Qantas Airways Limited (ASX: QAN) has announced that its Sydney-Melbourne route will resume flights immediately, following the decision by the New South Wales Premier to reopen the state’s border to Victorians starting today. At the time of writing, the Qantas share price has risen by 1.52% in early morning trading to $5.35.

How will this impact Qantas?

The Sydney-Melbourne route was the second busiest domestic route in the world prior to the pandemic, with the Seoul-Jeju route in Korea taking the number one spot. 

The Qantas share price is on the move today after the company announced that today’s flight resumption will increase its domestic capacity to just under 40% of pre-COVID levels. This is up from 30% prior to today. 

From today, Victorians wishing to travel to NSW will no longer have to get government permission or quarantine for 14 days. 

In addition, Qantas Chief Executive, Alan Joyce, today says he’s optimistic that Australia will enter into a number of travel arrangements with other COVID-safe countries, starting with flights across the Tasman as early as the first few months of next year.

He explains:

We’ve always planned that by July next year we will start reactivating our long-haul international aircraft and get a lot of our people back to work. The news about the vaccines is very positive which I think is great for that border reopening plan.

Brief take on Qantas

Qantas commands a market share of around two thirds of Australian domestic air travel. Combined with its low cost carrier brand, Jetstar, the company is also Australia’s largest international carrier, with 25% of Australia’s international traffic. Qantas has defended this leading market share pretty much for the past decade.

Despite its dominance in the domestic route, Qantas has struggled to compete in the international space. This is partly due to geography. Australia is not a natural hub location and, as a result, Qantas operates at a cost disadvantage against its Asian competitors. 

This cost disadvantage on international routes is reflected in the company’s results – where its earnings before interest and tax (EBIT) is 4% for its international division, but a much higher 12% for its domestic division. 

However, this apparent Achilles’ heel turned out to be the company’s savior during the pandemic, as international flights were grounded in favour of domestic travel.

Let’s take a look at the Qantas share price in 2020

Like most airlines, the Qantas share price has taken a beating in 2020 as a result of the pandemic. Its share price started the year at $7.11, and dropped to $2.11 in March at the height of the travel restrictions. Since then, the Qantas share price has recovered to its current price of $5.35.

More reading

• Why the Helloworld (ASX:HLO) share price is climbing higher today
• Revealed: Shares that’ll shoot up with a COVID-19 recovery
• Why the Webjet (ASX:WEB) share price is up 48% in November
• Flight Centre and Webjet were among the most traded shares on the ASX last week
• Aussie companies blast ‘knee-jerk’ COVID-19 border closures

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Helloworld Travel Ltd (ASX: HLO) share price is climbing higher today. This comes after the company released news about an acquisition of CruiseCo and renewed partnership with Qantas Airways Limited  (ASX: QAN). At the time of writing, the Helloworld share price is up 5.2% to $2.83.

Acquisition of CruiseCo

Helloworld advised it has entered into an agreement to acquire cruise wholesale company, CruiseCo.

Founded 20 years ago, CruiseCo is a specialist cruise package wholesaler led by Kevin Dale, Phil Hoffman, and Steve Lloyd. The company has over 250-member travel agencies with access to more than 50 global cruise lines. Prior to COVID-19, the company had an annualised total transaction value (TTV) of $70 million throughout Australia.

The acquisition will align with Helloworld’s strategy of expanding its cruise offerings in Australia and New Zealand. Furthermore, the takeover will compliment Helloworld’s existing cruise wholesale business, Seven Oceans Cruising. The latter recorded an annual TTV of around $110 million before COVID-19 hit the tourism market.

The acquisition will be funded from the company’s cash reserves and the purchase is not considered material.

Commenting on the acquisition, Helloworld executive director Cinzia Burnes said:

These two businesses, when combined, provide Helloworld Travel with a comprehensive range of cruise options for our retail agencies in Australia and New Zealand.

Given the recent demand for some 2022 specials in the market, the positive news around both the development of a vaccine and rapid testing capabilities, we are confident that demand for cruising will come back strongly from 2022 and we look forward to working with our cruise partners and agencies to capture that demand.

Renewed Qantas partnership

The Helloworld share price is also reacting to news today that Helloworld has renewed its partnership with Qantas.

The new commercial agreement will promote and sell the national carrier’s fares and products until 2023. The multi-year deal is said to provide confidence to Helloworld in the recovery of the ailing sector.

Helloworld CEO and managing director Andrew Burnes welcomed the deal, saying:

We have had a longstanding partnership with Qantas and the continuation of that was an important component in securing our position as their leading travel agency partner and ensures our owned businesses and agency networks can continue to sell Qantas with confidence.

Qantas global sales and distribution executive manager Igor Kwiatkowski said the agreement helped cement a long-standing relationship with Helloworld Travel “as their number one airline supplier in Australia”.

Despite the devastating impact of COVID-19 on the industry, we’re starting to see really positive momentum from the trade as domestic travel restrictions start to ease.

We are pleased to be working together to focus on opportunities that benefit our businesses – including joint marketing and sales activities – as the travel industry starts to recover.

Helloworld share price summary

The Helloworld share price has been soaring since the start of November. Its shares reached from a low of $1.67 to now $2.79, representing a gain of 67% in just 3 weeks. However, the Helloworld share price is still down on a high of $5.03 in January before the onset of COVID-19. The company fell to an all-time low of 67 cents in March.

More reading

• Revealed: Shares that’ll shoot up with a COVID-19 recovery
• Why the Webjet (ASX:WEB) share price is up 48% in November
• Flight Centre and Webjet were among the most traded shares on the ASX last week
• Aussie companies blast ‘knee-jerk’ COVID-19 border closures
• The Qantas (ASX:QAN) share price soared 12% higher last week

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Helloworld Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Shares in IT services provider, Empired Ltd (ASX: EPD), are soaring this morning after the company announced record first half revenue guidance for FY21 of between $87 million and $89 million. This is up from $84 million for the same period last year. At the time of writing, the Empired share price is up 14.06% to 73 cents following the the announcement which was made during the company’s annual general meeting (AGM).

What else is driving the Empired share price?

The Empired share price is rocketing higher after the company also advised it expects record earnings before interest, tax, depreciation, and ammortisation (EBITDA) of between $15.8 million and $16.5 million, compared to $7.8 million last year.

Empired says it expects to pay out an interim dividend in February 2021 in the range of 30% to 40% of earnings.

On its full year outlook, the company says it will continue to perform strongly for the rest of FY21, with no material adverse changes to trading conditions due to COVID-19.

FY22 growth will be underpinned by a full year contribution from Western Power managed services and asset refresh contracts, combined with additional forecast revenue from the recent Western Power systems integrator contract win.

Empired Managing Director, Russell Baskerville, said:

We have been delighted with the progress made in ramping up services relating to a number of key contract wins over the prior six months. In the face of challenging conditions our team has transitioned and commenced service delivery ahead of time and in line with anticipated financial performance.

Over the coming 12 months, the company will contest a number of multi-year strategic deals that, if successful, will provide a material uplift in earnings in FY22 and beyond.

What does Empired do?

Empired provides IT services ranging from business consulting to applications systems development and support. 

Only two weeks ago, the company won a master IT supply contract with Western Power to provide a range of systems integration services. This was the second contract awarded by Western Power, and followed the managed services and preferred infrastructure services contracts awarded to Empired in April 2020.

Empired also counts Aussie Home Loans as one of its clients. The company first listed on the ASX in 2007, and its biggest shareholder is Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

How did Empired perform in 2020

The Empired share price has been one the clear winners in 2020, gaining more than 108% year to date. The Empired share price began the year at 35 cents and, based on today’s price, now commands a market capitalisation of $102 million.

More reading

• 2 very reliable ASX dividend shares to buy
• 3 leading ASX dividend shares to buy for income
• ASX 200 ends flat on Friday
• ASX stock of the day: Japara Healthcare (ASX:JHC) share price soars 23%
• Why the Oil Search (ASX:OSH) share price is the worst performer today

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Christmas came early for the S&P/ASX 200 Index (ASX: XJO) with the index rallying more than 10% in November. While a majority of ASX shares are still below pre-COVID highs, these companies have managed to push higher into record territory. 

1. Galaxy Resources Limited (ASX: GXY) 

The Galaxy Resources share price has lifted more than 50% in this month alone to hit an 18-month high of $1.80. This comes off the back of President-elect Joe Biden’s plan to lead a transition to renewable energy. This includes a promise to eliminate federal subsidies to the oil industry and move to net-zero emissions by 2050. His plans have lifted sentiment for renewable related sectors including lithium miners. 

2. Lifestyle Communities Limited (ASX: LIC) 

Lifestyle Communities is involved in developing and managing affordable communities for working, semi-retired and retired people. It operates as land lease communities, which is a very different model to retirement villages. 

There has been a broad recovery in the real estate sector ranging from retail REITs such as Scentre Group (ASX: SCG) and Vicinity Centres (ASX: VCX) bouncing off lows to industrial REITs such as Goodman Group Ltd (ASX: GMG) making new record all-time highs. 

The Lifestyle share price has soared past its previous record all-time highs of $9.90 set in January 2020 to close at $10.98 last Friday. 

3. Seven Group Holdings Ltd (ASX: SVW) 

Seven operates a diverse portfolio of industrial services, media, property and other investments. Its recent share price run is reflective of the rotation from tech and growth to cyclical and value stocks. Seven’s last closed share price of $22.59 represents not only a 52-week high but also is cents away from a new all-time record high.  

4. Wesfarmers Ltd (ASX: WES)

The Wesfarmers share price has also enjoyed the benefits of the recent rotation into value and cyclical ASX shares. Its push this month to the $49 level represents record all-time highs for the company. 

Wesfarmers has experienced significant demand growth across its businesses including Bunnings, Officeworks and Catch with respective FY21 year-to-date sales growth of 25.2%, 23.4% and 114.4%. 

More reading

• ASX 200 Weekly Wrap: ASX continues to climb, despite outage
• 2 ASX blue chip dividend shares to buy this month
• ASX 200 rises again on Tuesday
• Macquarie (ASX:MQG) picks best ASX stocks to buy for 2021 post-COVID recovery
• Aussie companies blast ‘knee-jerk’ COVID-19 border closures

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In more than 10 years of investing, I’ve never experienced anything like 2020. The ups, the downs, the twists! Markets have been changing so quickly that thinking about anything beyond this year, and beyond COVID-19, feels like crystal ball gazing.

That goes for our investing too. However we can’t let the short-term events of 2020 derail the most important vehicle we have for growing our money over long periods: compounding returns.

Compounding is where earnings (or dividends) get reinvested, and those earnings start to produce their own earnings. Over time, this can turn an ordinary portfolio into spectacular, life changing wealth. So here are some quick tips to get that compounding back on track in 2021.

Reinvest those dividends!

Plenty of companies are paying out great dividends to shareholders. For compounding to happen, we need to put those dividends back to work.

For example, global packaging company Amcor CDI (ASX: AMC) pays a quarterly dividend which currently yields around 4.2% per annum (unfranked). In the 2020 financial year, strong cash flows allowed Amcor to increase its dividend by almost 10%. The company also has a dividend reinvestment plan (DRP) which can allow dividends to be automatically invested back into the company, without brokerage, commission or other transaction costs.

But there’s more. In November, the Amcor board of directors approved a $150 million buy-back of ordinary shares. When buy-backs reduce the number of outstanding shares, earnings and dividends are shared between fewer shares, increasing their value.

Rail freight operator, Aurizon Holdings Ltd (ASX: AZJ), also increased its final dividend by 10% after a strong full year result where underlying net profit after tax (NPAT) increased 12%. Like Amcor, Aurizon is planning to buy back $300 million of shares in the 2021 financial year. This is in addition to $400 million of shares repurchased during the 2020 financial year which sweetens the deal for investors. Both companies are currently rated as ‘buy’ by The Motley Fool’s expert dividend analysts.

Consistency is the key…

Compounding is about consistency, repetition and investing regularly over time. If you’re good at setting habits, this will be easy. If not, no problem! The trick is to automate your investing as much as possible. Set up automatic payments to regularly deposit money into an investment account and sign up for company dividend reinvestment plans to take the hassle out of the process.

…but don’t get complacent with investment risk

We need to give companies time to grow, but that doesn’t mean we can be complacent with risk.

If 2020 has taught us anything, it is that to sleep well at night we want to build a resilient, unshakeable portfolio. Owning shares in companies in different industries, that earn revenue across different regions, is a good start. For example, 47% of Amcor’s revenue comes from North America and another 24% comes from Western Europe. Aurizon earns almost all of its revenue in Australia, so between the two companies there is an element of diversification. 

Finally, if you’re managing your own portfolio, it’s important to keep up with company news and results. The compounding process is far more effective if earnings and dividends are growing regularly. Combined with a long-term perspective and some good habits, you can focus on leaving 2020 behind and turn 2021 into a great year for compounding your wealth.

More reading

• Leading broker warns that US dollar could face bear market crash in 2021
• Latest 3 “buy” recommendations from top brokers
• Amcor (ASX:AMC) share price rising after strong Q1 results
• With interest rates near zero these ASX income shares are in focus
• 3 ASX dividend shares rated as buys by brokers

Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia has recommended Aurizon Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Laybuy Holdings Ltd (ASX: LBY) share price has started the week positively following the release of its half year results.

At the time of writing, the buy now pay later provider’s shares are up over 1.5% to $1.41.

How did Laybuy perform in the first half?

This morning the Afterpay Ltd (ASX: APT) rival revealed that it recorded strong gross merchant value (GMV), customer, and merchant growth during the six months ended 30 September.

According to the release, first half GMV increased 167% over the prior corresponding period to NZ$244.8 million. This equates to annualised GMV of NZ$489.6 million.

Almost half of its annualised GMV is from the UK market, which now stands at NZ$212.5 million. This is up by a whopping NZ$196 million since this time last year.

Positively, the company’s defaults are also improving. They have reduced from 3% of GMV a year ago to 2.5% of GMV.

Also climbing strongly was its net transaction margin (NTM), which grew 448% to NZ$4.1 million. As a percentage of GMV, its NTM is now 1.7%. This compares to 0.8% in the prior corresponding period.

What were the drivers of Laybuy’s strong growth?

Key drivers of the company’s growth during the first half were increases in merchant and customer numbers.

Active merchants now total 6,323, which is an increase of 48%. Whereas active customers have lifted by 315,000 over the 12 months to 568,000. Management advised that this reflects strong growth in all regions.

Laybuy’s Managing Director, Gary Rohloff, commented: “Laybuy is delighted to announce its first financial results as an ASX listed company and update shareholders on the significant progress we have made against our growth strategy.”

“Revenue has increased 151% largely due to growth in the UK. We reported strong growth in all key operating metrics for the half year period. In addition to this strong revenue growth, we saw a significant improvement in Net Transaction Margin, more than doubling to 1.7% in H1 FY21,” he added.

Outlook.

Mr Rohloff spoke positively about the company’s outlook.

He said: “Setting the foundations for growth, Laybuy has expanded its debt facilities and raised capital on the ASX, which together with its capital efficient business model supports annual GMV growth of approximately NZ$4 billion. This sets us up well to capitalise on our differentiated offering and highly scalable and flexible technology platform to capture the substantial growth opportunity in both the UK and Australian market.”

Pleasingly, management revealed that it has experienced a marked uplift in activity since the end of the first half. During this time it has added over 60,000 customers and over 1,000 merchants.

It also revealed that GMV for October and November (based on a month to date run rate) improved to NZ$45 million and NZ$61 million, respectively. This represents GMV growth of 164% and 175%, respectively, over the prior corresponding periods.

Finally, it advised that it has recently launched with Wilko in the UK (annual turnover of ~1.6 billion pounds) and had a highly successful “Laybuy Mania” event on 7 November.

This event “produced record results with a 858% increase in referral to merchants, 804% more customers visiting Laybuy’s shop directory and 100% increase in orders made with Laybuy compared to the prior month.”

More reading

• Is buy now, pay later (BNPL) giving Aussies a headache?
• Laybuy (ASX:LBY) launches tap to pay digital card
• Why Laybuy, Oil Search, PointsBet, & Webjet shares are racing higher
• Meet Afterpay (ASX:APT)’s latest BNPL challenger

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In morning trade the Monadelphous Group Limited (ASX: MND) share price is pushing higher.

At the time of writing, the engineering company’s shares are up over 1% to $11.90.

This latest gain means the Monadelphous share price is now up 17% since this time last month.

Why is the Monadelphous share price pushing higher today?

Investors have been buying Monadelphous shares this morning after it released an announcement which revealed several new contract wins.

These contracts are with Australia’s two largest miners, BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

According to the release, the new construction and maintenance contracts with Rio Tinto and BHP have a combined value of approximately $60 million.

What are the contracts?

Monadelphous has been awarded three three-year master services contracts with Rio Tinto.

These are for the delivery of sustaining capital projects across various mine sites and port operations throughout the Pilbara region in Western Australia.

Management advised that the work includes structural, mechanical and piping, electrical, instrumentation and controls, and non-process infrastructure projects.

In addition to this, Monadelphous has secured another three-year contract with Rio Tinto, with a two-year extension option. This is to provide mechanical, electrical and access maintenance services for fixed plant shutdowns at its Gove operations in the Northern Territory.

Rio Tinto’s Gove operation is a leading producer of bauxite and has been supplying the global aluminium industry with the product for more than 40 years.

As for the BHP contract, management revealed that it has secured a 12-month extension to its existing mechanical and electrical maintenance, shutdown, and project services contract across BHP’s Western Australian nickel operations.

Is the Monadelphous share price in the buy zone?

One broker that still sees upside for the Monadelphous share price is Citi. It currently has a buy rating and $12.63 price target on its shares.

This price target implies potential upside of 6% excluding dividends.

More reading

• ASX 200 Weekly Wrap: ASX continues to climb, despite outage
• China is a much bigger threat to the ASX bull run than COVID
• Can Magellan (ASX:MFG) prosper in a market dominated by Macquarie (ASX:MQG)?
• Aussie companies blast ‘knee-jerk’ COVID-19 border closures
• 2 fully franked ASX dividend shares with attractive yields

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Ampol Ltd (ASX: ALD) share price is racing higher today after the release of a positive announcement.

At the time of writing, the fuel retailer’s shares are up 8% to $30.81

What did Ampol announce?

This morning the fuel retailer announced the completion of its convenience retail property transaction and its plans for the funds.

According to the release, on Friday Ampol, formerly known as Caltex, completed the sale of its convenience retail property which will generate net proceeds of approximately $635 million.

This is higher than the prior guidance of approximately $612 million due to lower than estimated transaction costs on completion of the transaction.

What will Ampol do with the proceeds?

When the company initially announced the transaction, given the then prevailing uncertainty around the COVID-19 pandemic, management advised that it would use the proceeds to reduce leverage in line with its Capital Allocation Framework.

However, since then, Ampol has experienced an improvement in its trading performance following the lifting of numerous COVID-19 restrictions.

In light of this, management has decided to use the property transaction proceeds for a combination of reducing leverage, pursuing appropriate growth opportunities, and returning capital to shareholders.

In respect to the latter, this morning Ampol has announced an off-market buy-back of approximately $300 million. This is planned to commence immediately and complete in the first quarter of FY 2021 and is expected to deliver earnings per share accretion for shareholders.

Ampol’s Managing Director and CEO, Matthew Halliday, commented: “We have delivered on our stated 2019 plan to unlock value through network optimisation and I am pleased the completion of the property transaction will further strengthen our balance sheet while allowing us to return capital and release franking credits.”

“The property transaction has complemented the resilient performance of the business in a tough environment and the strong action we have taken to protect cash flows in response to COVID-19,” he added.

More reading

• Takeovers will continue to rock ASX shares
• How La Nina will create unexpected ASX stock winners and losers

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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There are a number of ASX payment shares that have been rated as buys.

Some payment businesses are completely changing how people pay for things. However, there are others that are simply improving on what already exists.

Tyro Payments Ltd (ASX: TYR)

Tyro Payments is a business that provides payment terminals for businesses to accept payments from customers. There are lots of cafes, restaurants or other businesses that are currently using a payment terminal from Tyro.

It’s currently rated as a buy by the Motley Fool Blast Off service.

The company recently signed a deal with Bendigo and Adelaide Bank Ltd (ASX: BEN) to take over the bank’s payment terminal which will add around 26,000 to its Tyro’s national terminal network.

In Tyro’s most recent weekly update, the company said that its transaction value had grown by 15% in November so far. October’s transaction value grew by 10%.

At the ASX payment share’s AGM it revealed that it had more than 33,200 active merchants at 30 September 2020, an increase of 8% compared to last year.

It said that its transaction value to 23 October 2020 grew 5% to $6.8 billion compared to the same period last year. That included NSW transaction value growth of 8% whilst Victoria was down 35%.

The Tyro share price is still down 6% from where it was on 21 February 2020. But it has gone up 267% since 23 March 2020.

EML Payments Ltd (ASX: EML)

EML is an ASX payment share that offers various payment products including physical gift cards, digital gift cards, general reloadable cards, virtual account numbers, salary packaging, disbursements, gaming payouts and so on.

The company is currently rated as a buy by the Motley Fool Extreme Opportunities service.

EML recently gave a trading update for the first quarter of FY21. It said that first quarter revenue was $40.6 million, up 75% over the prior corresponding period and it was 20% higher than the fourth quarter of FY20. It also said that its earnings before interest, tax, depreciation and amortisation (EBITDA) of $10 million was up 215% compared to the prior corresponding period and up 69% compared to the fourth quarter of FY20.

EML Payments’ share price is still down 35% from 18 February 2020. However, it has risen by 171% since 23 March 2020.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is a digital giving business which facilitates donation payments predominately to large and medium US churches.

The business is currently rated as a buy by the Motley Fool Pro service.

Pushpay is steadily winning over more churches and more people are utilising the digital donation service in this COVID-19 period of social distancing. The Pushpay service also provides a livestreaming service so that churches can stay in contact with their congregations.

The ASX payment share boasts of rising profit margins. In the recent FY21 half-year result, Pushpay increased its gross profit margin from 65% to 68%. It also managed to increase its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin from 17% to 31%.

Pushpay itself said it expects “significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.”

The Pushpay share price has risen by 160% since 16 March 2020.

Looking at the estimated on Commsec, Pushpay is valued at 24x FY23’s estimated earnings. The company is aiming for a 50% market share of large and medium US churches, which could mean US$1 billion of annual revenue per year.

More reading

• Top brokers name 3 ASX shares to buy next week
• 2 great ASX shares to buy
• 5 fantastic ASX shares to buy today
• 2 ASX growth shares predicting big growth this decade
• Down 22% in 3 weeks, is the Pushpay (ASX:PPH) share price a 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 and recommends EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and Tyro Payments. The Motley Fool Australia has recommended EML Payments and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Among many announcements during its annual general meeting (AGM) last week, CML Group Ltd (ASX: CGR) voted to change its name. The debtor finance company is rebranding all of its disparate businesses to EarlyPay. Although not yet changed on the ASX, the company has already launched a rebranded software-as-a-service (SaaS) platform and website. By the end of the week, the EarlyPay share price had risen by 7.46%.

There were also many other structural changes announced during the AGM. For instance, a restructure of the company’s debt financing portfolio, a distribution agreement with a large scale brokerage network, and the formal launch of its SaaS platform.

What’s driving the EarlyPay share price?

EarlyPay is a non-bank lender in the commercial sector. Nonetheless, unlike non-bank lenders in the mortgage sector, its loans are not secured by real estate. Moreover, it specialises in debtor finance in the areas of invoice finance, asset finance and trade finance.

The company recently purchased a SaaS platform, moving its invoice financing operations onto a digital platform. The company believes this will increase its addressable market by 140%. 

Debt management

Like other non-bank lenders, EarlyPay does not have deposits. Nor does it have access to the Reserve Bank of Australia’s (RBA) $200 billion term funding facility (TFF). This is a facility that provides banks access to funds at the very low current cash rate of 0.1%. As a result, the company must rely on other mechanisms to secure the capital it needs to provide its loans. 

The EarlyPay share price is benefitting, in part, by the restructure of its debt portfolio, shaving $1.5 million from its annual costs. This will include retirement of corporate bonds in December. In addition, it will move to warehouse funding, and tap the Australian Office of Financial Management (AOFM) for $36 million of capital via COVID-19 initiatives. 

Distribution agreements

EarlyPay also announced a formal distribution agreement with COG Financial Services Ltd (ASX: COG), Australia’s largest asset finance broker and aggregator. This will provide EarlyPay with a much enlarged broker network through which the company can market to and educate potential customers. COG Financial Services currently holds a 16.3% stake in EarlyPay as a result of a FY20 aborted takeover attempt.

In addition, EarlyPay has appointed Mr Stephen White to the board. Mr White is also a current director of COG Financial Services. He has been appointed, in part, to facilitate the relationship between the two companies. 

Commenting on the opportunity with COG, Daniel Riley, CEO of CML said;

The agreement with COG facilitates access for CML to Australia’s largest distribution network for commercial finance. The CML team looks forward to working with COG brokers to offer its finance solutions to SME’s and anticipates an opportunity to expand business volumes across all products.

Foolish takeaway

EarlyPay believes it has significantly increased its addressable market by moving to a SaaS platform, and a distribution agreement. It has also dramatically reduced costs in its debt portfolio, along with cost reductions achieved during the COVID-19 lockdowns.

The EarlyPay share price is now enjoying a level of upward momentum. This was after falling substantially in May when the aforementioned takeover deal fell through.

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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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