The S&P/ASX 200 Index (ASX: XJO) is back on form and racing higher on Monday afternoon. At the time of writing, the benchmark index is up 1.45% to 6,770.1 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are sinking:

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price is down 6% to $22.64. Today’s decline has been driven by the the iron ore giant’s shares trading ex-dividend this morning for its fully franked interim dividend of $1.47 per share. When a share goes ex-dividend, it trades without the rights to an upcoming dividend. In light of this, a share will tend to drop to reflect this. Eligible shareholders can look forward to receiving this dividend on 24 March.

Genworth Mortgage Insurance Australia Ltd (ASX: GMA)

The Genworth share price has sunk 7% to $2.39. This morning the company revealed that major shareholder Genworth Financial has entered into an agreement to sell its ~52% stake in the company. If the sales agreement completes successfully, Genworth Financial will no longer own any shares in Genworth Mortgage Insurance Australia.

Limeade Inc (ASX: LME)

The Limeade share price has crashed 32% lower to $1.01. This appears to be a delayed response to the company’s full year results release on Friday. Investors appear very disappointed with the employee experience software company’s guidance for FY 2021. Management expects revenue of US$50 million to US$53 million. This is a decline on FY 2020’s revenue of US$56.6 million.

Northern Star Resources Ltd (ASX: NST)

The Northern Star share price is down 2.5% to $9.96. Investors have been selling this gold miner’s shares following a pullback in the gold price on Friday. On Friday night, the spot gold price sank 2.6% to US$1,728.80 an ounce. Rising US bond yields and a strengthening US dollar sent the precious metal to an eight-month low.

More reading

• ASX 200 up 1.5%: Afterpay & Zip jump, Fortescue tumbles
• Why the Fortescue (ASX:FMG) share price is sinking 6% today
• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• 5 things to watch on the ASX 200 on Monday
• Why outperforming ASX resources shares will be in the hotseat on Monday

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 Limeade, Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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When mentioning the red hot buy now, pay later (BNPL) sector, an investor might immediately think of the two largest and most famous providers on the ASX. Those would be Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASZ: Z1P). Afterpay did arguably start and pioneer the whole BNPL craze a few years ago, and it remains the largest BNPL company on the ASX today.

Zip is the second largest provider and has enjoyed playing silver to Afterpay’s gold for many years as well. Even today, as the ASX is graced by a dozen BNPL companies all fighting for a slice of this growing pie, Zip and Afterpay still seem to dominate investor sentiment around the burgeoning industry.

But another name has been in the news lately. And this name has a powerful ASX friend.

Klarna cleans up

Klarna is a BNPL company based in Sweden. If you haven’t heard of Klarna, you will no doubt have heard of the ASX giant it has teamed up with to provide its services here in Australia. Yes, Klarna is working with Commonwealth Bank of Australia (ASX: CBA). Today, the two companies offer Klarna’s services through CBA’s platform.

So exactly how much of a threat to Afterpay and Zip does Klarna pose? A recent report from Bloomberg sheds some light on that question. The report tells us that Klarna is about to undertake a capital funding round to its institutional investors. The company is seeking to raise between US$800 million and US$1 billion in fresh funds.

The report states that this funding round has just valued Klarna at “around” US$31 billion (~$40 billion). That means it would be worth roughly triple what it was back in September last year when the company held its last capital raise. Based on current prices, Zip has a market capitalisation of $6.06 billion, and Afterpay boasts a $35.94 billion market cap.

Is Klarna a threat to Afterpay and Zip?

If that valuation for Klarna does come to fruition, it would reportedly make Klarna “Europe’s most valuable startup”, and a gorilla in the BNPL space.

Afterpay and Zip are attempting to aggressively expand into new markets, primarily the United States. And that’s where they might run headlong into Klarna. Bloomberg reports that Klarna has “risen in popularity in the US”, and has emerged as a challenger to other US payments companies like Paypal Holdings Inc (NASDAQ: PYPL) and Squre Inc (NASDAQ: SQ).

For Afterpay and Zip, competition is certainly not going away anytime soon. But then again, it’s also nothing new.

More reading

• Why Afterpay, Austal, Reece, & Service Stream shares are racing higher
• ASX 200 up 1.5%: Afterpay & Zip jump, Fortescue tumbles
• BNPL providers like Afterpay (ASX:APT) set for increased regulation
• Will the Afterpay (ASX:APT) share price go higher in 2021? Here’s what Goldman Sachs thinks.
• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings

Sebastian Bowen 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 PayPal Holdings and Square. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings. 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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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is well and truly back on form and charging higher. At the time of writing, the benchmark index is up 1.5% to 6,774.6 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are racing higher:

Afterpay Ltd (ASX: APT)

The Afterpay share price has rebounded 6% to $126.40. Investors have been buying the payments company’s shares amid improving sentiment in the tech sector. In addition to this, this morning analysts at Ord Minnett retained their buy rating and increased their price target on its shares to $150.00.

Austal Limited (ASX: ASB)

The Austal share price is up 6% to $2.52. The catalyst for this was news that Austal’s Philippines business has successfully delivered Hull 419 to Fjord Line of Norway. The 109 metre high-speed catamaran vehicle-passenger ferry is the largest ferry to be constructed by Austal, at any of the company’s shipyards worldwide. In addition to this, this morning Credit Suisse upgraded the shipbuilder’s shares to an outperform rating with a $2.75 price target.

Reece Ltd (ASX: REH)

The Reece share price has climbed 5% to $17.00. This gain appears to have been driven by another broker note out of Ord Minnett. This morning its analysts upgraded the plumbing parts company’s shares to a hold rating. It made the move in response to its half year results release last week.

Service Stream Limited (ASX: SSM)

The Service Stream share price is up over 3% to $1.19. This is despite there being no news out of the essential network services provider. However, with the Service Stream share price losing almost 40% of its value last week, some investors may believe its shares have been oversold. Last week Ord Minnett put a buy rating and $2.06 price target on its shares following its half year results.

More reading

• ASX 200 up 1.5%: Afterpay & Zip jump, Fortescue tumbles
• BNPL providers like Afterpay (ASX:APT) set for increased regulation
• These are the 10 most shorted shares on the ASX
• Will the Afterpay (ASX:APT) share price go higher in 2021? Here’s what Goldman Sachs thinks.
• Here’s why the Austal (ASX:ASB) share price is storming 6% higher

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 Austal Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Service Stream Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Appen Ltd (ASX: APX) share price has become a shell of its former self. From a superstar performer in the ranks with leading ASX 200 tech shares such as Afterpay Ltd (ASX: APT) and Xero Ltd (ASX: XRO), to losing more than 50% of its value since August 2020. 

Despite its weaker earnings and shocking share price performance, analysts at Bell Potter think that the Appen share price is still worth holding. 

The Appen share price nosedives on weak earnings 

Just when you think things couldn’t get worse, shares in the data solutions provider dived last Wednesday on poor FY20 earnings. At the $16.50 level, this marks a 60% slump since its August 2020 record-all time high and brings its shares to a 2-year low.

After running the ruler for Appen’s full-year earnings,  the company’s underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) of $108.6 million was close to Bell Potter’s forecast of $109.0 million.

Revenue of $599.4 million was 6% below the broker’s forecast of $637.4 million, but a higher-than-forecasted EBITDA margin made this up. 

Looking ahead, Appen provided a forecast FY21 underlying EBITDA of $120 million to $130 million. This was well below the broker’s forecast of $145.8 million. The company cited year-to-date orders in hand of $240 million (vs. $210 million a year ago) and that “1H21 earnings growth will be impacted by the near-term challenges, a greater skew of timing of project delivery to 2H21 and the lower pcp cost base”. 

As a result, Bell Potter downgraded its 2021 and 2022 earnings per share (EPS) forecasts by 23% and 26%. It now forecasts underlying EBITDA in 2021 to be $119 million, just below the guidance range. 

Appen share price rated as a hold

Bell Potter maintains a hold recommendation for Appen shares with a 12-month price target of $19.50. This represents an upside of approximately 17.50% compared to its price at the time of writing. The broker points to the company’s redeeming factors, which include its long-term growth track record and strong customer relationships. 

Appen was established in 1996 and has a long track record of revenue growth with strong margins. In 2020, the company recorded revenue and underlying EBITDA growth of 12% and 8%, respectively. 

The key competitive advantage of Appen is the longstanding relationships it has with many of its customers. The majority of revenue is from repeat customers as they update and upgrade their products.

More reading

• Top ASX shares to buy in March 2021
• These were the worst performing ASX 200 shares in February
• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• Top brokers name 3 ASX shares to sell next week
• These were the worst performing ASX 200 shares last week

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO and Xero. 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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Macquarie Group Ltd (ASX: MQG) provided an earnings upgrade on 22 February, citing profit would be up 5% to 10% from its “slightly down” guidance just two weeks prior. This update helped the Macquarie share price push 2% higher on the day of the announcement.

Macquarie asset management to drive performance 

Macquarie’s earnings are being boosted by the extreme winter weather in North America which has significantly increased client demand for the physical supply of gas and power. 

Macquarie generates part of its income by connecting producers and consumers and has considerable investments in energy and oil storage, and a commodities trading business that benefits from higher prices. 

In a research report released on 23 February 2021, Morningstar stated that it believes Macquarie’s asset management business is well-placed to capitalise on growth in global infrastructure and renewable energy investment over the next five years. It cited low cash rates as being likely to spur investment, as investors chase income and drive up asset prices.

With established capabilities and investment records, the large asset managers in the space continue to garner the bulk of inflows into the category. In its report, Morningstar outlined the global infrastructure spending tailwinds which are likely to drive growth for Macquarie asset management. These include commentary from the American Society of Civil Engineers which estimated that around $5 trillion is needed to be spent on infrastructure by 2025, covering ageing transportation and electricity assets as well as schools and airports. 

Furthermore, Morningstar noted that Macquarie’s Australian home loan book also continues to grow well ahead of the market, benefitting from its investment into digital capabilities. Morningstar highlighted that Macquarie’s operating efficiency coupled with consistent lending standards is being rewarded in the mortgage broker channel.

Macquarie sources a larger share of its funding from business customers and cash management accounts, not only helping to keep funding costs low, but providing the capital required to grow its loan book.  

Morningstar maintains its Macquarie share price estimate 

Despite the tailwinds for Macquarie’s businesses, Morningstar believes that the one-off uplift to earnings due to volatile commodity demand and prices has no bearing on longer-term forecasts. On 23 February, the broker maintained its $125 fair value estimate for the Macquarie share price. 

The bull and bear case for the Macquarie share price 

Morningstar’s report provided a breakdown of what factors could sink or swim the Macquarie share price.

Bulls 

• Macquarie’s position as the largest infrastructure asset manager globally leaves the firm well placed to benefit from underlying demand for assets and investors searching for sustainable income streams.
• The expansion into funds management has produced more sustainable, less capital-intensive, annuity-style income, which will prevent a GFC-like shock to earnings and return on equity.
• A focus on niche segments of investment banking allows Macquarie to continue increasing earnings globally.

Bears 

• Without the support of falling cash rates, it is unlikely Macquarie can continue to achieve double-digit returns in infrastructure, resulting in lower performance fee income.
• Macquarie invests directly in unlisted assets and businesses, and despite being diversified, a large bankruptcy or asset write-down would still have an impact on group profits.
• A large investment portfolio makes it more difficult for investors to track and identify issues early.

At the time of writing on Monday, the Macquarie share price is trading 1.86% higher at $145.13.

More reading

• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• Nine (ASX:NEC) share price on watch as profit doubles
• Vocus (ASX:VOC) share price rises after takeover update
• ASX 200 drops 0.2%, Costa soars, BOQ is buying ME Bank
• ASX 200 up 0.1%: Macquarie upgrades guidance, Costa impresses, NIB surges higher

Motley Fool contributor Kerry Sun 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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The Xtek Ltd (ASX: XTE) share price was shot down as losses in the group widened substantially even though its results weren’t as bad as the headline numbers suggested.

Shares in the defence equipment supplier crashed 6.6% to 57 cents this morning. The sell-off comes as management reported a 55% increase in first half net loss to $3.6 million on Friday evening.

Xtek’s top line fell too. Revenue declined 23% to $12.4 million for the six months ended 31 December 2020, compared to the same period in 2019.

Silver lining to Xtek’s profit results

But it isn’t all bad news, although most investors would have missed any good news as these are buried in the details.

It also doesn’t help perception as Xtek chose to release its results after the market closed on Friday. There’s a market belief that only ASX shares with bad news will release an announcement after the closing bell on a Friday.

However, management’s positive outlook commentary should sooth fears about its new Adelaide manufacturing plant.

Ramping up production

Problems with the commissioning and ramp up of the new plant, which makes bullet proof composites, have been the main reason why the Xtek share price has underperformed since its capital raising in August 2020.

These issues seem to have been addressed. Xtek received regulatory approval to operate the plant and has successfully manufactured and tested three hard amour plates.

Xtek believes the plant will hit full production by the June quarter and current orders for its plates can be fulfilled at the smaller existing test plant.

Bigger net loss explained

The bigger net loss is also largely due to increase costs. These related to the commissioning the Adelaide plant and running the recently acquired US body armour business HighCom.

The drop in interim revenue is more disappointing. The fall comes even as HighCom’s topline increased by 30% to US$10 million for calendar 2020 compared to the year before.

This suggests a lacklustre first half for the rest of Xtek’s businesses, which includes military drones, software and armaments.

Positive outlook fails to support Xtek share price

But management is tipping a stronger second half result due to the seasonality of its business. Defence spending typically picks up towards the end of the financial year in Australia. This is because government departments have to spend their budgets or risk losing some of their funding in the new financial year.

Xtek is also predicting an increase in exports of its bullet proof plates, further sales of spare parts and servicing for its drones used by the Australian Army, and sales of its drone mapping software under the federal government’s C4EDGE program.

Shareholders not feeling the Pyne

Another piece of significant news is the appointment of former defence minister Christopher Pyne as a non-executive director.

The cynic in me thinks this could be another reason why the stock is underperforming. ASX companies that appoint ex-government minsters to their boards don’t have a good track record in creating shareholder value.

Xtek shareholders like myself will be hoping this time will be different.

More reading

• Douugh (ASX:DOU) share price falls as losses grow
• ASX 200 up 1.5%: Afterpay & Zip jump, Fortescue tumbles
• BNPL providers like Afterpay (ASX:APT) set for increased regulation
• Why the Cimic (ASX:CIM) share price is edging higher today
• Johnson & Johnson coronavirus vaccine wins FDA authorisation

Motley Fool contributor Brendon Lau owns shares of Xtek Limited. Connect with me on Twitter @brenlau.

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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Douugh Ltd (ASX: DOU) shares are falling in Monday’s session following the release of the company’s half-year (1H21) results. At the time of writing, the Douugh share price is trading 2.33% lower at 21 cents.

Here’s a rundown of the fintech company’s 1H21 performance.

What’s impacting the Douugh share price?

The Douugh share price is on the slide today after the company reported a 1H21 loss of $5.4 million, compared to a $739,000 loss reported in 1H20.

Douugh’s earnings per share (EPS) was negative $1.17 in 1H21 compared with negative 71 cents EPS in the prior corresponding period (pcp).

As of 31 December 2020, the company held $17 million in total assets. Total assets held as of 30 June 2020 was $812,000.

Cash and cash equivalents at the end of 1H21 was $16 million, compared with $370,000 at the end of the pcp.

Inclusive of GST, Douugh posted $734,000 in receipts from customers for the period, a bump up from the $363,000 earned in 1H20.

Douugh’s total equity for the half was $15.1 million. A $900,000 deficiency was posted for 1H20.

Operations review

In September 2020, Douugh completed its acquisition of Douugh Technologies Limited (formerly ‘Douugh Limited’).

DOU premiered on the ASX in October 2020 following a reverse takeover of Australian telco Zip Tel.

On Friday, Douugh announced that it has executed a binding share sale agreement with Goodments, a millennial investing app. Goodments currently operates in Australia with a customer base that exceeds 13,000.

Douugh advised that the transaction will enable it to accelerate the development of its activities while also positioning the company to move into the retirement and superannuation industries. 

Following its 2020 launch in the United States, the Douugh Australia app is set to launch later this year.

Douugh share price snapshot

Douugh is a fintech company that offers money management services to its client base via the Douugh mobile app. The business states that its vision is ‘to become a subscription-based financial control centre’.

Over the past year, the Douugh share price has gained 200%. Douugh shares have also surged more than 20% in the past month.

Based on the current share price, the company commands a market capitalisation of $77.3 million with 359.4 million shares outstanding.

More reading

• What’s with the Douugh (ASX:DOU) share price today?
• Why Chorus, Douugh, IOUpay, & Reliance shares are tumbling lower
• Douugh (ASX:DOU) share price plummets 9% today despite strong start
• Payright (ASX:PYR) shares get speeding ticket after 32% surge
• The Novatti (ASX:NOV) share price rocketed 38% today

Motley Fool contributor Gretchen Kennedy 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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At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is back on form and storming higher. At the time of writing, the benchmark index is up 1.5% to 6,774.9 points.

Here’s what is happening on the market today:

Tech shares rebound

The tech sector is rebounding after a positive night of trade on Wall Street’s Nasdaq index on Friday night. The likes of Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) are recording notably strong gains are helping to drive the S&P/ASX All Technology Index (ASX: XTX) 2.6% higher at lunch. On Friday night the tech-focused Nasdaq index rose 0.5%.

Fortescue share price tumbles

The Fortescue Metals Group Limited (ASX: FMG) share price has come under pressure on Monday. However, the pullback in the Fortescue share price has nothing to do with its performance and everything to do with its dividend. This morning the iron ore giant’s shares traded ex-dividend for its fully franked interim dividend of $1.47 per share. Eligible shareholders can look forward to receiving this dividend on 24 March.

Kogan rated as a buy

The Kogan.com Ltd (ASX: KGN) share price is rebounding from last week’s 22% decline. Investors have been buying the ecommerce company’s shares after analysts at Credit Suisse retained their outperform rating and trimmed the price target on them slightly to $20.85. The broker believes the company is well-placed for growth over the medium term.

Best and worst ASX 200 performers

The Austal Limited (ASX: ASB) share price the best performer on the ASX 200 today with a 6.5% gain. This follows the announcement of the delivery of a new vessel. The worst performer on the index has been the Fortescue share price with a 6% decline. This is due to its shares trading ex-dividend this morning.

More reading

• BNPL providers like Afterpay (ASX:APT) set for increased regulation
• Will the Afterpay (ASX:APT) share price go higher in 2021? Here’s what Goldman Sachs thinks.
• The Kogan.com (ASX:KGN) share price sank 22% in February: Time to buy?
• Why the Fortescue (ASX:FMG) share price is sinking 6% today
• Here’s why the Austal (ASX:ASB) share price is storming 6% higher

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 Austal Limited, Kogan.com ltd, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

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Ever since its inception, critics of the buy now, pay later (BNPL) concept have called for ‘more regulation’ for BNPL providers like Afterpay Ltd (ASX: APT).

Traditional credit providers, such as the ASX banks, have long been subject to strenuous rules and regulation in Australia. These are mostly designed to protect consumers from usurious practices and the like.

But the BNPL sector has largely escaped this kind of oversight. That’s mainly because BNPL products don’t tend to charge interest on their consumer’s debt. That makes it hard to call them ‘credit providers’. That’s despite the fact that BNPL companies help their customers spend money that isn’t theirs.

All of this has resulted in BNPL inhabiting a ‘grey area’ of financial laws and regulations. But the surge in popularity that BNPL services have enjoyed in recent years (particularly over the past year) has lead to growing calls for this grey area to be coloured in.

And that seems to be what is developing today. According to a news.com.au report today, Australia will become the first country in the world to implement industry standards for the sector. These standards will be designed to ensure safe practices and “name and shame dodgy lenders”.

BNPL gets deeper oversight

The new code, which the Australian Finance Industry Association (AFIA) drafted, is reportedly set to come into effect on Monday.

It will force companies like Afterpay, Zip Co Ltd (ASX: Z1P), and Commonwealth Bank of Australia‘s (ASX: CBA) Klarna to adhere to new rules. These include late payment caps for customers and compulsory financial/credit checks on customers before they make a purchase. Providers will also be prohibited from allowing people under the age of 18 to use a BNPL service.

It also aims to prevent any lender from placing additional pressure on someone in financial hardship. Companies will also be forced to take some partial payment upfront before offering a service.

According to the report, BNPL disputes under the code will be adjudicated by the Australian Financial Complaints Authority. A designated committee will be looking to name and shame companies providing shoddy lending to customers.

The report quotes AFIA chief executive Diane Tate, who had this to say on the new code:

The growth and diversity of the products and services enhances consumer choice… It brings to life the concept that innovation and competition are for the everyday person and that this can be achieved while codifying strong consumer protections.

BNPL shares like Afterpay are responding well in trading this morning. The Afterpay share price is up 4.6% at the time of writing. Zip shares are doing even better, up 5.77%.

More reading

• ASX 200 up 1.5%: Afterpay & Zip jump, Fortescue tumbles
• Will the Afterpay (ASX:APT) share price go higher in 2021? Here’s what Goldman Sachs thinks.
• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• These were the best performing ASX 200 shares in February
• 3 of the best ASX 200 results from last week

Sebastian Bowen 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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The Cimic Group Ltd (ASX: CIM) share price is edging slightly higher today following a contract award announcement.

In mid-morning trade, the engineering company’s shares are up 0.04% to $21.30.

What’s driving the Cimic share price today?

In its release, Cimic advised its subsidiaries, UGL and CPB Contractors, have entered into an early contractor involvement (ECI) contract with CuString Pty Ltd for works related to the Copperstring 2.0 project.

Based in Townsville, Queensland, CuString is a privately-owned company that delivers energy infrastructure needs to North Queensland.

The Copperstring 2.0 project is a 1,100km high-voltage transmission line that will stretch across Townsville to communities in north-west Queensland. The project is expected to have a capital expenditure of around $1.5 billion and employ 750 people during the construction phase. Once completed, electricity will be supplied to existing customers and open new opportunities for industrial facilities and agriculture projects.

Under the proposed agreement, UGL and CPB Contractors will conduct several services to begin the assessment stage. This includes scoping, designing, site investigations, pricing and finalising the engineering, procurement and construction contract for substations and high-voltage transmission lines. The deal’s initial phase is estimated to be worth $7 million.

Once the ECI stage is completed along with relevant approvals and financing, the project will move to the delivery phase. Cimic noted that both of its companies are preferred contractors to follow through with works. If selected, UGL and CPB Contractors will start construction services over 3 years. The works are projected to generate $1.7 billion in revenue.

The delivery phase involves the design, construction and commissioning of four new substations, two substation extensions, and the 1,100km high-voltage transmission line.

What did management say?

Cimic group executive chair and CEO Juan Santamaria welcomed the agreement, saying:

UGL and CPB Contractors have proven experience in the delivery of critical infrastructure. We are pleased to support the delivery of this vital transmission line and will look to maximise the economic benefits and employment opportunities that this project can bring to regional communities in North and North West Queensland.

UGL managing director Doug Moss added:

UGL has solid experience delivering high voltage power projects in some of Australia’s remote regions, including the HV connection that feeds Prominent Hill in South Australia.

We are delighted to be working with CuString Pty Ltd, the proponent of the CopperString project, to deliver power infrastructure that will support the growth of this globally significant resources region and export supply chain.

The Cimic share price is down more than 10% from the last 12-month period.

More reading

• Why the Cimic share price (ASX:CIM) is edging higher today
• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• These were the worst performing ASX 200 shares last week
• The Cimic (ASX:CIM) share price is dipping today despite contract win
• Here’s why all eyes will be on the Cimic (ASX:CIM) share price today

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 Cimic (ASX:CIM) share price is edging higher today appeared first on The Motley Fool Australia.

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