A disappointing quarterly report may not be the only thing weighing on the Rio Tinto Limited (ASX: RIO) share price.

News of a class action lawsuit filed in the US against our largest iron ore miner is also casting a shadow over the stock.

The lawsuit accuses Rio Tinto of making false and misleading statements about the controversial Oyu Tolgoi project, according to the Australian Financial Review.

Rio Tinto’s share price under pressure

The Rio Tinto share price fell 1.1% to $95.23 in the last hour of trade when the S&P/ASX 200 Index (Index:^AXJO) lost 0.5%.

In comparison, the Fortescue Metals Group Limited (ASX: FMG) share price slipped 0.2% to $16.66 while BHP Group Ltd (ASX: BHP) declined 1.3% to $36.28.

Cost blowout and delays

The case against Rio Tinto is partly based on claims made by its former employee, Richard Bowley. He told a London court he warned his bosses of a cost blowout more than two months before Rio Tinto said the project was “on budget and schedule” in an October 2018 market filing.

As we now know, this turned out to be a farse. The massive Mongolian project was initially costed at US$5.3 billion in 2015. But delays and over-optimistic geologic assumptions sent costs soaring to US$6.8 billion while pushing back the start date by two years.

The project is now in limbo. Rio Tinto refuses to rescue the project and is leaving that task to Turquoise Hill Resources Ltd (NYSE: TRQ).

Funding limbo

Turquoise Hill, which is 50.79% owned by Rio Tinto, owns two thirds of Oyu Tolgoi with the balance resting in the Mongolian government’s hands.

The Mongolian government doesn’t have the cash to get the copper mine back on track either. Rio Tinto is pushing Turquoise Hill to undertake a multi-billion-dollar capital raise.

Little wonder the Turquoise Hill share price collapsed by more than 70% in the last five years and leaving shareholders feeling peeved.

Rio Tinto’s class action co-defendants

The plaintiff in the class action is New Jersey resident Anthony Franchi, reported the AFR. Franchi claims Rio Tinto’s and Turquoise Hill’s false disclosures tricked him into purchasing Turquoise Hill shares at “artificially inflated prices”.

The class action is for investors who bought Turquoise Hill shares between July 17, 2018 and July 31, 2019.

Besides Rio Tinto and Turquoise Hill, Rio Tinto’s outgoing chief executive Jean-Sebastien Jacques and Rio’s copper boss, Arnaud Soirat, have been named as individual defendants in the case.

More reading

• Why Afterpay’s (ASX:APT) Nick Molnar is embracing the fashion world
• Meet the ASX stock that could pay its first dividend in 8 years
• There’s good news and bad for these ASX commodity shares
• Why Dubber, New Hope, Pro Medicus, & Rio Tinto shares are dropping lower
• The Medibank (ASX:MPL) share price rockets on broker upgrade

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. 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.

The post Class action lawsuit a new challenge for Rio Tinto (ASX:RIO) share price appeared first on Motley Fool Australia.

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If you’ve never heard of BWP Trust (ASX: BWP), you’re not alone.

Yet the $2.7 billion real estate investment trust (REIT) leases buildings to one of Australia’s best known, and most successful retailers, Bunnings Warehouse.

Most Australians will have visited a Bunnings Warehouse, and not just for their snags. Though, with a your home improvement and outdoor needs stacked in your trolley, it’s hard to bypass the sausage sizzle. Especially if you have kids in tow.

What does BWP Trust do?

BWP Trust is an ASX REIT that invests in and manages commercial properties across Australia. The majority of its properties are leased to Bunnings Group Limited, which you’ll know as Bunnings Warehouses. Bunnings is a wholly owned subsidiary of Wesfarmers Ltd (ASX: WES).

Wesfarmers also owns around 25% of the issued shares in BWP Trust. BWP shares first began trading on the ASX in 1998.

BWP’s share price benefits from reliable income stream

Many landlords of brick and mortar retailers have been struggling to collect the rent this year. That’s one of the primary drivers that’s seen shopping centre owner and developer Scentre Group‘s (ASX: SCG) share price tumble 42% this calendar year.

But with Bunnings Warehouse leasing the majority of its properties, BWP Trust hasn’t had this issue.

For an idea of just how well Bunnings is performing, I’ll quote the Motley Fool’s own Scott Phillips, who on Monday wrote:

Bunnings numbers are truly out of this world. Numerically, I think it’s fair to say Bunnings is the best retailer in the world. If that seems like a big call, it is. But it’s not hyperbole.

In the most recently completed financial year, Bunnings’ earnings were up 14%. It was the best performing unit in parent Wesfarmers’ portfolio. Its return on capital was an astonishing 61%.

That is, for every $1 of assets in the business, Bunnings earned 61c… The year before, it was 51c.

(To be fair — and to Wesfarmers’ credit, the company was clear to disclose this — the 2020 ROI was favourably impacted by lower working capital at year end, this year.)

The quality of its primary tenant is reflected in BWP Trust’s share price. Despite falling 33% from 20 February through to 23 March during the COVID-19 driven market rout, BWP’s share price is up 5% year-to-date.

That compares to an 8% loss of the wider S&P/ASX 200 Index (ASX: XJO).

BWP Trust also paid both of its dividends this year for an annual dividend yield of 4.4% at the current share price.

More reading

• These ASX ETFs could be perfect for dividend-seekers
• Is the Wesfarmers (ASX:WES) share price a strong buy today?
• 2 of the best ASX dividend shares to buy today
• Why the Indoor Skydive (ASX:IDZ) share price is up 300% today
• Revealed: ASX Christmas winners and losers

Motley Fool contributor Bernd Struben 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.

The post How ASX 200 investors can collect a rent check from Bunnings Warehouses appeared first on Motley Fool Australia.

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There’s a thing about pessimism.

It just sounds smart, right.

The dour, considered view, outlining everything that could go wrong.

It makes sense to consider the risks. To recognise the potential pitfalls. To factor in the evidence that could tear us asunder.

And it’s deeply evolutionarily rooted. The off chance you might be taken by a lion was really worth thinking about.

Moreover, early evolutionary life selected for pessimism.

Generations of ‘What if it’s a lion?’ thinking meant survival of the person, and their genes.

Those who had a more ‘She’ll be right’ attitude, well, had less chance of passing that view to their offspring.

And yet.

And yet, the story of humanity is one of deep, deep optimism.

It’s the story of growth. Of innovation. Of taking risks.

It’s the story of progress.

James Watt decided to try to invent the steam engine. The Suffragettes thought women should be allowed to vote. Howard Florey devoted his life to scientific discovery, identifying penicillin in the process. Steve Jobs wanted to build a beautiful computer.

None of these happen if the people involved look at the risks and think ‘Nah, I won’t try, just in case. I mean, look at what can go wrong!’

Perhaps more importantly, for them, and in our context. None of them happen if they gave up because people said it couldn’t be done. Or because there were hurdles, and the progress took time, effort and commitment.

I share this thought because I worry about the impact of Negative Nellies on investors.

The ones who only see problems, risks and bad news.

See, in March and April this year, I was yelling — almost literally — here, on our Facebook Live Chats, with our members… just about everywhere… that I thought abandoning the investing ship in the face of COVID was going to be a huge mistake.

Not because I knew the market would bounce back so far or so fast, but because I was convinced it would bounce back.

I mightn’t have been Robinson Crusoe, exactly, but there weren’t too many of us on Optimism Island at the time.

The smart people sold. They knew things were going to get worse. They were too smart, you see, to hang around while share prices kept falling.

Except, they didn’t.

And many — maybe even most — of those people missed the recovery, or much of it, while they held to their beliefs.

These are smart people.

Thoughtful, earnest people.

Making the calls they genuinely thought were right.

But — and here’s the point — for what?

See, the beauty of investing is that — done properly — it’s not a ‘lion or no lion’ question.

If you’re suitably diversified and you’re not relying on margin loans (you’re not, are you?), then the sharemarket ‘lion’ is closer to a passing storm on a diversified farm.

Yes, it might wipe out part of your crop. Yes, it might set you back a year or so. Yes, you might have to clear some debris and replant some of your fields. But you almost never have to start from zero.

And when the rain is over and the sun comes out, the crops will come back.

But here’s the kicker.

Maybe the storm doesn’t come.

Maybe it’s a short, sharp rainshower.

Or maybe the clouds blow over harmlessly.

Can you imagine a farmer ploughing her crops into the ground every time the prospect of a storm was raised?

Or refusing to plant, just in case the rains don’t come?

“I’ll wait for the weather to arrive, then I’ll decide” is ‘smart’ — unless you’re a farmer, in which case you know full well that it’s too late by then.

“I won’t harvest the crop, because there’s a chance the silo gets a hole in it”

“I’ll harvest now, even though the plants are only partly grown, just in case there’s no rain next month”

I hope those examples sound silly.

I also hope you understand the analogy.

Because here’s something I’ve said before, and that I’ll keep on saying:

The ASX has never yet failed to regain, and surpass a previous high.

Get it?

The lion isn’t coming.

The storms will come, from time to time, but the farm will, despite the occasional setback, be more and more productive, over time.

Now, you can be in the storm prediction business if you want.

You can be the farmer who assumes the worst, and abandons his crops at the first sign of potential trouble.

You can seem ‘smart’ when, once in a blue moon you get your ‘predictions’ right.

And you can even feel smug when you say ‘Well, the storm didn’t come, but at least I was prepared for it’.

But good luck making money that way, over any length of time.

See, the stock market is almost stupidly biased in favour of the (sensible) optimists.

No, not the speculators, day traders or the gamblers.

The optimists.

The market goes up, over time.

Meaning, if you’re a pessimist, the odds are already stacked against you.

It’s a stacked deck. A loaded dice. A weighted coin.

The irony is that the people smart enough to develop comprehensive bear cases for the market or the economy as a whole can’t see it.

Or don’t want to see it.

Maybe it’s too simple. You can’t sound smart that way. Or feel smart.

Maybe it’s because their egos don’t like the idea that they could get rich without needing to be smarter than the other guy.

But it’s a helluva thing, isn’t it?

I had a conversation on Twitter yesterday with some smart people. See, I think the economy is really starting to show strong signs of life. Others disagreed.

And for all I know, they’re right. I don’t think they are, but they might be.

The thing is, for the long term investor, it just doesn’t matter.

Nor do the short term movements of the ASX.

(But how many of the self-professed gurus picked the fact the market would be up 7% in 7 days recently?)

You, my dear, capital-F Foolish reader, have two choices.

You can get distracted — and worse — by the smart-sounding talking heads and prognosticators. You can buy into their stories of gloom and tales of woe.

Hell, you’ll actually be right sometimes if you do.

Or, you can choose the other path.

The decried and derided ‘Optimism wins’ route. 

See, optimism isn’t blind faith. It isn’t ignoring reality. It isn’t shutting your eyes, clicking your heels and saying ‘there’s no place like home’.

It’s realising that humanity and progress are inseparable, despite setbacks. It’s looking at centuries of human achievement — and more than a century of stock market history — and hitching your wagon to that train (if you’ll excuse the mixed metaphor).

You won’t get to write best-selling books. 

Your name won’t be quoted as the guy or girl who ‘predicted the crash’.

You won’t be one of the cool kids.

You’ll just have to make do with building life-changing wealth — at least if history is any guide.

Yeah, it’s a burden, but someone has to do it.

Shouldn’t it be you?

Fool on!

More reading

• These ASX ETFs could be perfect for dividend-seekers
• Is the Wesfarmers (ASX:WES) share price a strong buy today?
• Why Afterpay’s (ASX:APT) Nick Molnar is embracing the fashion world
• Why the Coventry Group (ASX:CYG) share price is up 10% today
• Meet the ASX stock that could pay its first dividend in 8 years

Scott Phillips 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 Twitter. 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.

The post So much brainpower… wasted by betting against humanity appeared first on Motley Fool Australia.

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As well as providing investors with access to international markets, exchange traded funds (ETFs) can be used to generate income.

There are a number of ETFs out there that have been specifically designed to give income investors access to a large number of dividend shares.

Two which I think investors ought to consider buying today are listed below. Here’s why I like them:

iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD)

The first ETF for income investors to consider buying is the iShares S&P/ASX Dividend Opportunities ETF. This fund aims to provide investors with the performance of the S&P/ASX Dividend Opportunities Accumulation Index, before fees and expenses. It has been designed to measure the performance of a diverse group of 50 ASX-listed shares that offer high dividend yields and stability.

Among its holdings you’ll find supermarket operator Coles Group Ltd (ASX: COL), banking giant Commonwealth Bank of Australia (ASX: CBA), iron ore miner Fortescue Metals Group Limited (ASX: FMG), and conglomerate Wesfarmers Ltd (ASX: WES). At present its 12-month trailing dividend yield stands at 4.1%. However, I suspect that this will start to increase at a solid rate once the pandemic passes and dividend payments return to normal.

VanEck Vectors Australian Banks ETF (ASX: MVB)

Another ETF for income investors to consider buying is the VanEck Vectors Australian Banks ETF. As you might have guessed by its name, this ETF gives investors exposure to the Australian banking sector. This means that through a single investment, you’ll be buying a piece of Commonwealth Bank and the rest of the big four, the regional banks, and even Macquarie Group Ltd (ASX: MQG). I think this makes it a great option for investors that are wanting exposure to the banking sector, but aren’t too sure which of the banks to buy.

Estimating the yield that the ETF will offer in FY 2021 is tricky because of the pandemic. However, when things return to normal, I would expect a yield in the region of 5% to 6%. For now, I would estimate a partially franked 4% yield over the next 12 months.

More reading

• Is the Wesfarmers (ASX:WES) share price a strong buy today?
• How to get Coles to give you money for 11 years
• 2 safe ASX shares for your retirement portfolio
• Is the Coles (ASX:COL) share price set for a big Santa Rally?
• 2 blockbuster blue chip ASX shares to buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and 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.

The post These ASX ETFs could be perfect for dividend-seekers appeared first on Motley Fool Australia.

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Is the Wesfarmers Ltd (ASX: WES) share price a strong buy today?

Wesfarmers has actually done really well since the March 2020 COVID-19 crash in my opinion. The Wesfarmers share price dropped to $31 at the lowest point. Since then it has risen around 55% to $48.

You may think that some of Wesfarmers’ businesses would be vulnerable in a global pandemic and a painful recession. But that’s not what happened.

People decided to buy from Bunnings to do home DIY projects. There was also big demand for Officeworks products to set up a home office and enable school children to learn from home as well. These trends really showed through in the FY20 result.

Wesfarmers’ strong FY20 result

Wesfarmers revealed a couple of months ago in its FY20 result that its continuing operations (before significant items) delivered growth of the net profit after tax (NPAT) of 8.2%. That would be a pretty good number in normal times, but during the COVID-19 pandemic I think it was a really good result.

The conglomerate reported that Bunnings’ FY20 underlying EBIT went up 13.9% and Officeworks’ underlying EBIT grew by 13.8%.

The Bunnings part of the result was the most important because it generates the lion’s share of the overall profit. In FY20 Bunnings made 64% of the total underlying EBIT.

I think that Bunnings is one of the best retail businesses in the whole country. It has great economics, provides strong customer service and has a good online offering.

However, FY20 proved to be a difficult year for its other divisions. Kmart Group continuing operations EBIT fell 23.5%, WesCEF continuing operations EBIT fell 9.2% and the industrial and safety division saw EBIT decline 53.5%.

The Kmart Group performance wasn’t too much of a surprise considering Target was already having difficulties before COVID-19 came along. It’s difficult for department stores when many customers are switching to the online format of retail rather than going in to stores.

But there was a promising update for FY21 when Wesfarmers released its FY20 result. It said that the strong retail sales growth experienced in the second half of FY20 continued through July. It also said that online sales increased significantly through July and August. Some businesses like Bapcor Ltd (ASX: BAP) have shown that retail sales continued strongly for the whole of the first quarter of FY21. 

Is the Wesfarmers share price a buy today?

That’s the big question. At the current Wesfarmers share price it’s trading at 27x FY21’s estimated earnings.

It’s a hefty valuation compared to previous years. But there are a few things to remember with this valuation if you think it’s definitely too expensive.

Wesfarmers may be able to show a strong FY21 half-year result if the impressive retail sales continue to Christmas, justifying the higher valuation.

Another factor is that interest rates are now extremely low in Australia. This is helping push investors into riskier assets looking for a better return. The cashflows of businesses are more valuable if interest rates are lower. Wesfarmers should be valued higher because of the RBA’s current position.

But the Wesfarmers share price certainly isn’t a buy at any price. I’m not looking to jump on it for my own portfolio right now. But I think it is priced reasonably for an income investor to take a small starting position and buy more shares on any price weakness.

Wesfarmers has been a solid ASX dividend share for many years. Its dividend has been reset a little after the divestment of Coles Group Limited (ASX: COL), but it continues to be a really good dividend option.

It currently offers a trailing grossed-up dividend yield of around 5%. That’s not a huge yield, but it’s much better than what you can get from a bank at the moment. I also think that the dividend can continue to grow if Bunnings keeps performing. Perhaps Wesfarmers will soon able to make another useful acquisition.

More reading

• How to get Coles to give you money for 11 years
• 2 safe ASX shares for your retirement portfolio
• Is the Coles (ASX:COL) share price set for a big Santa Rally?
• 2 blockbuster blue chip ASX shares to buy
• 4 ASX shares rated as strong buys by brokers

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool Australia owns shares of COLESGROUP DEF SET and 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.

The post Is the Wesfarmers (ASX:WES) share price a strong buy today? appeared first on Motley Fool Australia.

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There’s a reason the Afterpay Ltd (ASX: APT) share price makes headline news most every day.

In a year where most S&P/ASX 200 Index (ASX: XJO) shares have struggled to cope with pandemic burdens that have sent the index down 7% since 2 January, Afterpay has thrived.

Up more than 1.5% in early afternoon trading today, while the ASX 200 is slipping, the Afterpay share price has now gained a tremendous 214% for the year.

And if you were insightful, bold or just plain lucky enough to buy shares at the 23 March lows, you’d be sitting on a gain of more than 980% today.

How Afterpay is courting Millennial and Gen Z consumers

Afterpay’s buy now, pay later (BNPL) platform is dominated by younger consumers (under 40), with more women favouring BNPL options than men.

It seems like a savvy move, then, by co-founder Nick Molnar to sponsor a major event that caters to this demographic.

COVID-19 saw Australian Fashion Week cancelled this year. But the event is back on the agenda for 2021. And with major funding from Afterpay, it’s been rebadged Afterpay Australian Fashion Week.

Explaining the company’s reasoning behind supporting the fashion event, co-founder Nick Molnar says (as quoted by the Australian Financial Review):

The fashion industry was the first to embrace us. They were the ones who backed Afterpay to begin with – they got the Millennial and Gen Z attitude to money…

Our earliest adopting brands were Spell and the Gypsy Collective, Aje and Cue. It gives me immense pleasure to see Australian brands like these succeed internationally and to be a part of that story. When we started talking with Natalie (Xenita, executive director of event host IMG Australia) the thinking was, how do we leverage (Afterpay’s) reach locally and globally, working with Australian designers who are really having a moment. We feel privileged to partner with Fashion Week…

Molnar said from Afterpay’s perspective, the company was proudly Australian:

Having the ability to start with Australia gives us the right learning experience to see what opportunities exist down the track. We have 1 million users in the UK and 5 million in the United States, so we are uniquely positioned to take on something like fashion week as it becomes more consumer-facing.

With a dominant share of the BNPL market in Australia, and those kinds of growing numbers in the United States and the United Kingdom, the Afterpay share price could continue to grab headlines for a long time to come.

More reading

• Meet the ASX stock that could pay its first dividend in 8 years
• The Medibank (ASX:MPL) share price rockets on broker upgrade
• ASX 200 flat: Rio Tinto Q3 update, big four banks higher, GUD impresses
• How this fund manager’s 60% UP in the year of COVID-19
• How to use cash in an ASX share portfolio for maximum returns

Motley Fool contributor Bernd Struben 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.

The post Why Afterpay’s (ASX:APT) Nick Molnar is embracing the fashion world appeared first on Motley Fool Australia.

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The Coventry Group Ltd (ASX:CYG) share price is up 9.59%% at the time of writing to 80 cents. This came after the company released a quarterly update for the September quarter. 

What was in the announcement?

Coventry Group announced sales growth of 7.7% in the September quarter 2020 when compared to the September quarter 2019. Total sales for the period were $68.3 million. 

The company reported that sales of its fluid systems were up 12.7% in Q1 FY2021 when compared to Q1 FY2020. According to the company, this was due to its strong value proposition along with activity in key market sectors and diversification into new markets. Coventry Group received a large order for its fluid systems in September of $8 million from a major mining and resources client. The company expects this large order to have a positive effect on its half year results.

According to Coventry Group, sales from its trade distribution business were up 4.8% in the September quarter of 2020 when compared to the prior corresponding period. The company reported that all business units in trade distribution posted a positive contribution to results for the September 2020 quarter.

According to the company, COVID-19 has had a minimal impact on its business, with the exception of lock downs in New Zealand. Coventry Group reported that all business units are fully operational, apart from four Konnect branches in metropolitan Melbourne which are affected by lockdowns and have some customer constraints in store.

Coventry Group reported that it had net assets of $104.1 million at 30 September and is targeting completion of the acquisition of industrial hose and associated equipment supplier, HIS Hose, on 1 December 2020.

The company advised that the markets in which its fluid systems and trade distribution businesses operate have been reasonably resilient during the COVID-19 pandemic. Furthermore, it expects its businesses to benefit from additional government stimulus measures and for economic growth to rebound.

About the Coventry Group share price

Coventry Group is a supplier of industrial products to the mining, construction and manufacturing sectors. It has been listed on the ASX since 1966.

The Coventry Group share price is up 73.91% since its 52-week low of 46 cents, however, it has fallen 24.53% since the beginning of the year. The Coventry Group share price is down 26.61% since this time last year.

More reading

• Why Afterpay’s (ASX:APT) Nick Molnar is embracing the fashion world
• Meet the ASX stock that could pay its first dividend in 8 years
• Looking for the next big thing? Check out these exciting ASX tech shares
• Alterity (ASX:ATH) share price lower on completed placement
• Brokers name 3 ASX shares to buy right now

The post Why the Coventry Group (ASX:CYG) share price is up 10% today appeared first on Motley Fool Australia.

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The Emeco Holdings Limited (ASX: EHL) share price surrendered its morning gains even though it could pay its first dividend in eight years.

The EHL share price dipped 0.6% to 80 cents during lunch time trade after jumping by nearly 4% at the open.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) was trading 0.2% lower as mining and real estate stocks slumped.

Best balance sheet since IPO

Investors had initially taken a shine to Emeco after the heavy machinery rental group after it redeemed its US$142 million ($195 million) March 2022 notes.

The repayment of the debt enables management to extend the maturity of its $97 million revolving credit facility to September 2023.

Management now has $153 million in accessible cash following last month’s capital raising.

Emeco could restart paying a dividend

Emeco is now claiming its balance sheet is the strongest it’s ever been since it floated on the ASX in 2006.

It’s proforma net debt of $224 million gives it a net leverage of 0.9 times, while its pro forma interest coverage stands at 9.8 times.

More significantly for investors, Emeco could be about to restart paying a dividend – something it’s stopped doing since early 2013! This assumes it doesn’t use the cash to make a sizable acquisition.  

Good outlook for cash flow

“With longer tenor on significantly reduced total debt and lower interest expense, we are set to generate strong free cash flow in the years ahead,” said Emeco’s chief executive Ian Testrow.

“This allows the Emeco team to fully focus on running the business and continue our evolution to becoming a leading mining services solutions provider.

“We are excited to now be in a position to have the flexibility to implement a complete capital allocation framework, including distributions to shareholders in the future, as appropriate.”

Foolish takeaway

News that China is curtailing Australian coal and the global transition towards decarbonisation could impact on Emeco’s business.

But I believe the stock is oversold. Emeco can offset the loss by picking up work from other mineral miners, including gold producers.

In fact, the group announced yesterday that it won an open pit mining contract for Red 5 Limited’s (ASX:RED) Great Western Project, south of the Darlot Gold Mine, commencing in January 2021.

Given the near record high gold price and the bullish outlook for the precious metal, demand for Emeco’s services should stay robust through next year, if not beyond.

The stock looks cheap and this weakness is a buying opportunity.

More reading

• Why Afterpay’s (ASX:APT) Nick Molnar is embracing the fashion world
• There’s good news and bad for these ASX commodity shares
• Why the New Hope Corporation (ASX:NHC) share price is down
• Why Dubber, New Hope, Pro Medicus, & Rio Tinto shares are dropping lower
• The Medibank (ASX:MPL) share price rockets on broker upgrade

Motley Fool contributor Brendon Lau owns shares of Emeco Holdings Limited. 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.

The post Meet the ASX stock that could pay its first dividend in 8 years appeared first on Motley Fool Australia.

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If you’re looking for the next Appen Limited (ASX: APX) or Xero Limited (ASX: XRO), then I think you might want to check out the small cap tech shares listed below.

I believe these three companies have the potential to grow materially over the 2020s. If this happens, it could lead to their shares generating very strong returns over the next decade.

Here’s why I think they should at least be on your watchlist:

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan is a $495 million provider of enterprise mobility software. The company’s software allows sales and service organisations to increase their sales win rates, reduce expenditures, and improve customer satisfaction. It achieves this by pairing functionality with a highly-intuitive user interface that provides an advanced content management system, document automation, internal communications, and fully integrated modern LMS. Demand for its platform has been growing at a very strong rate and has attracted a number of blue chip customers. The good news is that it still has a long runway for growth. Management estimates that the sales engagement platform will be worth $6 billion a year by 2021.

ELMO Software Ltd (ASX: ELO)

ELMO is a $520 million cloud-based human resources and payroll software company. It streamlines processes such as employee administration, recruitment, on-boarding, remuneration, and payroll through a single a unified platform. At present the company is operating in both the ANZ and UK markets. Though, given how its platform is jurisdiction agnostic, expansions into other regions seems likely in the future. For now, though, the company estimates that it has a $2.4 billion opportunity in the ANZ market and a $6.8 billion opportunity in the UK market. Its footprint in the latter market has just been boosted with the acquisition of UK-based Breathe.

Whispir (ASX: WSP)

Finally, Whispir is a $425 million software-as-a-service communications workflow platform provider. Its industry-leading software platform allows businesses and governments to deliver actionable two-way interactions at scale using automated multi-channel communication workflows. A great example of its use was during the height of the pandemic when it was used by 22 government departments for COVID-19 communications. It was used for secure, interactive two-way messages and real-time updates to sufferers and those who have been in the close contact with someone with COVID-19. Management estimates that the Workflow Communications platform as a Service market could reach US$8 billion per year by 2024.

More reading

• 3 exciting ASX growth shares to buy for stellar long term returns
• Bigtincan (ASX:BTH) share price edges higher following acquisition
• Top ASX tech shares to buy in October 2020
• Top brokers name 3 ASX shares to buy next week
• Why Downer, ELMO, Netwealth, & Sezzle shares are storming higher today

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO, Elmo Software, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO, Elmo Software, and Whispir 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.

The post Looking for the next big thing? Check out these exciting ASX tech shares appeared first on Motley Fool Australia.

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The Alterity Therapeutics Ltd (ASX: ATH) share price has been falling today following the release of a completed capital raise announcement. In early morning trade, the biotech’s shares were pushing higher but have since pulled back. At the time of writing, the Alterity share price is down 2% to 4.9 cents.

Let’s take a further look at Alterity and what it announced.

What does Alterity do?

Alterity is an Australian biotech company that focuses on commercialising research into neurodegenerative disorders. These include Parkinsonian movement disorders, Alzheimer’s disease, Huntington disease and others.

The company’s lead candidate, ATH434, is currently in development. It aims to block the aggregation of pathological proteins that cause brain degeneration. Current remedies include medications and lifestyle choices to the manage symptoms, but there is no treatment to cure the disease.

Completed placement

Alterity advised it has received binding commitment for a capital raising of $35 million. The placement will be via two tranches to top tier institutional investors in Australia and North America. In addition, new institutional and sophisticated investors from Australia, the United Kingdom and North America will take part.

The fully subscribed capital raise was conducted at an offer price of 3.7 cents. This represented a 25.7% discount on the 30-day volume weighted average price prior to the trading halt. The company said that for every share allocated in tranche two of the placement, one option will be issued.

The option will have an exercise price of 7 cents and an expiry date of three years post allotment.

The first tranche is expected to raise approximately $10 million under the current placement capacity. The second tranche is valued at $25 million, subject to shareholder approval planned on 18 November at the company’s AGM.

The new shares to be issued will rank equally with the existing fully paid Alterity ordinary shares.

Where are the funds going to?

The proceeds of the placement will used to progress Alterity’s clinical development program for ATH434. This will include a natural history study and a phase II trial targeting multiple system atrophy patients.

Furthermore, ongoing research and discovery, as well as working capital, will be allocated a portion of these funds.

Management commentary

Alterity Chair and CEO, Mr Geoffrey Kempler commented on positive feedback to fund ATH434. He said:

We are thrilled with the response of global investors in supporting Alterity to advance our lead compound ATH434 for the treatment of MSA to later stage patient trials.

We believe that our science is unique, validated, and is capturing the attention of physicians and researchers for its potential to have a positive impact on the lives of many people suffering from Parkinsonian diseases which currently have no cure.

More reading

• Brokers name 3 ASX shares to buy right now
• Aussie Broadband (ASX:ABB) share price rockets 122% following IPO
• There’s good news and bad for these ASX commodity shares
• Why the Dubber (ASX:DUB) share price is tumbling lower today
• Why the New Hope Corporation (ASX:NHC) share price is down

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. 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.

The post Alterity (ASX:ATH) share price lower on completed placement appeared first on Motley Fool Australia.

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