It may not be the biggest tech sector in the world, but the ANZ region is home to a good number of companies with significant potential.

Two small cap ASX tech shares that have been tipped for big things in the future are listed below. Here’s why they are currently rated as shares to buy:

Damstra Holdings Ltd (ASX: DTC)

Damstra is a growing integrated workplace management solutions provider to multiple industry segments. Its cloud-based workplace management platform is used by businesses globally to track, manage and protect their workers and assets.

The company also offers solutions such as fever detection and mobility tracking, which are particularly appropriate in the current environment.

Furthermore, it recently strengthened its offering with the acquisition of Vault Intelligence. It is a software company offering solutions which combine health, safety, compliance, and risk management.

Following its 61% increase in first quarter cash receipts, analysts at Morgan Stanley reiterated their overweight rating with a $2.00.

MyDeal.com.au Limited (ASX: MYD)

MyDeal.com.au is a recently listed online retail marketplace provider with a focus on furniture, homewares, appliances, technology, baby products, and hardware.

It has also been a strong performer in FY 2021, delivering first quarter gross sales growth of 317% to $56.67 million. This strong form has continued since, with MyDeal recording gross sales of $30 million in November. This was up 192% year on year and 63% month on month. Its active customers also grew to a record 778,867, up 236% year on year.

Morgans is a fan of the company and recently put an add rating and $1.70 price target on its shares. It was pleased with its performance in November and notes that its private label sales have been growing ahead of its expectations in FY 2021. This is a big positive given the stronger margins these products have. 

More reading

• Here’s how Nuix (ASX:NXL) and these recent IPOs are performing since listing
• 2 exciting small cap ASX shares to watch closely in 2021
• Top brokers name 3 ASX shares to buy next week
• MyDeal (ASX:MYD) share price falls despite record November sales
• 2 rapidly-growing small cap ASX shares to buy

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 Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra Holdings 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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As 2020 draws to a close, we cast our net out for the best ASX shares to buy now to take with you into 2021.

Today we look at two shares that one fund manager has highlighted. One stands to benefit from the expected nationwide reopening and return of shoppers in 2021. The other stands to benefit from the forecast global infrastructure spending splurge, led by China.

An ASX share to benefit from the reopening

First up is EML Payments Ltd (ASX: EML).

Dushko Bajic is the Head of Australian Equities Growth at First Sentier Investors.

In an interview with Livewire, Bajic said they’ve been analysing and adding, “great stocks to the portfolio that we believe are beneficiaries of the reopening as the world normalises in the years ahead.”

Bajic went on to say:

[E]xamples include… EML Payments, which is a company that provides gift cards and general-purpose re-loadable cards. We believe that they will be a big beneficiary of foot traffic returning more broadly in the economy.

EML Payments, with a market cap of $1.46 billion, is part of the S&P/ASX 200 Index (ASX: XJO). And the company has been posting strong revenue growth in its recent quarterly reports.

EML reported revenue of $40.6 million for the first quarter of the 2021 financial year (FY21). That’s up 75% from the first quarter for FY20. Earnings before interest, tax, depreciation and amortisation (EBITDA) also leapt 215% year-on-year.

The EML Payments share price has yet to fully recover from the COVID market crash, which saw its shares plummet 77% from 14 February through to 24 March. Since that low, shares have soared 206% higher. Year-to-date the share price remains down 12%.

An ASX share to benefit from the global infrastructure splurge

The second ASX share is Fortescue Metals Group Limited (ASX: FMG).

The Aussie mining giant – the fourth largest iron ore producer in the world – has a market cap of $72.3 billion and pays a juicy dividend yield of 7.7%, fully franked.

Dushko Bajic notes, “[W]e’ve also done well out of the Pilbara iron ore sector of Australia, which is one of the great comparative advantages of our economy and one of the great sources of investment in the stock market.”

He says that Fortescue, in particular, is a company that’s “really low on the cost curve and generating very strong returns, not only for our economy, but also as stocks and earnings for us as individual investors in the company.”

Indeed, Fortescue is trading at a price to earnings (P/E) ratio of only 10.3 times. And that’s after seeing its share price rocket 117% higher in 2020.

Happy investing!

More reading

• 2 ASX dividend shares with fully franked yields over 7% today
• With the ASX tipped to outperform in 2021, shares in this sector could rocket
• Are we heading for a new ASX resources ‘supercycle’?
• Why is everyone talking about the iron ore price?
• ASX miners put on alert as the iron ore price crashes overnight

Bernd Struben 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 EML Payments. The Motley Fool Australia has recommended EML Payments. 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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One of the few certainties we have going into 2021 is the continuing futility of traditional cash and fixed-interest investments. Even for term deposits these days, the best interest rate you can expect will likely come in with a yield at less than 1% per annum.

That’s a very large price to pay for the certainty of income and capital preservation that these investments provide. And it doesn’t look like this is set to get any better any time soon. The Reserve Bank of Australia (RBA) has said that it doesn’t expect interest rates to start rising again until 2023 at the earliest.

So what to do? Well ASX dividend shares are a good place to start. Yes, dividend shares don’t offer the guaranteed return that a term deposit does. But they do offer the chance of getting a dividend yield of more than 1% per annum.

Here are 2 ASX shares doing one better. They both have yields on the table today that gross-up to more than 7%.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue has been one of the surprise performers of 2020 so far. Since the start of the year, Fortescue shares have risen from around $10.78 a share to today’s price (at the time of writing) of $23.42. That’s a handy 117% return that Fortescue shareholders have enjoyed.

A surging iron ore price in 2020 has loaded Fortescue’s coffers with cash. And Fortescue has been returning a lot of it to investors this year. Even after this meteoric share price appreciation, Fortescue shares are still offering a trailing yield of 7.51% on current prices. With full franking credits, that grosses-up to 10.73%.

Alumina Limited (ASX: AWC)

Our second dividend share today is aluminium/alumina producer Alumina Limited. Alumina is one of the largest pure-play aluminium companies on the ASX.

Alumina recently told investors that the company saw strong earnings growth in its aluminium division in its most recent quarter, up 35% to $119 million. No doubt investors who buy Alumina shares for dividend income would have been pleased.

The company boasts a trailing yield of 5.2% on current prices, which grosses-up to 7.43% with Alumina’s full franking. It could get even better from here too.

My Fool colleague Brendon Lau recently covered how one broker sees Alumina shares offering a yield of 13.6 cents a share by FY2022. That would net a yield of around 7.5% (or 10.71% grossed-up) on current prices.

More reading

• With the ASX tipped to outperform in 2021, shares in this sector could rocket
• Are we heading for a new ASX resources ‘supercycle’?
• Why is everyone talking about the iron ore price?
• ASX miners put on alert as the iron ore price crashes overnight
• These ASX shares have more than doubled in 2020

Motley Fool contributor Sebastian Bowen 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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Global share markets are entering the final days of 2020 in a tug of war between the same 2 prevailing forces that have dominated share prices since February.

COVID-19, now responsible for more than 1.7 million deaths around the globe, continues to roil investors.

Shares largely surged on the back of multiple successful vaccine approvals in recent weeks. But the new, more transmissible variant of the virus coming out of the United Kingdom is raising fresh uncertainties.

Manufacturers are broadly expressing confidence that their vaccines should prove effective against the new mutation. But it will be several weeks before clinical trials can confirm that.

On the other side of this tug of war, pulling share prices higher, are the world’s leading central banks and governments.

Company earnings, debt positions and management teams often took a back seat in 2020 when it came to share price moves.

Instead, it was unprecedented monetary stimulus (zero bound interest rates and quantitative easing (QE)) from the central banks and trillions of dollars of fiscal stimulus packages from first world governments that pulled global share markets out of their February and March nosedive.

Indeed, US share markets have repeatedly set new record highs over the past weeks. In fact, the 0.5% gain posted by the Nasdaq Composite (NASDAQ: .IXIC) yesterday (overnight Aussie time) set a fresh all-time high for the tech-heavy index.

And the All Ordinaries Index (ASX: XAO) – after plunging 37% during the market crash – is back in positive territory for the year, up 1.4%. Though the All Ords is still 4.8% below its own all-time highs set on 20 February.

The master of uncertainty

On the subject of stimulus, the US$900 billion (AU$1.2 billion) coronavirus relief package that finally made it through the US House and Senate faces a final hurdle from outgoing President Donald Trump.

As if investors needed any more uncertainty to cap off 2020, Trump indicated he might not sign the package without certain amendments. That announcement has seen US futures dip lower.

Which brings us to…

Are share prices overvalued or undervalued?

Are share prices overvalued, undervalued, or fairly valued as we head into 2021?

That’s a question that analysts and investors the world over are trying to wrap their heads around.

Joanne Feeney, a partner at Advisors Capital Management, leans to the bearish side, at least short term. Speaking on Bloomberg TV, Feeney said:

So much of the good news of the vaccine had been already digested and even the stimulus bill that people had largely anticipated. So some of the flattening of the market just reflects how much has already been built into the market from those two good sources of news.

And US President-elect Joe Biden’s warning that the “darkest days” of the pandemic are still to come is unlikely to stir investors’ animal spirits. Though again, as grave as that reality is, those darkest days for the US, Europe and other hard-hit regions of the world should brighten considerably as the vaccine rollout picks up pace in the first months of 2021.

In more soothing news for share markets, Biden is already pressuring Congress to craft the next big stimulus package for early next year once he has the keys to the White House.

Taking a more bullish stance on what some analysts are flagging as overvalued share prices is Brad McMillan, chief investment officer at Commonwealth Financial Network.

As quoted by the Australian Financial Review, McMillan says:

In fact, 2020 earnings are still on the recovery path from the pandemic. If we look at 2022 (earnings per share) expectations, we see much greater appreciation potential. With ongoing economic recovery and the possibility of one or more vaccines, that valuation seems very achievable.

So, with a year-end multiple of 20 on forward earnings (which is at the lower end of recent valuations), a potential target for the S&P 500 is 3900—or about 10 per cent above current levels.

McMillan is talking about the US market here. But as we know, the US share market performance has a major influence on the rest of the world’s markets, including the ASX.

The good news here is that numerous analysts – including Shane Oliver, head of investment strategy and economics and chief economist at AMP Capital – are predicting an outperformance for ASX shares compared to the rest of the world over the next 6 to 12 months.

Some of that is based on Australia’s exceptional handling of the virus (to date).

But it’s the predominance of resource shares trading on the ASX that could really set the index – and select shares – up for a strong performance in 2021.

According to Ausbil Investment Management portfolio manager Luke Smith (quoted by the AFR):

We think we’re entering the early stages of a multi-year bull cycle for resources and the backdrop is extremely positive.

China’s economy is clearly very strong at the moment and when you combine that with the rest of the world, which is going to benefit from unprecedented stimulus, the backdrop is looking extremely compelling.

ASX resource shares leading the charge

Though past performance is no guarantee of future performance, the top gaining share on the S&P/ASX 200 Index (ASX: XJO) over the past month is Fortescue Metals Group Limited (ASX: FMG).

Despite slipping a touch today, Fortescue’s share price is up 33% since 23 November. And this is a company with a $72 billion market cap we’re talking about here. The past month’s surge brings Fortescue’s share price gains in 2020 up to an eye-popping 117%.

And it’s not just Fortescue. Four of the top 10 performers on the ASX 200 over the past month are resource shares.

OZ Minerals Limited‘s (ASX: OZL) share price has gained 23% in the past month, the fourth best performer on the ASX 200. That’s seen the copper and gold miner’s share price leap 77% year-to-date.

If we really are in the early stages of a multi-year resources bull cycle, as Ausbil’s Luke Smith predicts, there could be far more gains ahead for well-positioned ASX resource shares.

More reading

• Are we heading for a new ASX resources ‘supercycle’?
• Why is everyone talking about the iron ore price?
• ASX miners put on alert as the iron ore price crashes overnight
• These ASX shares have more than doubled in 2020
• How to get the best out of the 2021 mining boom

Motley Fool contributor Bernd Struben 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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Investing in the share market can be a scary plunge to take when starting out as a beginner. There are many lessons that are best to learn through experiencing them firsthand.

However, today I want to share with you the lessons I learned from holding Afterpay Ltd (ASX: APT) shares since 2017, through the ups and the downs, all the way to a 20x return!

Owning Afterpay shares has been lucrative for many investors, with the Afterpay share price appreciating by an astounding 283% in the last year alone, compared to the S&P/ASX 200 Index (ASX: XJO) which fell 2.15%.

The question is what kind of volatility can be expected as a shareholder for these market-beating returns, and what lessons might you be able to apply in your own future investments?

Buckle up, it’s going to be a wild ride

Although each year since listing Afterpay shares have finished higher than they started, there have been dramatic drops in the share price in this time as well – at one point in 2019 shares were down by 26.2%, while 2020 saw a hefty 78% drop, its largest to date.

These massive share price swings are typical of higher-risk investments, where the long-term potential of the company is not yet clear and fundamental analysis is difficult. This leads to the share price being heavily influenced by developments in the industry, general news, and broker ratings.

Over the years there have been many challenges that have put pressure on the Afterpay share price:

• Regulatory: In June last year Afterpay had a knock on its door from AUSTRAC (Australian Transaction Reports and Analysis Centre) requesting an audit to assess compliance with anti-money laundering and counter-terrorism financing laws.
• Competition: Investors grew concerned as competition built from the likes of Visa Inc, MasterCard Inc, PayPal Holdings Inc. and a slew of ASX-listed buy now, pay later (BNPL) entrants. Afterpay shareholders were particularly concerned when PayPal announced its ‘Pay in 4’’ instalment offering, with the news shaving 8.04% off the share price.
• COVID-19: During the peak of the coronavirus-induced market crash, Afterpay’s share price fell 78% as the fear of customers not paying off their instalment purchases grew.

At any of these points, I could have sold into the fear for a far smaller profit than 20x. Instead, I remained optimistic by focusing on the core reason why I invested in the first place.

Understand the business

In order to confidently hold onto your shares while the market is selling off, you need to know how the business works, how it is differentiated from its competition, and why you invested in the company to begin with.

In the case of Afterpay, the company makes money by charging a merchant fee on each purchase, not the customer (excluding late fees). This is actually a key point of difference to the high-interest rates charged by credit cards.

The fundamental reason why I initially invested was the cult-like popularity of Afterpay amongst the younger demographic. This remained unchanged.

Whatever it is that you have invested in – understand the business. This will give you the fortitude to hold when the broader market is caught up in a short-term panic.

Ignore the noise

It’s important to keep up to date with your investments, but it is easy to get caught up in dramatic headlines if you’re not careful.

A helpful trick I found with Afterpay is to try to consume a balanced diet. That is – for every negative perspective you read or hear, try to find a positive take, and vice versa. The truth is often somewhere in the middle. You will become much more informed and less likely to make a short-term irrational investment decision.

For every buyer, there is a seller in the share market – you’ll always be able to find people with the opposite view to you. This is where it’s important to focus on the company’s reported numbers, such as earnings per share (EPS) and revenue growth – these don’t lie.

De-risk to match personal risk tolerance

The last lesson is to know your personal risk tolerance. You should only risk what you are willing to lose – that includes profits.

I took some profits off the table when the Afterpay share price was around $15 and again after it cracked the $40 mark – not because I didn’t believe in the company anymore, but because I personally couldn’t bear to lose the profits that I had made at those points.

Investing is a long-term game – and to succeed you have to stay in it. Take action to ensure that your strategy is sustainable. Too many investors have given up on lifelong returns as a result of ‘blowing up’ their accounts by taking on more risk than they could stomach.

More reading

• Here’s why the Zip (ASX:Z1P) share price is in focus today
• How to get the best out of the 2021 mining boom
• In a record-breaking year, here are some of the world’s most popular shares
• Why shares are less risky now than 30 years ago
• New BNPL enters ASX: How it promises to be different

Motley Fool contributor Mitchell Lawler owns shares of AFTERPAY T 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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Do you know what the interest rate on a Commonwealth Bank of Australia (ASX: CBA) savings account is right now? It’s just 0.05% per annum.

This means that one million dollars in the bank’s NetBank Saver account would yield just $5,000 of interest each year.

And it isn’t just Commonwealth Bank. A series of cuts to the cash rate by the Reserve Bank means that all the banks are offering interest rates at a similar level.

As a result, if you’re looking for a source of income in this low interest rate environment, then you might want to take a look at the dividend shares listed below:

Coles Group Ltd (ASX: COL)

Coles is a big favourite of income investors due to its positive long term growth outlook and its defensive earnings. The latter was the main reason why Coles delivered strong growth in FY 2020 despite the pandemic. It reported a 6.9% increase in sales to $37.4 billion and a 7.1% lift in net profit after tax to $951 million in FY 2020. Pleasingly, it has followed this up with further strong sales growth in the first quarter of FY 2021.

Goldman Sachs is a fan of the company and has a buy rating and $20.50 price target on its shares. It is forecasting a fully franked 64 cents per share dividend in FY 2021. Based on the current Coles share price, this equates to a 3.5% dividend yield.

Wesfarmers Ltd (ASX: WES)

As with Coles, Wesfarmers has been a positive performer during the pandemic. This is thanks largely to its key Bunnings business, which has been experiencing very strong sales growth. The good news is that with the government providing home improvement stimulus and tax cuts, Bunnings has been tipped to continue its positive form over the coming years.

This should be supported by its other businesses, such as Kmart, Target, and Catch, which are all experiencing positive tailwinds of their own.

Analysts at Credit Suisse are expecting a strong result from the company in FY 2021. Its analysts recently retained their outperform rating and lifted the price target on its shares to $55.83. The broker has also pencilled in a $1.90 per share fully franked dividend. Based on the latest Wesfarmers share price, this will be a 3.7% dividend yield over the next 12 months.

More reading

• Why shares are less risky now than 30 years ago
• 3 top ASX retail shares for your 2021 portfolio
• Forecast double-digit surge in Aussie dollar could put brakes on ASX rally in 2021
• ASX 200 Weekly Wrap: ASX hits new post-March high
• 2 top ASX dividend shares to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re looking to put your money to work by investing in the share market next year, then you might want to take a look at the shares listed below.

Here’s why they are currently rated as buys:

a2 Milk Company Ltd (ASX: A2M)

a2 Milk Company is a leading fresh milk and infant formula company. While FY 2021 is going to be a disappointing year because of the pandemic’s impact on the daigou channel, management appears confident that these are only temporary headwinds and that its growth will resume in FY 2022. One broker that appears to believe the recent weakness in the a2 Milk share price is a buying opportunity is Morgans. It has recently retained its add rating and put a $12.20 price target on the company’s shares.

Pro Medicus Limited (ASX: PME)

Pro Medicus is healthcare technology company that provides radiology information systems (RIS), picture archiving and communication systems (PACS), and advanced visualisation solutions to healthcare organisations across the globe. Due to the quality of its software and its sizeable market opportunity, Pro Medicus has a lot of admirers. One of those is Morgans. Last week the broker retained its add rating and lifted its price target on the company’s shares to $35.02. This was in response to the signing of a five-year contract with MedStar Health worth a total of A$18 million.

Whispir Ltd (ASX: WSP)

Whispir is a software-as-a-service communications workflow platform provider. Its industry-leading software platform allows users to deliver actionable two-way interactions at scale using automated multi-channel communication workflows. Management estimates that the Workflow Communications platform as a Service market could be worth US$8 billion per year by 2024. Analysts at Ord Minnett currently have a $4.40 price target on the company’s shares. This compares to the current Whispir share price of $3.22.

More reading

• Why a2 Milk, Air New Zealand, Mesoblast, & Recce shares are storming higher
• Why a2 Milk and these ASX shares have been smashed in 2020
• Leading brokers name 3 ASX shares to sell today
• Why a2 Milk, Doctor Care Anywhere, McPherson’s, & Volpara are pushing higher
• ASX 200 down 0.85%: ANZ CFO resigns, tech shares tumble, iron ore jumps

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’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk and Pro Medicus 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 Vection Technologies Ltd (ASX: VR1) share price has rocketed up today on news the software company has signed a deal for its software program, Trainer Creator.

At the time of writing, the Vection share price has lifted 8.7% to an intraday high of 12.5 cents.

What’s the deal?

Vection announced it has made a pilot agreement with agri-food processing leader, Mutti SpA for its augmented reality (AR) program, Trainer Creator. 

Mutti is a famous Italian tomato brand. Established in 1899, the company generated global revenue of €378 million (close to A$610 million) for 2019.

Vection’s software program Trainer Creator – launched in June 2020 – enables machine operators and technicians to visualise tasks in AR through wearable technology or a smart device. This in turn allows a company to create real world operational efficiencies and cost savings.

In today’s release, Vection advised it has entered an initial arrangement that will see Trainer Creator implemented within the first of 40 production lines operated by Mutti.

The deal, valued at around $50,000, represents a first-time use of Trainer Creator by an agri-food company. Should the rollout be successful, it is expected that this will create further commercial opportunities for Vection.

What did the managing director say?

Vection managing director Gianmarco Biagi welcomed the agreement, saying:

During the last 6 months, we have been experiencing a strong market interest for our augmented reality solutions and products, since the launch of Trainer Creator.

Mutti represents a key client in a new vertical and a strong opportunity for further growth for the company, leading into 2021.

Vection share price snapshot

The Vection share price has accelerated over the past 12 months, gaining more than 400% for shareholders. Most surprisingly, while COVID-19 wreaked havoc on the ASX market, Vection barely fell, dipping to 1.5 cents in the March lows. The Vection share price was recorded at 2 cents the month prior.

The company has a market capitalisation of $115.9 million on current prices.

More reading

• Why the Redcape Hotel (ASX: RDC) share price is sliding today
• 3 of the best ASX shares to buy right now
• Here’s why the Genex (ASX:GNX) share price has jumped 13% today
• Why the Regional Express (ASX:REX) share price has flown 5% higher today
• Avecho (ASX:AVE) share price rockets 83% on milestone announcement

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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The Redcape Hotel Group Pty Ltd (ASX: RDC) share price has slumped lower this afternoon after the group released a key trading update.

At the time of writing, the Redcape share price is sitting 0.53% lower at 93 cents per share.

Why is the Redcape Hotel share price sliding lower?

The Aussie hotel group provided a trading update alongside its interim distribution, debt extension and acquisition news.

According to the announcement, Redcape’s business is “performing strongly” as coronavirus restrictions continue to ease.

Operating earnings before interest, tax, depreciation and amortisation (EBITDA) is tipped to increase, despite higher COVID-related compliance operating costs.

Redcape is forecasting first half operating EBITDA to be $40–$40.5 million compared to $38.7 million in the first half of 2020. Distributable earnings is forecast to climb to $32–$32.5 million, up from $26.4 million in the first half.  

The increased forecasts are due to a strong trading quarter for the Aussie pubs business. Redcape also announced an interim distribution of 1.83 cents per stapled security to shareholders.

Redcape also provided an update on its financing and acquisition activities. The hotel group has secured an additional $100 million funding facility expiring in December 2025. That extends the weighted average maturity of the group’s debt to 4.1 years with total facilities of $600 million.

The group is expecting gearing to be maintained within its targeted range of 35% to 45% for the full year ending 30 June 2021.

Redcape also announced it has exchanged contracts to acquire the O’Donoghues Hotel. The pub is located in Emu Plains, New South Wales, with Redcape set to buy it for $30.5 million excluding transaction costs.

It’s the latest part of Redcape’s strategy to grow sustainable distributions for securityholders in the long term.

Redcape share price summary

The Redcape share price has fallen 17.0% lower in 2020 to 93 cents per share. Shares in the pubs business are trading at a 45.7 price to earnings (P/E) ratio, and on current pricing the company has a market capitalisation of $513.5 million.

More reading

• Redcape (ASX:RDC) share price on watch after hotels acquisition

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

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When it comes to deciding which ASX shares are the best to buy right now, we investors sometimes get to cheat a little.

Some of the top brokers in the world regularly publish buy recommendations. These recommendations aren’t always right of course. But no one is when it comes to the share market.

So if you’re searching for the best ASX shares to buy today, here are 3 recent recommendations:

Qantas Airways Limited (ASX: QAN)

Qantas is a company we’d all be familiar with. We’re all also probably aware of the difficulties this company has faced in 2020.

As an airline, Qantas had to adapt very quickly to a very challenging disruption to its entire business model. However, unlike its rival Virgin Australia, the company was able to keep afloat during the worst months of the coronavirus pandemic.

Today, things are looking up for Qantas, despite some less-than-savoury recent news. Last week, the company announced that its budget brand Jetstar will exceed pre-COVID flight levels within 3 months.

Broker Goldman Sachs is bullish on Qantas. It reiterated its ‘buy’ recommendation on Qantas shares with a 12-month price target of $7.05, implying upside of more than 45% on current prices.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Unlike Qantas, Domino’s Pizza was an actual beneficiary of the pandemic. It makes sense if you think about it. Many people do like to order pizza when they are in lockdown.

Back in August, Domino’s reported that its network sales were up 12.8% year on year to $3.27 billion. Online sales did even better, rising by 21.4% to $2.36 billion. Domino’s also told investors that its earnings before interest and tax (EBIT) grew by 3.6% to $228.7 million and free cash flow increased by 90.7% to $161.9 million in FY2020.

Goldman Sachs hasn’t failed to notice these positive trends. It recently upgraded its recommendation to ‘buy’ with a 12-month price target of $88 a share.

Xero Limited (ASX: XRO)

Finally today we have cloud accounting software company Xero.

Xero has been an absolute beast share in 2020, with the Xero share price up more than 83% year to date, and up almost 150% since 23 March. Again, the pandemic has arguably helped Xero more than hindered it.

Last month, Xero provided a half-year update for the 6 months to 30 September. It told investors that over that time, revenues grew by 21%, and subscribers by 19%. Xero’s earnings were turbocharged by these numbers, up 86% over the period. That has helped Xero to reach new all-time highs in recent weeks.

But Goldman Sachs doesn’t think the stock has run its course just yet. It has recently slapped Xero with another ‘buy’ recommendation, with a 12-month price target of $157 a share. If Xero reaches that target, it would be another new all-time record for this tech star.

More reading

• Qantas taken to High Court over COVID-19 sick leave
• Air New Zealand (ASX:AIZ) share price rises despite falling air traffic
• Why this fund manager prefers Transurban over Sydney Airport, Flight Centre and Qantas
• How to get the best out of the 2021 mining boom
• 2 of the best ASX 50 shares to buy today

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 Xero. The Motley Fool Australia has recommended Domino’s Pizza Enterprises 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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