The Helloworld Travel Ltd (ASX: HLO) share price is wobbly today following the release of a trading update.

The Helloworld share price stumbled on opening this morning, dropping down to $1.69. However, shares in the travel company rallied back up to $1.75 in midday trade, down 2.78% at the time of writing.

Let’s look at how Helloworld performed in the September quarter.

Business update

Helloworld reported a poor result for the period ending 30 September, as COVID-19 continued to severely impact the travel industry.

Total transaction value (TTV) plummeted to $176.8 million, representing a 90.6% decline on the previous corresponding period (pcp). However, the company highlighted a small recovery, which saw TTV increase from $51 million in July and August to $74.4 million in September.

Revenue sank to $12.4 million, an 86.8% fall from the same time from last year. The halt in travel booking effectively put a large number of its agency network in hibernation mode.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) saw a loss of $4.1 million. This was a slight improvement on the $6 million loss forecast by the business.

Helloworld recorded a cash balance of $105 million at the end of the quarter. However, a bank debt was prepaid for $20 million, reducing its free cash to $85 million. The repayment decreased the company’s interest expenditure by $0.4 million per annum.

COVID-19 response

As international air travel dropped by 98% between March and October, Helloworld expects average TTV and revenues to remain low. The company has predicted that these levels will be around 10% to 15% below previous amounts until early 2021.

By responding quickly to the evolving COVID-19 crisis, Helloworld reduced personnel costs up to 75%, saving $9 million per month.

In addition, the company cut other key costs such as technology and communications, advertising and marketing, occupancy and non-personnel overheads.

Retail networks

Retail networks across Australia and New Zealand have been forced to adapt the fallout of travel bookings. A number of outlets have moved their operations to home or shared a premise with other agencies. The company said the liquidity runway for agents was getting shorter, especially without any specific federal government assistance.

Outlook for the Helloworld share price

With the re-opening of interstate borders, Helloworld is anticipating a recovery in the Australian domestic travel market. Furthermore, safe travel corridors established with COVID safe countries is scheduled to commence throughout 2021.

Based on current projections, Helloworld estimates an EBITDA loss of $1.5 million to $2 million per month until March 2021. In the latter of the year, the company advised it will move into a break-even position, conditional on travel bubbles.

Helloworld stated that it has enough liquidity to maintain operations until late 2022, and possibly longer from its current cash burn rate.

More reading

• Why ANZ Bank, JB Hi-Fi, Northern Star, & SEEK shares are dropping lower
• The Seek Ltd (ASX:SEK) share price under attack by offshore shorter
• ASX 200 down 1.1%: ANZ cash earnings down 42%, SEEK slammed, HUB24 jumps
• Why Coles, HUB24, Mesoblast, & Temple & Webster shares are pushing higher
• Yikes: World will owe 265% of GDP this year

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Helloworld Limited. The Motley Fool Australia 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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The Seek Limited (ASX: SEK) share price has followed the struggling S&P/ASX 200 Index (ASX: XJO) to slump more than 6% on Thursday. Adding further insult to injury, Seek has come under strong scrutiny from an offshore shorter, Blue Orca Capital. Blue Orca published a 39-page report that values the Seek share price at just $7.20. Here is the rundown of the report. 

The Seek business 

Seek has a portfolio of employment, education and volunteer businesses which span across Australia, New Zealand, China, South East Asia, Brazil, Mexica, Africa and Bangladesh. The company is regarded as a tech company as it creates product technology solutions to address the needs of job seekers and hirers. It then facilitates the matching between job seekers and hirers across its online employment marketplaces. 

Blue Orca’s short report 

Blue Orca critiques Seek’s legacy platform in Australia as stagnating in growth. But the report mainly target’s Seek’s China business. Its Chinese online recruiting platform Zhaopin has been cited by Seek as China’s #1 player and growing rapidly. In FY20, Zhaopin accounted for 48% of the company’s consolidated revenues and was Seek’s only segment which reportedly grew revenues and profits. Blue Orca points to Seek’s Chinese business as a driving factor for why the company is able to trade at 404 times forward earnings. 

However, Blue Orca’s due diligence has revealed that “Zhaopin’s platform is inundated with fake postings by companies which were deregistered, in liquidation or flagged as abnormal operations” by Chinese authorities. Companies that Blue Orca had called out about their job postings on the website “stated directly that the postings were fraudulent”.

Blue Orca has described the Zhaopin platform as “rotten” and “devastating for Seek’s prospects”. It also takes a jab at the company’s financials, stating that Seek’s dividends give the false impression that its business produces healthy profits and cash flows, but these payments have “largely been funded by debt”. 

Rather than valuing Seek as a fast-growing online recruiting platform, Blue Orca describes the business as one that is “a slow or no-growth platform whose core business is shrinking and which carries a dangerous amount of debt”. As a result, it values Seek’s business at a “generous 20.5 times EV/adjusted EBITDA” and value’s the Seek share price at just $7.20 per share. 

Foolish takeaway 

Whether these statements are true or not, this situation is very similar to the short attack on WiseTech Global Ltd (ASX: WTC). J Capital made similar, seemingly outrageous statements such as Wisetech delivering overstated profit, suspect European growth and underperforming acquisitions. The repeated back and forth between J Capital and Wisetech was devastating for the Wisetech share price and sentiment. However, the company has since made a significant recovery from its previous lows. 

More reading

• ASX 200 down 1.1%: ANZ cash earnings down 42%, SEEK slammed, HUB24 jumps
• 5 things to watch on the ASX 200 on Thursday
• Today was mixed for the ASX 200, ending 0.1% higher
• These could be the next ASX stocks to unlock value by selling assets
• After sliding 3% this week, is Sydney Airport’s (ASX:SYD) share price a buy?

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of WiseTech Global. The Motley Fool Australia has recommended SEEK 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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At lunch on Thursday the S&P/ASX 200 Index (ASX: XJO) is on course to record a disappointing decline due to COVID-19 concerns. The benchmark index is currently down 1.1% to 5,989.3 points.

Here’s what is happening on the market today:

SEEK shares slammed.

The SEEK Limited (ASX: SEK) share price is crashing lower today after the job listings company was targeted by a short seller. According to a note out of Blue Orca, it believes SEEK’s China-based business is full of fake listings. It also alleges that the company is paying students to make fake resumes. The short seller believes SEEK’s shares are worth only $7.20.

ANZ full year results.

The Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price is trading lower today following the release of its full year results. ANZ reported an unaudited statutory profit after tax of $3.58 billion. This was down 40% on the prior corresponding period. Its cash profit from continuing operations fell 42% $3.76 billion. A final fully franked 35 cents per share dividend was declared.

HUB24 shares surge higher.

The HUB24 Ltd (ASX: HUB) share price is surging higher on Thursday after returning from its trading halt. The investment platform provider’s shares were halted whilst it undertook a $50 million institutional placement. This placement has now been complete and will be used to acquire investment platform provider Xplore Wealth Ltd (ASX: XPL) and Ord Minnett’s non-custody Portfolio Administration and Reporting Service. The company also intends to increase its investment in integrated accounting and wealth solutions provider Easton Investments Ltd (ASX: EAS) to up to 40%.

Best and worst ASX 200 performers.

The best performer on the ASX 200 today has been the HUB24 share price with a sizeable 7% gain. Investors have responded positively to its acquisition plans. The worst performer has been the Westgold Resources Ltd (ASX: WGX) share price with a 9% decline. A number of gold miners are falling heavily today after a pullback in the gold price.

More reading

• The Seek Ltd (ASX:SEK) share price under attack by offshore shorter
• Why Coles, HUB24, Mesoblast, & Temple & Webster shares are pushing higher
• Why the HUB24 (ASX:HUB) share price is storming higher despite the market selloff
• ANZ (ASX:ANZ) share price on watch after FY 2020 results release
• 5 things to watch on the ASX 200 on Thursday

James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd and SEEK 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 late morning trade the S&P/ASX 200 Index (ASX: XJO) has followed the lead of international markets and is sinking notably lower. The benchmark index is down 1.25% to 5,982.2 points.

Four shares that have not let that hold them back are listed below. Here’s why they are pushing higher:

Coles Group Ltd (ASX: COL)

The Coles share price is up a further 1% to $17.84. Investors have been buying the supermarket giant’s shares after brokers responded very positively to its first quarter update on Wednesday. One broker that was impressed was Morgans. It has upgraded Coles’ shares to an add rating with an improved price target of $19.40.

HUB24 Ltd (ASX: HUB)

The HUB24 share price has jumped almost 7% higher to $22.38. This morning the investment platform provider successfully completed its $50 million institutional placement. These funds will be used to acquire investment platform provider Xplore Wealth Ltd (ASX: XPL) and Ord Minnett’s non-custody Portfolio Administration and Reporting Service. In addition, HUB24 will increase its investment in integrated accounting and wealth solutions provider Easton Investments Ltd (ASX: EAS).

Mesoblast limited (ASX: MSB)

The Mesoblast share price has risen almost 1% to $3.13. This follows the release of its first quarter update this morning. This release included an update on the potential pathway to marketing approval for its lead product candidate remestemcel-L. Management continues to believe the immunomodulatory properties of remestemcel-L position this potential therapy at the forefront of treatment for severe and life-threatening inflammatory conditions. This includes COVID-19 acute respiratory distress syndrome (ARDS) and steroid-refractory acute graft versus host disease (SR-aGVHD).

Temple & Webster Group Ltd (ASX: TPW)

The Temple & Webster share price is up 2.5% to $10.91 despite there being no news out of the online furniture and homewares retailer. However, its shares have been very volatile this week, with the bulls and bears seemingly battling for control.

More reading

• Why the HUB24 (ASX:HUB) share price is storming higher despite the market selloff
• Today was mixed for the ASX 200, ending 0.1% higher
• These could be the next ASX stocks to unlock value by selling assets
• Beat low interest rates with these 2 ASX dividend shares
• Why Redbubble, Kogan, Marley Spoon and 1 other ASX share are surging

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 Hub24 Ltd and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended Hub24 Ltd and Temple & Webster Group Ltd. 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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Governments, businesses and citizens all over the globe have had to borrow money to survive the COVID-19 pandemic. 

But exactly how much?

Credit rating agency S&P Global Ratings has calculated that the world will owe a stunning 265% of gross domestic product by the end of the year.

That’s almost quadruple the amount of goods and services the entire planet produces.

“Since COVID-19 took hold, higher leverage, together with a challenging operating environment, has led us to lower the ratings on 22% of corporate and sovereign issuers globally,” said S&P Global Ratings senior research fellow Terry Chan.

“We project global debt to rise 10% to a massive US$200 trillion in 2020.”

The level of debt in Australia is comparable to the global rate.

According to AustralianDebtClock.com.au, all government, household and private credit in Australia currently total about $7.6 trillion.

The 2019 GDP for the nation was just under $2 trillion, according to the World Bank.

So total debt in Australia is at about 280% of GDP.

Don’t panic though, it’ll be okay

As scary as those numbers are, a debt crisis is unlikely in the short term, according to S&P Global Ratings head of research Alexandra Dimitrijevic.

“This is based on our assumption of a continuing, albeit choppy, global economic recovery,” she said.

“The recovery, in turn, is predicated on the wide availability of a COVID-19 vaccine by mid-2021, continuing accommodative financing conditions supported by monetary policies from major central banks, and the return of private-sector demand.”

Governments don’t have any choice but to borrow to prop up economies. If they don’t, a recovery will not come and unemployed citizens will struggle even more to pay off their debts.

“While governments globally are doing the heavy lifting supporting businesses and individuals, two-thirds of this year’s build-up is concentrated among G-7 sovereigns, which have strong financial markets and monetary flexibility,” Dimitrijevic said.

Business debt is indeed a worry, especially for sectors hit hard by lockdowns and other health restrictions.

“We see rising insolvency risk, with defaults likely to rise to levels not seen since the 2009 financial crisis,” said Chan. 

A saving grace for all borrowers is that interest rates are forecast to stay at historic lows well into 2023.

But a lot of known unknowns and unknown unknowns still remain.

“Our expectation that a global economic rebound will pick up speed next year is not without risks. Additional waves of COVID-19, or a delayed vaccine, could alter the trajectory to a W-shaped rebound – as could rising interest rates and a sustained dramatic widening of credit spreads, or a rebound in demand that falls short of our expectations,” Dimitrijevic said. 

“In many cases, debt-to-GDP ratios will only flatten as a result of a GDP recovery rather than debt actually declining.”

More reading

• 3 ASX shares you’ll regret not buying during this correction
• Why the HUB24 (ASX:HUB) share price is storming higher despite the market selloff
• How did ASX iron ore shares perform in the last quarter?
• GPT (ASX:GPT) share price falls after Q3 update
• Fortescue (ASX:FMG) share price lower despite record Q1 shipments

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. 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 share market is currently going through a little bit of a correction. I think there are some ASX shares worth buying during this period.

The S&P/ASX 200 Index (ASX: XJO) is down 4.5% over the past 10 days. The NASDAQ is down around 7.5% from 12 October 2020. The share market could get even more volatile during/after the US election.

I think there are some ASX shares that are worth buying over the next week:

Redbubble Ltd (ASX: RBL)

The Redbubble share price has fallen 23% since 20 October 2020. That’s despite Redbubble recently announcing that it had a really strong first quarter.

In the first quarter it saw marketplace revenue increase by 116% to $147.5 million, gross profit soared 149% to $64.5 million and it generated $22.1 million of earnings before interest and tax (EBIT). Redbubble made $27.1 million of operating cashflow.

The artist-produced marketplace business is delivering some very impressive growth numbers. It’s this type of business model that can deliver really strong network effects as an ASX share. Both economically and with its brand. The more sellers and products there are the more customers it will hopefully attract. The more customers there are, the more that potential artist sellers will want to join the platform.

Economically, Redbubble has already developed its website. So a rising portion of new revenue will fall to the net profit line.

BWX Ltd (ASX: BWX)

The BWX share price has fallen by 20% since 14 October 2020.

The natural beauty business had a really strong FY20 with net revenue rising by 26% to $187.7 million and statutory net profit soaring 59% to $15.2 million. The multi-brand strategy is helping BWX grow its product footprint across the world.

Sukin is growing well, with exciting potential in North America. Meanwhile, Andalou Naturals and Mineral Fusion are now expanding outside of the US. I think BWX has exciting growth potential globally.

The ASX share is looking to build a new manufacturing hub in Melbourne which would make a big difference for its margins. But BWX is already seeing growth of its margins – in FY20 its gross profit margin improved to 58%.

In FY21 BWX is looking to grow its revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) by at least 10%.

At the current BWX share price it’s valued at 18x FY23’s estimated earnings.

Australian Ethical Investment Limited (ASX: AEF)

Australian Ethical’s share price is down 11% since 16 October 2020. That means it’s now down 54% since 19 June 2020.

I think the ASX share is definitely worth considering because of its long-term growth prospects. The funds under management (FUM) continues to rise each quarter. In the first quarter of FY21 it saw its FUM go up by 6.5% to $4.32 billion.

It’s benefiting from two trends. It’s being helped by the trend of people wanting to be invested ‘ethically’. Mandatory superannuation contributions are also helping steadily grow Australian Ethical’s superannuation FUM. Its managed funds’ FUM is also going up too.

Its underlying revenue and net profit went up 15% in FY20. I believe its net profit could steadily compound over the coming years as FUM keeps going up.

Fund management businesses are pretty scalable. The same team can manage $4 billion almost as easily as $4.3 billion. This will allow Australian Ethical to reduce its investment fees, which will make the investment proposition for potential members to be more attractive.

Foolish takeaway

I think each of these ASX shares have really good long-term growth potential, particularly Redbubble. I believe market selloffs are a good time to take advantage of lower share prices for the same businesses. That’s why I’m looking to invest today and over the next few weeks.

More reading

• Why Redbubble, Kogan, Marley Spoon and 1 other ASX share are surging
• Temple & Webster (ASX:TPW) share price barnstorms back with 11% rise
• The best time to invest may feel uncomfortable
• Got $1,000? You should buy one of these 8 ASX shares
• Why it makes sense to invest in ASX shares

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 Australian Ethical Investment Ltd. The Motley Fool Australia owns shares of and has recommended BWX Limited. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. 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 HUB24 Ltd (ASX: HUB) share price has returned from its trading halt and is defying the market selloff on Thursday.

At the time of writing, the investment platform provider’s shares are up 4% to $21.79.

Why was the HUB24 share price in a trading halt?

HUB24 requested a trading halt on Wednesday whilst it launched a $60 million equity raising to fund three strategic transactions.

These transactions comprise the acquisition of investment platform provider Xplore Wealth Ltd (ASX: XPL), the acquisition of Ord Minnett’s non-custody Portfolio Administration and Reporting Service (PARS), and an increased investment in integrated accounting and wealth solutions provider Easton Investments Ltd (ASX: EAS).

Management believes these transactions will strengthen its position as the leading provider of integrated platforms, data, and technology services for financial advisers, stockbrokers, private banks, licensees, accountants and their clients.

This morning the company took a step closer to completing these deals after announcing the successful completion of the institutional component of its equity raising.

According to the release, HUB24 has raised $50 million via a fully underwritten placement of 2.5 million new shares to institutional and sophisticated investors at a price of $20 per new share. This represents a 4.6% discount to its last close price.

Management advised that the placement attracted strong demand from existing HUB24 shareholders, as well as new investors.

What now?

HUB24 will now push ahead with its share purchase plan, which is aiming to raise a further $10 million from retail investors.

Eligible HUB24 shareholders will have the opportunity to apply for up to $30,000 worth of new shares. This is free of any brokerage, commission, or transaction costs, and at the same price as the institutional placement.

Why is HUB24 making these transactions?

Management notes that the transactions will increase the funds under administration (FUA) across the combined company to $42 billion ($28 billion in custody and $14 billion in non-custody).

It will also introduce additional capability to HUB24’s market leading platform and allow the company to benefit from the addition of new relationships. This includes two significant new clients who have indicated that these strategic transactions represent a positive outcome for their advisers and their clients.

In respect to earnings, HUB24 expects the transactions to deliver approximately 13% earnings per share accretion in FY 2022.

More reading

• ASX 200 flat: Afterpay impresses, Coles beats expectations, & HUB24 in a trading halt
• Why the HUB24 (ASX:HUB) share price is in a trading halt
• 5 ASX shares hitting record all-time highs this week
• Why HUB 24 (ASX:HUB) and these ASX shares are hitting new highs
• ASX 200 jumps more than 1%, big ASX banks rise

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 Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. 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 iron ore spot price is at a record 6-year high of around US$121 per tonne. This has been driven by significant iron ore demand from China and supply issues from iron ore producing countries such as Brazil and India.

China has a massive appetite for the world’s industrial metals, and when the country emerged from its COVID-19 woes in March, the government unleashed a flurry of fiscal stimulus aimed at building bridges, roads, utilities, broadband and railroads around the country.

The speed and size at which the country mobilised for economic recovery can only be described as unprecedented, in a good way. In August, its state railway operator announced plans to double its high-speed railway network by 2035. In Guangdong, the city has also put its chips in infrastructure amid slowing growth and plans to spend approximately 700 billion yuan (US$100 billion) this year on public medical facilities, 5G networking and transportation infrastructure. This significant move into infrastructure spending has seen the Chinese economy rebound 4.9% in the July to September quarter.

With iron ore prices holding record highs, let’s take a look at what this means for ASX iron ore shares.

BHP Group Ltd (ASX: BHP)

The BHP share price was largely flat during the 3 months ended 30 September. This is in line with the performance of the S&P/ASX 200 Index (ASX: BHP) more broadly, and during a period where iron ore prices had peaked.

As a diversified resources company, BHP derives approximately 64% of its earnings before interest, taxes, depreciation and amortisation (EBITDA) from iron ore, 19% from copper, 9% from metallurgical coal, and 10% from petroleum as per its FY20 results. Iron ore not only generates the most revenues, but also produces the highest EBITDA margins at 70% and the highest return on capital employed (ROCE) at 56%.

In its recent Q1 results, BHP reported iron ore production of 66.04mt, which is a 1% quarter on quarter decline, but is up 7% on the prior corresponding period. Management noted that record quarterly production at Jimblebar and strong supply chain performance offset the impact from planned major car dumper maintenance.

BHP’s earnings were relatively flat year-on-year as iron ore prices had spiked in a similar fashion in FY19. Its underlying EBITDA fell 5% to US$22.1 billion while underlying basic earnings per share (EPS) improved by 2% to US$179.2 cents per share. All things considered, BHP delivered a fair result despite 2 cyclones earlier in the year that could have materially lowered production.

Rio Tinto Limited (ASX: RIO)

Similarly, the Rio Tinto share price was also flat during the quarter ended 30 September. The company follows a similar distribution of earning as BHP with approximately 76% of its underlying EBITDA derived from iron ore, 9% from aluminium, 7% from copper and diamonds and 7% from energy and minerals as per 1H20 results.

The 1H20 results highlighted a 12% fall in operating cash flow to US$5.6 billion compared to 1H19, mainly due to lower prices and effect of timing differences. In June 2020, it made a final payment of $1.0 billion in Australian income tax with respect to 2019 profits. Its earnings were marginally weaker due to lower prices for aluminium and copper, while iron ore prices remained stable.

In Rio Tinto’s more recent third quarter production results, the company commented that global economic activity in the third quarter was generally strong and helped sustain optimism for a widespread recovery in 2021. However, it also pointed out that recent data suggests that the rate of recovery in growth is slowing in most economies, with pent-up demand dissipating and the rise of renewed lockdowns threatening recovery.

Furthermore, management highlighted that commodity demand in China has been strongly supported by commodity-intensive stimulus measures. However, this is against the backdrop of recovering seaborne supply that was disrupted earlier in the year, with major producers expected to deliver strong volumes in the fourth quarter.

It also noted that steel production ex-China remains down significantly, year on year.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price almost looks like a tech stock, having soared more than 60% this year. However, as a pure iron ore player with some of the lowest production costs in the world, in my view Fortescue could double in share price and still look cheap.

The company’s full year FY20 results highlight an outstanding year for shareholders with underlying EBITA increasing 38% to US$8.4 billion, net profit after tax increasing 49% to US$4.7 billion and a fully franked final dividend of A$1.00, lifting total dividends declared in FY20 to A$1.76 per share. 

In its Q1 results released this morning, Fortescue reported a strong start to FY21. In the quarter ended 30 September, mining, processing, rail and shipping combined to deliver record first quarter iron ore shipments of 44.3mt, 5% higher than the prior comparable period and 6% lower than Q4 FY2 (this reflected planned seasonal maintenance activity).

Fortescue reported C1 costs of US$12.74/wet metric tonne in Q1 FY21 were 2% lower than the prior comparable period. The miner also confirmed its Eliwana Mine and Rail and Iron Bridge Magnetite projects remain on schedule, with key milestones delivered for both projects in the latest quarter.

Fortescue recorded strong free cash flow generation in the quarter, which contributed to net cash of US$1.0 billion at 30 September 2020, compared to net debt of US$0.3 billion at 30 June 2020. 

Foolish takeaway

Rio Tinto’s recent commentary could make the case that iron prices have peaked, following surging demand from China and increasing iron ore supply from the rest of the world. This could potentially see some weakness in ASX iron ore shares in the short term, particularly in the Fortescue share price as it only mines iron ore.

However, while iron ore prices may take a breather, China has reiterated its focus on infrastructure and its consumption is likely to remain high to meet its key GDP growth targets.

In my view, the ASX iron ore shares are at a reasonable price level, highly profitable and currently pay market-leading dividends. While I wouldn’t classify them as growth shares, I believe their low production costs could make them a consistent ASX 200 dividend option for the long term.

More reading

• Fortescue (ASX:FMG) share price lower despite record Q1 shipments
• 3 ASX stocks are outperforming today after brokers upgraded them to “buy”
• Why China’s new COVID outbreak is seeing the Aussie dollar fall… and what this means for ASX shares
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• Buy these blue chip ASX shares for generous dividends in 2021

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. 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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Property investment company GPT Group (ASX: GPT) released a quarterly update on its operations this morning. At the time of writing, the GPT share price has fallen 1.94% amidst a broader market sell-off.

Whilst there are encouraging signs in the report, the company also mentioned challenges ahead.

Major highlights of today’s announcement

• Rent collection for the September quarter was 90%, up from 67% in the June quarter. This means only 10% of GPT’s tenants are yet to pay their due rents.
• Completion of a new 50,200sqm warehouse in Penrith, New South Wales fully leased for 10 years.
• Approximately 97% of GPT’s retail stores (excluding Victorian assets) are currently open and trading.
• The company remains in a strong financial position with modest debt and $1.1 billion available liquid assets.
• Given the current uncertainty, funds from operations (FFO) and dividends still remain withdrawn. 

A quick look at GPT Group’s property portfolio

GPT Group is a property investment company. It’s an active owner and manager of premium, A-grade Australian retail, office and industrial properties. GPT also manages three property funds.

Retail properties make up 50% of  GPT Group’s portfolio, offices 30%, and industrial properties the remainder.

GPT Group owns some of the most prestigious commercial properties in Australia. These include landmarks such as Melbourne Central, Sydney’s Australia Square and Governor Phillip Tower, Brisbane’s One One One Eagle Street and Riverside Centre, and numerous properties around Collins Street in Melbourne’s CBD.

It also has a pipeline to redevelop Sydney’s exclusive Darling Park and Cockle Bay area, although the project is uncommitted at this point.

What’s in store for GPT Group?

Like many landlords across Australia, GPT Group has encountered issues in its retail portfolio in FY2020. Along with lockdown restrictions, sluggish wage growth and high unemployment have limited consumers’ ability to spend during the pandemic. This has, in turn, affected the ability of retailers to pay or renew their leases. 

Around 25% of GPT’s tenant contracts are up for renewal in 2020, and the company will face pressure to lower its rent. However the fact that GPT has managed to collect 90% of its rent this quarter, as announced today, is a very encouraging sign.

In the office space, although growth in white-collar jobs is very weak, GPT Group still commands bargaining power as it owns 10% of both Sydney’s and Melbourne’s prime CBD offices. 

The company has previously mentioned that e-commerce, not rival shopping-centres, presents the biggest threat to its retail portfolio, which makes up half its business. E-commerce is undermining the bargaining power of retail landlords, in particular those exposed to the discretionary department stores.

About the GPT share price

The GPT share price has recovered 35% since the lows seen in the March bear market. Despite this, however, the company’s shares are still trading nearly 37% lower than their 52-week high of $6.39. Since reaching a post-pandemic high of $4.57 in early June, the GPT share price has largely been trading between $3.70 and $4.20.

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Motley Fool contributor dsunarto 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 Fortescue Metals Group Limited (ASX: FMG) share price is trading lower with the rest of the market on Thursday despite the release of a strong first quarter update.

At the time of writing, the iron ore producer’s shares are down 1% to $16.32. 

What happened in the first quarter?

For the three months ended 30 September, Fortescue delivered record first quarter iron ore shipments of 44.3 million tonnes (mt). This was a 5% increase on the prior corresponding period.

Also heading in the right direction was the company’s costs. Fortescue’s C1 costs came in at US$12.74 per wet metric tonne (wmt) for the quarter, down 2% on the same quarter last year.

Another big positive was the strong demand it is experiencing for its products. Management notes that Chinese crude steel production reached 781.6mt in the nine months to September 2020. This is an increase of 4.5% compared to the same period in 2019.

Demand was particularly strong for sinter fines, supporting Fortescue’s pricing during the quarter and leading to average revenue of US$105.77 per dry metric tonne (dmt). This represents revenue realisation of 89% of the average Platts 62% CFR Index.

Balance sheet.

Fortescue achieved strong free cashflow generation during the quarter.

This led to the company finishing the period with net cash of US$1 billion, compared to net debt of US$0.3 billion at 30 June 2020.

Cash on hand stood at US$5.1 billion at 30 September. Though, this includes US$2.2 billion allocated to the FY 2020 final dividend, which was paid on 2 October 2020. It also includes approximately US$850 million reserved for the FY 2020 final tax payment, which is due in December.

Guidance.

Fortescue has reaffirmed its guidance for FY 2021. It continues to expect its iron ore shipments to be in the range of 175mt to 180mt, with C1 costs of US$13.00 to US$13.50 per wmt. This is based on an assumed exchange rate of AUD:USD 0.70.

Capital expenditure is forecast to be in the range of US$3 billion to US$3.4 billion. This is inclusive of US$1 billion of sustaining, operational, and hub development capital, US$140 million of exploration expenditure and studies, and US$1.9 billion to US$2.3 billion for major projects. The latter includes Eliwana, Iron Bridge and Energy.

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• I would buy Fortescue (ASX:FMG) and this high yield ASX dividend share
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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. 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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