On Wednesday the S&P/ASX 200 Index (ASX: XJO) was out of form and dropped lower. The benchmark index fell 0.5% to 6,795.2 points.

Will the market be able to bounce back from this on Thursday? Here are five things to watch:

ASX 200 futures pointing higher

The Australian share market looks set to push higher on Thursday morning following a positive night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 5 points or 0.1% higher this morning. In late trade on Wall Street, the Dow Jones is up 0.55%, the S&P 500 has risen 0.3%, and the Nasdaq is up 0.55%.

US Fed keeps rates on hold

The US Federal Reserve has sharply increased its expectations for economic growth but indicated that there will be no interest rate hikes until 2023 despite this and higher inflation. According to CNBC, the committee also voted to keep short-term borrowing rates steady near zero and will buy at least US$120 billion of bonds a month.

Oil prices drop

Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could underperform today after oil prices dropped. According to Bloomberg, the WTI crude oil price is down 0.25% to US$64.64 a barrel and the Brent crude oil price has fallen 0.45% to US$68.08 a barrel. This was the fourth session in a row of declines. Traders were selling oil due to rising US inventories.

Gold price surges higher

Gold miners Newcrest Mining Ltd (ASX: NCM) and Resolute Mining Limited (ASX: RSG) could be on the rise today after the gold price surged higher. According to CNBC, the spot gold price is up 1.05% to US$1,749.00 an ounce. The gold price climbed after the US Fed committed to not increasing rates until 2023.

Afterpay rated neutral

A note out of Goldman Sachs reveals that its analysts have held firm with their neutral rating and $127.60 price target on Afterpay Ltd (ASX: APT) shares following a deep dive into the buy now pay later sector. Goldman spoke very positively about the company, but continues to struggle with its valuation. It commented: “we believe relatively few players will dominate this sector in each market and flag that APT is showing the operational signs of being one of the key winners in this space (strong customer growth, merchant pipeline and frequency of use trends). […] However, valuation keeps us as Neutral.”

More reading

• ASX 200 dips, CBA launches BNPL, Fonterra reports
• 2 ASX investing strategies that could give young people an advantage
• Afterpay (ASX:APT) share price wobbles on CommBank BNPL news
• How this week’s Fed meeting could impact ASX 200 shares
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T 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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The Zip Co Ltd (ASX: Z1P) share price has been pummelled in recent weeks, does that make it a buy now or buy later?

The Zip share price has actually fallen by almost 40% since 16 February 2021. That’s an even stronger decline than what has happened to Afterpay Ltd (ASX: APT) over the same time period.

Since the start of the decline, Zip has reported its FY21 half-year result, so let’s look at those numbers:

FY21 half-year report

Zip reported that in the six months to 31 December 2020 it delivered record transaction volume (TTV) of $2.3 billion, which was up 141% year on year. Zip said that this is now annualising at more than $7.5 billion as at December 2020.

The increase in TTV led to revenue growing by 130% year on year to $160 million – this is annualising at more than $480 million as at December 2020.

Zip said that it delivered positive cash earnings before tax, depreciation and amortisation (EBTDA) in the first half with cash gross profit margins increased to 54%. Management boasted that this demonstrated market leading unit economics whilst investing for global growth.

The buy now, pay later business completed its acquisition of Quadpay in August 2020, which operates in the US. It has grown its TTV by more than 130% in the four months since the deal was completed.

Zip said that the addition of Quadpay has delivered a step change in unit economics, revenue yield and capital efficiency for the company. Revenue as a percentage of TTV was 6.89%, the gross margin as a percentage of TTV was 3.71% and the blended book is now recycling every three months on average.

There was significant growth of customers, which went up 217% year on year to 5.7 million, whilst it ended with 38,500 merchants across the US, Australia, New Zealand and the UK.

Some of the latest merchants to sign up include Gamestop, Sunglass Hut, Harvey Norman Holdings Limited (ASX: HVN) and Adore Beauty Group Ltd (ASX: ABY).

What do brokers think of the Zip share price?

There’s quite a divergent view of Zip shares at the moment.

At one end there’s a broker such as Morgans which has a share price target for Zip of just over $12. Morgans thinks that Zip is growing strongly, especially in North America. However, it’s spending a lot to do it. The broker acknowledged that Zip is investing in a number of different areas, including new offerings for customers.

However, the brokers at Macquarie Group Ltd (ASX: MQG) have a much less rosy outlook for Zip shares with a price target of $5.70. Macquarie says that Quadpay has very good net transaction margins, however future competition may mean that the margin reduces over time. The broker is wary of the high valuation and the higher costs.

New competition in Australia

Zip is also going to have to come to terms with the fact that Commonwealth Bank of Australia (ASX: CBA) is launching its own buy now, pay later product. It will be able to be used anywhere that Mastercard is accepted.

There will be a limit of $1,000 and it’ll be repaid in four fortnightly instalments for transactions higher than $100.

CBA paid particular attention to note that the cost would be lower for merchants because there are no additional fees to businesses, just the standard merchant fee. Customers aren’t charged ongoing fees, just a late fee of $10 per missed instalment repayment – up to a cap.

Zip may need to react to this development to ensure continuing long term growth in Australia.

More reading

• ASX 200 dips, CBA launches BNPL, Fonterra reports
• Is the Commonwealth Bank (ASX:CBA) share price a buy or hold?
• How much have investors made (or lost) on Zip (ASX:Z1P) shares?
• 2 ASX investing strategies that could give young people an advantage
• Afterpay (ASX:APT) share price wobbles on CommBank BNPL news

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of AFTERPAY T 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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There are a few ASX dividend shares out there with much higher dividend yields than most of the market.

High yield businesses come with the normal points of risks and rewards. Plenty of high yield dividends may not stay high yield forever. 

These businesses currently have a high dividend yield for shareholders:

Nick Scali Limited (ASX: NCK)

Nick Scali is an ASX dividend share that is now paying a much bigger payout than a few years ago. The FY21 interim dividend payout was the same size as the entire payout in FY18.

The board of Nick Scali implemented a 60% increase of the dividend to 40 cents per share after underlying earnings per share (EPS) grew by 99.5% to 50 cents.

Not only did revenue increase by 24.4% to $171.1 million, but the underlying earnings before interest and tax (EBIT) margin grew by 1,270 basis points to 33.6%.

The ASX dividend share is also expecting more growth in the second half of FY21, with the sales order growth in January being up 47% year in year. The sales order bank at the end of January 2021 was at an all time high.

At the current Nick Scali share price, it has a trailing grossed-up dividend yield of 9.4%.

Pengana Capital Group Ltd (ASX: PCG)

Pengana is a fund manager that operates a number of different strategies for investors including ASX shares, international shares and private equity.

The business is seeing steady growth of its funds under management (FUM). In the FY21 half-year result, it reported that funds under management increased by 15% to $3.6 billion thanks to a mixture of investment performance ($463 million) and positive net inflows ($81 million).

Indeed, the ASX dividend share said that all of its strategies outperformed their respective benchmarks for the period.

Underlying earnings per share (EPS) went up by 13% to 5.96 cents, which helped fund a 25% increase to the interim dividend to 5 cents per share.

The last 12 months of Pengana dividends amounts to a grossed-up dividend yield of 7.1%.

At the end of February 2021, Pengana’s FUM had grown to $3.63 billion.

Pacific Current Group Ltd (ASX: PAC)

Pacific is another ASX dividend share that it’s in the funds management business.

It doesn’t actually run any funds itself yet, instead it looks for fund managers around the world to invest in. Pacific Current takes stakes in those businesses and then aims to help them grow.

Some of its investments include fund managers called Aether, Carlisle, GQG, Proterra, Victory Park and ROC.

Pacific Current said that widespread growth led to its FUM increasing by 23.9% to $113 billion on a 100% basis. GQG continues to receive “substantial” inflows.

In the recent FY21 half-year result it said that base management fees grew by 10% (or 16% in US dollar terms), whilst operating expenses fell 24%. It was a large fall in performance fees (down 68%) and a stronger Australian dollar that saw underlying net profit fall 13.4%.

However, Pacific Current announced that the interim dividend would remain at $0.10 per share, which represented a dividend payout of 44%.

The ASX dividend share has a trailing grossed-up dividend yield of 9%.

More reading

• 2 ASX dividend shares to buy with yields above 4%
• The JobKeeper payment is ending. So what will happen next?
• Why Audio Pixels, Nick Scali, Smartgroup, & Zip are tumbling lower
• 2 cheap ASX shares to buy with impressive growth
• 3 highest yielding ASX dividend shares

Motley Fool contributor Tristan Harrison owns shares of PACCURRENT 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.

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The S&P/ASX 200 Index (ASX: XJO) fell by around 0.5% today to 6,795 points.

One of the main highlights of the ASX was one of the big banks announcing that it was going to get involved directly in a buy now, pay later offering.

Here are some of the biggest news pieces from the ASX today:

Commonwealth Bank of Australia (ASX: CBA) to launch buy now, pay later product

Australia’s biggest bank has announced that it’s launching a buy now, pay later offering which can be used anywhere that Mastercard is accepted. Eligible customers will start being able to use it from mid-2021. There will be no ongoing fees for customers and it won’t cost anything more than the standard merchant fees for merchants.

The big ASX 200 bank said that buy now, pay later average industry costs to businesses are around 4% per transaction and BNPL fees cost Australian businesses hundreds of millions of dollars a year.

CBA said that robust criteria will be used to approve customers based on specific eligibility and credit assessments.

It will be available alongside the existing Klarna BNPL offering which gives customers an integrated shopping experience, as well as offers and notifications.

Angus Sullivan, an executive from the retail banking services division said:

As the leading digital bank in Australia, we believe we are best placed to offer our customers a prudent and responsible BNPL option based on the trends and insights sourced from real time transaction data over many years.

Customer needs are evolving and this new BNPL offering is about giving customers more choice around how they choose to pay and when, depending on the option which suits them best.

When making a payment, customers will have additional flexibility to use it for their everyday spending for smaller purchases as well as split over four instalments to help smooth payments for bigger purchases.

Despite the news, the Afterpay Ltd (ASX: APT) share price ended up 1%, whilst the Zip Co Ltd (ASX: Z1P) share price fell over 1%.

Fonterra Shareholders’ Fund (ASX: FSF)

Fonterra announced its FY21 half-year result today. It said that normalised gross profit was up 3% to $1.7 billion, expenses dropped 3%. This led to normalised earnings before interest and tax (EBIT) going up 17% to $684 million and normalised net profit after tax (NPAT) rose 43% to $418 million.

Whilst reported net profit was down 22% to $391 million, it was because last year’s result included the gain from the divestments of DFE Pharma and Foodspring.

In regards to its outlook, the business said that its earnings performance is expected to come under significant pressure in the second half. Whilst the strong milk price is good for farmers, it is hurting Fonterra’s margins. Normalised earnings per share (EPS) for the full year is expected to be 25 to 35 cents per share.

The Fonterra share price rose 1% today. 

Cimic Group Ltd (ASX: CIM)

ASX 200 engineering business CIMIC announced that the alliance that UGL is part of has reached a contract award with Rail Projects Victoria for the Gippsland Line upgrade.

This will deliver revenue to Cimic of approximately $124 million.

The upgrade includes second platforms, station improvements, tracks, signalling and level crossing upgrades.

UGL managing director Doug Moss said:

UGL is Australia’s leading rail and infrastructure service provider with operations across the country. We look forward to improving services and safety for the people of the Gippsland region and Victoria.

The project is expected to begin in early 2021 and be completed by the end of FY22.

The Cimic share price fell 1.3% today. 

More reading

• Is the Commonwealth Bank (ASX:CBA) share price a buy or hold?
• Why the Elders (ASX:ELD) share price is outperforming the ASX today
• How much have investors made (or lost) on Zip (ASX:Z1P) shares?
• 2 ASX investing strategies that could give young people an advantage
• Cimic (ASX:CIM) share price falls despite positive update

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T 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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At the small end of the Australian share market, there are a number of companies with the potential to grow materially in the future.

Two that brokers believe are in the buy zone are listed below. Here’s what you need to know about them:

MyDeal.com.au Limited (ASX: MYD)

The first small cap ASX share to look at is MyDeal.com.au. It is an online retail marketplace with a focus on homewares, furniture, and electronics.

Despite delivering very strong growth during the first half, the MyDeal share price has been dragged lower by the tech selloff in recent weeks. This means it is now trading below its IPO price of $1.00.

This could be a buying opportunity for patient investors, especially given its exposure to the structural shift to online shopping and its rapidly growing active customer base. In respect to the latter, at the end of the first half the company had 813,764 active customers.

One leading broker that is a fan is Morgans. In response to the company’s half year results last month, the broker retained its add rating and $1.70 price target.

Whispir Ltd (ASX: WSP)

Another small cap ASX share to look at is Whispir. It is a software-as-a-service communications workflow platform provider.

Whispir’s increasingly popular software platform allows businesses and governments to deliver actionable two-way interactions at scale using automated multi-channel communication workflows.

As with MyDeal, the Whispir share price has come under pressure during the tech selloff. So much so, it is now trading 30% lower than its 52-week high. This is despite the company releasing a strong half year result last month and reporting a 29.2% increase in its annualised recurring revenue to $47.4 million.

Ord Minnett appears to see this as a buying opportunity. Earlier today it retained its buy rating and put a $4.25 price target on its shares.

More reading

• The MyDeal (ASX:MYD) share price is down 22% in a month: Is it time to buy?
• 2 small cap ASX shares to watch closely in 2021
• One person earned $250,000 on Airtasker last year. Now it’s listing
• 2 small cap ASX tech shares trading at a big discount
• Why Limeade, Oil Search, Platinum, & Whispir shares are sinking

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 recommends Whispir Ltd. The Motley Fool Australia has recommended Whispir Ltd. 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 Kleos Space SA (ASX: KSS) share price marched ahead today despite a lack of announcements during the trading session. The satellite reconnaissance company’s shares finished up 6% higher to 71 cents per share.

With no news out today, it might be worth looking at recent developments to understand what could have the market excited.

Kleos share price tapping US interest?

The volume of shares traded today (more than 1.13 million) was abnormally high considering its last announcement was on 12 March. At that time, Kleos provided an investor presentation specifically for United States public market investors. Since that release, the company’s shares have gained nearly 14%.

Kleos’ service is focused on collecting radio spectrum data via orbiting satellites. This information is beamed back to Earth, where it is then processed with the Kleos’ algorithms.

From there, the valuable data is delivered to its clients. Currently, those clients are mostly Five Eyes organisations and agencies homing in on illegal activities.

There are a few reasons the presentation could be driving shares higher. Firstly, there is potential that some US investors liked the proposition and have gone ahead and invested. Secondly, as the information is available to the ASX, potentially local investors found a few valuable nuggets in the slides.

Lastly, the second satellite cluster launch around mid-year is fast approaching. The nearing of that particular event could have investors scrambling to accumulate.

SpaceX Starship seems feasible

Another potential catalyst for the Kleos share price is the recent developments in Space X’s Starship.

The 50m tall rocket has been under development for years now as an ambitious endeavour to reduce space flight costs further. On 5 March, the rocket managed to make a return landing on the launch platform before later exploding.

SpaceX released new high definition video of Starship SN10’s landing earlier this month: https://t.co/X9DiV5w6Ow pic.twitter.com/1JZdcJY9f6

— Michael Sheetz (@thesheetztweetz) March 17, 2021

https://platform.twitter.com/widgets.js

Due to the rocket’s size, if successful, it would be able to carry a far greater number of satellites/people in the future. Thereby decreasing the per kilogram cost for sending into space.  

This is an exciting potential for a company like Kleos, as it may significantly reduce one of its highest operation costs – getting the satellite into space to begin with. 

Accounting for today’s gain in the Kleos share price, the company now has a market capitalisation of $107 million.

More reading

• Kleos (ASX:KSS) share price is edges lower despite positive update

Motley Fool contributor Mitchell Lawler 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 Kyckr Ltd (ASX: KYK) share price was rocketing this afternoon after the company announced a partnership with BAE Systems Applied Intelligence.

At the close of trading, the regulatory technology company’s shares were up 18.9%, trading at 6.9 cents.

Let’s take a closer look at the new alliance.

What did Kyckr announce?

In today’s release, Kyckr advised that it has partnered with BAE Systems to address anti-money laundering and compliance issues posed by regulated firms. The company aims to deliver reliable and efficient know-your-customer (KYC) and customer due diligence (CDD) solutions.

Kyckr believes the alliance will empower mutual customers to benefit from its solutions. Its network spans more than 180 registries and 170 million entities in 120 countries.

According to Kyckr, demand has been growing rapidly for its capabilities and services, supplying real-time access to a company’s registry details. It said that regulations increasingly required for accurate and up-to-date KYC information.

A detailed study by Facts and Factors assessed the global KYC market value in 2019 at $257.23 million. This is forecast to reach $1,015.36 million by 2026, growing at a compound annual growth rate (CAGR) of 22%.

Management commentary

Kyckr partnerships head Myles McLaren welcomed the collaboration, saying:

We are delighted to be partnering with BAE Systems Applied Intelligence to provide live registry data to their end customers, improve KYC capabilities via enhanced access to our registry network and bring the best solution to their customers. We look forward to continuing to provide leading services in KYC compliance.

BAE Systems product director Peter Fisher added:

Partnering with Kyckr enables the automated screening of corporate records data within our NetReveal customer due diligence solution. The result is effective investigations, better detection and ultimately, a smoother end customer experience.

About the Kyckr share price

The Kyckr share price has gained more than 40% over the past 12 months but fallen around 10% year-to-date. The company’s shares are currently between its mid-range of its 52-week chart (between a low 3.5 cents and a high of 11 cents).

Based on valuation grounds, Kyckr has a market capitalisation above $23.7 million, with roughly 343 million shares on issue.

More reading

• Bring your portfolio to life with these fantastic ASX healthcare shares
• Why the Metalstech (ASX:MTC) share price has rocketed today
• Why the Humm (ASX:HUM) share price will be on watch on Thursday
• Which ASX shares with ethical values are seeing returns in 2021?
• Should ASX investors own Bitcoin (CRYPTO:BTC) as a defensive investment?

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.

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Because of ageing and growing populations, better technologies and treatments, and increasing chronic disease burden, demand for healthcare services is expected to continue to increase over the long term.

This bodes well for healthcare shares, positioning them perfectly for growth over the 2020s and beyond. With that in mind, I have picked out two healthcare shares that are highly rated right now:

CSL Limited (ASX: CSL)

CSL is one of the world’s leading biotechnology companies, comprising the CSL Behring and Seqirus businesses. CSL Behring is the global leader in plasma therapies, whereas Seqirus is the world’s second largest influenza vaccines business.

Both businesses appear well-placed for growth over the long term. For CSL Behring, this is due to robust demand for its life-saving immunoglobulins products and its highly promising research and development pipeline. The latter is filled with a good number of potentially lucrative products.

Supporting this growth will be its Seqirus business, which is expected to experience a surge in demand for seasonal flu vaccines because of the pandemic.

And while plasma collection headwinds are likely to weigh on the company’s overall growth in the immediate term, once the pandemic passes, collections will become easier and this headwind will ease.

One broker that is positive on CSL is Citi. Last week it upgraded its shares to a buy rating with a $310 price target. This compares to the current CSL share price of $261.00.

ResMed Inc. (ASX: RMD)

Another healthcare share which is highly rated is medical device company ResMed.

ResMed aims to change lives by developing, manufacturing, and distributing innovative medical devices and cloud-based software solutions that better diagnose, treat, and manage sleep-disordered breathing, chronic obstructive pulmonary disease (COPD), and other key chronic diseases.

These are lucrative markets for the company to target. Management estimates that there are hundreds of millions of sufferers of both sleep apnoea and COPD globally.

In addition to its industry-leading hardware, the company has a burgeoning digital health ecosystem. This ecosystem reached over 12 million cloud connectable medical devices in 2020, providing ResMed with strong recurring revenues and a material amount of high quality data.

Analysts at Morgans are bullish on the company. They recently retained their add rating and put a price target of $30.09 on its shares. This compares to the current ResMed share price of $25.03.

More reading

• Temperature check: How is the CSL (ASX:CSL) share price faring today?
• 3 beaten down ASX shares that could be great value
• Share market on watch over AstraZeneca vaccine fears
• 2 outstanding ASX shares to buy and hold
• This fundie refuses to invest in gambling and fossil fuels

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 CSL Ltd. The Motley Fool Australia has recommended ResMed Inc. 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 Metalstech Ltd (ASX: MTC) share price opened nearly 18% higher today after the mineral exploration company announced it was spinning off its lithium assets into a new, publicly-listed company.

Shares in the miner retreated through the course of the day but rallied in the closing moments of trading to an intraday high of 21 cents before closing at 19.5 cents, up 14.7%. In comparison, the All Ordinaries Index (ASX: XAO) is down 0.52%.

Let’s take a closer look at what Metalstech announced.

Metalstech recycles its lithium

In today’s release, Metalstech advised it would spin out its Québécois lithium projects into a new, yet to be named company.

Metalstech foreshadowed the spinoff in a statement released to the market 6 days ago. The company said it would reorganise the assets into one Australian-owned subsidiary. From there, 22 million shares in the new company will be created and held by Metalstech.

Metalstech will then seek shareholder approval for the spinoff. Once approved, shares in the new company will be distributed to shareholders on a pro-rata basis.

After the distribution of shares, the new company will have its initial public offering (IPO). Metalstech hopes the new company will raise between $5 million – $8 million for the listing. Shares in the new company will be sold at a rate of 20 cents each.

The company is selling its lithium assets to focus on its gold and cobalt operations.

Words from the chair

Speaking on today’s announcement, Metalstech chair Russell Moran said:

… our portfolio of high-grade lithium assets [is] valuable. A spinout of the lithium assets into a separate listing provides a non-dilutive and ‘off balance sheet’ solution for accelerated development in what is now a booming battery metals sector.

Metalstech share price snapshot

This time almost 1 year ago, the Metalstech share price hit a 52-week low of 3.2 cents. Since then, the company’s value has increased by 462.5%. However, the share price is 37.9% lower than its 52-week high of 29 cents in July 2020.

Metalstech has a market capitalisation of $26.4 million.

More reading

• Why has the MetalsTech (ASX:MTC) share price boosted 41% today?

Motley Fool contributor Marc Sidarous 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 Humm Group Ltd (ASX: HUM) share price will be one to watch on Thursday.

This follows the release of an announcement by the financial services company just as the market closed on Wednesday.

What did Humm announce?

This afternoon Humm announced the pricing of $450 million of asset-backed securities (ABS), which is significantly more than previously planned. These are supported by a pool of fully amortising, secured commercial auto and equipment finance receivables.

According to the release, strong investor demand enabled a upsize of $150 million over the launch amount previously flagged in February. The receivables are originated through flexicommercial.

The release explains that the flexicommercial ABS Trust 2021-1 represents the second ABS transaction in FY 2021 for Humm. It is also the third securitisation of receivables originated through flexicommercial.

Following the close of this transaction, Humm will have issued $700 million of ABS notes during FY 2021.

Humm’s Chief Financial Officer, Jason Murray, commented: “We are extremely pleased with the market appetite for this transaction which was oversubscribed across all note tranches and is testament to the quality of the underlying receivables being securitised.”

“Considering the significant demand from investors, the transaction was upsized to A$450 million, representing the largest hummgroup ABS transaction and raising to date.”

“The strong demand also led to a tightening of pricing across all tranches and reflects that investors continue to seek high quality assets in a low interest rate environment. The pricing and successful completion of this transaction is an important step in the strategic review of flexicommercial, to increase the capital efficiency of the business. This will also provide a material capital release for hummgroup.”

The Humm share price is underperforming in 2021 and down 12% year to date. This compares to gains of 53% by Zip Co Ltd (ASX: Z1P) shares and 26% by Sezzle Inc (ASX: SZL) shares.

More reading

• Is Afterpay (ASX:APT)’s BNPL competition heating up?
• Why Appen, Bigtincan, Humm, & Nanosonics are tumbling lower
• Humm (ASX:HUM) share price plummets 15% despite rising profits
• Humm (ASX:HUM) share price up on new BNPL for SMEs

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 ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia has recommended Humm Group Limited and Sezzle Inc. 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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