Although we see U.S. markets recovering, many believe the initial market rally had everything to do with the Fed intervention and not earnings. According to a recent Bank of America survey, 78% of respondents think the market is “overvalued”. WealthWise Financial President Loreen Gilbert joins The Final Round panel to discuss why she believes the market’s recovery will be W-shaped.
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The Serko Ltd (ASX: SKO) share price is tumbling this morning after the ASX small-cap reported its full-year results for the year ending 31 March 2020.
At the time of writing, Serko shares have fallen 3.96% to $2.91. This drop takes the company’s year-to-date share price loss to around 40%.
Serko is an Auckland-based online travel and expense management technology provider. The company’s core software, Zeno, addresses two main functions: corporate travel and expense management.
Zeno Travel is an online travel platform that delivers AI-powered end-to-end travel itineraries, cost control and travel policy compliance to corporate customers.
Meanwhile, Zeno Expense provides finance teams with intelligent technology to automate and streamline the expense administration function, identify out-of-policy expense claims and prevent fraud.
Starting at the top line, total operating revenue came in at NZ$25.9 million. While this result represented 11% growth over the prior corresponding period (pcp), it was substantially lower than Serko’s initial guidance range of 20% to 40%.
In light of COVID-19, Serko revised its revenue expectations in late February and then withdrew guidance completely in mid-March.
Turning to expenses, operating costs increased 59% to NZ$37.1 million. This reflected a full-year of InterplX operating costs, an expense management software provider Serko acquired in late 2018, and the scale-up of the company’s international presence.
This increase in operating costs led to Serko reporting a full-year net loss after tax of NZ$9.4 million, compared to an FY19 profit of NZ$1.6 million.
Serko capitalised NZ$11 million of development costs in FY20 compared to NZ$6.7 million in FY19. Total research and development amounted to NZ$13.6 million, representing 53% of net operating income compared to 39% in the pcp.
Following the company’s NZ$45 million capital raising in November 2019, Serko remains well-funded with NZ$39.9 million cash on its books as at 31 May 2020. Serko’s net cash burn for the year, including capital development, was NZ$16.5 million.
Moving forward, Serko is targeting a maximum cash burn average of no more than NZ$2 million per month.
Serko achieved year-on-year bookings growth each month through to February 2020. The Australian and New Zealand markets generated most of Serko’s total bookings, the majority of which were domestic.
With this, the number of corporates transacting through Serko’s platforms continued to grow, increasing by more than 700 compared to the prior year.
In February, a peak of over 24,000 bookings were processed in a single day. This compares to a peak of 21,000 bookings in the same month in the prior year.
However, as detailed in previous trading updates, Serko noted that a gradual decline in bookings became evident in mid-February, which was followed a rapid decline in March.
As a result, total bookings for FY20 were up only 2% over the pcp.
Looking forward, Serko believes that the Australian and New Zealand domestic and trans-Tasman travel markets, which represents most of its revenue, are poised to recover more quickly than international routes outside of Australasia.
Serko noted that travel volumes gradually started to recover in May in light of the easing of domestic travel restrictions in New Zealand. However, it is yet to see any material increase in domestic travel in Australia.
Despite the uncertain outlook, the company anticipates that its core Australasian markets will be operating at 40% to 70% of their pre-COVID-19 activity levels by March 2021.
Commenting on the results, acting chair Claudia Batten said:
“The first three quarters of the financial year ended 31 March 2020 were characterised by monthly revenue growth and the achievement of a number of key milestones.”
“However, Serko’s performance was impacted in the fourth quarter of the financial year as the Covid-19 pandemic became widespread, significantly affecting booking volumes. This resulted in an adverse impact on the full-year result.”
Unconvinced about the outlook for the travel sector? Then check out the top ASX growth shares in the free report below.
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Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia has recommended Serko 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 ASX dividend share game has changed in 2020 – markedly so. This time last year, we were likely discussing which ASX banks had the largest dividend yield, or how safe Transurban Group‘s (ASX: TCL) payouts are.
Fast forward to 2020 and we’re now asking which ASX bank will pay a dividend this year, or how low Transurban’s payouts will be.
So here are 3 ASX shares that I think are great choices for strong dividend income within this new paradigm.
BHP Group Ltd (ASX: BHP) is an ASX mining behemoth. It would be our largest ASX company if it wasn’t for its multiple listings across London and New York. BHP has massive global operations across 4 key commodities: copper, oil, iron ore and coal. It’s this diverse earnings base that I think lends strength to BHP by enabling it to balance commodity pricing swings in any one area.
On current prices, BHP is offering a trailing dividend yield of 5.97% – or 8.53% grossed-up with full franking. I think this dividend is well funded today, and could even increase if iron ore prices stay above US$100 a tonne for an extended time. Either way, I think BHP is a top contender for a strong dividend in 2020.
WAM Capital Limited (ASX: WAM) is a listed investment company (LIC) that has been around since 1999. Since that time, it has handily delivered investors outperforming returns, which stand at an average of 15.7% per annum. WAM’s focus is normally on growth-orientated, mid-cap ASX shares, which are bought when the company identifies a ‘growth catalyst’.
On current prices, WAM shares are offering a dividend yield of 8.42%, 12.03% grossed up with full franking. However, this LIC’s profit reserves are looking a little bare. It’s possible this dividend won’t be maintained at its current level moving forward.
Commonwealth Bank of Australia (ASX: CBA) is our final dividend pick – and a long-shot. I, for one, don’t have massive expectations on the bank’s final dividend for 2020, due to be paid in September. However, I also don’t think CBA will follow its banking compatriots Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) and ditch the dividend entirely.
Although the ASX banking sector is facing a number of headwinds as a whole, CommBank is unquestionably our strongest bank and therefore the most likely to return to its former glory as a dividend kingpin, in my view. Thus, I think on current pricing, you could be picking up a great deal for a long-term dividend share winner.
For some more ASX shares you might to check out, take a look at the report below!
3 “Double Down” Stocks To Ride The Bull Market
Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon three under-the-radar stock picks he believes could be some of the greatest discoveries of his investing career.
He’s so confident in their future prospects that he has issued “double down” buy alerts on each of these three stocks to members of his Motley Fool Extreme Opportunities stock picking service.
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. 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 PolyNovo Ltd (ASX: PNV) share price may have jumped 56% over the last 12 months, but one fund manager believes it can still go higher.
According to a recent update by the DNR Capital Australian Emerging Companies Fund, it has recently initiated a position in PolyNovo.
PolyNovo is the medical device company behind the NovoSorb technology, which was developed by CSIRO following the Bali bombings.
NovoSorb is a biodegradable material that can be used to aid the repair of bone fractures and damaged cartilage, and in skin grafts.
The key product in its portfolio is the NovoSorb Biodegradable Temporising Matrix (BTM) product. NovoSorb BTM is a wound dressing intended for treatment of full-thickness wounds and burns where the dermal structure has been lost to trauma, or damaged requiring surgical removal.
DNR Capital believes that PolyNovo is undervalued based on its future cash flows.
It commented: “We believe Polynovo shares are undervalued based on our assessment of long-term cash flows. The company has a leading product that is in the early phase of its penetration into a large addressable market of $1.5b.”
It’s worth noting that DNR Capital isn’t including other markets that the company has its eyes on. Adding these into the equation would increase its addressable market opportunity to an estimated $7.5 billion per year according to management.
DNR Capital explained: “We don’t ascribe value to the hernia and breast opportunities given the limited visibility on cash flows, as these products need to pass certain milestones before they become commercial.”
In addition to this, the fund manager notes that PolyNovo’s earnings growth potential is very strong and its outlook is increasingly positive.
“With the business now at a cash-flow break even run-rate, we expect significant earnings growth as it penetrates a large addressable market estimated at $1.5b. The business generates attractive gross margins of 90%, which will lead to high returns on invested capital.”
“The company continues to reinvest into research and development with a number of new products to be launched targeting the hernia and breast market, with the combined opportunity valued at $6b,” it added.
I think DNR Capital makes some great points and PolyNovo could be well worth considering with a long term view. Though, given the premium that its shares trade at, you might want to consider limiting an investment to just a small part of your portfolio.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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I believe the Telstra Corporation Ltd (ASX: TLS) share price could hit $4 in 2020.
Let’s be clear, this isn’t an earth-moving price target. Telstra shares have been at $4 before, most recently in August last year. Before then, the ASX telco giant actually spent between 2012 and 2017 above $4 per share, even hitting $6.50 at one point in 2015. We were getting close to $4 in January this year (Telstra touched $3.90), but then the coronavirus pandemic hit and Telstra has been stuck in a rut at around $3.20 ever since. Right now, one Telstra share will set you back just $3.17.
So why do I think Telstra shares can make it back to $4 and potentially beyond in 2020?
There are two reasons:
The first is Telstra’s dividend. This company has quite an infamous history when it comes to dividend payments. Some shareholders might still not have forgiven Telstra for slashing its dividend back in 2017 from 31 cents per share (annually) to 16 cents today. It’s my view, this was partly behind Telstra’s massive re-valuation between 2015 and 2018.
But Telstra has managed to keep it’s dividend steady at 16 cents per share for close to two years now, and I don’t believe there is any danger this will be cut down any further. For one, the dividend is comfortably covered by Telstra’s free cash flow. And two, the company is close to putting the damage done to its earnings by the NBN behind it.
So what’s so good about Telstra’s dividend then? Well, at 16 cents per share (which includes 6 cents in ‘special’ NBN dividends), Telstra is offering a 5.05% dividend yield. If you include the full franking that Telstra shares also come with, this grosses-up to 7.21%. That’s not a bad yield in a zero interest rate environment.
The second reason I believe Telstra shares could reach $4 this year is the rollout of the new 5G mobile technology. 5G is the next generation of mobile network and promises unprecedented speeds, low latency and increased applications. We don’t know for sure just how many benefits 5G will bring to the table, but if the rollout of 4G a few years ago is anything to go by, it looks likely to be good news for all ASX telco companies. And Telstra looks set to be in prime position for this shift. It is investing more into 5G than its competitors, from what I can see, which could see better speeds and range for Telstra’s 5G network compared with anything Optus or TPG Telecom Ltd (ASX: TPM) delivers.
All in all, I think Telstra’s healthy dividend policy, as well as its investment in 5G technology, could well see the Telstra share price hit $4 again in 2020. As such, Telstra is a share that I’m very happy to own, and I don’t anticipate this changing anytime soon.
For some more ASX shares you might want to check out today, take a look at the report below!
3 “Double Down” stocks to ride the bull market higher
Motley Fool resident tech stock expert Dr. Anirban Mahanti has identified three stocks he thinks can ride the bull market even higher, potentially supercharging your wealth in 2020 and beyond.
Doc Mahanti likes them so much he has issued “double down” buy alerts on all three stocks to members of his Motley Fool Extreme Opportunities stock picking service.
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Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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 Why I think the Telstra share price could hit $4 in 2020 appeared first on Motley Fool Australia.
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Over the past few days, it’s dawned on me that the situation regarding coronavirus is unlikely to change anytime soon. Like many others, I thought that by now we would find ourselves opening up our own borders. Then opening up to New Zealand, and then slowly to the rest of the world.
However, the recent surge of coronavirus infections in Victoria has forced us to temper our expectations on how quickly we can open up the economy and our borders. If we’re going to continue managing this pandemic successfully, then potentially we may need to be taking two steps forward and one step back for some time.
While none of us can do anything about this, we can definitely shape our investment portfolios to reflect our circumstances. So on that note, here are some of my thoughts.
I believe that Alliance Aviation Services Ltd (ASX: AQZ) is likely to be the only airline to deliver anywhere near decent earnings over the short term. This company recently forecast a year-end profit before tax of $40 million. The core business of Alliance Airlines is providing charter flights and servicing fly-in fly-out workers. Demand for these services increased during lockdown restrictions as travellers were forced to comply with social distancing requirements.
Alliance Airlines’ recent award of flights to the Whitsundays by the Queensland Government further reinforces my optimism surrounding this Aussie airline. Alliance is structured as a nimble organisation with a low cost base. If we do have to live only with domestic tourism for a while, I believe the company will prosper. Conversely, an organisation like Qantas Airways Limited (ASX: QAN) is just too big to survive on local flights alone.
Another potential beneficiary of an increased concentration of local travel could be Bapcor Ltd (ASX: BAP), a distributor of car parts and services. If, for the time being, most travel will be local, it stands to reason much of it will be by car. This definitely appears to be increasing demand for Bapcor’s automotive parts, accessories, equipment, and services. Back in March, when the lockdown commenced, Bapcor still managed to deliver an 11.5% growth in revenue against the previous corresponding period.
I think ongoing work-from-home requirements will mean continued solid sales volumes for retailers like Bunnings and Officeworks; businesses owned by Wesfarmers Ltd (ASX: WES). Wesfarmers also owns Catch, an online marketplace it recently purchased. Catch has increased its sales turnover by 68.7% in H2 FY20 so far against the previous corresponding period. This is in line with other online sales businesses like Kogan.com Ltd (ASX: KGN).
Another interesting internet sales story has been City Chic Collective Ltd (ASX: CCX). On 25 May, the company declared that two-thirds of its sales came from online channels. Moreover, it announced a 57% increase in online sales during the company’s store closures versus the same period last year.
Depending on your investment horizon, it may still be too soon to invest in shares like Commonwealth Bank of Australia (ASX: CBA). In fact, I would be cautious of any shares with exposure to the long-term credit commitments of the general public. With higher unemployment and uncertain economic conditions, I believe fewer people will be seeking long-term credit arrangements.
In addition, as the nation’s largest bank, CommBank is also potentially facing the biggest impact of defaults on housing and business loans. Moreover, there is an underlying trend away from credit cards, particularly among millennials.
Nonetheless, I think short term credit organisations like Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) are likely to continue to do well. Particularly those that are light on credit checks.
Payment processing companies like Tyro Payments Ltd (ASX: TYR) are also destined to continue performing well, in my opinion. Tyro has a network across many small and medium enterprise companies, many of which have already re-opened. Furthermore, the company has increased YTD earnings by 16% against last year during April and May, despite lockdowns restrictions.
In just a few years, Tyro has catapulted itself to be the largest EFTPOS provider of all authorised deposit-taking institutions (ADI) outside of the big four banks.
The resurgence of coronavirus cases in Victoria this week suggests the recovery is not going to play out the way we might have hoped. Nonetheless, the market continually provides us with opportunities.
I recommend pivoting an investment portfolio towards companies with strong online sales capabilities, or those which have thrived during the lockdown. In addition, look for companies that do not require a full re-opening of the Australian or international economies in order to thrive, such as the buy now, pay later providers.
If you’re after more opportunities in the current market, make sure to check out our free report.
3 “Double Down” stocks to ride the bull market higher
Motley Fool resident tech stock expert Dr. Anirban Mahanti has identified three stocks he thinks can ride the bull market even higher, potentially supercharging your wealth in 2020 and beyond.
Doc Mahanti likes them so much he has issued “double down” buy alerts on all three stocks to members of his Motley Fool Extreme Opportunities stock picking service.
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Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Bapcor. 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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On Tuesday the Coles Group Ltd (ASX: COL) share price climbed 0.5% higher to $16.67.
This latest gain means the supermarket giant’s shares have now risen a sizeable 11% since the start of the year.
This means Coles’ shares are vastly outperforming the S&P/ASX 200 Index (ASX: XJO), which is down 11% over the same period.
I don’t believe it is too late to invest in Coles. Although its shares have been strong performers this year, I believe they are still good value. Especially in comparison to its arch rival Woolworths Group Ltd (ASX: WOW).
At present, I estimate that the Coles share price is trading at a little over 21x FY 2021 earnings, whereas Woolies is trading closer to 26x FY 2021 earnings.
Another reason to be positive on Coles is its dividend. I expect Coles to provide investors with a fully franked 3.9% dividend yield next year. For Woolworths, I’m expecting a fully franked 2.9% dividend yield in FY 2021.
I’m not the only one that is positive on Coles. After looking through recent updates by Woolworths and Metcash Limited (ASX: MTS), this morning analysts at Goldman Sachs reiterated their conviction buy rating and $18.60 price target on its shares.
This price target implies potential upside of 11.6% for its shares over the next 12 months or 15.5% including dividends.
Goldman appears confident that Coles will finish FY 2020 strongly and has revised its sales forecasts higher. And while it does have concerns over margin pressures, it feels Coles is better positioned to limit the damage.
The broker commented: “While the sales trends remain strong across the industry, margins have underwhelmed but the outlook for margins over the remainder of CY20 look supportive. We revise 4Q20 LFL growth for the Food division to +8.5% and for the Liquor division to +8%, reflecting the stronger than expected industry growth trends.”
“Over 2H20, we anticipate COL’s cost out program and earlier timing of EBA implementation will limit the downside to margins compared to that anticipated by WOW’s update. We have revised 2H20 Food EBIT margins from 4.2% to 4.0% (+10bps on pcp). Overall, FY20 Food EBIT has been reduced by -1.6% and Group EBIT by -1.5%. We revise pre-AASB16 FY20 EPS to A$0.71, -1.5%,” it concluded.
And here are more top shares which analysts have just given buy ratings to…
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Motley Fool resident tech stock expert Dr. Anirban Mahanti has stumbled upon three under-the-radar stock picks he believes could be some of the greatest discoveries of his investing career.
He’s so confident in their future prospects that he has issued “double down” buy alerts on each of these three stocks to members of his Motley Fool Extreme Opportunities stock picking service.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths 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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