Oil Search Limited (ASX: OSH) is an LNG producer operating out of Papua New Guinea. The company has recently announced it will have reduced its workforce by 34% by the end of this calendar year. The impetus for this has been the dramatic and sustained reduction of oil prices. However, this is not the end of the story. No matter how you look at it, the Oil Search share price has had a terrible year so far.

2020 in review

Oil Search entered the new year with a new Managing Director, Dr Keiran Wulff. He replaced Mr Peter Botten, who led Oil Search for an amazing 25 years. During this time, Mr Botten took the company from $250 million in market capitalisation to around $11 billion.

In February this year, Oil Search announced that talks with the PNG government on the P’nyang Gas Agreement had stalled. This was a complex joint venture arrangement with Exxon Mobil Corporation and Santos Ltd (ASX: STO) which the company had been touting for several years.

Even though the project has not been entirely abandoned, the delay has already had a significant impact. As noted by Wood Mackenzie research director Angus Rodger:

“…From both a macro pricing and a contractor quality/pricing perspective, trailing in the wake of the biggest wave of new LNG supply the industry has ever seen is not ideal.”

In other words, Oil Search has already lost the window for enabling forward contracts to be written at prices to maximise profits.

Shortly after this disappointing development came the pandemic and associated restrictions in March. This was followed very closely thereafter by the Saudi/Russian oil price feud. 

By April, Oil Search had a new Managing Director, the loss of major revenue-generating infrastructure, and an oil price that was getting closer to the company’s rising production unit costs. It really doesn’t get much worse than this.

Oil Search’s response

In response to these headwinds, Oil Search has totally reshuffled its executive leadership team. There is a clear focus on efficiency, operational excellence, and leveraging technology. As a result, the company’s production costs are expected to be approximately US$10.50 per barrel of oil equivalent (BOE) as opposed to the USD$11 – $12 initially forecast. Moreover, all non-essential capital expenditure has been suspended or deferred in PNG. 

At the time of writing, the LNG spot price has just come off its lowest point for 25 years due to an oversupply and reduced demand resulting from warmer than usual winter temperatures. Oil Search does, however, only have less than 10% of its current production exposed to spot prices.

It was also able to raise US$700 million through a share placement. On 5 May, Oil Search was forecasting a liquidity of US$1.8 billion in cash and no near-term debt maturities.

Foolish takeaway

It is currently trading at a price to earnings (P/E) ratio of 11.08, however the Oil Search share price remains down 54% year to date. I feel the discipline the company has shown in managing its costs and curbing expansions has been impressive. So much so that I’m starting to think this could be one of the great turnaround companies of the year.

Nonetheless, I do think low LNG and oil prices will stick around a while longer, particularly with demand remaining low and coronavirus trends turning upwards. This could definitely put a dampener on the near to medium-term performance of the Oil Search share price. 

Having said that, investing in Oil Search today will get you a trailing 12 month dividend yield of 4.26%. I also think you will likely see some share price growth. Although it is hard for me to see it returning to its former price range until future significant reserves are planned to come online at a profitable price.

More reading

• 5 things to watch on the ASX 200 on Thursday
• These ASX 200 shares were the worst performers of FY20
• 5 things to watch on the ASX 200 on Wednesday
• Morgans picks the best FY21 ASX buys for the COVID-19 world
• 5 things to watch on the ASX 200 on Tuesday

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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The Temple & Webster Group Ltd (ASX: TPW) share price surged almost 14% in today’s early trade. Shares in the online retailer rocketed after announcing the completion of its capital raise.

Why did Temple & Webster raise capital?

Earlier today Temple & Webster released an announcement informing the market that the company has successfully executed a $40 million share placement. The company placement of 7 million new fully-paid ordinary shares issued at $5.70 per share saw strong investor demand. 

The company raised new capital to increase financial flexibility and continue the structural shift online, despite being debt-free with around $30 million in cash. Temple & Webster management noted that the capital raise will allow the company to make further investments in its growth strategy, whilst also improving its technology, product and service offerings.

How has Temple & Webster performed during the pandemic?

In a brief business update released yesterday, Temple & Webster acknowledge that strong demand has continued into June with gross sales to the 28 June surging 130% year-on-year. In mid-June, the online retailer reported a 668% increase in year-to-date EBITDA of $7.1 million. Additionally, Temple & Webster reported a 68% increase in year-to-date revenue of $151.7 million.

Temple & Webster has thrived during the coronavirus pandemic with many shoppers switching to online channels during the lockdown period. The company noted strong operating leverage, reporting a 68% increase in active customers of 440,257 YTD, up from 335,000 at the end of December.

The company is confident consumers who started shopping online during the pandemic will continue shopping online, even when all stores reopen. As a result of changing consumer preferences and demographics, Temple & Webster looks to continue its sales growth by investing in longer-term initiatives.

Foolish takeaway

Temple & Webster is Australia’s largest online retailer of furniture and homewares, boasting more than 150,000 products for sale. The company is able to offer a broad product range thanks to its innovative drop-shipping model. This model allows products to be sent directly to consumers from suppliers.

Temple & Webster shares fell as low as $1.57 during the market sell-off in March but have rebounded strongly. At the time of writing the company’s share price is trading near all-time highs around $7.

More reading

• Temple & Webster share price quadrupled in FY20
• E-commerce is the COVID-19 success story. These businesses are the clear winners.
• These ASX retail shares are lockdown winners
• Short-sellers are stepping up their attack against these popular ASX shares
• Temple & Webster shares continue to grow despite coronavirus restrictions

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group 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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On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three ASX 200 shares that have just been given sell ratings by brokers are listed below.

Here’s why these brokers are bearish on them:

Suncorp Group Ltd (ASX: SUN)

According to a note out of Credit Suisse, its analysts have downgraded this insurance and banking giant’s shares to an underperform rating and cut the price target on them to $8.75. The broker believes Suncorp’s earnings growth will be challenging in the future and is forecasting lower than target return on equity. And while it has just announced a new operating model, it doesn’t appear overly convinced that this will be enough and is expecting further changes. The Suncorp share price is trading at $8.85 this afternoon.

Tabcorp Holdings Limited (ASX: TAH)

A note out of Goldman Sachs reveals that its analysts have retained their sell rating but lifted the price target on this gambling company’s shares slightly to $2.80. The broker has lifted its earnings estimates very slightly to reflect the new reseller agreement with Jumbo Interactive Ltd (ASX: JIN). However, it feels Tabcorp could have got a better deal. As a result, it sees no reason to make any changes to its rating and feels its shares are expensive at the current level. The Tabcorp share price is trading notably higher at $3.42 this afternoon.

Webjet Limited (ASX: WEB)

Analysts at Morgan Stanley have retained their underweight rating and $3.30 price target on this online travel agent’s shares. This follows the announcement of a $163.1 million convertible note offering which will be used to repay debt and fund potential acquisitions. While this will boost its liquidity, which has decreased markedly over the last few months, it isn’t enough for a change of rating. Morgan Stanley continues to believe Webjet’s shares are overvalued. The Webjet share price is fetching $3.59 on Thursday.

More reading

• ASX 200 up 0.9%: Citi lifts Afterpay price target, Webjet boosts liquidity
• Why De Grey, Resolute, Suncorp, & Webjet shares are dropping lower
• Fund managers have been snapping up Sonic and these ASX 200 stocks
• Down 32% in FY20, is the NAB share price a buy this year?
• Webjet share price on watch after boosting its liquidity

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited and Webjet 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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Kathmandu Holdings Ltd‘s (ASX: KMD) share price has surged 11% so far today on the back of its market update. Kathmandu is a retailer in Australia and New Zealand selling travel and outdoor adventure apparel and equipment. 

The surge in the Kathmandu share price comes with same-store sales growth returning to positive through stores re-opening, a shift to online shopping and a strengthened balance sheet with April’s equity raising. However, the group remains cautious about the demand over the medium-term given the potential of a second coronavirus wave.

Sales update pushes Kathmandu share price

For the 10 months ended 31 May 2020, total group sales were 15.1% below the comparable period last financial year. However, the group’s retail and online sales exceeded management expectations since stores began re-opening with the exception of airport stores which remain closed.

The increase in sales is a reflection of the easing of restrictions and has strengthened the group’s liquidity.

The group’s 2 businesses; Rip Curl and Kathmandu’s same-store sales were up 21% and 12.5% respectively for the last 6 weeks to 28 June 2020, adjusted for closed stores.

Pleasingly, online sales have made a material contribution to the increase seen in both businesses. This is in addition to a market update released in May reporting a surge in online sales. 

However, Kathmandu saw May wholesale sales impacted by COVID-19. Rip Curl global wholesale sales were 26% below the comparable 7-month pre-ownership period last financial year.

Successful equity raise

Kathmandu completed a successful NZ$207 million equity raising in April helping to strengthen its balance sheet. The group expects total liquidity in excess of $300 million at the end of this financial year. The business came to this expectation based on its assessment of the operating environment. 

Outlook

Kathmandu expects FY20 earnings-before-interest-taxation-depreciation-amortisation (EBITDA) to be above $70 million. Its gross margin is expected to be in the lower end of the 61%–63% target range. 

The group is concerned about the end to government stimulus measures, the second coronavirus wave currently experienced in Melbourne and the impact of foot traffic in tourist located stores.

Chief Executive Officer, Mr Simonet commented:

“Whilst we are pleased with the strong recovery in direct recovery in direct to consumer sales over the past six weeks, we remain cautious about the medium-term levels of consumer demand. We believe that some short term factors, including government support packages and pent up demand are underpinning current sales. The heightened uncertainty that currently exists is likely to persist…”

Similarly, in the May update, the group reported the closure of the store network had a material adverse impact on FY20 earnings.

More reading

• Why the Lovisa share price is at risk of falling further over the coming weeks

Motley Fool contributor Matthew Donald 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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In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to record another solid gain. At the time of writing the benchmark index is up almost 1.1% to 5,997.3 points.

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

The Afterpay Ltd (ASX: APT) share price is up 5% to $65.44. The catalyst for this gain has been a broker note out of Citi. Although the broker has retained its neutral rating on its shares, it has increased its price target by more than double to $64.25. The broker made the move after upgrading its earnings estimates.

The Bigtincan Holdings Ltd (ASX: BTH) share price is up 2% to 80.5 cents. Investors have been buying the artificial intelligence-powered sales enablement automation platform provider’s shares after it announced a new contract win. Bigtincan has signed a contract with Red Bull GmbH for a deployment of its software with a total contract value of $1.8 million over 30 months. It also includes an option to extend the agreement for a further 60 months.

The Dicker Data Ltd (ASX: DDR) share price has jumped 7.5% to $7.53. This follows the release of a half year update by the wholesale distributor of computer hardware and software. Dicker Data has recorded over $1 billion of unaudited revenue during the half, which represents an 18.3% increase over the prior corresponding period. Unaudited net profit before tax came in at ~$40 million for the six months. This represents a 25% jump on its profit before tax during the first half of FY 2019.

The NIB Holdings Limited (ASX: NHF) share price is up over 5% to $4.88. Investors have been buying the private health insurer’s shares after it responded to an announcement by APRA. The regulator has warned private health insurers to provision in FY 2020 for a presumed catch up in treatment and claims post-pandemic. This morning NIB confirmed that its forecast capital position remains well ahead of regulatory requirements, internal targets, and allows for APRA’s announcement.

More reading

• ASX 200 up 0.9%: Citi lifts Afterpay price target, Webjet boosts liquidity
• What’s next for WAAAX shares?
• Dicker Data share price surges higher after revealing strong first half profit growth
• NIB share price storms higher on market update
• Bigtincan share price jumps 18% on Red Bull deal

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 BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended BIGTINCAN FPO and NIB 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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The ASX fashion retailers have bounced back from store closures with share prices and online sales surging. Here we take a look at how 2 ASX fashion retailers are recovering from the coronavirus pandemic.

City Chic Collective Ltd (ASX: CCX)

The City Chic share price is up 281% from its March low to $3.05, 14% below its $3.58 year high. The share price recovery saw City Chic joining the S&P/ASX 300 (ASX: XKO) last week. The plus-size clothing retailer closed Australian and New Zealand stores during the height of the coronavirus pandemic but has since reopened. During closures, City Chic benefitted from its high proportion of online sales, which account for two-thirds of global sales. Despite online already accounting for a large part of the business, Australian and New Zealand saw online sales growth of 57% during the store closure period.

City Chic quickly adjusted its product mix to better suit customer needs, recording strong buying of intimates, casual, and streetwear which has offset weakened demand for higher-end dressing. Increased promotions have been used to manage cashflows and inventory during the period of uncertainty, which means online gross margins have been lower. Positively, the company has finalised negotiations with landlords, agreeing to reduced rents during store closures and market appropriate rents going forward. Through agreements unable to be reached on post-COVID rents, 14 stores will close. The impact of these store closures is expected to be minimal as customers are directed to nearby stores and the online channel.

Mosaic Brands Ltd (ASX: MOZ)

The Mosaic Brands share price has gained 230% from its March low of 23 cents. The company is currently trading at 76 cents. Although this is an impressive gain, Mosaic Brands’ shares are still trading well below last year’s high of $3.06. The company closed stores in March but re-opened from mid-May. Through substantial work to accelerate the company’s digital offering during store closures, online sales increased by 80%. The company added more than 100,000 SKU’s and 20 categories during this period.

The ASX fashion retailer expects a FY20 EBITDA loss as a result of store closures and foot traffic declines. Mosaic expects second-half EBITDA loss to exceed the first-half of $32.7 million. The company cancelled its interim dividend following its earlier deferral announcement. Nonetheless, management expects the pandemic’s impact on its performance to be short-term, with a return to profit anticipated in FY21.

More reading

• This $1,000 small-cap strategy could earn you a 19% dividend yield
• E-commerce is the COVID-19 success story. These businesses are the clear winners.
• 3 top ASX growth shares to buy for FY21
• Share price winners and losers of the pandemic
• Coronavirus second wave potential could drive investment portfolio changes

Motley Fool contributor Kate O’Brien 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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