will weigh down Twilio’s gross margins. Its growing dependence on acquisitions to boost its revenue could exacerbate that pressure.

Second, it still faces competition from similar platforms like Vonage‘s Nexmo, Bandwidth, and MessageBird. Those competitors could all make it tough for Twilio to raise its prices and offset the impacts of its A2P fees and inorganic growth strategies.

Lastly, Twilio relies heavily on big stock-based bonuses and secondary offerings to preserve its cash. As a result, its number of outstanding shares has increased by a whopping 70% over the past four years.

The valuations and verdict

Alphabet trades at 25 times forward earnings and less than seven times this year’s sales — which makes it a reasonably valued stock in the frothy tech sector. Twilio trades at 26 times this year’s sales, making it a much more speculative stock, and the ongoing dilution of its shares could keep its valuations elevated.

If I had to choose one over the other, I’d pick Alphabet because its core business is more stable and its stock is cheaper. I still admire Twilio’s business, but investors shouldn’t pay the wrong price for the right company — especially as higher bond yields potentially spark a rotation from growth to value stocks.

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

More reading

• Here are the US shares that ASX investors were buying last week
• Why Alphabet stock jumped 14% last month
• How high can Microsoft’s and Alphabet’s margins go?
• Seven West (ASX:SWM) share price wobbles on market update
• Retail just changed. Forever…

Leo Sun owns shares of Amazon, Apple, and MercadoLibre. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. 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 recommends Airbnb, Inc., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, MercadoLibre, Microsoft, and Twilio and recommends the following options: long January 2022 $1920 calls on Amazon, short March 2023 $130 calls on Apple, short January 2022 $1940 calls on Amazon, and long March 2023 $120 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Twilio. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Better buy: Alphabet vs. Twilio appeared first on The Motley Fool Australia.

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

from The Motley Fool Australia https://ift.tt/3nLUmC6

The Ramsay Health Care Limited (ASX: RHC) share price was a relatively poor performer on Tuesday.

The private hospital operator’s shares edged 0.25% lower to $66.93 following the release of a presentation.

This compares to a 0.55% gain by the S&P/ASX 200 Index (ASX: XJO).

Is the Ramsay share price in the buy zone?

According to a note out of Goldman Sachs, it believes the Ramsay share price is in the buy zone.

This morning the broker retained its conviction buy rating and $75.00 price target on the company’s shares.

This price target implies potential upside of 12% over the next 12 months.

What did Goldman say?

Goldman notes that Ramsay has provided an update which revealed that Australian organic revenue grew 8.2% during the third quarter. This compares to historic levels of 3% to 5%.

However, one slight negative was that volumes are still being skewed towards surgical and day-patient caseloads, putting near-term pressure on its sales mix.

Positively, though, Goldman believes there are positive signs around the recovery in non-surgical volumes. Furthermore, COVID costs are now tracking -50% below the first half average, which it estimates releases upwards of 7% to 8% of APAC EBIT on an annualised run-rate.

Overall, Goldman Sachs is positive on its outlook and continues to expect Ramsay to outperform the market’s current expectations in FY 2021 and FY 2022.

It commented: “Following an encouraging start to CY21, we expect to see positive trends continuing into FY22: 1) elevated utilisation profile: 2) improving cost absorption; 3) tapering of cash ‘covid costs’; 4) improving sales mix (non-surgical); and 5) improving surgical mix (higher-acuity).”

“Overall, we make no changes to our sales/EBITDA/EPS forecasts and remain +2% and +9% above Bloomberg consensus in FY21 and FY22 respectively, as we factor in the recovery of margin-accretive caseload, delivery of a backlog, and a tapering of PPE/Covid costs. Our 12-month target price remains A$75, based on our target NTM EV/EBITDA multiple of 10.2x, methodology unchanged, and reiterate Buy (on CL),” it concluded.

The Ramsay share price is up approximately 7% since the start of the year.

More reading

• The Ramsay (ASX:RHC) share price is sliding on third quarter update
• 2 high quality ASX 50 shares for your retirement portfolio
• 2 buy-rated ASX healthcare shares
• 3 fantastic ASX shares to buy this month
• Ramsay (ASX:RHC) share price rises on acquisition speculation

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Broker tips Ramsay Health Care (ASX:RHC) share price to shoot higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3tslHux

A fund manager has told investors to shirk off the recent price plunge for Redbubble Ltd (ASX: RBL) shares.

Shareholders have nervously watched the art merchandise marketplace’s price go from $5.95 at the start of the year to now $4.05 – a 32% drop in just 4 months.

During the month of April alone, the stock price dived more than 18%. 

Ouch.

In a video to clients, Frazis Capital portfolio manager Michael Frazis said the recent quarterly results were “solid” and “in line” with expectations.

“Redbubble is a COVID beneficiary. Those companies are going to be all under pressure, across the board.”

The company is “still executing” and growing, according to Frazis. 

Redbubble also has the advantage of operating a two-sided marketplace, where revenue comes from both the merchant and end customer.

For the quarter ending 31 March, Redbubble’s marketplace revenue increased 54% to $103 million and gross profit was also up 55%.

But the figure that had investors panicked was that its EBITDA/marketplace revenue margin fell to 2.1% for the quarter, compared to 13.8% in the first half. 

According to colleague James Mickleboro, that nosedive was never explained.

Are you an investor or trader?

Frazis’ fund bought into Redbubble at around $3. It has been as high as $7.35 in the past year.

Investors should commit to such growth businesses for the long term, according to Frazis.

“If you’re more a fast, [short-]term follow-the-money trader kind of person, maybe now’s the time you just flick all of those and go into travel stocks and airlines,” he said.

“That’s not what we do. We will stay in this one for the long term.”

Frazis did remind viewers that Redbubble only takes up 2.5% of his fund, so admitted holding is easier said than done for individuals who have a larger stake.

While the share price sunk after the quarterly results last month due to the shrinking margins, other brokers seem to agree with Frazis.

Morgans downgraded its rating from “buy” to “hold”, but still has a price target of $4.88, which is higher than the current level.

RBC Capital kept the faith, retaining a “buy” rating. But it did downgrade the price target to $5.60.

More reading

• Why the Redbubble (ASX:RBL) share price sank 18% lower in April
• Is there still upside to the JB Hi-Fi (ASX:JBH) share price?
• Could the Resmed (ASX:RMD) share price face a similar selloff to Kogan?
• This broker thinks you should buy the Kogan (ASX:KGN) share price dip
• 2 excellent ASX growth shares that are rated highly

Motley Fool contributor Tony Yoo owns shares of REDBUBBLE FPO. 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.

The post What to do with Redbubble (ASX:RBL) shares: fundie appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3vMbJpj

More reading

• ANZ (ASX:ANZ) share price on watch after reporting $2.9bn half year profit
• Is the SEEK (ASX:SEK) share price in the buy zone?
• Why Soul Patts (ASX:SOL) is such a strong ASX dividend share
• 2 buy-rated ASX dividend shares for income investors
• 5 things to watch on the ASX 200 on Wednesday

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.

The post LIVE COVERAGE: ASX to fall; ANZ delivers $2.9 billion profit, increases dividend appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2Arppiz

The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price will be one to watch closely on Wednesday.

This follows the release of the banking giant’s highly anticipated half year results.

How did ANZ perform in the first half?

For the six months ended 31 March, ANZ reported a statutory profit after tax of $2,943 million and cash earnings from continuing operations of $2,990 million. This was up 45% and 28%, respectively, on the second half of FY 2020.

Boosting ANZ’s result was a net credit provision release of $491 million for the half. This is up from a net release of $150 million during the first quarter.

The bank advised that despite ongoing uncertainty, the credit provision release is a result of the improving economic outlook over the course of the half, as well as some loan volume reductions. It notes that home loan and small business customers have also behaved prudently by building savings buffers through the half.

This ultimately led to ANZ reporting earnings per share of 105.3 cents, return on equity of 9.7%, and a CET1 ratio of 12.4%.

Positively for shareholders and the ANZ share price today, this allowed the ANZ board to declare a fully franked interim dividend of 70 cents per share.

How does this compare to expectations?

According to a note out of Goldman Sachs, its analysts were expecting cash earnings (pre-one offs) of $3,073 million and a fully franked interim dividend of 60 cents per share.

So, while it has fallen a touch short of expectations for earnings, it has smashed them for dividends.

The latter potentially could bode well for the ANZ share price on Wednesday.

What were the drivers of its result?

ANZ’s Chief Executive Officer, Shayne Elliott, advised that all sides of the business performed well, which was complemented by cost reductions.

He said: “Following the trends of the first quarter, all parts of our business performed well. Costs were down 2% and we also increased investment in new digital capability that will provide ongoing productivity improvements and better customer outcomes.”

“Australia Retail & Commercial had another good half, becoming the third largest home lender in the market. Deposits performed well, with retail and small business customers behaving prudently by building solid savings and offset balances through the half,” he added.

And while its Institutional business reported lower revenues, this was in line with expectations.

Mr Elliott explained: “Lower revenues in our Institutional business were largely expected due to the impact of falling interest rates as well as a normalisation of Markets revenue after an exceptionally strong 2020. Our disciplined focus on credit management has been a positive with our largest customers going into the pandemic from a position of strength and adapting fast to the rapidly changing environment.”

Positively, its New Zealand business performed strongly.

“New Zealand continued its recent strong performance with record lending growth combined with disciplined cost management. This is a well-run business that is an important part of our overall portfolio and is well-placed to manage increased regulatory capital demands,” the Chief Executive advised.

Outlook

Mr Elliott appears cautiously optimistic on the future.

He said: “There is still significant uncertainty. You only need to look at how the pandemic is playing out overseas, as well as recent lock-downs, to realise how quickly the situation can escalate.”

Before adding: “ANZ is in a strong position both financially and operationally. We are well capitalised and our disciplined approach to costs over many years has us well placed to invest in opportunities to grow our business in targeted segments. The work to digitise core processes and platforms continues at pace and this will be more visible to customers towards the end of the year.”

The ANZ share price is up 25% since the start of the year.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Morgans just added these ASX shares to its “best ideas” buy list
• ASX 200 Weekly Wrap: Shares have average week but a great month
• ANZ (ASX:ANZ) share price lower after announcing $817m earnings impact
• Why ASX bank shares may be facing a big sell-off in the next few weeks

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.

The post ANZ (ASX:ANZ) share price on watch after reporting $2.9bn half year profit appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2RrdgSQ

The SEEK Limited (ASX: SEK) share price was on form again on Tuesday.

The job listings giant’s shares jumped 7% at one stage to reach a record high of $32.92 before closing the day at $31.30.

Why did the SEEK share price hit a record high?

Investors were scrambling to buy the company’s shares yesterday following the release of an update.

That update revealed that all conditions precedent to completion of the Zhaopin transaction have been satisfied. Following its selldown, management intends to return some of the proceeds to shareholders via a 20 cents per share special dividend.

In addition to this, SEEK revealed that its performance has been stronger than expected in FY 2021. As a result, it has upgraded its guidance.

It now expects revenue of ~$1,740 million and EBITDA of ~$510 million in FY 2021. This compares to previous guidance of ~$1,700 million and ~$510 million, respectively.

And on the bottom line, SEEK’s reported net profit after tax is expected to be $150 million. This is up from $100 million previously.

Is it too late to invest?

Analysts at Goldman Sachs believe it could be too late to invest and feel its shares are fully valued at the current level.

According to a note, the broker has retained its neutral rating but lifted its price target by 11% to $30.40.

Based on the current SEEK share price, this implies potential downside of approximately 3% over the next 12 months.

What did Goldman say?

Goldman Sachs was pleased with SEEK’s update and its stronger than expected guidance upgrade.

It said: “SEK is experiencing significant leverage to the strong ANZ economic recovery, from both improving volumes, but also the resulting increased yield per listing due to dynamic pricing. This is not entirely unexpected, and we had expected a guidance upgrade given strong recent ANZ data points. However, we had also expected increased investment, mitigating the size of the EBITDA upgrade. We are also pleased to see the stronger revenues/commentary around Asia, given this segment delivered what we viewed as a particularly soft 1H21 result.”

However, it believes that there are better ways for investors to benefit from the ANZ economic recovery – News Corporation (ASX: NWS) and Nine Entertainment Co Holdings Ltd (ASX: NEC).

It explained: “Overall we revise our SEK earnings estimates to reflect the stronger underlying result (i.e. EBITDA +5% / +7% / +10% in FY21-23E), but also incorporating the Zhaopin sell down. As a result our SEK EBITDA declines -1%/ -23%/ -20% in FY21-23E, but NPAT increases +11% /+5% /+10%. Our SEK TP increases +11% to A$30.40, reflecting the earnings upgrades & higher ESV value. We stay Neutral on SEK, as although it is delivering strong earnings’ momentum, we attribute the majority of this to the broader macro recovery, and would prefer play this through News Corporation or Nine.”

More reading

• ASX 200 rises, Flight Centre drops, Super Retail grows
• Why De Grey, Infomedia, Northern Star, & SEEK shares are storming higher
• ASX 200 up 0.2%: SEEK hits record high, Flight Centre tumbles
• SEEK (ASX:SEK) share price jumps 7% to record high on trading update
• These ASX 200 shares are tracking the Aussie economy higher in 2021

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is the SEEK (ASX:SEK) share price in the buy zone? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3ti9cBz

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), also known as Soul Patts, is one of the strongest ASX dividend shares around.

What is Soul Patts?

It’s an investment conglomerate that has been listed since 1903. That makes it one of the oldest businesses on the ASX.

Soul Patts started off as a pharmacy business but now it’s diversified across a number of sectors.

The business has been served by multiple generations of some families. More than 40 employees have worked for the company for over 50 years. Five generations of the Pattinson family have served the company, as have three generations of the Dixson, Spence, Rowe and Letters families.

The long-term nature of the employees means that the business itself can plan and act in the company’s long-term interests. They themselves are sizeable shareholders of the business, so they’re certainly aligned.

Diversification

One of the strongest things about the current Soul Patts business is that it’s invested in a number of sectors.

Some of the biggest ones include telecommunications, building products, resources, listed investment companies (LICs), financial services, agriculture, pharmacies, swimming schools and property.

In terms of actual businesses, it’s biggest listed investments includes TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Pengana International Equities Ltd (ASX: PIA), Pengana Capital Group Ltd (ASX: PCG), Bki Investment Co Ltd (ASX: BKI) and Milton Corporation Limited (ASX: MLT).

Flexible investment mandate

Soul Patts is not stuck being a telco or a bank like Telstra Corporation Ltd (ASX: TLS) and Australia and New Zealand Banking Group Ltd (ASX: ANZ).

This investment mandate gives Soul Patts the ability to pick whatever investment it wants in whichever sector it’s targeting, listed or unlisted.

It gives the investment team a wide array of potential opportunities which allows it to find the right ideas at the different points of economic cycles.

That’s how it has ended up with a portfolio ranging from agriculture to luxury retirement living.

Dividend growth

Soul Patts has a very impressive dividend record, particularly for an ASX share.

It has increased its dividend every year going back to 2000. Soul Patts has also paid a dividend every year going back to 1903, including through wars, recessions and COVID-19.

That dividend growth is funded by the cashflow of investment income from its portfolio. That comprises dividends, distributions and interest income.

Each year, Soul Patts pays a dividend from that net cashflow (after expenses). It holds back some of the cashflow to reinvest into more opportunities. This adds more cashflow, like a growing snowball that’s rolling downhill each year.

What’s the ASX dividend share’s yield?

At the current Soul Patts share price it offers a grossed-up dividend yield of 2.9%.

That’s not very high, the big search for yield by income investors has driven up share prices. However, the yield remains comfortably higher than what you can get in interest from the bank.

More reading

• 2 ASX dividend shares that keep growing their dividend every year
• 3 small caps ASX dividend shares offering big income
• 3 ASX dividend shares to buy today

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why Soul Patts (ASX:SOL) is such a strong ASX dividend share appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/2POYsgd