Thursday night last week, space stocks popped on Wall Street. Shares in Virgin Galactic Holdings Inc (NYSE: SPCE), Maxar Technologies Inc (NYSE: MAXR), and Stable Road Acquisition Corp Class A (NASDAQ: SRAC) all jumped more than 19%.

The reason? The announcement of an actively managed space exploration ETF from Cathie Wood’s ARK Investment Management. Although the holdings of the ETF are unknown, the market obviously has already begun speculating. Which leads us to the question, what sort of exposure does the ASX space sector offer?

But before we get ahead of ourselves, let’s cover why investors are paying attention to what one managed ETF is doing.

A bit of background on Cathie Wood and ARK

If the name Cathie Wood doesn’t ring a bell, I would be very surprised. The founder and CEO at ARK Invest has become known as somewhat of a modern Warren Buffett. Although, between the two, there aren’t too many similarities in investing style.

Buffett is known for his investments in cash-generative businesses that are fundamentally undervalued and being a champion for passive investing through index funds. On the contrary, Cathie Wood invests heavily based on growth.

Cathie Wood began her rise to prominence in 2019 when ARK Invest set a bull case pre-split price target on Tesla Inc (NASDAQ: TSLA) of US$7,000. At the time, Tesla shares were trading between US$200 to US$250. Many market commentators shrugged this off as crazy, unrealistic, and a pipe dream.

People started to wake up and pay attention to Cathie and ARK Invest through 2020, as Tesla broke out and ran, while Cathie’s actively managed ETFs substantially beat the broader market returns. For example, the flagship ARK Innovation ETF returned 133% in 2020.

It’s out of this world

According to ARK Invest’s website, the space exploration ETF will seek to provide exposure to companies involved in space-related businesses. These include reusable rockets, satellites, drones, and other orbital and sub-orbital aircraft.

ARK stated that the ETF would be looking for companies that are “[l]eading, enabling, or benefitting from technologically enabled products and/or services that occur beyond the surface of the Earth.”

The ETF will be actively managed, and the typical number of holdings will be between 30 to 50.

So, are there any companies on the ASX that would fit the bill?

It’s slim pickings for ASX space shares

Unfortunately, the truth is there aren’t too many ASX-listed companies that have exposure to space exploration. However, we’ll cover a few that dabble in that realm.

Electro Optic Systems Hldg Ltd (ASX: EOS)

Electro Optic Systems (EOS) develops and produces a range of electro-optic technologies in the aerospace sector. The company is Australia’s largest aerospace entity and the largest defence exporter in the southern hemisphere.

EOS grew in 2019 by acquiring EM Solutions to build out its own satellite communications offering. In its half-year results, the company indicated that it would continue to monetise its space technology in the communications and defence sectors.

In late 2020, EOS announced its own Medium-Earth Orbit (MEO) satellite constellation, EOS SpaceLink. The company expects it to be launched and operational in 2024 with positive operating cash flow. 

As of the half-year report, the company indicated a $570 million project backlog. EOS shares are down 37.7% in the last year. The company now has a market capitalisation of $863.07 million.

Xtek Ltd (ASX: XTE)

Xtek is aiming to predominantly draw revenue from its manufacturing of ballistic materials using its proprietary XTClave technology. The unique method allows the protective material to be made with a higher projectile resistance-to-weight ratio.

However, the benefit of this technology is that it can be applied to many other applications outside of just ballistic products. According to the company, the lightweight product also bodes well for manufacturing materials to be used in spacecraft and other space-related equipment. In fact, in June 2020 Xtek, in conjunction with Skykraft Pty Ltd, was given a grant to develop a small satellite launch stack.

Shares in Xtek are down 17.39% over the last 12 months. The company now has a market capitalisation of $38.61 million.

Kleos Space SA (ASX: KSS)

Kleos is a bit of a unique company in terms of what it does. The company uses satellites to deliver a global image of covert maritime activity. This is used by intelligence agencies and governments when traditional geospatial intelligence doesn’t suffice, due to weather, distance, or sea state. Hence, Kleos brands itself as an RF reconnaissance data-as-a-service provider.

In May 2020, Kleos was awarded a contract on the Micro-Satellite Military Utility (MSMU) project. This entails Kleos’ data being made available to the MSMU project, which involves the Departments of Ministries of Defense of Australia, Canada, Germany, Italy, Netherlands, New Zealand, Norway, United Kingdom, and the United States.

Late last year, the company announced it had successfully placed 4 of its satellites into orbit after launching from India. This will enable Kleos and its government partners to detect maritime activity such as drug and people smuggling, piracy, and illegal fishing. 

The company anticipates revenue to be derived from the satellites from the first quarter of FY2021. Currently, agreements are in place with the US Airforce, L3Harris Technologies Inc (NYSE: LHX), and other government entities. The annual licensing fees for the first cluster of satellites will be between $128,000 and $971,000 per license and the number of initial licenses targeted is around 130. 

Kleos shares are up 71.62% for the last year. The company now has a market capitalisation of $97.34 million.

More reading

• Signal share price? An Elon Musk tweet and a WhatsApp controversy
• These ASX stocks just got a big upgrade on the back of Tesla (NASDAQ:TSLA)
• Will the ASX see a share market bubble in 2021?
• Here are the US shares ASX investors are buying in 2021 so far
• Elon Musk is now world’s wealthiest person

Mitchell Lawler owns shares of Electro Optic Systems Holdings Limited, Tesla, and Xtek Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla and Virgin Galactic Holdings Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At the start of each week I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) continues to be the most shorted share on the ASX after its short interest increased to 14.9%. There are concerns that the travel market could take longer than expected to recover from the pandemic. This could weigh on Webjet’s short term earnings.
• Tassal Group Limited (ASX: TGR) has seen its short interest rise once again to 12.1%. Short sellers have been targeting the salmon producer amid speculation China could put tariffs on seafood like it did with wine.
• Mesoblast limited (ASX: MSB) has seen its short interest increase to 9.9%. Short sellers will have been disappointed to see this biotech company’s shares rise strongly last week after finally releasing some positive news.
• Speedcast International Ltd (ASX: SDA) still has short interest of 9.3%. The communications satellite technology provider’s shares have been suspended for around one year as it undertakes a recapitalisation.
• Inghams Group Ltd (ASX: ING) has 8.4% of its shares held short, which is down slightly week on week. This poultry producer was a very poor performer in FY 2020 due to rising input costs and an unfavourable sales mix caused by COVID-19. While it has reported an improvement early in FY 2021, short sellers aren’t giving up just yet.
• InvoCare Limited (ASX: IVC) has short interest of 8.2%, which is flat week on week. Short sellers have been going after this funerals company amid concerns it is struggling because of the pandemic and losing market share to its rivals.
• A2 Milk Company Ltd (ASX: A2M) has seen its short interest remain flat at 8%. The a2 Milk share price has fallen heavily over the last few months after it reported material weakness in the daigou channel. Short sellers don’t appear to believe this will be a quick fix and may be expecting the weakness to persist into FY 2022.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest ease again to 7.8%. Short sellers aren’t giving up on the department store operator despite its shares rising over 50% during the last six months. They may believe that Myer and department stores in general are in a structural decline.
• AVITA Medical Inc (ASX: AVH) is back in the top ten with short interest of 7.7%. A disappointing performance so far in FY 2020 has been weighing heavily on this medical device company’s shares. Though, it is worth noting that its performance has improved greatly early in FY 2021.
• Flight Centre Travel Group Ltd (ASX: FLT) has seen its short interest fall to 7.6%. As with Webjet, there are fears that the travel market rebound could take longer than hoped and lead to a greater than expected overall cash burn.

More reading

• ASX 200 Weekly Wrap: ASX drops despite promises of more US stimulus
• These were the best performing ASX 200 shares last week
• ASX 200 rises 0.1%
• Leading broker downgrades a2 Milk (ASX:A2M) shares
• Why Afterpay, Altium, Mesoblast, & PolyNovo shares are dropping lower

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 Avita Medical Limited. The Motley Fool Australia owns shares of and has recommended A2 Milk and Webjet Ltd. The Motley Fool Australia has recommended Avita Medical Limited, Flight Centre Travel Group Limited, and InvoCare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Lithium Australia NL (ASX: LIT) share price is on the run today. This comes after the company announced that it will be reducing its exposure to operating in the European lithium market.

During early-morning trade, the Lithium Australia share price is up 6% to 10.5 cents.

Review of European operations

According to this morning’s release, Lithium Australia has reviewed its exploration activities in Germany.

Since 2017, the company has had its eyes on developing the historic mining areas in the Erzgebirge (Ore Mountains) in Saxony. In that time, Lithium Australia occupied three main areas to take advantage of the growing demand for lithium. These were the Hegelshöhe, Eichight, and Sadisdorf projects – all located along the eastern border of Germany.

However, the company revealed COVID-19 restrictions has created extremely difficult working conditions within the projects. Coupled with the huge financial commitments needed to run its activities, Lithium Australia decided to withdraw its German operations.

Its Sadisdorf exploration permit is at the end of its full-term, and the company will not seek to renew the licence. In addition, its Eichight project has been abandoned, and Hegelshöhe awaits an outcome on its future.

What did management say?

Mr Adrian Griffin, managing director of Lithium Australia, reiterated the company’s strategy, saying:

Rationalising the Company’s exposure to direct exploration expenditure in Europe is in line with our corporate policy, which has seen a marked reduction in our global exploration footprint and the farm-out of many assets. Our preference is to maintain leverage to battery materials in Europe by applying our proprietary technologies, including lithium extraction, cathode powder production and battery recycling, to emerging opportunities.

How has the Lithium Australia share price performed?

The Lithium Australia share price spiked higher last week, gaining more than 30% off the back of positive investor sentiment.

Without the recent surge, the company’s shares would have remained relatively flat over a 12-month snapshot.

The Lithium Australia share price dropped to a 52-week low of 3.2 cents in March, and reached a multi-year high of 10.5 cents last Friday.

More reading

• Why Galan Lithium (ASX:GLN) and Lithium Australia (ASX:LIT) shares are storming higher today

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

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The Super Retail Group Ltd (ASX: SUL) share price has been surging higher following the release of a trading update.

In morning trade the retail conglomerate’s shares are up 5.5% to $12.40.

How is Super Retail performing in FY 2021?

Today’s update reveals that Super Retail has been performing very positively so far in FY 2021.

For the 26 weeks ending 26 December 2020, Super Retail delivered a record result which was driven by unprecedented consumer demand.

According to the release, group sales increased 23% over the prior corresponding period and 24% on a like for like basis. This was supported by an impressive 87% jump in online sales to $237 million, which represents 13% of total sales.

Pleasingly, the company has seen its gross margin increase 270 basis points over the prior corresponding period, which has supported higher earnings before interest and tax (EBIT) margins across all four core brands.

This is expected to lead to EBIT of $253 million to $256 million for the first half of FY 2021. This will be an increase of 119% and 122% than the same period last year.

And on the bottom line, normalised net profit after tax is expected in the range of $174 million to $177 million. This represents a 135% to 139% increase on the first half of FY 2020.

How are its businesses performing?

The Supercheap Auto business has performed strongly and delivered a 20% increase in both total and like for like sales during the six months. Online sales grew 46% over the prior corresponding period.

Also performing strongly was its BCF business. It reported a 51% increase in both total and like for like sales. Online sales grew at an even quicker rate of 113% during the half.

Supporting this growth was the Rebel business, which achieved total sales growth of 15% and like for like sales growth of 17%. This includes the impact of the Infinte Retail closure. Online sales doubled during the period.

Finally, the one disappointment during the half was its Macpac business once again. It reported a 5% decline in total sales and a 3% reduction in like for likes sales. Positively, online sales increase 94% over the prior corresponding period.

Super Retail’s Group Managing Director and Chief Executive Officer, Anthony Heraghty, was very pleased with the half.

He commented: “Since our last update to the market in October, the Group has continued to perform well. We are particularly pleased with our record online sales over the November cyber weekend and strong Christmas trading. This has culminated in a record first half performance for the Group.”

“The successful execution of the Group’s omni-retail business strategy and the effectiveness of our supply chain and inventory management have been instrumental in fulfilling large volumes of customer orders and delivering a strong result for the first 26 weeks of trading.”

“The operating leverage which the Group has been able to achieve during a period of robust online sales growth clearly reinforces the profitability of our digital sales and, in particular, the scalability of our omni-retail platform,” he added.

Outlook.

Mr Heraghty spoke positively about the company’s prospects in the second half.

He explained: “Strong cashflow generation leaves us well placed in the second half to reinvest in our brands to maintain our customer value proposition, expand and reward our customer base, consolidate our market-leading positions and grow our market share. As inventory levels are restored during the second half, following a period of unprecedented consumer demand, we expect the level of promotional activity to increase.”

“While we remain cautious on the outlook for the second half given the uncertain economic environment, the Group has a resilient business model, underpinned by powerful brands with market-leading positions in growing lifestyle categories, an active customer base of 7.1 million loyalty club members and a conservative balance sheet with a strong cash balance and no net bank debt,” he concluded.

More reading

• Why ARB, Mesoblast, Pushpay, & Super Retail shares are racing higher
• Leading fund manager names the ASX dividend shares to buy in 2021
• 2 ASX dividend shares offering generous yields in 2021

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

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In morning trade on Monday, the Money3 Corporation Limited (ASX: MNY) share price is racing higher.

At the time of writing, the vehicle-focused consumer finance provider’s shares are up 4$ to $2.85.

Why is the Money3 share price racing higher?

Investors have been buying the company’s shares this morning after it announced a new acquisition and an update to its guidance for FY 2021.

According to the release, the company has entered into an agreement to acquire GMF Australia for $17 million. This will be funded from the company’s cash reserves.

GMF Australia is a subsidiary of General Motors Financial Company and consists of a portfolio of approximately 700 automotive loans for new vehicles.

The transaction is expected to settle in February 2021 and increases the company’s automotive loan book by approximately $23 million.

The release explains that GMF Australia will be absorbed by the company’s Customer Care operation with a minimal increase in ongoing operational expenses.

Money3’s Managing Director, Scott Baldwin, commented: “Money3 continues to leverage its strengths in collections with the acquisition of approximately 700 customers of prime credit quality that purchased a new vehicle through a Holden dealership. It demonstrates the group’s ability to acquire customers either organically or through portfolio acquisitions.”

“There are no staff or complicated transition processes needed for this acquisition as all outstanding commitments will roll into the existing Customer Care team deploying capital immediately with customer repayment patterns aligning nicely with the cash requirements of the business in 2021,” he added.

FY 2021 guidance.

Pleasingly, the company’s strong form continued through to the end of the first half. Combined with recent acquisitions, the company expects its full year result to be stronger than previously forecast.

As a result, management has upgraded its full year guidance for net profit after tax to $36 million. This compares to its previous profit after tax guidance of $34 million and will be a year on year increase of 12.2%.

More reading

• Why the Money3 (ASX:MNY) share price is on watch today

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

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While blue chip shares such as Ramsay Health Care Limited (ASX: RHC) and Sydney Airport Holdings Pty Ltd (ASX: SYD) have had their growth stifled by the pandemic, not all blue chips have been impacted.

Two blue chip ASX shares which are growing at a strong rate are listed below. Here’s why it may not be too late to buy their shares:

ResMed Inc. (ASX: RMD)

ResMed is a medical device company with a focus on sleep disorders. It has been growing at a strong rate over the last 12 months despite the pandemic.

For example, in FY 2020, ResMed delivered a 15% increase in revenue to US$2,957 million and a 32% jump in net income to US$692.8 million.

Pleasingly, this strong form has continued in FY 2021. During the first quarter, the company reported a 10% increase in revenue to US$751.9 million and a 37% increase in non-GAAP net income to US$185.4 million. This was driven by robust demand for its core sleep treatment products and increased demand for ventilators due to the COVID-19 pandemic.

Also supporting its growth has been its rapidly growing digital health ecosystem, which reached over 12 million cloud connectable medical devices in 2020. This provides ResMed with strong recurring revenues and a material amount of high quality data.

Analysts at Morgans are fans of the company and currently have an add rating and $30.99 price target on its shares.

Sonic Healthcare Limited (ASX: SHL)

Another blue chip growing strongly is Sonic Healthcare. It is a leading medical diagnostics company with operations across the world.

Sonic has been a very impressive performer so far in FY 2021. It recently released its first quarter update and revealed a 29% increase in revenue to $2,144 million and a 71% lift in EBITDA to $580 million. The key driver of its growth has been strong demand for COVID-19 testing services globally. This was supported by a solid performance from the rest of the business during the quarter.

And while this level of growth is expected to moderate in the coming quarters, Sonic has been tipped to deliver a very strong full year result in August by brokers.

One of those is Credit Suisse. It has been pleased with its performance in FY 2021. So much so, it recently put an outperform rating and $39.00 price target on Sonic’s shares.

More reading

• 3 blue chip ASX growth shares to buy
• This ASX 200 stock is tipped to lift dividends by 87% this year
• 3 reasons why the Pushpay (ASX:PPH) share price could be a buy
• Fundies reveal 3 top ASX shares to buy for 2021
• 3 ASX growth shares to buy right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited, ResMed Inc., and Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Tyro Payments Ltd (ASX: TYR) share price is one to watch this morning as the Aussie payments company looks to respond to an activist short-selling report.

Why is the Tyro share price on watch?

According to an article in the Australian Financial Review (AFR), Tyro executives have been working on a response to the allegations.

The Tyro share price plummeted 11.8% lower on Friday after a short-seller released a damaging report. Viceroy Research alleged that 50% of Tyro’s payment terminals were experiencing problems — more than the company had previously announced.

Tyro had previously updated the ASX on the terminal outage in early January. On 13 January, the company said 19% of merchants were “impacted” by the outage first announced on 7 January.

The outage has proven more difficult to fix than Tyro had first hoped. That has seen transaction volumes impacted and updates unable to run for Tyro’s merchants. That’s put the Tyro share price under pressure in recent days.

The Viceroy report was released during trading hours, meaning the company’s shares plummeted before a trading halt was called.

Prior to the payments issue coming to light, shares in the Aussie payments group had been performing well. In fact, the Tyro share price climbed 228.9% from 19 March 2020 to the end of the year.

However, 2021 hasn’t started in a strong fashion for Tyro shareholders. The company’s shares have slumped 31% since the start of the year thanks to the outage issue.

Tyro is far from the first Aussie company to come under fire from short-sellers. Both Seek Ltd (ASX: SEK) and WiseTech Global Ltd (ASX: WTC) have been among those targeted by short-sellers recently.

Foolish takeaway

The Tyro share price is one to watch today as the market waits for the company’s response. The Viceroy Research report sent the company’s shares plummeting on Friday — shareholders will want to see a strong response from the company this week.

More reading

• ASX 200 ends flat on Friday
• Why Advance Nanotek, Polynovo, Resolute, & Tyro shares are dropping lower
• Tyro Payments (ASX:TYR) share price crashes 12% on short seller attack
• Outage issues could weigh on growth for the Tyro (ASX:TYR) share price
• Why BrainChip, Pilbara Minerals, Premier Investments, & Tyro shares are dropping lower

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Ramsay Health Care Limited (ASX: RHC) share price has been an underperformer over the last 12 months.

However, one leading broker believes its shares could soon be heading notably higher from here.

What happened?

This morning analysts at Goldman Sachs upgraded and added the private hospital operator’s shares to its conviction buy list with an improved price target of $70.00.

This implies potential upside of almost 20% over the next 12 months including the 1.4% dividend yield Goldman is forecasting.

Why is Goldman Sachs positive on Ramsay?

According to the note, Ramsay’s shares are currently changing hands at 8.1x earnings before interest, tax, depreciation and amortisation (EBITDA) for an 8% EBITDA compound annual growth rate (CAGR) (FY21-24E). This is towards the bottom of its five-year range.

And while the broker sees various industry challenges over the long term, for now it believes the improvement in near-term fundamentals has not yet been reflected in either consensus forecasts or current trading multiples.

As a result, it expects improvements in both to drive its outperformance through 2021.

In respect to the near-term, the broker commented: “Contrary to many other hospital groups globally, most of RHC’s core market (Australia, 65% of EBIT) has been operating largely unencumbered since July, and entirely without volume limitations since end-November.”

“Reflecting a material backlog, we estimate current surgery volume growth of +7-9%, approximately double long-term rates (+4%), driving an extended period of elevated utilisation and more favorable cost absorption than seen for many years. Furthermore, in recent months, the industry has seen a strong recovery in the margin-accretive ‘medical specialties’, which had lagged conventional surgery volumes in prior recent quarters, likely contributing to further margin relief,” it added.

And while it notes that considerable uncertainty persists in Europe, it points out that much of the downside risk is being limited through government support. Furthermore, the broker expects trading conditions in that market to improve once vaccines are rolled out.

In light of this, the broker sees “scope for improved volume and margin dynamics in FY22-23E” across all markets if PPE costs also taper through this period as it expects.

Overall, it feels this makes the Ramsay share price great value at the current level.

More reading

• 5 things to watch on the ASX 200 on Monday
• 2 ASX 50 shares to buy
• Infinite games: 3 ASX shares with long-term visions
• Sonic Healthcare (ASX:SHL) share price gets fresh COVID boost
• 2 ASX blue chip shares tipped as buys for 2021

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

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The Pendal Group Ltd (ASX: PDL) share price slipped 3% lower on Friday despite a funds under management (FUM) update from the Aussie investment group.

What did Pendal announce?

Last week, Pendal updated the market with its quarterly FUM update for the period ended 31 December 2020.

The company posted a $5.0 billion increase in FUM — up 5.4% on the prior quarter for a total period-end FUM of $97.4 billion.

The Aussie investment group cited strong markets and investment outperformance as triggering the uplift. However, negative currency impact of $2.7 billion and net outflows of $1.6 billion tempered the absolute $9.3 billion FUM increase.

Despite the update, the Pendal share price remained under pressure and fell 3.0% on Friday. It’s also worth noting the broader market closed broadly flat on Friday after climbing in early trade. The S&P/ASX 200 Index (ASX: XJO) edged marginally higher to close at 6,715.4 points on Friday afternoon.

Pendal Group CEO Emilio Gonzalez said the FUM increase “continues to demonstrate the benefits” of the group’s diversified business model.

The company also provided an update on its full-year J O Hambro Capital Management (JOHCM) performance fees. JOHCM is a boutique investment management business with offices in London, Singapore, New York and Boston specialising in the active equities management. According to Pendal’s website, JOHCM managed assets of $53.1 billion as at 31 December 2019.

Performance fees totalled ~$41.2 million up from ~$0.6 million in the prior corresponding period. Six investment strategies, primarily the Global and International Select stratgies, generated the fees which will contribute $21.4 million to Pendal’s statutory and underlying profit after tax.

JOHCM saw strong flow momentum into US pooled funds with the International Select strategy seeing consistent monthly inflows.

What about other ASX 200 Financials shares?

The Pendal share price slipped lower on Friday despite the FUM increase announcement. The 3.0% share price fall is in contrast to many of Pendal’s ASX 200 Financials peers.

The Westpac Banking Corp (ASX: WBC) share price climbed 1.5% higher to $21.35 while Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares edged 0.2% higher to $24.66.

The Commonwealth Bank of Australia Ltd (ASX: CBA) share price fell 1.1% lower on Friday while the broad market index closed broadly flat.

More reading

• ASX 200 Weekly Wrap: ASX drops despite promises of more US stimulus
• These ASX dividend shares could solve your income needs
• 5 things to watch on the ASX 200 on Monday
• 2 ASX dividend shares with yields over 5% right now
• ASX banks to steal the dividend crown from mining stocks by next year

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

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The DEXUS Property Group (ASX: DXS) share price could be on the rise today.

This morning the property company’s shares were upgraded by analysts at Goldman Sachs.

What did Goldman Sachs say?

The broker notes that since June, Dexus has managed to offload $1.7 billion of Office assets and taken advantage of resilient asset pricing in the face of rapidly deteriorating occupier market conditions.

In addition to this, during the period the company has continued to build its Logistics and Healthcare funds under management base, while positioning for any further cyclical deterioration via the formation of an Opportunistic Fund.

Based on this and on a proforma basis, Goldman expects look-through gearing to fall to ~20%. This compares to 26% at the end of June and its target range of 30% to 40%.

But it doesn’t expect it to stop there. With its Gold Tower asset in Brisbane currently being marketed for sale, Goldman expect Dexus’ gearing to decline further. It feels this provides additional scope for share buyback activity and positions its balance sheet to absorb further material asset devaluations.

Asset devaluations.

Goldman Sachs believes the market is pricing in a significant decline in the value of its Office assets.

It commented: “On our estimates, DXS’ current stock price implies a ~21% decline in the value of its Office portfolio vs Jun-20 levels. We continue to expect a peak-to-trough decline of ~30% for Sydney and Melbourne CBD Office assets. However, with valuations (and transactional evidence) to date proving resilient and purchaser demand for Australian Commercial assets holding up, we believe the disconnect between private and public market pricing implicit in DXS’ stock price provides scope for potential M&A activity.”

Upgrade to neutral.

In light of the above, Goldman Sachs has upgraded its rating on Dexus from sell to neutral with a price target of $9.65. This compares to the current Dexus share price of $8.99.

The broker also estimates that Dexus’ shares currently provide investors with a generous FY 2021 dividend yield of 5.6%.

Combined with its price target, this implies a potential total return of almost 13% over the next 12 months.

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

The post Why the DEXUS (ASX:DXS) share price just got upgraded by a top broker appeared first on The Motley Fool Australia.

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