The Blue Sky Alternatives Access Fund Ltd (ASX: BAF) is about to have a face off kind of event. Not a confrontation per se, a face off in the style of the 1997 John Travolta/Nicholas Cage film. In that film (of questionable quality), Nicholas Cage’s character assumes the face of John Travolta in order to do some sinister things. Sorry if that was a spoiler for anyone.

Well, Blue Sky is about to have a different face as well. It is set to rebrand as WAM Alternative Assets very shortly. So should we pick up shares in Blue Sky before it changes its face? Recent data indicates there might be a decent buying opportunity here.

What is Blue Sky?

The Blue Sky Alternatives Access Fund is a listed investment company (LIC) with something of a sordid past. Its original mandate was a focus on ‘alternative assets’, which refers to any assets outside the conventional circles of ASX shares, bonds and cash, such as water rights, infrastructure or venture capital. Many investors find these alternative assets attractive due to their low correlation to shares and the prospects of income in our low interest rate world.

However, Blue Sky has been in trouble for a couple of years, ever since a short-seller report exposed alleged problems and overvaluations regarding several of its underlying assets. Receivers were appointed in May 2019 to try and work through these issues, which has led the company into the arms of Wilson Asset Management (WAM).

Enter WAM

WAM is a company that has built a stellar reputation as an LIC manager. It currently offers six different ASX LICs which range from a focus on small or micro-cap ASX shares with WAM Microcap Ltd (ASX: WMI) to international growth companies with WAM Global Ltd (ASX: WGB). Its flagship LIC, WAM Capital Limited (ASX: WAM), has been around since 1999 and has delivered an average return to its investors of 16.1% per annum since (before fees and taxes).

WAM has been courting Blue Sky for a while now, but investors finally gave it the go-ahead for a takeover during an extraordinary general meeting earlier this month. As such, Blue Sky Alternatives Access Fund is set to become WAM Alternative Assets (ticker symbol to be WMA) in the near future (although an exact date has yet to be named). Under the agreement WAM struck with shareholders, the company will guarantee that the new WMA shares will return to being priced in line with its underlying net tangible assets.

Since shares of an LIC are traded in the public market, they can sometimes be priced at a level that is either above or below the value of the underlying assets. And Blue Sky has been underwater for a while now, likely reflecting the uncertainty of its future until recently.

So WAM has promised investors that if the new WMA shares don’t trade at a premium to their underlying NTA for no less than one month at least three times during the next five years, shareholders will have the right to terminate the agreement with WAM.

Should investors buy BAF shares today?

So, it looks like Blue Sky has a very promising path back to potential glory. But let’s look at the numbers. So, as I mentioned earlier, an LIC often trades at a premium or a discount to its underlying value. Recently (as of yesterday), Blue Sky has notified the markets of its underlying NTA for the month of August. The company advised that each share represented $1.084 in value on a pre-tax basis. At the time of writing, Blue Sky shares are going for 86 cents each. That means you can effectively purchase $1.08 worth of assets for 86 cents today in Blue Sky shares. That’s a rough 20% discount to the assets’ true value.

As such, I think there is definitely a value case for Blue Sky shares today. WAM is an astute and well-regarded steward of capital that I think can turn around Blue Sky’s fortunes under the new name. We have here a compelling long-term value opportunity in my view.

More reading

• 3 ASX dividend shares I’d buy with $3,000 today
• 3 ASX shares for beginners to buy
• 2 ASX dividend shares with fully franked yields over 4%
• This ASX tech share is still cheap to buy
• The biggest threat to tech shares

Motley Fool contributor Sebastian Bowen owns shares of WAMGLOBAL FPO. 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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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) is fighting hard to get into positive territory. At the time of writing it is just falling short and is trading broadly flat at 5,897.9 points.

Four shares that have been acting as a drag on the market today are listed below. Here’s why they are sinking lower:

The Beach Energy Ltd (ASX: BPT) share price is down over 1.5% to $1.33. Investors have been selling the energy producer’s shares after oil prices dropped lower overnight. Oil prices came under pressure amid subdued demand and news that Libya was on the verge of resuming production.

The BrainChip Holdings Ltd (ASX: BRN) share price has continued its slide and is down 6.5% to 62.7 cents. The artificial intelligence technology company’s shares have come back down to earth after rocketing higher in recent weeks. This appears to be down to the realisation that its shares were vastly overvalued given its billion-dollar market capitalisation on next to no revenue.

The Cleanaway Waste Management Ltd (ASX: CWY) share price has tumbled 5.5% lower to $2.21. The waste management company’s shares have continue to slide after it confirmed reports of poor workplace behaviour by its CEO, Vik Bansal. Although the board has given Mr Bansal a final warning, it appears as though the market doesn’t believe it went far enough given the allegations of bullying.

The Credit Corp Group Limited (ASX: CCP) share price has dropped 2.5% lower to $17.19. This appears to have been driven by a broker note out of Macquarie this morning. Its analysts have downgraded the debt collector’s shares to a neutral rating and cut the price target on them down to $18.50. It believes near term trading conditions could be tough for Credit Corp due to delays in new debt sales.   

More reading

• ASX 200 flat: Afterpay (ASX:APT) rebounds, Cleanaway (ASX:CWY) sinks, big four banks lower
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises by 0.7%, Cleanaway (ASX:CWY) shares dumped
• Cleanaway (ASX:CWY) share price plummets 7% today. Time to buy?
• ASX 200 up 0.4%: Macquarie guidance disappoints, Cleanaway sinks on CEO behaviour reports

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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Qantas Airways Limited (ASX: QAN) is considering moving its headquarters out of Sydney after 82 years.

The airline floated the idea Tuesday morning, along with the possibility of Jetstar moving its HQ away from Melbourne.

The COVID-19 downturn had already prompted the company to sack more than 8,000 workers.

And now, as its planes continue to sit on the ground, it has been forced to reconsider its spending on corporate real estate.

Qantas’ 49,000 square-metre leased headquarters is located in Mascot in Sydney, right next to Sydney Airport. Jetstar’s leased office space is in Collingwood in Melbourne’s inner east. 

“Like most airlines, the ongoing impact of COVID means we’ll be a much smaller company for a while,” said Qantas chief financial officer Vanessa Hudson.

“We’re looking right across the organisation for efficiencies, including our $40 million annual spend on leased office space.”

As well as office space, some aviation facilities will also be reviewed for relocation. These include flight simulator centres in Sydney and Melbourne and heavy maintenance depots in Brisbane.

“As well as simply rightsizing the amount of space we have, there are opportunities to consolidate some facilities and unlock economies of scale,” said Hudson.

“For instance, we could co-locate the Qantas and Jetstar head offices in a single place rather than splitting them across Sydney and Melbourne.”

New western Sydney airport could be a new home

While most of Qantas’ activities have to take place at airports, any other facilities that can “reasonably move” will be considered in the cost-cutting review.

“We’ll also be making the new Western Sydney Airport part of our thinking, given the opportunity this greenfield project represents,” Hudson said.

Colliers International has already been commissioned to sublease roughly 25,000 square metres of surplus office space in Sydney, Melbourne and Hobart. The lease on a 230 square-metre downtown Sydney office will not be renewed next month.

The facilities review is expected to take 3 months, according to the airline.

Qantas, starting in 1920 as the Queensland and Northern Territory Aerial Services, operated out of Winton, Queensland. After a few years in Longreach, Queensland then Brisbane, the headquarters moved to Sydney in 1938.

It started gradually moving its HQ from downtown Sydney to Mascot in the 1990s.

More reading

• Why the Qantas (ASX:QAN) share price is sinking lower today
• Half of ASX 200 stocks at risk as China-Australia relations hit new low
• How to build a recession-beating ASX share portfolio
• Why the Qantas share price has lifted 22% in the past month
• How household savings could boost these ASX share prices

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 Electro Optic Systems Hldg Ltd (ASX: EOS) share price has surged higher today after the global defence contractor announced it had secured two new contracts. The Electro Optic share price is up 3.49% at $5.34 at the time of writing.

New contract awards

Electro Optic has won contracts worth $4.25 million from a European NATO country. The company will supply the R400 remote weapon station (RWS) for a European remotely operated combat vehicle (ROCV) program. Both contracts are expected to be delivered by the end of the calendar year.

Electro Optics’ RWS are considered the best in the world due to market leading accuracy, reliability and light weight.

With a number of its systems well-suited for ROCVs, the company is participating in ROCV tender opportunities in multiple countries. Current forecasts suggest the sales pipeline could top more than $1 billion.

The global defence contractor is optimistic about possible major contracts within the next 12 months.

Recent updates

Electro Optics has made tailwinds since its poor FY20 results. Just this month, the company released the world’s first full-spectrum system for defence attacks against drones. The total addressable market for counter-drone products is estimated to be US$48 billion for the decade ending 2030.

In addition,  the company has resumed work on a major overseas contract previously disrupted by COVID-19. The $150 million product delivery and testing is now expected to be completed within six to eight weeks. This will help remedy Electro Optics’ cash flow worries.

Is the Electro Optic share price a good investment?

I think that the Electro Optic share price is grossly undervalued. With a market capitalisation of $790 million, the company’s current backlog of orders stands at $570 million. This means that products on order represent 72%  of Electro Optic’s worth.

COVID-19 has presented challenges the company could not have foreseen. However, I believe it is only a matter of time before the Electro Optic share price recovers near its all-time high of $10.80.

The Australian aerospace and defence specialist has grown at an impressive ratein recent years. In 2017, total revenue accounted for $23.1 million compared to 2019’s revenue of $165.4 million.

I think the Electro Optic share price is a strong buy today.

More reading

• Why now is a good time to buy ASX defence shares
• 3 booming ASX shares for the new space age
• Why the DroneShield (ASX:DRO) share price is up even higher today
• Electro Optic (ASX:EOS) share price up on resumed contract
• Electro Optic (ASX:EOS) share price shoots higher on new product release

Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. 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. 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 Tuesday the S&P/ASX 200 Index (ASX: XJO) has given back its morning gains. The benchmark index is currently trading broadly flat at 5,898.8 points.

Here’s what is happening on the market today:

Tech shares rebound.

There are indications that the tech rout could finally be over. Overnight the tech-heavy Nasdaq index stormed almost 2% higher. This positive form has flowed through to the Australian tech sector, with the likes of Afterpay Ltd (ASX: APT) and Nearmap Ltd (ASX: NEA) pushing higher today. It isn’t just these two on the rise. At lunch the S&P/ASX All Technology Index (ASX: XTX) is up 1.5%.

Cleanaway shares continue to sink lower.

The Cleanaway Waste Management Ltd (ASX: CWY) share price has continued to sink lower. Investors have selling the waste management company’s shares this week after it confirmed reports of poor workplace behaviour by its CEO, Vik Bansal. While the board has given Mr Bansal a final warning, the market doesn’t appear to believe it went far enough given the allegations of bullying.

Bank shares weigh on the ASX 200.

The big four banks have given back yesterday’s gains and are sinking lower on Tuesday. All four banks have dropped into the red and are weighing heavily on the ASX 200 index. The worst performer in the group has been the Westpac Banking Corp (ASX: WBC) share price with a decline over just over 1%.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Tuesday has been the New Hope Corporation Limited (ASX: NHC) share price with a gain of over 7%. This comes amid reports of institutional buying in the coal sector. The worst performer has been the Cleanaway share price with a 6% decline. This follows the aforementioned reports of poor workplace behaviour by its CEO.

More reading

• Why Beach, BrainChip, Cleanaway, & Credit Corp shares are sinking lower
• KGL Resources (ASX:KGL) share price surges on big upgrade
• Borrowers on loan holidays are ignoring ASX bank communications
• Why Afterpay, Clinuvel, Mesoblast, & Uniti shares are storming higher
• Have we reached “peak” Afterpay (ASX:APT) as its US website growth stalls?

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap 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 KGL Resources Ltd (ASX: KGL) share price could soon retest its 2020 high after it issued a resource upgrade for the Jervois Copper Project.

Shares in the explorer surged 35.3% to 23 cents in morning trade when the All Ordinaries (Index:^AORD) (ASX:XAO) and the S&P/ASX 200 Index (Index:^AXJO) struggled to stay in the black.

The overnight jump in the copper price is helping the sector outperform the broader market. The OZ Minerals Limited (ASX: OZL) share price and BHP Group Ltd (ASX: BHP) share price gaining 0.5% each, but its KGL that’s being celebrated today.

KGL share price jumps on copper upgrade

Management significantly increased its copper estimates for its wholly-owned project in Northern Australia.

The copper grade doubled to 2.03% from 1.07%. KGL also reported a 30%increase in contained copper to 426,200 tonnes associated with a 31%reduction in the resource tonnage.

The project is also deemed to hold 21.4 million ounces of silver and 175,700 ounces of gold. Given the high prices of both metals, they will go a long way in lowering the costs of extracting the copper.

KGL also noted an increased confidence in the Jervois resource with 68% now in the Indicated Resource category.

Jervois looking better than thought

“We committed to a new strategy of concentrating on understanding the geological structures. State of the art technologies were employed to plan efficient drilling that would confirm the structures,” said KGL chair Denis Wood.

“Ultimately, this resource outcome – 30% more copper, a near doubling of grade and greater confidence levels – should have a positive impact on the mining and processing cost.

“A pre-feasibility study, including an Ore Reserve based on this Resource Estimate, and other project planning work is now being completed and is expected to be ready for release during the fourth quarter of 2020.”

The resource update includes the three main deposits considered for development –Reward, Rockface and Bellbird. Resources at Reward South will be re-assessed in the future.

Copper benefiting from multiple tailwinds

The outlook for copper looks positive for 2021 as output from the world’s largest copper producing mine, Escondida, is hampered by the COVID-19 outbreak in Chile.

Other significant copper projects have also suffered setbacks and supply of the red metal could tighten. The imbalance is happening at a time demand is rebounding.

Global factory output is recovering strongly after the sudden hit from the pandemic. Copper demand is closely linked to industrial activity.

What’s more, the trend towards electrification of vehicles will put even greater pressure on supplies. Electric vehicles use three times more copper than a conventional vehicle.

Despite today’s big rally, the KGL share price lost around 18% of its value over the past year.

More reading

• ASX 200 flat: Afterpay (ASX:APT) rebounds, Cleanaway (ASX:CWY) sinks, big four banks lower
• Can the Harvey Norman (ASX:HVN) share price push higher in 2021?
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises by 0.7%, Cleanaway (ASX:CWY) shares dumped
• The best ASX stocks to buy for the COVID-19 recovery play

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and OZ Minerals 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.

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Tens of thousands of property borrowers are ignoring communications from ASX banks according to reporting by the Australian Financial Review.

The AFR is reporting that a fifth of the 400,000+ deferred home loan borrowers are not responding to phone calls, texts, letters and emails from banks. That equates to around 80,000 loans with a combined value of $30 billion.

The publication said that one senior banker explained that people were obviously not talking to the banks in the hope that the problem might simply go away. But, he added, this situation could not continue indefinitely. The AFR quoted that banker:

“The notes will get a little bit sharper to get a response. One month after, three months after, the letters will get more severe. Then, of course, we’ll get a bullying complaint.”

The article made no specific reference to which bank the banker came from.

There are a number of ASX banks in Australia: Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Macquarie Group Ltd (ASX: MQG), Suncorp Group Ltd (ASX: SUN), Bank of Queensland Limited (ASX: BOQ), Bendigo and Adelaide Bank Ltd (ASX: BEN) and MyState Limited (ASX: MYS).

These banks have collectively provisioned several billion dollars of COVID-19 credit provisions. So they are expecting some borrowers not to be able to repay.

What’s going to happen?

Australia has officially entered a recession, so it’s not surprising that the banks are seeing some difficulties with a material portion of their loans.

Borrowers currently have a lot of leeway with the ASX banks as everyone tries to collectively get through this without having a GFC-like meltdown. It’s working well so far, particularly thanks to the government’s jobkeeper and increased jobseeker schemes.

But government support is scheduled to reduce at the end of September 2020 and then drop further at the end of December 2020.

ASX banks can’t be lenient forever. They aren’t charities, they are meant to make profit. Banks can’t exactly make a profit from loan if it’s never paid, can they? Non-paying loans eventually become bad loans and then ASX banks would normally do what they can to get their money back.

The introduction of an effective vaccine could be a double edged sword for some of these troubled borrowers. Many industries like hospitality, tourism, travel and education are suffering because of COVID-19 impacts. A COVID-19 vaccine could help these industries return to somewhat normal, but it would also likely mean the ASX banks (and regulators) will be less forgiving for those struggling borrowers.

But who knows if a world-changing vaccine is possible at this stage?

Are the ASX banks a buy?

Some banks have fallen significantly since the COVID-19 crash around six months ago.

The Westpac share price is down 34%, the CBA share price is down 25.5%, the ANZ share price is down 35% and the NAB share price is down 36.5%.

They are clearly a lot cheaper than they were before. But I’m not sure if they are worth buying because it’s uncertain how many of these non-paying loans will turn into bad debts.

Not only are some loans worrying, but the banks’ overall net interest margin (NIM) is falling because of lower official interest rates in Australia and overseas. A lower NIM is bad for bank profitability and that’s bad for dividends.

If I had to buy one big four ASX bank it would be CBA because of its higher quality and strong balance sheet.

However, out of all of the financial businesses I named earlier in the article, I’d go for Macquarie because of its global earnings diversification and its smaller loan book (which is less likely to derail Macquarie’s overall profit).

More reading

• ASX 200 flat: Afterpay (ASX:APT) rebounds, Cleanaway (ASX:CWY) sinks, big four banks lower
• Have we reached “peak” Afterpay (ASX:APT) as its US website growth stalls?
• Top ASX dividend shares to buy in September 2020
• ASX 200 rises by 0.7%, Cleanaway (ASX:CWY) shares dumped
• NAB (ASX:NAB) penalised $57.5 million for ripping off customers

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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) is just managing to keep its head above water. At the time of writing, the benchmark index is up 0.1% to 5,905.7 points.

Four shares that are climbing more than most today are listed below. Here’s why they are storming higher:

The Afterpay Ltd (ASX: APT) share price is back on form and is charging 4% higher to $75.47. Investors have been buying the buy now pay later provider’s shares after a rebound on the tech-focused Nasdaq index overnight. It isn’t just Afterpay on the rise in the tech sector today. At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is up 1.5%.

The Clinuvel Pharmaceuticals Limited (ASX: CUV) share price is up 4% to $22.18. This morning the biopharmaceutical company released an update on its attempts to expand the use of its SCENESSE drug to treat xeroderma pigmentosum (XP). This morning it revealed that the first patient diagnosed with XP has been administered the drug under a Special Access Program. Initially the company will be focused on its safety. If this is successful, it will conduct two further studies to test its efficacy.

The Mesoblast limited (ASX: MSB) share price has jumped 7% to $4.98. This follows the release of an announcement relating to its lead product candidate remestemcel-L. That announcement reveals that the product has been selected as the winner of the Fierce Innovation Awards – Life Sciences Edition 2020 for Biotech Innovation.

The Uniti Group Ltd (ASX: UWL) share price is up almost 15% to $1.40. Investors have been buying the company’s shares after it made an improved offer to acquire fellow telco OptiComm Ltd (ASX: OPC). Uniti has matched an offer of $5.85 per share made by First State Super last week. In light of this, Uniti and OptiComm have entered into an amended and restated scheme implementation deed.

More reading

• Uniti (ASX:UWL) share price surges higher on revised OptiComm (ASX:OPC) takeover offer
• Have we reached “peak” Afterpay (ASX:APT) as its US website growth stalls?
• Why the Clinuvel (ASX:CUV) share price is storming higher today
• Buy Afterpay (ASX:APT) and these ASX shares before the tech rebound
• 5 things to watch on the ASX 200 on Tuesday

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

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The Uniti Group Ltd (ASX: UWL) share price is surging higher today after announcing an improved offer to acquire fellow telco OptiComm Ltd (ASX: OPC).

This follows the announcement of a competing offer by First State Super last week valuing OptiComm at $5.85 per share.

At the time of writing the Uniti share price is up 13% to $1.38.

What has Uniti offered?

This morning Uniti revealed that it has now increased its offer to $4.835 cash per share and 0.80537 Uniti shares per share from $5.20 per share. This implies a value of $5.85 per share, which matches First State Super’s offer.

This offer will be funded via existing cash reserves, an upsized $250 million new debt facility, and 84 million Uniti shares.

Despite the increased price tag, management notes that the acquisition remains highly earnings accretive. It estimates earnings accretion of ~20% on a combined proforma FY 2020 basis, including cost synergies. It also believes it will create the pre‐eminent challenger in national private fibre networks.

What now?

OptiComm appears happy with this offer and has entered into an amended and restated scheme implementation deed with Uniti, which is being recommended by the OptiComm board.

Uniti notes that it has already secured a 19.5% relevant interest in OptiComm through commitments from a number of OptiComm institutional shareholders, comprising call option agreements and share purchase agreements.

It believes this relevant interest is highly strategic for Uniti, placing it in a considerably strengthened position to successfully complete the acquisition this time around.

Uniti CEO & Managing Director, Michael Simmons, commented: “It is by now well understood that the combination of the Uniti and OptiComm businesses is both highly strategic and synergistic. We have been very thoughtful in preparing our revised offer, to ensure we have the best opportunity to secure the company we have sought to own for some time.”  

“To this end, the nearly 20% relevant interest we have secured in OptiComm delivers us a significant strategic stake in OptiComm. We are excited and ready to complete the OptiComm acquisition over the coming weeks and to welcome the OptiComm team as part of the Uniti Group. I am more confident than ever of being able to realise the many benefits inherent in the Acquisition and to taking up our position as the pre‐eminent challenger in the private fibre market,” he concluded.

All eyes will be on First State Super to see if it comes back with an improved offer of its own in the coming days.

More reading

• Why Afterpay, Clinuvel, Mesoblast, & Uniti shares are storming higher
• OptiComm share price rockets higher on competing takeover approach
• Why Jumbo, St Barbara, Sydney Airport, & Uniti shares are dropping lower
• Why Magellan, Nufarm, Opticomm, & Scentre shares are storming higher
• Why G8 Education, Monash IVF, NIB, & Uniti shares are dropping lower

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

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There are few other stocks that have attracted as much love and loathing as the Afterpay Ltd (ASX: APT) share price. But risks of slowing growth could give the bears the kind of vindication they crave.

The 20% pullback in the shares of the buy now, pay later (BNPL) superstar from last month’s record high of $92.48 still leaves the APT share price with a gain of more than 700% from its COVID-19 low in March.

Supporters believe the pullback is healthy and gives Afterpay room to rally again, while detractors point to a long way down for the tech darling.

Slowing growth in the US

This is why a warning from Citigroup about increasing competition and flat growth in Afterpay’s US website hits are attracting attention. The US market is a key growth driver for the Afterpay share price.

Citi estimated that there were 10.6 million site visits in August with unique visitors up 1% month-on-month (MoM)to about 4.3 million, reported the Australian Financial Review.

Competitors catching up

There are signs that Afterpay’s competitors are also gaining ground while new entrants, including the Commonwealth Bank of Australia (ASX: CBA), are nipping at its heels.

“Further, while Afterpay’s Android app downloads increased +10% mom, Klarna regained the top spot with 392k downloads (vs. 351k for Afterpay),” said Citi.

“Klarna and Sezzle saw the strongest increase in website visits in August (up +8% MoM).”

Others feeling the heat?

There are also signs that fellow BNPL darling, the Zip Co Ltd (ASX: Z1P) share price, is coming under pressure.

The broker pointed to the 3% MoM decline in visits to Zip’s Australia and New Zealand website in August after a big jump in July.

However, Citi said it’s too early to be reading too much into the website stats. Shops have started to reopen in Australia and Zip’s falling website hits may be reflecting consumers going in-store to make purchases instead.

Foolish takeaway

Nonetheless, investors should be keeping a close eye on any early warning signs that growth is slowing.

This is because Afterpay and friends are trading on extremely high multiples that can only be justified if they can maintain a breakneck expansion pace (think triple digits) over the next two or three years, at least.

Any signs of cracks in the growth story will see the sector de-rate quickly. This is why buying these stocks now are only for the brave.

And in case you are wondering, Citi’s rating on Afterpay is “neutral” while its recommendation on Zip is “sell/high risk”.

More reading

• Why Afterpay, Clinuvel, Mesoblast, & Uniti shares are storming higher
• Buy Afterpay (ASX:APT) and these ASX shares before the tech rebound
• 5 things to watch on the ASX 200 on Tuesday
• Flexigroup (ASX:FXL) launches humm in New Zealand
• How this new red tape could send the Afterpay (ASX:APT) share price tumbling

Brendon Lau owns shares of Commonwealth Bank of Australia. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. 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 Have we reached “peak” Afterpay (ASX:APT) as its US website growth stalls? appeared first on Motley Fool Australia.

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