Australia’s top brokers have been busy adjusting their estimates and recommendations again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

A2 Milk Company Ltd (ASX: A2M)

According to a note out of Morgans, its analysts have retained their add rating but reduced their price target on this infant formula and fresh milk company’s shares to $17.28. This follows the release of an update at its annual general meeting earlier this week. While Morgans has concerns over a2 Milk’s ability to achieve its guidance in FY 2021, it believes the weakness it is experiencing now is only temporary. In addition to this, it sees the recent pullback in the a2 Milk share price as a buying opportunity for investors. The company’s shares are trading at $13.88 this afternoon.

Aventus Group (ASX: AVN)

A note out of Macquarie reveals that its analysts have retained their outperform rating and lifted the price target on this retail centre operator’s shares to $2.93. The broker was pleased with Aventus’ guidance for FY 2021, which was broadly in line with its own estimates. In addition to this, Macquarie likes Aventus due to its favourable tenant mix. It is also expecting the company to pay a full year distribution of 16.7 cents per share. Based on the current Aventus share price of $2.70, this equates to a generous 6.2% distribution yield.

SEEK Limited (ASX: SEK)

Analysts at Credit Suisse have retained their outperform rating and lifted their price target on this job listings company’s shares to $28.50. This follows the release of an update by SEEK this week at its annual general meeting. SEEK has lifted its guidance after a stronger than expected rebound in its performance across a number of markets. This update went down well with Credit Suisse, underpinning its price target increase. The SEEK share price is changing hands for $25.49 on Friday.

More reading

• Why Accent, Mesoblast, Redbubble, & Regis Healthcare shares are charging higher
• Broker retains $20 price target on A2 Milk (ASX:A2M) share price
• Redbubble (ASX:RBL) share price on watch after naming former SEEK exec as new CEO
• 2 high quality ASX dividend shares to buy today
• ASX 200 rises on mixed Thursday

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended AVENTUS RE UNIT and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Kazia Therapeutics Ltd (ASX: KZA) share price is one of the best performers on the ASX this past month, almost doubling in value before retreating today by 12% to $1.53. Overall, the drugmaker’s share price has gained over 82% during the past month of trading. 

Why the big rise in the Kazia share price

Kazia is a Sydney-based, oncology-focused biotechnology drugmaker. The company’s flagship is the paxalisib drug used for the treatment of glioblastoma, which is the most common and aggressive form of primary brain cancer. The Kazia share price has risen strongly on the back of the ongoing and promising development of this particular drug. 

In August, paxalisib was granted a fast track designation (FTD) by the United States Food and Drug Administration (FDA). This designation was a significant first step for the development of the drug, as it allowed Kazia to get better access to the FDA, including opportunities for face-to-face consultations throughout paxalisib’s development. 

Later that month, it was again announced that the FDA has also awarded the rare pediatric disease designation (RPDD) to paxalisib. This designation would allow the company to receive a priority grant from the US government for the treatment of intrinsic pontine glioma, a rare and highly-aggressive childhood brain cancer.

And just two days ago, Kazia released an announcement to the market confirming that the phase-2 studies of Paxalisib has returned highly consistent results against prior data. In the release, the company says that the paxalisib compares favourably to temozolomide, the existing FDA-approved standard of care drug. The results showed that the median progression-free survival (PFS) is 8.4 months (versus 5.3 months for temozolomide), and the median overall survival (OS) is 17.5 months (versus 12.7 months for temozolomide).

What about the Kazia share price in 2020?

As mentioned earlier, the Kazia share price has risen by around 82% during the past month. On a year-to-date basis, the Kazia share price has surged by almost 170%. At the current share price of $1.53, it commands a market cap of $220 million. 

Kazia is dual listed, and has a listing on Nasdaq under Kazia Therapeutics Limited (NASDAQ: KZIA). That share price has risen by over 100% during the past month.

More reading

• Here’s how the voting went down at the Kogan (ASX:KGN) AGM
• Here’s why the Clover (ASX:CLV) share price is rising today
• Why the Oil Search (ASX:OSH) share price is the worst performer today
• Why Kogan, Oil Search, Orica, & Soul Pattinson shares are dropping lower
• What would it take for the ASX 200 to hit 7,000 again?

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.

The post Why has the Kazia Therapeutics (ASX:KZA) share price skyrocketed 80% in 1 month? appeared first on Motley Fool Australia.

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The Kogan.com Ltd (ASX: KGN) share price has come under pressure on the day of its annual general meeting (AGM).

In afternoon trade the ecommerce company’s shares are down over 3% to $17.72.

How did the voting go at the AGM?

As readers might be aware, there was a lot of controversy over Kogan’s AGM this year due to its plan to issue options to its Chief Executive Officer, Ruslan Kogan, and its Chief Financial Officer, David Shafer.

The Kogan board was wanting to grant 3.6 million share options to Mr Kogan and a further 2.4 million share options to Mr Shafer. These retention options, as they have called them, have been proposed as an incentive for the two executives to stay with the company for the next three years.

They will be exercisable for $5.29 per share in three years if the executives remain with the company.

This means for ~$19 million and ~$12.7 million, respectively, the two directors can convert these options into shares worth ~$93.7 million and ~$42.5 million, respectively, at today’s market price.

This plan did not go down well with many investors and particularly proxy advisors, who urged shareholders to vote against the issuing of these options at its AGM.

Though, for extra controversy, the Kogan board suggested it would just buy the shares on-market in the future and gift them to the executives if shareholders voted against their issue at the AGM.

But that won’t need to the case, because today Kogan shareholders narrowly voted in favour of the issue of these options.

According to the release, 56.35% of votes were in favour of granting options to Mr Kogan and 56.3% of votes were in favour of granting options to Mr Shafer.

Remuneration report receives a first strike.

Proxy advisers may not have been able to block the options from being granted, but they delivered Kogan a first strike for its remuneration report.

A total of 43.74% votes were against the report according to the release (compared to the 25% required for a strike). This means that if Kogan receives a second strike next year, the Kogan board could be voted out of office.

The company’s Chairman, Greg Ridder, was perplexed by the strike. Prior to the vote, he commented: “Based on Proxies received to-date, the vote on adopting the Remuneration Report is also interesting.”

“For a company that delivered strong returns in FY20; was right at the top of performance relative to peers and ASX200 companies; did not pay any LTI to Executive Directors; and had Executive Directors with their pay at the bottom of the peer set (many of whom didn’t generate positive shareholder returns), it was perplexing to see proxy advisers recommend a vote AGAINST the adoption of the Remuneration Report, and for many super funds to follow the proxy advisers’ recommendations.”

“While the Remuneration Report is retrospective, it appears many of the votes received are prospective and we will receive a “strike”, albeit that – based on Proxies – it does seem that a majority of Shareholders are in favour of adopting the report,” he added.

More reading

• Why Kogan, Oil Search, Orica, & Soul Pattinson shares are dropping lower
• Kogan (ASX:KGN) share price lower on AGM and trading update
• Tussle at Kogan (ASX:KGN) over executive compensations
• Why ASX tech shares should fly long after this crisis is over
• Dow Jones hits new record highs. Are ASX 200 shares next?

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 Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com 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 Clover Corporation Limited (ASX: CLV) share price is trading higher by 1.10% today, after the company announced in its annual general meeting (AGM) that it has a pipeline of new product releases, and that it has won additional business in FY21.

What was said in today’s AGM?

Clover says that during FY20, it has faced incredible hardship with bushfires, COVID‐19, and regulatory challenges. Despite all that, the company says it was still able to deliver a solid result for the full year, which was announced in September.

Clover reported a revenue growth of 15% to $88 million, and a 35% increase in its earnings before interest, tax, depreciation and amortisation (EBITDA) to $18.9 million for the full year. The company says that it achieved those results without receiving any government support such as JobKeeper.

Clover highlighted that although the underlying demand in the infant formula market remains strong, it has experienced reduced orders for the first quarter FY21. The company says it is now reiterating its previous advice released to the market on 20 October, which stated that revenues for the first half FY21 would be down 15% to 25% to previous year.

On the day of that announcement, the Clover share price dropped by 20%. 

Where future growth will come from

Clover announced its strategic growth plan for the coming years. It says that its research and development department is about to release a range of new products that will help to deliver growth in the future. It also says that its concentrated powders have won additional business in a range of new applications across bread, yoghurt, health bars and sport nutrition.

In addition, the company has participated in clinical trial work to prove the health benefits of docosahexaenoic acid (DHA), adding to the credibility of Clover’s product use and applications. DHA is an omega-3 fatty acid that is a primary structural component of the human brain, cerebral cortex, skin, and retina.

Clover says that it will continue to grow its sales across all geographical markets and food segments. The company is currently selling into Asia, the European Union and the US.

More reading

• Here’s why the Clover (ASX:CLV) share price crashed 20% lower today

Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Clover 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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The Oil Search Limited (ASX: OSH) share price crashed on Friday after brokers downgraded their recommendation on the stock.

The Oil Search share price tumbled 5.6% during lunch time trade to $3.52 – making it the worst performer on the S&P/ASX 200 Index (Index:^AXJO).

In case you are wondering, the Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price is the second worst with a 4.1% slump after Regis Healthcare Ltd (ASX: REG) rejected its takeover offer.

The Orica Ltd (ASX: ORI) share price is in third position with a 4% drop to $16.30 after it posted a disappointing profit result.

Oil Search share price slumps on broker downgrades

However, it was the OSH share price that’s holding the wooden spoon even as the oil price inched up. This is because at least two brokers cut their rating on the stock following its 2020 Investor Day event.

Management didn’t reveal anything untoward. In fact, JP Morgan noted a few positive bits of news including a sizable lift in OSH’s estimated resources in Alaska.

The estimated 2C resources at its Alaska project was increased to 968 million barrels of oil equivalent (mmbbl) on a gross basis. The key driver for the upgrade came from the satellite deposits.

Oil Search also received the green light from its joint-venture partners for the Papua LNG project.

Good news priced into the OSH share price

“Notwithstanding these positive outcomes, the stock price has increased 49% this month alone (ASX200 +10%) and is now in line with our revised NPV so we downgrade to Neutral,” said JP Morgan.

The broker isn’t alone in thinking the stock has shot up to fair value. UBS also downgraded the stock to “neutral” from “buy” as it believes the stock is pricing in an oil price of US$58 a barrel, the highest among the energy stocks under its coverage.

How the OSH share price compares to the oil price

The Brent crude price is currently trading at US$44.21 a barrel after it crashed by around 27% over the past year.

“At the current price, the market is paying A$0.93/sh for exposure to growth projects in Alaska and Papua LNG with an FID [final investment decision] on either unlikely within 12 months, we move Oil Search to least preferred across our Energy coverage,” said UBS.

Despite the recent jump in the Oil Search share price, the stock is still the worst performer among its large cap peers.

Oil Search lost 52% of its value over the past 12 months. The Woodside Petroleum Limited (ASX: WPL) share price fell 36% and the Santos Ltd (ASX: STO) share price surrendered 27% of its value.

More reading

• Why Kogan, Oil Search, Orica, & Soul Pattinson shares are dropping lower
• What would it take for the ASX 200 to hit 7,000 again?
• Why Accent, Mesoblast, Redbubble, & Regis Healthcare shares are charging higher
• Takeover battle for Regis (ASX:REG) share price triggers sector-wide upgrade
• ASX 200 up 0.1%: CBA’s APRA update, Mesoblast rockets, Oil Search sinks

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) has fought back from a weak start and is on course to end the week on a positive note. In afternoon trade the benchmark index is up 0.2% to 6,559 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

Kogan.com Ltd (ASX: KGN)

The Kogan share price is down over 2% to $17.91. This morning the ecommerce company held its annual general meeting and defended the issuing of options to its CEO and CFO. The options were narrowly approved by shareholders. However, its renumeration report was given a first strike with 43.74% votes against it. Kogan also provided a trading update which revealed that its strong growth has continued during the first four months of FY 2021, albeit at a slightly slower rate to the first two months.

Oil Search Limited (ASX: OSH)

The Oil Search share price has fallen 5% to $3.54. This follows a touch of weakness in oil prices overnight and the release of a bearish broker note out of Credit Suisse this morning. Its analysts have downgraded the energy producer’s shares to an underperform rating with a $3.10 price target.

Orica Ltd (ASX: ORI)

The Orica share price has dropped 4% to $16.29 following the release of its full year results. For the 12 months ended 30 September, the commercial explosives company reported a 31% decline in net profit after tax to $168 million. Orica’s Chief Executive, Alberto Calderon, advised that the company was battling extremely difficult conditions as COVID-19 severely impacted its customers in the emerging markets countries.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)

The Washington H. Soul Pattinson share price has fallen 4% to $28.02 after Regis Healthcare Ltd (ASX: REG) rejected its takeover approach. The investment house tabled an offer of $1.85 per share, but the aged care operator believes it undervalues the company. Judging by the share price reaction, Washington H. Soul Pattinson shareholders don’t appear keen on the move.

More reading

• Why Accent, Mesoblast, Redbubble, & Regis Healthcare shares are charging higher
• Takeover battle for Regis (ASX:REG) share price triggers sector-wide upgrade
• ASX 200 up 0.1%: CBA’s APRA update, Mesoblast rockets, Oil Search sinks
• Here’s why the Regis (ASX:REG) share price has soared by 21% today
• The Orica (ASX:ORI) share price falling, profits down 31%

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 Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Kogan.com 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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Today, the S&P/ASX 200 Index (ASX: XJO) has reached a new post-March high of 6,562 points. That’s 6% higher than where the index was a month ago, 17.6% higher than where it was 6 months ago and 44% higher than the low point we saw on 23 March during the coronavirus-induced market crash. However, it’s also 2% below the level the ASX 200 started 2020 at, and 8.5% below the all-time high of 7,162 points it reached in February.

Yes, the ASX 200 has only crossed 7,000 points at one period in its entire history, and that was for a period of fewer than 2 months at the start of this year.

So what would it take for the ASX 200 to go back over 7,000 points?  One might think, due to the effects and maladies from the coronavirus pandemic, that reaching a pre-pandemic stock market high is unfeasible in the current climate.

However, that view could be rendered moot by looking at the United States markets right now. The Dow Jones Industrial Average Index (DJX: .DJI) (one of the benchmark indexes for the US markets) has just made a new high. Not a 2-month or a 6-month high, but an all-time high. On Monday this week, the Dow closed at 29,950 points, a level it has never closed at or above in history, including the ‘golden’, pre-COVID months of January and February this year.

Why the markets are surging to new highs might be a question for another time, but let’s see what would need to happen for the ASX 200 to follow the Dow and make new highs of its own.

How do banks fit into the ASX 200?

The ASX 200 is a market capitalisation-weighted index. This means that the largest companies (by market cap) within the index have the most influence on the index. To illustrate, the ASX 200’s largest holding is CSL Limited (ASX: CSL) with a 7.78% weighting. The smallest constituent is Western Areas Ltd (ASX: WSA) with a 0.03% weighting. That means if CSL goes up 2% on any day, it’s going to have more of an impact on the ASX 200 than if Western Areas goes up 200%.

Together, the top 10 shares in the ASX 200 make up roughly 43% of the total weighting. Of those top 10, 5 are banks: Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Westpac Banking Corp (ASX: WBC) and Macquarie Group Ltd (ASX: MQG).

Together, these ASX bank shares have a collective weighting of 21.4% in the ASX 200. Why is this important? Well, because all 5 of these companies (we might make an exception to Macquarie here), operate in the same industry, in the same market and under the same conditions. The big four especially have an oligopolistic hold on the Australian retail banking market. That, in turn, means the factors that affect one bank’s share price are likely to affect them all.

For the ASX 200 to reach 7,000 points, it’s likely that the ASX banking sector will need to carry the load, as it were. Remember, last time the ASX 200 was over 7,000 points, the big four were trading with valuations far above what we see today.

Foolish takeaway

Looking at the numbers, a logical conclusion could draw us to this scenario: the only way the ASX 200 is going to go back over 7,000 points is if the ASX banks appreciate considerably, or else the rest of the ASX 200 has an exceptional growth period and picks up the slack.

More reading

• Takeover battle for Regis (ASX:REG) share price triggers sector-wide upgrade
• ASX 200 up 0.1%: CBA’s APRA update, Mesoblast rockets, Oil Search sinks
• Why the Atlas Arteria (ASX:ALX) share price is falling today
• CBA (ASX:CBA) share price in focus after APRA Remedial Action Plan update
• Harmoney (ASX:HMY) share price drops lower following IPO

Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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.

The post What would it take for the ASX 200 to hit 7,000 again? appeared first on Motley Fool Australia.

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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a positive note. At the time of writing, the benchmark index is up slightly to 6,550.9 points.

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

Accent Group Ltd (ASX: AX1)

The Accent share price has climbed 5% to $1.87. This follows the release of a trading update at its annual general meeting. That update revealed that the footwear retailer’s sales were well ahead of expectations during the first 20 weeks of FY 2021. Accent revealed that like for like sales are up 15.7% over the period excluding its Auckland and Victorian stores.

Mesoblast limited (ASX: MSB)

The Mesoblast share price has rocketed 14% higher to $3.73 after announcing a major deal with pharma giant Novartis. The biotech company has signed an exclusive worldwide license and collaboration agreement with Novartis for the development, manufacture, and commercialisation of its mesenchymal stromal cell (MSC) product remestemcel-L. Novartis will make a US$50 million upfront payment and could then pay over US$1.25 billion in milestones to Mesoblast.

Redbubble Ltd (ASX: RBL)

The Redbubble share price has jumped over 7.5% higher to $4.89 after the ecommerce company named its new CEO. Redbubble has appointed former SEEK Limited (ASX: SEK) executive, Michael Ilczynski, as its new chief executive. Mr Ilczynski, who was formerly the CEO of SEEK Asia Pacific and Americas, will replace interim CEO, Martin Hosking, on 27 January 2021.

Regis Healthcare Ltd (ASX: REG)

The Regis Healthcare share price has surged 22% higher to $1.80. This follows the receipt of a takeover approach by investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) on Thursday. Washington H. Soul Pattinson tabled an offer of $1.85 per share, which has since being rejected by the aged care operator.

More reading

• Takeover battle for Regis (ASX:REG) share price triggers sector-wide upgrade
• ASX 200 up 0.1%: CBA’s APRA update, Mesoblast rockets, Oil Search sinks
• Here’s why the Regis (ASX:REG) share price has soared by 21% today
• Mesoblast (ASX:MSB) share price rockets higher on major Novartis agreement
• Accent (ASX:AX1) share price on watch after strong trading update

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Accent Group and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Redcape Hotel Group Pty Ltd (ASX: RDC) has stepped back into the buyers’ circle. At the time of writing, the Redcape share price is trading flat at $1.00 despite the company announcing it has acquired the Gladstone Hotel in Dulwich Hill, Western Sydney, for $38 million. The deal does, however, represent Redcape’s first acquisition since it returned to full operations and resumed dividend distributions to shareholders.

How has the Redcape share price been performing?

Redcape owns and operates a portfolio of 33 pubs and hotels across New South Wales and Queensland. The company’s shares first began trading on the ASX on 30 November 2018.

From there, the Redcape share price gradually moved higher with little volatility, for a gain of 9% by 4 March 2020.

I’m sure you know what happened next.

Like most every share trading on the ASX, especially those tied to hospitality and leisure, the Redcape share price was savaged during the wider COVID-19 market rout.

From 4 March through to 20 March, the share price dropped a gut-wrenching 61%.

Since then, Redcape shares have rebounded strongly, up more than 127% from the March lows. Year to date, the Redcape share price remains down nearly 11%.

By comparison, the All Ordinaries Index (ASX: XAO) is down nearly 1% since 2 January.

A word from Redcape’s CEO

Commenting on Redcape Hotel Group’s $38 million acquisition of the Gladstone Hotel, CEO Dan Brady said:

We are delighted to announce the addition of such a quality asset to our portfolio. Being our first acquisition since returning to full operation and with distribution reinstated, the purchase signifies a return to our strategy of active portfolio optimisation and growing sustainable distributions for our securityholders over the long term. Our vision is to create and nurture sociable and sustainable communities.

Brady added his company plans a major refurbishment program for the Gladstone Hotel, including a focus on developing hospitality professionals. “We look forward to immersing ourselves in the Dulwich Hill community and learning about the Gladstone Hotel’s customers and staff as we look to drive even better outcomes for our staff, our customers and our securityholders.”

With the same family holding ownership of the hotel for the past 40 years, Redcape expects the asset to benefit from its operational platform and refurbishment capabilities.

The company stated it will fund the acquisition from its existing resources. It expects settlement before March 2021, subject to customary conditions.

More reading

• What’s lifting the Platinum Asset Management (ASX:PTM) share price today?
• Landlease (ASX:LLC) share price falls on subdued earnings
• Takeover battle for Regis (ASX:REG) share price triggers sector-wide upgrade
• ASX 200 up 0.1%: CBA’s APRA update, Mesoblast rockets, Oil Search sinks
• Orthocell (ASX:OCC) share price jumps 17% on positive clinical trials

Motley Fool contributor Bernd Struben 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 Platinum Asset Management Ltd (ASX: PTM) share price is 2.59% higher to $3.56 per share at the time of writing, following the chair’s address to Platinum’s annual general meeting (AGM) on Friday. 

The Platinum share price has experienced downward, whipsaw-like action in recent years, driven by disappointing earnings. Despite the consistent dividend yield from the company, the $3 share price level represents 12-year lows for Platinum.

What was shared at the Platinum AGM?

In today’s AGM address, Platinum chair Michael Cole said, “it has been a somewhat challenging year for Platinum with investment returns for our flagship International Fund overshadowing some strong investment performance in other areas, most notably our Asia ex-Japan and Healthcare focused investment strategies.” 

The underperformance in its flagship fund translated into net fund outflows and lower funds under management (FUM). Platinum’s overall revenues were flat for the year and profit after tax was down only slightly, by 2% on the prior corresponding period. 

FUM at 30 June 2020 was $21.4 billion, a decrease of 14% from the 30 June 2019 closing FUM of $24.8 billion. The reduction in FUM was driven primarily by net fund outflows of $3.0 billion. 

Strong dividend yield to continue 

The board declared a 2020 final fully franked dividend of 11 cents per share. Together with its interim fully franked ordinary dividend of 13 cents per share, Platinum’s total dividends for FY20 come to 24 cents per share. The 24 cents per share annual dividend represents a 6.4% annualised yield (based on the company’s share price at 30 June 2020). 

The board noted that over the past decade, it has consistently paid shareholders over 90% of the company’s profit after tax as dividends. This is because the company’s capital requirements have been limited. In today’s announcement the Platinum board indicated it generally expects that most, if not all, future profits will continue to be distributed by way of dividends. 

FY21 outlook 

At 31 October 2020, Platinum’s FUM was $21.8 billion, which represents an increase of 1.9% from the 30 June 2020 FUM of $21.4 billion. 

The company also highlighted that the financial markets have continued to appreciate in the first four months of the new financial year, and this appreciation has more than offset net outflows from its funds.

Platinum reports its early positioning in COVID recovery cyclical stocks has begun to be rewarded in recent weeks as equity markets start to digest the future implications of a vaccine-led economic recovery in more cyclical stocks. 

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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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