Pizza delivery company Domino’s Pizza Enterprises Ltd. (ASX: DMP) has had an impressive year. Despite the operational difficulties caused by the COVID-19 pandemic, including delayed store openings across the Australia and New Zealand regions, Domino’s has still managed to deliver significant revenue growth in FY20.

In its FY20 annual report, Domino’s reported global sales of $3.27 billion, an increase of 12.8% over FY19. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at a record $303 million, while net profit after tax grew by 3.3% year on year to $145.8 million.

The strong result was driven by impressive gains in the Japanese market. Domino’s Japan delivered 25.9% growth in sales year on year, with 75 new stores opening across the country in FY20. Sales growth was a more modest 5.1% in Europe and 4.1% in Australia and New Zealand, with both of those geographies reporting small declines in year-on-year EBITDA.

Domino’s has also responded well to the ‘new normal’ of doing business under COVID-19 restrictions. It invested heavily in personal protective equipment, boosted its digital sales channels, and pioneered COVID-safe strategies such as ‘zero contact delivery’.

The rising Domino’s share price

The company’s strong financial performance has had a positive impact on the Domino’s share price. Since bottoming out at a 52-week low of just $41.66 during the mid-March market crash, Domino’s shares have now skyrocketed more than 100%.  

But there is the risk these big gains could cause the company’s shares to become too overvalued. After the recent surge in its share price, Domino’s is now trading at more than 50x earnings.

Should you invest?

Despite these ballooning valuations, Goldman Sachs remains bullish on Domino’s shares. The broker upgraded Domino’s to a buy at the beginning of December, and slapped a 12-month target price of $88 on the company’s shares. However, it is worth bearing in mind that, at the time of the Goldman Sachs recommendation, the Domino’s share price was trading at just $74.02, but has since climbed to $84.09. This means Goldman’s target price now only offers a 5% upside to Domino’s current share price.

The analysts at Goldman Sachs thought Domino’s offered better growth potential than ASX fast-food peers like Collins Foods Ltd (ASX: CKF), which operates KFC restaurants in Australia, Asia and parts of Europe, as well as the Australian Taco Bell network.

Goldman Sachs was particularly impressed by the pizza chain’s expansion into the German and Japanese markets and argued this would continue to drive margin growth for Domino’s in FY21. The broker also noted that a return to a more stable operating environment post-COVID could accelerate pipeline growth.

Goldman did, however, point to some downside risks to an investment, including Domino’s underperformance in France, where COVID-19 restrictions forced stores to close and had a much more severe impact on sales. If this market continues to lag in FY21, it could slow down the company’s overall business momentum.

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• ASX 200 rises on Tuesday

Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Collins Foods Limited and 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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The Bank of Queensland Limited (ASX: BOQ) share price could be on the move on Tuesday after the release of a business update ahead of its annual general meeting.

How is Bank of Queensland performing?

Bank of Queensland has started FY 2021 positively and is currently on track to deliver on the outlook it provided with its full year results.

The bank’s Managing Director and CEO, George Frazis, commented: “BOQ continues to execute on its transformation program with the family and friends phase 1 launch of the Virgin Money digital bank going live this week. We reconfirm the FY21 outlook for BOQ to deliver broadly neutral jaws.”

Broadly neutral jaws means that its revenue will increase broadly in line with costs. Positive jaws would be if its revenue was growing quicker than costs and vice versa for negative jaws.

COVID-19 update.

Management also provided an update on its COVID-19 banking relief package deferrals.

According to the release, at the end of November, Bank of Queensland had 2,500 housing loans remaining in deferral with balances of $889 million. These balances represent 3% of its housing loan portfolio.

In addition to this, the bank had 3,300 small to medium sized business (SME) loans remaining on deferral with balances of $390 million. These balances also represent 3% of its total SME lending.

This represents an 80% and 82% reduction, respectively, since the end of June. At that point there was $4.5 billion of housing loans in deferral and $2.7 billion of SME loans in deferral.

Mr Frazis commented: “It is really pleasing to see the vast majority of our customers who accessed the banking relief package resuming repayments. We will continue to work with the remaining 3% of customers still accessing our banking relief packages to support them in their recovery.”

The bank remains committed to supporting customers throughout the challenging period. It advised that it is providing a range of options to customers as they reach the end of their loan deferral periods.

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• The Bank of Queensland (ASX:BOQ) share price is lifting today. Here’s why
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Our Foolish contributors have compiled a list of some of the ASX shares experts are saying to Buy in December.

Here is what the team have come up with…

Sebastian Bowen: Collins Foods Ltd (ASX: CKF)  

Collins Foods is not exactly a household name. But the primary business that Collins has a license to operate and franchise in Australia certainly is. Ever heard of Kentucky Fried Chicken (KFC)? Yes, Collins runs KFC, as well as Taco Bell in Australia (as well as in a few other countries), and is doing a good job of it, if the numbers are anything to go by.

For the six months ended 30 September, Collins Foods delivered an 11.3% increase in revenue, which included a 15.6% increase from KFC restaurants. Even in a pandemic, fried chicken is apparently an Aussie staple.  

Motley Fool contributor Sebastian Bowen does not own shares of Collins Foods Ltd.

Brendon Lau: Elders Ltd (ASX: ELD)

Expectations for a wetter than normal summer bodes well for agri-business Elders, which is among the ASX shares most leveraged to increased crop yield. Further, Citigroup noted the preliminary data from the latest Wool and Sheepmeat Survey reinforces the outlook for an accelerated sheep flock rebuild in 2021. While this will likely lead to a 5% decline in lamb prices, the increased volumes will offset this.

Citi is recommending Elders shares as a ‘Buy’ with a price target of $13 per share. At the time of writing, the Elders share price is trading at $10.18.

Motley Fool contributor Brendon Lau owns shares of Elders Ltd.

Tristan Harrison: Pushpay Holdings Ltd (ASX: PPH) 

Pushpay is an electronic donation business servicing the medium and large church sector in the United States. The company has been benefitting from the shift away from cash to digital payments.  

In its recent FY21 half-year result, Pushpay demonstrated its scalability with rising profit margins. Operating revenue increased 53% and earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) grew by 177% to US$26.7 million.  

In FY21, Pushpay is aiming to more than double its EBITDAF and, in the long run, its goal is US$1 billion in revenue. At the time of writing, the Pushpay share price is valued at 24x FY23’s estimated earnings according to Commsec. 

Motley Fool contributor Tristan Harrison does not own shares of Pushpay Holdings Ltd. 

Rhys Brock: Dubber Corp Ltd (ASX: DUB) 

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• Why Fortescue, Metcash, Nuix, & Xero shares are storming higher

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and Xero. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Collins Foods Limited, Elders Limited, and PUSHPAY FPO NZX. 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 G8 Education Ltd (ASX: GEM) share price will be on watch this morning after the release of a trading update.

How is G8 Education performing?

G8 Education has experienced a further recovery in its occupancy since the release of its half year results in August.

According to the release, the childcare centre operator’s like-for-like occupancy currently stands at 75.5%. This represents an occupancy gap of 4.5 percentage points compared to the same period last year. It is also a 5.5 percentage points improvement from its April low at the height of the pandemic.

Another positive is that G8 Education has managed to deliver wage efficiencies in line with its targets for the year. This was driven by the utilisation of its technology platform that forms part of its new rostering system.

This means that on a year-on-year comparison, based on the same occupancy levels as last year, there has been a clear improvement in its wage costs.

However, due to the decline in its occupancy rate, its wage hours per booking metric is currently higher than the prior corresponding period.

Nevertheless, despite the challenges it is facing, G8 Education is still profitable.

The release explains that the company has recorded underlying earnings before interest and tax (EBIT) of $98 million for the first 11 months of calendar year 2020. This includes current year employment costs relating to its employee payment remediation program.

Outlook.

Management expects 2021 to be a recovery year due to the absence of additional government subsidies and the ongoing impacts of COVID-19 on its occupancy.

In addition to this, the absence of a 2020 fee increase (as stipulated by the government COVID-19 subsidiary arrangements) and its lower occupancy, is expected to see wages increase as a percentage of revenue.

Gary Carroll, Chief Executive Officer, commented: “Progress in our strategic focus areas has been pleasing. Together with our significantly strengthened balance sheet, this provides the group with confidence to increase the pace in our strategic focus areas as they will deliver significant benefits in the medium term. The program costs in 2021 will be carefully managed to ensure they do not result in a material drag to earnings in the near term.”

More reading

• G8 Education (ASX:GEM) share price rebounds after lawsuit news

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

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Late yesterday, we were treated to the news that the states of New South Wales and Victoria have lost their coveted ‘AAA’ credit ratings.

According to reporting in the Australian Financial Review (AFR), it was the rating agency S&P Global (Standard & Poor’s) that issued the downgrades. NSW now has a credit rating of ‘AA+’, and Victoria now ‘AA’.

The AFR reports that S&P had placed Victoria’s AAA rating ‘on-watch’ in August, but has re-rated the state due to its deteriorating budget position. The AFR quoted S&P as stating the following on the re-rating:

The lowered rating reflects our view that the COVID-19 pandemic has dealt Victoria a severe economic and fiscal shock that has materially weakened its credit metrics more than domestic and international ‘AAA’ and ‘AA+’ rated governments… In our view, the Victorian government’s path to fiscal repair will be more challenging and prolonged than other states because of the significant increase in debt stock projected over the next few years.

Meanwhile, NSW did manage to receive a higher rating of ‘AA+’ over Victoria, despite still receiving a downgrade. Here’s what S&P said about NSW:

The downgrade primarily reflects our expectation that NSW’s debt burden will rise substantially during the next three years… We expect NSW to post a historically large after-capital-account deficit this fiscal year, though the deficit should narrow in future years. NSW has a higher degree of flexibility than its peers, with some potential upside to our deficit and debt projections from unbudgeted asset sales and expenditure reviews.

So what does all of this mean? And what exactly is a credit rating to begin with?

Credit where credit is due

A credit rating is a rating usually issued by one of the ‘big three’ dominant credit rating agencies: S&P Global, Moody’s and Fitch Group (although others exist as well). These ratings agencies issue ratings for everything from corporations and bonds to sovereign governments. 

The ratings essentially reflect the quality of the rated institution as a debtor. Think of it as a supercharged version of the credit check a bank will perform on a potential customer applying for a home loan.

The ‘ratings’ these agencies issue reflect this paradigm. The ratings differ slightly from issuer to issuer, but generally speaking, they range from ‘AAA’ to ‘D’ or ‘DDD’. Sometimes (especially for bonds), the ‘BBB-‘ and above are referred to as ‘investment-grade’, whereas ‘BB+’ and below are ‘non-investment grade’ (sometimes called ‘junk’ or ‘subprime’).

Usually, the credit rating an entity receives (whether it be a government or corporation) affects the kind of interest rates it can borrow at. Obviously, an entity with a ‘AAA’ rating is, in theory, a ‘safer’ investment to loan money to than a ‘D’ rated one. Hence, the higher the rating, the less expensive it is for the entity to borrow money.

That’s why it’s a big deal of sorts when a state government gets a downgraded rating.

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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 Moody’s. 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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A former managing director of Legacy Iron Ore Limited (ASX: LCY) has been charged with 13 counts of stealing from the company.

Former Legacy boss, Sharon Kia Le Heng, appeared in Perth Magistrates Court on Friday facing allegations of theft from the ASX-listed mining business.

Karen Kwan, an ex-Legacy accountant, also appeared in court facing the same charges.

Prosecutors claim the pair stole about $725,000 over a period of 17 months in 2012 and 2013.

The Australian Securities and Investments Commission is accusing the two women of making 13 electronic transfers out of Legacy’s bank account into an entity called Regency Infrastructure Pty Ltd.

Regency is allegedly a company controlled by Heng, with the corporate watchdog claiming there was “no legitimate basis” for the payments.

The Motley Fool has contacted Legacy Iron Ore for comment.

The court granted Heng and Kwan bail but with strict conditions they surrender their passports and not flee overseas.

The case has been adjourned to 26 March.

The Legacy share price was unchanged Monday, staying at 0.7 cents. 

More reading

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Motley Fool contributor Tony Yoo 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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A number of classic Australian brands listed on the ASX last week. These tech-enabled companies saw significant increases in their share prices after listing. Here’s the rundown for ASX IPOs you might have missed. 

Booktopia Group Ltd (ASX: BKG) 

Booktopia is the largest Australian-owned online book retailer by market share with revenue in FY20 of $165.8 million. More than 85% of the items it sold in FY2020 were books. However it also sells eBooks, DVDs, audiobooks, magazines, maps, calendars, puzzles, stationery and cards. The company’s revenue has grown at a compound annual growth rate of approximately 26.4% between FY15 and FY20. 

The company raised $43.1 million at an offer price of $2.30 per share.  The Booktopia share price has since jumped more than 30% to almost $3.00. 

Nuix Ltd (ASX: NXL) 

Nuix is a provider of investigative analytics and intelligence software. Its platform supports a range of established use cases, including criminal investigations, financial crime, litigation support, employee and insider investigations, data protection and privacy, data governance, legal eDiscovery and regulatory compliance.

The company has been involved in some headline events over the last 15 years including the Panama Papers, the Royal Commission into the misconduct in the banking, superannuation and financial service industry in Australia, organised crime rings, corporate scandals and terrorist activities. 

Nuix has a customer base of more than 1,000 existing customers, including large government agencies, regulators, corporations and professional services firms. In FY20, the company achieved $175.9 million in total revenue, an increase of 25.9% on the previous financial year.

The company successfully raised $953 million at an offer price of $5.31 per share. Its shares opened more than 50% higher on its debut last Friday and closed at $9.06 on Monday. 

Cashrewards Ltd (ASX: CRW) 

Cashrewards is the largest Australian-owned-and-operated cashback ecosystem with more than 800,000 members and 1,500+ merchant partners. Members can browse brands and access cashback offers while shopping online or in-store with participating merchant partners.

The company generates revenue from commission from merchant partner sales and gift cards. In FY20, the company achieved $17.1 million in revenue and a net profit after tax loss of $5.7 million.

Its IPO raised $65.0 million at $1.73 per share. The Cashrewards share price is closed at $2.03 on Monday, or 17% higher than its offer price. 

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Motley Fool contributor Lina Lim 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 AML3D Ltd (ASX: AL3) share price will be on watch this morning. This comes after yesterday’s market close announcement that the company is progressing with its next-gen body armour program.

Progression to stage 2 development

The AML3D share price could be on the move today after the company advised its next-gen body armour program has progressed to the second stage.

According to the release, AML3D’s ‘made-to-fit’ titanium body armour entered the next stage of prototype development with Lightforce Australia Pty Ltd.

Lightforce is a developer and manufacturer of defence solutions with operations in Australia and the United States.

Production of the innovative, high-tech body armour is under direct supervision of AML3D’s Wire Arc Manufacturing division. It is stated that the prototype is uniquely printed in a way that is not possible using traditional techniques. Potential applications include creating ‘made-to-fit’ body armour by scanning the torsos of individual soliders. 

The first stage of the program marked the beginning of the Memorandum of Understanding (MoU) with Lightforce and involved product testing. The second stage will encompass ballistics testing with additional prototypes. These samples will be used with a variety of thicknesses and finished using a range of different techniques and treatments. The end goal for AML3D is to optimise the design to deliver the lightest, yet strongest armour to market.

Finalisation of the second stage will conclude the testing phase under the MoU. AML3D will spend $55,000 on providing several prototypes to Lightforce for testing.

AML3D advised it is confident it will succeed in developing the next-gen body armour product for commercialisation. The company also noted the opportunity for contract manufacturing revenues is significant.

According to AML3D, the market for such a product is expected to be above US$3 billion by 2025, representing a compound annual growth rate of 5.5%.

Management commentary

AML3D managing director, Mr Andrew Sales, was pleased with the company’s achievements. He said:

We’re excited to progress to Stage 2 with Lightforce in the development of a disruptive, world- first product offering. We’re confident that our highly qualified team will be able to deliver a range of prototypes that meet or exceed Lightforce’s required specifications.

Post the recent capital raise, AML3D is now well capitalised to fulfil the demands of opportunities such as Lightforce, which have the potential to deliver significant contract manufacturing revenues.

About the AML3D share price

The AML3D share price has risen strongly since its initial public offering (IPO) earlier this year. Back in April, AML3D shares were asking just 15 cents but have since increased to 42 cents as at yesterday’s close. This reflects a gain of 180% for investors who held the company’s shares over this eight month period.

The AML3D share price reached an all-time high of 73 cents in September, and has been gradually trending lower in the months following.

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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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There are a few different reasons to be interested in watching the A2 Milk Company Ltd (ASX: A2M) share price.

What does A2 Milk do?

It’s a premium-branded dairy nutritional company which is focused on products containing the A2 beta-casein protein type. Its sales items like liquid milk, powdered milk, ice cream and infant formula.

Its products are sold in various places including New Zealand, Australia, China, the US, Vietnam and South Korea. It’s also testing a fresh milk presence in Singapore and recently launched into the Canadian market.

Here are three reasons to consider looking at A2 Milk shares:

International growth

The company has experienced difficulties this year because of impacts relating to COVID-19.

A2 Milk said it has seen disruption to the corporate daigou and reseller channel, particularly because of the restrictions in Victoria. The daigou revenue reduction was beyond its previous expectations and without the replenishment orders that would have been expected by that point.

Sales in the daigou channel represent a significant portion of infant formula sales in the Australia and New Zealand business.

However, sales made internationally are growing strongly. In FY20 A2 Milk achieved sales of $337.7 million for the Chinese label infant nutrition business, which was growth of over 100%. Its Chinese mother and baby store (MBS) value share was 2%, compared to 1.7% at 31 December 2019 and 1.3% at FY19. It also saw 40.3% growth of its English label infant nutrition cross border-commerce sales in FY20.

In the US it achieved 91.2% growth of its revenue, whilst earnings from Western Canada had just started.

A2 Milk’s recent trading update said that its US milk revenue continues to grow strongly, whilst the local China business is performing strongly as well.

Once local COVID-19 impacts subside, A2 Milk is expecting significant improvement in the second half of FY21 and beyond.

Strong balance sheet

Many businesses had to carry out a capital raising during the 2020 to ensure stability during the difficult COVID-19 conditions.

A2 Milk wasn’t one of those businesses that had to do a dilutive capital raising at a low share price.

That’s because it has a large amount of cash sitting on the balance sheet. At the end of FY20 it had a closing cash balance of NZ$854.2 million and no debt.

At the moment A2 Milk is contemplating using some of that cash, around NZ$385 million, to buy a 75.1% interest in Mataura Valley Milk. This business has recently constructed and commissioned a state of the art nutritional facility which could be used to complement A2 Milk’s existing supply relationships. Management think it’s well located for access to a growing productive milk pool supported by favourable climactic conditions and water availability.

Mataura Valley Milk has agreed to provide A2 Milk with a period of exclusivity to conduct confirmatory due diligence and negotiate definitive transaction documentation.

Valuation

The A2 Milk share price has fallen down to almost $13. It didn’t even fall that low during the COVID-19 crash. It was November 2019 when it was last that low.

At this level, it’s priced at 23x FY22’s estimated earnings according to Commsec. This compares to other popular growth shares like Appen Ltd (ASX: APX) which is trading at 30x FY22’s estimated earnings.

More reading

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• 10 fantastic ASX shares to buy in December
• 2 fantastic ASX growth shares to buy

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 Appen Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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With the outlook for interest rates remaining very bleak, it is fortunate that there such a large number of dividend shares for investors to choose from on the Australian share market.

Two ASX dividend shares that offer investors very generous yields are listed below. Here’s why they come highly rated:

Aventus Group (ASX: AVN)

Aventus is a retail property company with a difference. It is the owner and operator of 20 large format retail parks across Australia. These retail parks count major retailers such as ALDI, Bunnings, Officeworks, and The Good Guys as tenants.

It was thanks to its high weighting to national retailers, and particularly everyday needs, that allowed Aventus to come out of the pandemic relatively unscathed. The company was able to collect the majority of its rent as normal despite the disruption in the retail sector.

One broker that is positive on the company is Goldman Sachs. Its analysts have a buy rating and $2.76 price target on its shares. They also estimate that the current Aventus share price currently offers a forward ~6.1% dividend yield.

Fortescue Metals Group Limited (ASX: FMG)

Fortescue is one of the world’s leading iron ore producers. It appears well-positioned to deliver another very strong result in FY 2021. This is thanks to its record shipments, ultra low C1 costs of US$12.74 per wet metric tonne, and sky high iron ore prices.

In respect to the latter, on Friday the spot iron ore price jumped a further 5.4% to a seven year high of US$145.30 a tonne. This was driven by production cuts in Brazil by mining giant Vale.

This news led to analysts at Macquarie reaffirming their outperform rating and lifting their price target on the company’s shares to $23.00. The broker is also now forecasting a $2.61 per share fully franked dividend in FY 2021. Based on the latest Fortescue share price, this equates to a massive 12% dividend yield.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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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