The WAM Microcap Limited (ASX: WMI) share price is up 6% right now after announcing a special dividend for FY20.

A quick overview of WAM Microcap

WAM Microcap is a listed investment company (LIC) which invests in ASX shares with market capitalisations under $300 million at the time of purchase.

The LIC is operated by Wilson Asset Management (WAM), one of the best small cap managers in Australia in my opinion. Fund management firm WAM was founded by veteran investors Geoff Wilson. WAM operate a number of other LICs including WAM Capital Limited (ASX: WAM) and WAM Leaders (ASX: WLE). 

FY20 result

WAM Microcap reminded investors that over the 12 month period to 30 June 2020 its investment portfolio outperformed the S&P/ASX Small Ordinaries Accumulation Index by 17.5% after rising by 11.8% (before fees, expenses and tax). WAM enable shareholders to benefit from this growth through the WAM Microcap share price growth as well as from the dividends it pays.

Since inception in June 2017, the WAM Microcap investment portfolio has increased by 15.9% per annum, outperforming the index by 10% per annum – again this is before fees, expenses and tax.

WAM Microcap said that it had a profit reserve of 28.7 cents per share at 30 June 2020 before the payment of dividends.

WAM Microcap dividend

The WAM Microcap share price seems to be rising after the board announced two dividends.

As expected, the LIC announced a final fully franked dividend of 3 cents per share, which is a 33.3% increased compared to a year ago. WAM Microcap also announced a special fully franked dividend of 3 cents per share.

WAM Microcap said that it is committed to paying an increasing stream of fully franked dividends as long as it has sufficient profit reserves and franking credits and it is within prudent business practices.

That means at the current WAM Microcap share price, the two end-of-year dividends amounts to a grossed-up dividend of 6%.

WAM Microcap share purchase plan (SPP)

WAM Microcap also announced a SPP for shareholders who want to increase their holding of the LIC. Investors will be able to purchase up to $30,000 of new shares without being charged brokerage.

Shareholders who participate will be entitled to receive the final ordinary dividend and the special dividend.

The WAM Microcap board intend to offer shares to professional and sophisticated investors at the same price and terms as the SPP.

The SPP will be priced at the WAM Microcap net tangible assets (NTA) at 31 July 2020. That may end up being a material discount to the current WAM Microcap share price. At the end of June 2020 the WAM Microcap NTA was $1.31 per share.

WAM Microcap said that the primary purpose of the capital raising is to increase the company’s assets, increase its relevance to the market, improve the prospect of broker and research coverage, increase interest from financial planners and gain more access to market opportunities such as pre-IPO capital raisings.

Positions

At the end of each financial year, LICs reveal their investment positions. At 30 June 2020, WAM Microcap’s biggest positions were: Infomedia Limited (ASX: IFM), City Chic Collective Ltd (ASX: CCX), Temple & Webster Group Ltd (ASX: TPW), People Infrastructure Ltd (ASX: PPE), Viva Leisure Ltd (ASX: VVA) and AMA Group Ltd (ASX: AMA).

Foolish takeaway

WAM Microcap has been a strong performer since inception. It had a great run between 31 March 2020 and 30 June 2020. Its portfolio’s gross return was 32.9% over that three month period.

The LIC offers quite a large dividend, which is attractive in this COVID-19 era. Excluding the special dividend, it has an annual ordinary grossed-up dividend yield of 6% for new investors.

Depending on what the NTA was at 31 July 2020, it’s quite likely I will participate in the SPP, even if it’s just a relatively small purchase.

More reading

• 3 top ASX shares to buy for growth investors in August
• 3 top small cap ASX shares to buy now
• How to become a millionaire with ASX shares starting with $0
• Here are two ASX shares I’ve recently bought
• How to create a yearly income of $65,000 in dividends

Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Infomedia and Temple & Webster Group Ltd. The Motley Fool Australia has recommended People Infrastructure Ltd and 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.

The post WAM Microcap share price rises on big special dividend appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3gASnMN

The Vmoto Ltd (ASX: VMT) jumped to a more than five-year high today after it released a market update.

The electric scooter manufacturer rallied 13.3% to $0.51 in after lunch trade when the All Ordinaries (Index:^AORD) (ASX:XAO) and the S&P/ASX 200 Index (Index:^AXJO) slipped 0.2% each.

The ASX small cap may be benefiting from the COVID-19 pandemic with increased demand on food delivery services – which uses e-scooters.

Record deliveries

Management said it’s receiving strong interest from other business customers too, including parcel delivery and ride-sharing companies.

Vmoto reported selling a record breaking 6,389 units in the June quarter, which is 55% above what it achieved in the previous quarter. International orders accounted for 94% of these units.

It also reported that it delivered 2,000 units of its ride sharing products to Netherlands-based Go Sharing, and it received an additional order for another 1,500 units.

Further, Vmoto shipped its first order of 60 units to a new ride-sharing company in the Czech Republic called re.volt.

Riding the COVID and electric vehicle trends

Management is currently supplying products to seven sharing operators globally and is actively in discussions with 12 other sharing operators.

“With the European governments’ initiatives encourage consumers to adopt electric vehicles and the impacts from Covid-19 on personal and public transportation and social distancing, the Company and its business are well positioned to benefit from these for longer term,” said Vmoto in its ASX statement released today.

Financial position

The company completed a $4 million capital raise in May via a share purchase plan (SPP). This takes its total cash holding to $7.3 million at the end of June after it paid a RMB30 million ($6 million) capital contribution to Nanjing Vmoto Soco Intelligent Technology.

Vmoto reported having firm international orders for 6,353 units and it continued to receive further orders from its existing and new customers after the end of the latest quarter.

International interest

“In  2Q20, the Company signed a number of exclusive distribution agreements with international  distributors across Armenia, Japan, Costa  Rica, Panama and Thailand for the warehousing, distribution and marketing of its B2C range of electric two-wheel vehicle products,” added the company.

“Vmoto has also supplied samples to and/or is in discussions with a number of potential B2C and  B2B  distributors and customers in Brazil, Bulgaria, Cuba, Dubai, Egypt, Kazakhstan, Maldives,  Malaysia, Mongolia, Nepal, Indonesia,  Israel, Mexico, Morocco, Nepal, Portugal, Philippines,   Romania, Russia, Saudi Arabia, Singapore, Slovenia, South Africa, Spain, Switzerland, Turkey and Ukraine.”

More reading

• ASX stock of the day: Catapult share price leaps 15% on US college football contract
• My top retail ASX 200 share to gift right now
• Why ASX bank stocks are the worst performing group today
• ASX 200 up 0.1%: Big four banks tumble, Flight Centre sinks, SEEK cancels final dividend
• Is the Transurban share price a buy right now?

Motley Fool contributor Brendon Lau 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 The ASX small cap benefitting from COVID that you’ve probably never heard of appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2DcUVSF

It seems investors in these two ASX medical shares have taken the opportunity to lock in recent gains, sending prices down significantly in July. The Avita Therapeutics Inc (ASX: AVH) share price fell more than 30% in July as sales faltered in the face of COVID-19. The PolyNovo Ltd (ASX: PNV) share price fell nearly 14% despite reporting record sales in June. Both companies operate in the medical device space and will potentially see strong demand for their products over the coming decade. Coronavirus may have dented short-term demand, but are these ASX medical shares worthy long-term buys?  

Avita Therapeutics 

Avita Therapeutics produces a spray-on skin system used to treat burn wounds. The ‘Recell System’ allows a suspension of spray-on skin cells to be produced using a small sample of the patient’s own skin. This can be sprayed onto a wound, improving healing and scar appearance. Avita is primarily focused on the United States market and redomiciled to the US earlier this year. Growth in sales of the Recell System were strong in FY20, growing 213% over the prior year. But the rate of sales growth took a tumble in the fourth quarter with sales revenue of US$3.79 million compared to US$3.78 million the previous quarter. 

Lockdown measures meant there was a reduction in accidents leading to burn injuries. Access to facilities and patients was also limited due to infection control procedures aimed at preventing the spread of coronavirus. A re-prioritisation of hospital resources meant April sales fell to their lowest level in 2020. Encouragingly, procedural volumes resumed growth in May and June with the benefits of the Recell System, which include fewer surgeries and reduced hospital stays, embraced by surgeons. The system is also being investigated for use in treating vitiligo, scar reconstruction, and for aesthetic applications. This could substantially increase the addressable market for this ASX medical share. 

The Avita share price is currently trading at $6.12 which is a 1% gain for the day so far. 

PolyNovo

PolyNovo produces ‘Novosorb BTM’, an implantable dressing that can be integrated into the body as it heals. The product is produced using a biodegradable polymer, which helps the body to use its own mechanisms to repair damaged tissue. Novosorb BTM is used in the treatment of severe wounds or burns where the dermal layer of the skin has been lost and requires a graft to close. PolyNovo reported record US sales of Novosorb BTM in June, with a 67% increase in hospital accounts over FY20. The company also made its first sale in the United Kingdom and expects additional near-term sales from this market. 

Sales of Novosorb BTM tend to be lumpy, but there is a strong upward trajectory with product sales in FY20 expected to double those of FY19. In a July update, PolyNovo Chairman, David Williams, said “While FY20 sales will show impressive growth over FY19, the sales run-rate is more impressive and should be a better indicator of the near-term future”. PolyNovo’s polymer has potentially even wider applications. The company is currently working on hernia repair and breast reconstruction products. Both areas have large addressable markets and would diversify the revenue base for PolyNovo.  

At the time of writing, the PolyNovo share price is trading 0.91% up for the day at $2.22.

Foolish takeaway

I believe these two ASX medical shares have serious long-term potential. While coronavirus may have put a dampener on short-term demand, longer-term indicators are positive. This means recent pull backs in each company’s share price may provide an opportunity for long-term investors to take a stake at a discount. 

More reading

• These were the worst performing ASX 200 shares in July
• These were the worst performing shares on the ASX 200 in July
• Why PolyNovo and these ASX healthcare shares could be long term market beaters
• 3 junior ASX healthcare shares with explosive growth potential
• Why Opthea shares could offer big growth potential

Kate O’Brien owns shares of Avita Medical Limited and POLYNOVO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited and POLYNOVO FPO. The Motley Fool Australia has recommended Avita Medical 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 These ASX medical shares fell double figures in July – are they a buy? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3i2jlNC

If you’re interested in adding some growth shares to your portfolio in August, then you might want to take a look at the ones listed below.

I believe they have the potential to grow materially in the future. Here’s why I would buy them:

Bravura Solutions Ltd (ASX: BVS)

The first growth share to consider buying is Bravura Solutions. It is a leading financial technology company for the wealth management and funds administration industries. The key product in its portfolio is the Sonata platform, which connects and engages with clients via computers, tablets, or smartphones.

Due to the quality of its platform and its large addressable market, I believe Sonata can underpin strong earnings growth over the next decade. This should be supported by a couple of acquisitions that have opened Bravura up to new and lucrative markets. All in all, I believe the Bravura share price is well-positioned to be a market beater over the 2020s. This could make it well worth buying today.

Nearmap Ltd (ASX: NEA)

Another ASX growth share to consider buying in August is Nearmap. It is a leading aerial imagery technology and location data company which currently operates in both the ANZ and North American regions. At present, these two markets provide the company with a total addressable market (TAM) of $2.9 billion per year. This compares to the annualised contract value (ACV) of $103 million to $107 million that Nearmap expects to record in FY 2020.

Given the quality of its software and how fragmented these markets are, I believe Nearmap is well-placed to grow its share of these markets significantly in the future. In addition to this, the company could increase its TAM in the future by expanding its footprint into other territories. Overall, I think this positions the Nearmap share price to also be a market beater over the long term.

More reading

• 3 top ASX tech shares to buy right now
• These are the 10 most shorted shares on the ASX
• Top ASX Stock Picks for August 2020
• Buy these fantastic ASX tech shares for potential market beating returns
• Is this your last chance to buy Altium shares for a good price?

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 Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 2 exciting ASX growth shares that could beat the market in the 2020s appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/33gzwCN

Welcome to August.

With the financial headlines again dominated by the rising economic impact of COVID-19‘s resurgence in Australia, it’s worth taking note of the Aussie share market’s – and Australian people’s – remarkable resilience.

If you’re living in Victoria and subject to the new curfews, distancing and isolation measures, know that the rest of Australia stands with you. The nation appreciates the great sacrifices you’re making both in your personal and financial lives to help get this pandemic off our shores.

Treasurer Josh Frydenberg noted that the cost of a stage three, 6-week lockdown in Victoria had previously been estimated to cut GDP by $3.3 billion. With Victoria moving to stage four, and the measures potentially lasting longer, the true cost is one more uncertainty investors will have to swallow.

And let’s not forget that Victoria makes up some 25% of the Aussie economy.

Resilience in the face of uncertainty

Investors tend to hate uncertainty. It sees them run to perceived haven assets like government bonds, cash and gold. That’s one of the reasons why gold has been trading at record prices in US dollars, currently at US$1,976 (AU$2,768) per troy ounce.

Much as I’d like to tell you otherwise, the uncertainty around the coronavirus is unlikely to let up in August. One big question is whether the second wave can be contained within Victoria. Another is when an effective vaccine will be developed and widely available.

But here’s the remarkable thing.

Despite all these doubts, the S&P/ASX 200 (INDEXASX: XJO) just posted its 4th month of consecutive gains. It ended the month of July up 0.5%, despite Friday’s 2.0% sell-off.

Now in these highly volatile times, that may not sound like much. But a 0.5% monthly average gain equates to an annualised nominal gain of roughly 8%. That’s the power of compounding at work for you.

I’ve stressed nominal gain here, because as you likely know Australia has entered a period of deflation. After a sharp plunge in the last quarter, the consumer price index is down 0.3% over the past 12 months. Unlike our accustomed inflationary environment, where you subtract inflation from your share returns, we’re now in a position to add the amount of deflation to discover our real adjusted returns.

You see, mild deflation really isn’t the Bogeyman it’s generally made out to be. Unless, of course, you’re sitting on an ever growing trillion-dollar debt pile.

Before digging into a few specific shares making big moves up and down on Friday, let’s round off the big picture look of the ASX 200.

The index’s sharp fall commenced on 20 February. And the panic selling didn’t really let up until 23 March. By then the average value of Australia’s largest 200 listed companies had fallen a gut wrenching 37%.

And then things turned around.

While still down 11% year-to-date, the ASX 200 is up more than 30% from its 23 March low. And in early afternoon trade, it’s again demonstrating remarkable resilience, down by 0.32% to claw back most of today’s early losses after tumbling 1.1% in the first 20 minutes following the opening bell.

And that’s with all the negative virus news coming out of Victoria over the weekend.

A market of stocks

You’ve likely heard the old cliché, ‘It’s not a stock market, it’s a market of stocks.’

It’s admittedly trite, but like most clichés it also rings true.

Take last Friday 31 July, for example.

After posting a relatively strong month, the ASX 200 closed the day down 2.0%. But some shares, as you’d expect, lost a lot more.

AMP Limited (ASX: AMP) topped the losing board, with the AMP share price shedding 12.5% on the day.

The major daily fall for the diversified financial services company was driven by its announcement lowering its half yearly profit guidance. The stock, with a market cap of $4.8 billion, has struggled in the wake of the Financial Services Royal Commission. The AMP share price finished July down by 21.5%. At the current price of $1.40 per share, its worth putting AMP on your watchlist for an eventual, and potentially sharp, turnaround.

On the other end of the spectrum, Super Retail Group Ltd (ASX: SUL) topped Friday’s list of gainers. With a market cap of $2.0 billion, Super Retail is one of Australia’s biggest retailers. And on Friday, the Super Retail share price rocketed by 9%.

The surge was likely driven by the company announcing increased sales expectations for the 2020 financial year. The full results should be released on 24 August. If the renewed and higher expectations are met, the Super Retail share price could certainly run higher from here, in my view.

Foolish takeaway

If you’ve let all of the uncertainty surrounding the coronavirus mitigation efforts keep you on the sidelines, it may be time to step back onto the field.

The next months will almost certainly see continued volatility in Australian and international shares. But with record low interest rates and record government stimulus packages likely to remain in place as long as needed, the equity markets have a lot of helpful tailwinds.

If you’re investing for the long-term, I suggest ignoring the shorter-term price swings and investigating quality ASX shares while they’re still selling for a bargain.

More reading

• Leading brokers name 3 ASX shares to buy today
• AMP and 2 other ASX 200 shares to watch this week
• These were the worst performing ASX 200 shares in July
• Top ASX Stock Picks for August 2020
• These were the worst performing shares on the ASX 200 in July

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail 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 Why you should buy ASX shares in this resilient market appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/39QaXO5

One of the most eagerly anticipated results this earnings season will come from Telstra Corporation Ltd (ASX: TLS).

Opinion is divided on how the telco giant is performing and ultimately what impact this will have on its dividend payment.

In light of this, I thought I would take a look to see what the market is expecting from the company on 13 August.

What does the market expect from the Telstra full year result?

According to a note out of Goldman Sachs, its analysts expect Telstra to report a 4% decline in income to $26.7 billion and an 8% decline in EBITDA to $9 million.

The latter includes core EBITDA of $7.45 billion, down 9% on the prior corresponding period. This compares to Telstra’s guidance for the bottom end of its $7.4 billion to $7.9 billion range.

And on the bottom line, Goldman is forecasting a 22% decline in net profit after tax to $2.4 billion.

Despite this decline, the broker believes Telstra’s free cash flow will be sufficient to maintain its final dividend of 8 cents per share.

What about FY 2021?

Telstra traditionally provides guidance for the year ahead with its full year result, so all eyes will be on that.

Goldman is forecasting FY 2021 underlying EBITDA to decline 4% to $7.14 billion, with NBN payments of $1.05 billion.

Once again, investors will be eager to see what Telstra’s dividend plans are for the financial year. Pleasingly, Goldman is confident that a 16 cents per share dividend will be paid.

It commented: “TLS believes it requires $7.5bn of EBITDA to support 16¢ DPS. Hence, we see the messaging around the ‘one-off’ Covid-19 impacts as important to determine how the company will assess FY21 earnings and the outlook into FY22. We continue to believe that TLS can comfortably fund 16¢.”

Should you invest?

I agree with Goldman Sachs on its dividend and believe 16 cents per share is sustainable for the foreseeable future. In light of this, I would be a buyer of its shares now.

This is something that Goldman is also recommending. It has retained its conviction buy rating and $4.10 price target on the company’s shares.

More reading

• Will outages make the Telstra share price a buy?
• Buy these ASX dividend shares before the RBA meeting
• 3 of the best ASX dividend shares to buy right now
• I would buy ResMed and these ASX blue chip shares in August
• Buy these ASX ETFs for dividends in August

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Earnings season: What to expect from Telstra in FY 2020 appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3i4XncP

With so many shares to choose from on the ASX, it can be hard to decide which ones to buy.

The good news is that brokers across the country are doing a lot of the hard work for you.

Three top shares that leading brokers have named as buys this week are listed below. Here’s why they are bullish on them:

Bapcor Ltd (ASX: BAP)

According to a note out of Citi, its analysts have retained their buy rating and $6.85 price target on this auto parts company’s shares. The broker has been looking into the retail sector and the potential impacts of the removal of the JobKeeper program. It believes this will have a limited impact on Bapcor and remains positive on its outlook. Especially given its belief that it will benefit from increasing personal transport use. The broker also sees opportunities for Bapcor to grow in the Thai market. I think Citi makes some good points and Bapcor could be worth considering.

OceanaGold Corp (ASX: OGC)

Analysts at Credit Suisse have upgraded this gold miner’s shares to an outperform rating with an improved price target of $4.10. It made the move after the release of its second quarter production update late last week. Although it notes that its production guidance has been downgraded, this was for reasons outside the company’s control. Overall, the broker appears very positive on its long term growth potential and believes its shares are great value at the current level. I would agree that it could be worth taking a closer look at.

Super Retail Group Ltd (ASX: SUL)

A note out of Goldman Sachs reveals that its analysts have retained their buy rating and $10.30 price target on this retailer’s shares. The broker was pleased with Super Retail’s recent update and believes it was supportive of its investment thesis. Goldman is positive on the company due to its belief that it will benefit from more domestic travel, increased usage of private transport, and home fitness equipment demand as a result of the pandemic. The broker also notes that its shares are currently trading at ~12.4x earnings, which is a 25% discount to its historical average. I think Goldman Sachs is spot on and Super Retail could be a good retail option.

More reading

• AMP and 2 other ASX 200 shares to watch this week
• Top ASX Stock Picks for August 2020
• These were the best performing shares on the ASX 200 last week
• ASX 200 drops 2%, ASX banks fall, Super Retail jumps
• Latest ASX stocks upgraded by top brokers to “buy” today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor and Super Retail 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 Leading brokers name 3 ASX shares to buy today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/30rkDMd

I am quite excited by the newest ASX fintech share, CML Group Ltd (ASX: CGR). The company recently acquired a software as a service (SaaS) website, Skippr. This platform allows CML to provide greater support to small business, one of its key verticals. It announced the acquisition on Tuesday 28 July. Consequently the CML Group share price rose by nearly 13% last week.

CML Group provides a range of debtor finance options for medium and small businesses. This type of finance implies short-term credit often secured by alternative assets to real estate. More specifically, it is a short-term solution to cashflow issues. The company provides three types of debtor finance; invoice finance, equipment finance, and trade finance.

The greatest revenue generator is invoice discounting, a loan against an invoice that has yet to be paid. I have personally used this type of service with a different provider when I owned a consulting company. Second, equipment finance, is a loan secured by both new and owned equipment. For instance, equipment finance is often something used to fund a management buy out. Third, trade finance, where the loan is used to pay for imports. Trade finance is the smallest revenue generator for CML Group. 

Companies like CML Group are vital to the small business sector. In my opinion, these types of services help small companies become large companies and can be critical in growing an organisation.

The small business support platform

While the company provides various types of credit, it is the invoice finance that drives the lion’s share of revenue. Its SaaS platform has deep functionality and is able to integrate with Xero Limited (ASX: XRO), MYOB and a range of other commonly used software. Accordingly, the platform allows CML Group to work with its clients in a far more collaborative and integrated manner. 

The acquisition of clients using manual processes is expensive and can be prohibitive for CML. For instance, the company has previously avoided clients with receivables less than $200,000 because the costs of onboarding reduced its profitability. However, with the automation provided by Skippr, it can now target smaller clients more cost effectively. The automated processes provide cost benefits in client acquisition, approval of invoices selected for funding, live payment monitoring and reconciliation, and sophisticated reporting for the end client. 

One of the main benefits of the SaaS platform, aside from all of the cost benefits mentioned above, is that of customer engagement. As a platform designed to facilitate small business growth, it is likely clients would require the service multiple times over a period of years. Therefore, Skippr will enable CML Group to build long lasting relationships with its customers rather than simply meeting on-demand requirements. 

Company management

CML Group has delivered year-on-year growth in invoices funded every year. As coronavirus restrictions have started to ease, the company has seen strong monthly growth. It financed a total of $1.7 billion in invoices through FY20, an increase of 6% despite the interruptions of bushfires and coronavirus. This should provide the company with an earnings before interest, taxes, depreciation and amortisation (EBITDA) of $19.5 – $20.5 million. 

Over FY21, CML expects to see a high volume of business financing required. This is due to companies taking stock of the level of working capital they need on hand to best manage through the pandemic and return to full capacity. We are still seeing increased small business disruption and gradual decreases in government support.

Foolish takeaway

CML Group is, in my view, a great company with a valuable product. Its service offering is suited to the times and will be a critical support mechanism for many small business owners as they strive to return to a steady state of trading. Moreover, the acquisition of the Skippr platform makes it the newest fintech on the ASX and I believe the CML share price will really start to go places over the next 12 months. At its current level, the CML share price pays a trailing, 12-month dividend yield of 6.96%.

More reading

• Top ASX Stock Picks for August 2020
• 3 top ASX shares to buy and hold for at least a decade
• 5 things to watch on the ASX 200 on Friday
• WAAAX or FAANG? Which ASX tech shares to buy in 2020
• Xero and 1 other ASX growth share to watch in August

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 Xero. 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 CML share price surged 13% last week appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2DqfuuK