The Money3 Corporation Limited (ASX: MNY) share price is closing in on pre-COVID-19 levels with an 87% increase since March lows. The Money3 share price jumped up 4.44% yesterday and is trading higher again today at $2.87.

Let’s take a closer look at the company and its share price trajectory.

What’s moving the Money3 share price?

Money3 a non-bank lender operating in secured subprime automotive loans. The company yesterday announced positive first quarter results and a new low cost warehouse securitisation facility expected to save it more than $10 million per year.

New funding facility

The lower cost warehouse facility will start with $250 million from international bank Credit Suisse Group AG (NYSE: CS). Money3 intends to use the facility to help achieve its goal of a $1 billion loan book. The company will also use it to increase market share in both automotive sectors.  In addition, Money3 will be able to offer loans in car repair finance.

Money3 CEO Scott Baldwin, said:

The new funding facility positions Money3 in the strongest position in our history to continue the growth of the Australian loan book. We are delighted with the flexibility and incremental funding this provides for our growing Australian operations.

This facility reflects the quality of our existing loan book and operations, providing significant validation from what is a globally recognised A+ rated bank.

First quarter highlights

In first quarter results, Money3 saw its revenues increase by 12.3% against the previous corresponding period (pcp). Consequently, statutory net profits after tax (NPAT) also increased by 33.3% pcp. This is a continuation of the solid results delivered in the company’s FY20 annual report, despite the pandemic. 

In presenting the results yesterday, Mr Baldwin highlighted the cash collections and improving credit quality. This rose by 31.1% pcp and is attributable largely to government stimulus, and the superannuation capital release in Australia.

Following the easing of Victorian COVID-19 lockdown restrictions, new loan originations continue to improve. In fact, October 2020 produced more loan book growth than the first three months of FY21. Moreover, November 2020 has started with good results and the company loan book now exceeds $456m.

Mr Baldwin referenced the demand for second-hand cars, and the rise in second-hand car prices. He acknowledged that car loans in the subprime sector may increase by an average of $1000 per loan in the short term.

More reading

• Why the Electro Optic Systems (ASX:EOS) share price is shooting higher today
• ASX 200 jumps 1.2%: Technology One results, Brickworks update, gold miners sink
• Why Brickworks, Mesoblast, Qantas, & Telix shares are storming higher
• Are ASX lithium shares making a comeback?
• Primero (ASX:PGX) share price surges 10% on takeover news

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

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SRG Global Ltd (ASX: SRG) shares shot up more than 10% this morning, after the engineering company announced two new separate contracts worth $100 million. At the time of trading, the SRG Global share price is up 9.23% at 35.5 cents.

SRG Global provides asset services, mining services and construction operating across the entire asset lifecycle. It has a global portfolio of work, including The Emirates Tower in Dubai.

What were the new contract wins

SRG Global has secured contracts in Brisbane and Perth worth $100 million.

The first is with Multiplex to complete specialist facade work at the Oueen’s Wharf residential tower in Brisbane. The scope of works includes the design, supply and installation of engineered curtain wall facades. The work is expected to be completed by March 2023.

The second contract, with D&C Corporation, is to complete structure works at the Elizabeth Quay West development in the Perth CBD. This is SRG Global’s fourth major contract for the Elizabeth Quay waterfront precinct. The project is expected to start immediately and end around June 2022.

Other recent contract wins

Only last week, SRG Global announced it had won three contracts worth $55 million. These projects include work on the NSW Government’s New England Highway upgrade, a 20ML water tank for the Water Corporation in Karratha, and remedial works at Paradise Dam for Sunwater and CPB Contractors.

Overall, the company has secured contracts worth a total of $550 million since the start of the first half of FY21.

SRG Global managing director David Macgeorge is pleased with the progress, saying:

We continue to secure significant contracts, on some of the most important developments across Australia, demonstrating the value of our long-term, trusted relationships with our key clients.

These contract awards are also evidence of our strong technical expertise and 40-year track record of delivering specialist building projects.

With $550 million of new contract wins since July, many of them long-term, SRG Global is in a period of significant momentum that we anticipate extending well into calendar 2021. Importantly, the contract wins are being achieved across a diversity of sectors and geographies, positioning SRG Global well for long-term, sustainable growth.

About the SRG Global share price in 2020

The SRG Global share price started the year at 40 cents. It dropped dramatically to 18 cents in the COVID-19 crash in March before recovering to today’s level of 35.5 cents. The company commands a market cap of $143 million.

More reading

• SRG Global (ASX:SRG) share price up 5% on new contract wins

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

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The Electro Optic Systems Holding Ltd (ASX: EOS) share price is shooting higher today follow the company’s release of its SpaceLink presentation. At the time of writing, the Electro Optic Systems share price is up 2.59% to $6.73. In comparison, the All Ordinaries Index (ASX: XAO) is edging 0.9% higher to 6,829 points.

Let’s take a look at what’s driving the Electro Optic Systems share price today.

What’s moving the EOS share price?

The Electro Optic Systems share price is on the move after the company advised it will build and operate a medium earth orbit (MEO) satellite constellation. It projects to have the system launched and operational in 2024, producing a positive operating cash flow.

The new era of satellite communications will be optimised for defence and government customers. The company said that a vast majority of current commercial systems are unsuitable for the special needs of its target market.

Most satellite constellations are either geosynchronous equatorial orbit (GEO) or low earth orbit (LEO) satellites. Both are considered expensive and limited by the availability of radio frequencies. This hinders continuous connectivity in downloading data in real-time, especially in ocean regions or insecure land networks.

MEO satellites provide high bandwidth and low latency satellite communications. In addition, security levels are much more heightened when compared to the current constellations used.

SpaceLink target market

Electro Optic Systems will seek to target defence and government customers from the Five Eyes alliance for its SpaceLink market. Five Eyes is a signals alliance between the United States, Canada, Australia, the United Kingdom, and New Zealand.

According to estimates, it’s projected that the total Five Eyes defence budget will exceed US$6.3 billion by 2024. This is a lift from US$4.6 billion today, representing an annual compound growth rate of 7.8%.

Most pleasingly for the company, is that it already has long-standing relationships with key Five Eyes customers.

Project cost

Looking at the project from an economics prospective, capital expenditure is forecast to be around US$800 million to US$1 billion. This will equate to roughly four tranches of $200 million to $250 million over a four-year period.

Electro Optic Systems revealed there will be a mix of debt and equity funding. The project will be 70% financed from vendors and export credit agencies. The other 30% will come from external sources into a special purpose vehicle.

The company will look to secure firm customer commitments for US$150 million to underwrite project funding. Based on Electro Optic Systems’ business plan, the internal rate of return is predicted to be above 20%.

More about the Electro Optic Systems share price

The Electro Optic Systems share price went on a mini-rollercoaster ride when COVID-19 hit the global economy. Although defence orders for its products remained, supply chain logistics became disrupted. In turn, this sent its share price south, hitting a low of $2.95 in March.

The Electro Optic Systems share price is still nearly 38% off its all-time high of $10.80 reached in February.

More reading

• Why the Electro Optic Systems (ASX:EOS) share price is up today

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) is on course to record another strong gain thanks to positive vaccine news. The benchmark index is currently up 1.2% to 6,638.7 points.

Here’s what has been happening on the market today:

Technology One full year results.

The TechnologyOne Ltd (ASX: TNE) share price is on the rise today after it delivered a solid full year result which beat its guidance. Due to a combination of strong software-as-a-service growth and good cost control, the enterprise software company’s underlying profit before tax came in at $82.5 million. This was up 13% year on year and compares favourably to its guidance range of 8% to 12% growth for FY 2020.

Brickworks trading update.

The Brickworks Limited (ASX: BKW) share price is pushing higher today after the release of a trading update. According to the release, the building products company has started FY 2021 in a positive fashion. Although its North American business is facing disruptions to sales activity and manufacturing operations from COVID-19, the rest of the business appears to be performing well. For example, management advised that the Building Products Australia business delivered first quarter earnings well ahead of the prior corresponding period.

Gold miners sink lower.

The AstraZeneca COVID-19 vaccine news is weighing heavily on safe haven assets today. This has led to the gold price and gold miners such as Northern Star Resources Ltd (ASX: NST) and Silver Lake Resources Limited (ASX: SLR) falling heavily. So much so, the S&P/ASX All Ordinaries Gold index is down 5.1% at lunch.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Tuesday has been the Beach Energy Ltd (ASX: BPT) share price with a 9% gain. A rise in oil prices following the vaccine news appears to be behind this rise. The worst performer has been the Saracen Mineral Holdings Limited (ASX: SAR) share price with a 6.5% decline. This follows the aforementioned pullback in the gold price.

More reading

• Why Brickworks, Mesoblast, Qantas, & Telix shares are storming higher
• TechnologyOne (ASX:TNE) share price higher on strong FY 2020 results
• Brickworks (ASX:BKW) share price on watch after trading update
• ASX 200 to rise after positive AstraZeneca COVID-19 vaccine news
• 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 and has recommended Brickworks. 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 on course to record another strong gain. The benchmark index is currently up 1.1% to 6,639.2 points.

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

Brickworks Limited (ASX: BKW)

The Brickworks share price is up 2.5% to $19.23 following the release of a trading update ahead of its annual general meeting. While its North American business continues to struggle because of the pandemic, the rest of the business has started FY 2021 strongly. Management revealed that the Building Products Australia business delivered first quarter earnings well ahead of the prior corresponding period.

Mesoblast limited (ASX: MSB)

The Mesoblast share price has continued its incredible run and is up a further 10% to $4.72. This means the biotech company’s shares are now up a massive 39% over the last three trading days. This has been driven by a major announcement on Friday which revealed a potentially lucrative deal with global pharma giant Novartis. The deal could see Mesoblast earn upwards of US$1.25 billion from milestone payments.

Qantas Airways Limited (ASX: QAN)

The Qantas share price is up 3.5% to $5.55. Investors have been buying the airline operator’s shares after AstraZeneca announced that its COVID-19 vaccine had performed very strongly. One dosing regimen of its COVID-19 vaccine candidate, AZD1222, had an average efficacy of 90%. Another positive is that this low cost and not-for-profit vaccine option can be stored, transported, and handled at normal refrigerated conditions for at least six months. This makes it much easier logistically than those developed by Moderna and Pfizer. This has sparked hopes of a quicker than expected recovery in the travel market.

Telix Pharmaceuticals Ltd (ASX: TLX)

The Telix share price has jumped 12% to $3.18. Investors have been buying the company’s shares this morning after it announced that the United States Food and Drug Administration (FDA) has approved its new drug application for a prostate cancer imaging product. Telix’s prostate cancer imaging product is a radiopharmaceutical targeting Prostate-Specific Membrane Antigen. It uses a Positron Emission Tomography to scan for the disease.

More reading

• Why the Telix (ASX:TLX) share price is surging 8%
• Qantas (ASX:QAN) to make COVID vaccine mandatory for passengers
• Brickworks (ASX:BKW) share price on watch after trading update
• Why the Mesoblast (ASX:MSB) share price rocketed 17% higher
• JobKeeper saved 700,000 jobs, reveals RBA

Motley Fool contributor James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia owns shares of and has recommended Brickworks. 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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ASX lithium shares have rallied significantly following President-elect Joe Biden’s call for a clean energy revolution in the US. In November, the Pilbara Minerals Ltd (ASX: PLS) share price is up 70% to an 18-month high of 73 cents, the Galaxy Resources Limited (ASX: GXY) share price is up 60% to a 22-month high of $2.21 and the Orocobre Ltd (ASX: ORE) share price is up 50% to a year-to-date high of $3.98. 

Could ASX lithium shares be making a comeback in FY21 or is this just a short-lived period of hype? 

Lithium spot price remains weak

Despite a global commitment to reducing carbon emissions, this has not yet translated to higher lithium prices. Fastmarkets have provided the following updates for November: 

• China’s battery-grade lithium carbonate prices moved up following increasing demand from producers 
• China’s industrial-grade lithium carbonate prices firmed up on tighter supply 
• China’s lithium hydroxide prices drifted lower on limited domestic demand 
• Asia battery-grade lithium prices kept unchanged this week under a flat spot market 

Despite the small improvement, lithium prices remain at multi-year lows. In Orocobre’s September quarterly update, the company revealed that it had been selling lithium carbonate at US$3,102/tonne while the cost of sales were US$3,974/tonne. Current prices are not sustainable for lithium producers. However, there are many redeeming factors that could explain the recent price run. 

Well-capitalised and ready to meet demand 

Despite the lithium market and material prices rolling over in 2018, producers have maintained strong cash positions to survive the market trough.

In many cases, producers have curbed production to adapt to market conditions. Galaxy’s flagship site, Mt Cattlin, has production settings moderated to 50-55% of its nameplate capacity. It noted that Q4 was expected to be the best quarter for 2020 sales due to recovering demand and some supply-side interruptions. Galaxy is examining the potential to ramp up Mt Cattlin to full rate, dependent on product inventory and spot prices. 

Positive medium to long-term outlook 

The global lithium market has suffered a setback due to COVID-19. However the medium to long-term outlook remains positive and continues to be further reinforced with increasing government regulation and funding. ASX lithium shares have lifted as a result of slight improvements in the lithium market and anticipation of the significant changes to come. 

Following the easing of COVID-19 restrictions, Germany and France’s electric vehicle (EV) sales grew 100% and 50% respective year-on-year in May. This demonstrates the immediate impact of new subsidies on consumer EV appetite. 

 After 12 consecutive months of year-on-year (YoY) declines in neighbourhood electric vehicle sales (NEV), China reversed its downward trajectory. It has recorded growth during July, August and September of +23%, +28% and +73% YoY respectively. 

To add to this potential turning point in the lithium market, President-elect Joe Biden also has his own plans for renewable energy in the US. This includes re-joining the Paris Climate Accords, a reduction in fossil-fuel subsidies, eliminating solar tariffs and a historic $400 billion investment into clean energy and innovation over 10 years. 

More reading

• ASX shares that made 52-week highs last week
• Here are the 10 most shorted shares on the ASX
• Why Orocobre, Ramsay, Webjet, & Xero shares are dropping lower
• Lithium miner Orocobre (ASX:ORE) share price down after AGM
• Why the Galaxy (ASX:GXY) share price could push higher

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

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Primero Group Ltd (ASX: PGX) shares are on the rise after the company announced it has received a conditional off-market takeover offer from NRW Holdings Limited (ASX: NWH). At the time of writing, the Primero share price has surged 10.42% to trade at 53 cents. The Primero board has unanimously recommended Primero shareholders accept the offer, which consists of 27.5 cents cash plus 0.106 NRW shares for each Primero share.

In addition to the surge in the Primero share price, following the announcement, the NRW share price has also risen by more than 4% to $2.70.

Details of the takeover offer

The Primero share price is rocketing higher after the company advised the takeover offer values it at an equivalent of 55 cents per share, or a total equity value of approximately $100 million. This represents a 14.6% premium to the closing share price of Primero on 23 November 2020.

The board says this offer represents value for shareholders. It is worth noting however that Primero’s directors collectively own or control approximately 30% of Primero shares. Each of those directors has confirmed they will accept the offer in respect of all Primero shares they own. Primero also says that its management team will remain with the business under NRW ownership.

NRW has confirmed that it will fund the acquisition through a combination of cash on its balance sheet, and a $50 million bank loan facility. 

Why the takeover?

Both companies believe there are synergies to be achieved through this merger, which will allow the combined entity to expand to other business pipelines and opportunities. 

 NRW Chief Executive, Jules Pemberton, says:

The acquisition of Primero will provide NRW with the opportunity to expand its Minerals, Energy & Technologies specialised capability and to leverage the combined expertise of both companies to pursue new business initiatives across a large pipeline of opportunities.

NRW and Primero have already been working together on a number of projects and we look forward to continuing to work with the Primero team to build out Primero’s design, construction and operations capabilities through NRW’s client network, and expect that the combined operations of NRW and Primero will present clients, employees and shareholders with compelling outcomes

Primero Chief, Cameron Henry, says that the transaction is compelling as it will allow Primero shareholders to avoid dilutive capital raising. He says:

The NRW offer allows Primero to avoid the need for a potential significantly dilutive capital raising to fund working capital required to deliver on our FY21/22 contracted order book.

The combination of NRW’s diversified delivery model coupled with the Primero capabilities will provide our client base with a unique end to end delivery model that will differentiate within the current market and will rapidly accelerate Primero’s growth strategy.

Quick take on Primero and NRW

Primero is a vertically integrated business that provides engineering design, construction and operational services to the minerals, energy and infrastructure sectors. The Primero share price has risen by more than 51% in 2020, and it commands a market capitalisation of around $82 million.

NRW is a much bigger company than Primero, and is a provider of contract services to the resources and infrastructure sectors across most states of Australia. The NRW share price has fallen by 14.8% in 2020, and it commands a market cap of $1.1 billion.

More reading

• Are ASX lithium shares making a comeback?
• 3 reasons why I’d invest money in blue-chip shares at today’s prices
• Catapult (ASX:CAT) share price lower despite announcing a new acquisition
• Mayne Pharma (ASX:MYX) share price falls on results update
• Why the Telix (ASX:TLX) share price is surging 8%

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

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Investing money in blue-chip shares after the stock market crash could be a profitable long-term move. In some cases, high-quality businesses are currently trading at prices that do not fully reflect their long-term growth potential.

Furthermore, the stock market has a long track record of recovery from downturns. Therefore, even if there is another market crash, the prospects for equities over the coming years could prove to be positive.

Meanwhile, a lack of return potential elsewhere may mean that stocks outperform other assets. This could make now the right time to build a diverse portfolio of shares.

Undervalued blue-chip shares

Many blue-chip shares currently face uncertain operating conditions that may persist for a number of months. However, in many cases those risks appear to have been priced in by investors. A wide range of stocks currently trade at prices that are significantly below their long-term averages. In some cases, today’s valuations have not been seen since the last bear market during the global financial crisis over a decade ago.

Buying undervalued shares can prove to be a sound move. It allows an investor to access a high-quality business at a low price that can provide scope for greater capital returns over the coming years. Certainly, cheap shares can become even less expensive in the short run. However, their long-term prospects may be much more positive than current valuations suggest.

Recovery potential after a stock market crash

Another reason to invest in blue-chip shares is their long-term recovery prospects. The stock market has experienced numerous corrections, bear markets and downturns in its long history. While they have been painful in the short term for many investors, indexes such as the S&P 500 Index (SP: .INX) and FTSE 100 Index (FTSE: UKX) have always recovered to post fresh highs in the following years.

At the present time, a stock market recovery may seem somewhat unlikely. Risks such as a weak economic outlook and coronavirus mean that investor sentiment may deteriorate in the short run. However, the stock market’s track record suggests that growth from its current level via a sustained bull market is likely to take place in the coming years.

Relative appeal of stocks

Blue-chip shares may face an uncertain near-term outlook. However, their long-term return prospects appear to be far more attractive than those of other mainstream assets.

For example, low interest rates mean that cash and bonds offer return prospects that are potentially lower than inflation. This could hurt an individual’s spending power over the long run. Meanwhile, high house prices and gold’s rise in 2020 may mean that there is better value for money in the stock market.

Through buying a diverse portfolio of blue-chip shares, an investor could profit from low prices and a likely long-term recovery. Therefore, now could be the right time to buy stocks, rather than other assets.

More reading

• Are ASX lithium shares making a comeback?
• Primero (ASX:PGX) share price surges 10% on takeover news
• Catapult (ASX:CAT) share price lower despite announcing a new acquisition
• Mayne Pharma (ASX:MYX) share price falls on results update
• Why the Telix (ASX:TLX) share price is surging 8%

Motley Fool contributor Peter Stephens 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 Catapult Group International Ltd (ASX: CAT) share price is trading lower on Tuesday after announcing an acquisition.

At the time of writing, the sports analytics and wearables company’s shares are down 1% to $2.07.

What did Catapult announce?

This morning Catapult announced the acquisition of subscription online sport learning platform, Science for Sport.

According to the release, Science for Sport was founded in 2016 and has grown into the number one source for content, online courses, and community engagement in the global sports science industry.

It has built an organic social audience of hundreds of thousands of followers, becoming one of the most-trusted sources of information for sport practitioners around the world.

The release explains that the platform empowers athletes and teams with easy to consume answers to their performance-related questions, addressing key sports issues such as athlete agility, mitigation of soft tissue injuries, and enhanced recovery methods.

What else does Science for Sport offer?

Science for Sport has two core paid products. The first is an online magazine that summarises the latest sports science research into relatable and applicable content.

The second is a library of educational courses focused on topics such as nutrition, coaching, and performance, with thousands of members around the globe.

Management notes that through its dedicated focus to advance the sports science industry, it has built a community where knowledge, best practices, and world-class research and content is shared, while generating positive free cash flow.

Catapult began partnering with Science for Sport at the beginning of this year. It notes that it has been extremely impressed with the reach, engagement, and influence of the platform.

As such, management believes this acquisition will accelerate Catapult’s development of its professional service solutions by providing professional and amateur customers with advanced training and education through industry-leading content and online courses.

Catapult’s Chief Executive Officer, Will Lopes, commented: “Science for Sport has built the pre-eminent content platform and community for the fast-growing, intelligent, and influential world of sports science.”

“We are excited at the prospect of growing Science for Sport’s content and helping its audience learn how technology solutions can accelerate performance of teams and athletes. This strategic acquisition will help us, and the sports technology industry, to scale even faster,” he added.

No details were provided in relation to how much Catapult paid for the acquisition.

More reading

• Why the Catapult (ASX:CAT) share price is racing 12% higher today
• Top ASX shares to buy in November 2020

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 Catapult Group International Ltd. The Motley Fool Australia has recommended Catapult Group International 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 Mayne Pharma Group Ltd (ASX: MYX) share price has fallen 2.82% to 34 cents in early trading today, after the company reported a 9% drop in revenue for the first four months of FY21.

Mayne Pharma is a pharmaceutical company that commercialises branded and generic drugs. The business provides contract development and manufacturing services to more than 100 clients worldwide. It earns 90% of its revenue from the US.

What did Mayne Pharma report today?

Mayne Pharma advised that its revenue declined by 9% to $140 million for the four months up to October. The company said this was due to a weakening USD foreign exchange rate which depreciated 3 cents to US$ 71.5 cents, as well as a softer generic result.

Generics products division revenue was US$55 million in the first four months of FY21, down 10%. This was due to weaker performance in methylphenidate, amiodarone and butalbital.

Profit margin has remained consistent year on year at 47%, and operating expenses have fallen by 20% or $10 million, benefiting from the restructure undertaken in FY20, and continued cost containment.

Restructuring and strategy

Mayne Pharma says it has worked extensively on minimising its cost base by $16 million in 2020. A significant part of these savings have been in its dermatology business, where restructuring of the sales team has driven a more profitable operating model.

In addition, research and development (R&D) spend decreased by $15m. The company says while it continued to invest in R&D and business development activities, it has refocused from the more volatile retail generic segment to more sustainable areas in women’s health, dermatology and infectious disease.

What did the company report for FY20?

Back in August, Mayne Pharma announced its full year results for FY20. The company reported a net loss of $93 million driven mainly by asset impairments. This result was achieved on the back of a full year revenue of $457 million, which was down 13% from the prior year.

In October,  the company suffered a setback when the US Food and Drugs Administration (FDA) raised questions in relation to the company’s generic version of the drug Nuvaring. The share price fell by 16% on the news that day.

About the Mayne Pharma share price in 2020

The Mayne Pharma share price has fallen by almost 20% this year. It started the year at 43 cents, and is now trading at 34 cents. The company commands a market cap of $587 million.

More reading

• 2 ASX healthcare shares that have risen since Pfizer’s vaccine news

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

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