ASX oil-exposed stocks are the worst performing group on the market this morning, but this could change in 2021.

The energy sector tumbled 1.3% when the S&P/ASX 200 Index (Index:^AXJO) slipped 0.4% at the time of writing.

The Brent crude oil price tumbled 1.7% overnight to US$47.80 a barrel, while the WTI benchmark fell by a similar amount.

ASX energy stocks retreat as oil prices slide

A retreat in the commodity is triggering this bout of profit-taking on ASX energy stocks. The Oil Search Ltd (ASX: OSH) share price crashed 3.6% to $3.66 and the Beach Energy Ltd (ASX: BPT) share price lost 2.7% to $1.79.

This makes them the third and fourth worst performers, respectively, on the ASX 200 this morning.

But the Woodside Petroleum Limited (ASX: WPL) share price and Santos Ltd (ASX: STO) share prices aren’t too far behind. They’ve each lost more than 1% of their value.

Is the pullback in the oil price a buying opportunity?

These stocks have enjoyed a big bounce recently as speculation of the impending arrival of COVID‐19 vaccines fuelled optimism of an economic recovery.

But the pullback in ASX energy stocks could present a buying opportunity as Credit Suisse believes oil is heading higher.

The broker created a proprietary model that explains 86% of the Brent price variation since 1993 by looking at demand and supply drivers. This model is based on a range of factors like industrial production, ISM new orders index, world oil production and capacity utilisation, just to name a few.

Why oil can hit US$196 a barrel

Even under a more pessimistic scenario, the model is pointing to much higher oil prices. And under the best-case outcome, the Brent price could rocket to a new record high.

“If the Organization of the Petroleum Exporting Countries (OPEC) maintains agreed production cuts, the model points to an oil price of US$196 per barrel!” said Credit Suisse.

“If OPEC production returns to pre‐pandemic levels, fair value falls to US$80 per barrel.

“Even accounting for additional risks, such as inventory build, lack of storage space and political uncertainty, we can see oil prices returning to pre‐pandemic levels of US$60‐65 per barrel if world IP [industrial production] does not collapse or even recovers.”

Economic growth looking like a good bet for 2021

There’s little risk that industrial production will crash. If anything, experts are confident that economic activity will rebound in 2021 as it looks increasingly likely that a successful vaccine will be found.

The question is how quickly it can be made available to the general public. But as long as there’s a viable treatment for COVID, there will be enough business and consumer confidence to reflate the global economy, even if the vaccine takes a little longer to become available.

More reading

• ASX 200 expected to drop lower amid COVID-19 vaccine concerns
• 5 things to watch on the ASX 200 on Friday
• ASX 200 falls on Thursday
• ASX 200 flat: Bega Cheese announces major acquisition, WiseTech reaffirms guidance
• The real earnings growth driver for ASX bank stocks in FY21 isn’t what you think

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.

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The PointsBet Holdings Ltd (ASX: PBH) share price doubled in a single day after the announcement of its FY20 results and game-changing media partnership with NBCUniversal. But as the sports betting scene in the US continues to develop, why has the PointsBet share price gone nowhere since August? 

Time needed to digest run up?

Without further news, a company’s share price likely needs to take a breather after such a significant move up.

Zip Co Ltd (ASX: Z1P), for example, ran more than 60% in August after the announcement of its partnership with eBay and FY20 results. However, as the company emptied the clip of good news, its share price ran out of momentum to give up most of its August gains in the following months.

In the case of the PointsBet share price, not only did it jump 100% in a single day but it also announced a $353 million capital raising at an offer price of $6.50 per share a few days later. The significant move up combined with the share price dilution from the capital raising may have capped its ability to push higher. 

The recent rotation from tech and growth to value and cyclical sectors is possibly another force acting as a drag on the PointsBet share price. Leading S&P/ASX 200 Index (ASX: XJO) tech shares across the board including Afterpay Ltd (ASX: APT) have struggled to outperform the broader market in November. 

PointsBet timeline already announced 

PointsBet’s plans in the US have already been announced in its previous FY20 results. This includes its plans to launch in Colorado in November 2020 and Michigan in the third quarter of FY21. And also the launch of its iGaming product in Michigan in Q3 FY21 and New Jersey in the second half of FY21. 

The company announced its Colorado launch on 17 November. This represents its fifth online sportsbook operation in the US. The Colorado market represents an estimated revenue opportunity of $296 million by FY23. This compares to the FY23 revenue opportunity of $784 million in Illinois, $555 million in New Jersey, $317 million in Indiana and $159 million in Iowa. Pointsbet currently maintains a market share of 6.5% in New Jersey and 3.2% in Indiana as of the first quarter of FY21. 

More reading

• The 13 ASX shares that could have doubled your money in 2020
• Why Afterpay, Goodman, MedAdvisor, & PointsBet shares are dropping lower
• PointsBet (ASX:PBH) share price on watch after US update
• Why Laybuy, Oil Search, PointsBet, & Webjet shares are racing higher

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Biotech investing is not for the weak-hearted. While the clinical and regulatory success of a drug can mean huge gains, any failure in the development and commercialization process can literally decimate a biotech investor’s portfolio.

Many investors consider Moderna (NASDAQ: MRNA) to be one such risky biotechnology company, with fortunes largely dependent on the success or failure of its experimental COVID-19 vaccine, mRNA-1273. But although Moderna may be riskier than other prominent COVID-19 vaccine players such as Pfizer (NYSE: PFE) and AstraZeneca (NASDAQ: AZN), that doesn’t mean it’s purely a speculative play. mRNA-1273 is definitely the biggest short-term growth driver for the company — but Moderna also has much more to offer in the field of mRNA therapeutics.

Here are three reasons why healthcare investors can consider starting a small position in this high-growth stock on any pullback in 2020.

Its COVID-19 vaccine could be a game-changer

With traditional vaccines, a small and/or inactive amount of a virus or disease is injected to provoke the body into mounting an immune response to the proteins the intruder produces. mRNA vaccines are different, using messenger RNA — a molecule in cells that translates DNA into proteins — to fool the body into producing some of the virus’s proteins itself, then mounting the immune response. No mRNA vaccines have ever been approved for human use, but Pfizer and BioNTech (NASDAQ: BNTX) recently reported 95% overall efficacy for their mRNA-based COVID-19 vaccine candidate, BNT162b2, based on an ongoing phase 3 study. The companies did not report any serious safety concerns.

The positive news from these competitors bodes well for Moderna. The mRNA technology that is Moderna’s focus, and that Pfizer and BioNTech used to make their vaccine candidate, is not yet commercialized, so the latter’s success should boost confidence in Moderna’s approach.

Also, vaccine development is generally more time-consuming than drug development, requiring a wide array of safety studies to ensure that the vaccine does not cause serious adverse events in various populations. But to speed up the process, this protocol has not been followed for potential COVID-19 vaccines, meaning the safety of any vaccine development platform must now be assessed based on the totality of data available from all companies. Because of this, Pfizer and BioNTech’s positive safety data is good news for Moderna, too.   

On Nov. 16, Moderna reported efficacy of 94.5% for mRNA-1273 in a phase 3 study that involved more than 30,000 participants. This is important especially considering that many participants were from the populations most affected by the pandemic, including people over 65 years of age, people of color, and people with comorbidities such as diabetes, obesity, and cardiac diseases. Moderna has also not reported any severe side effects for its vaccine in the interim analysis; two-month safety follow-up data should be released at the end of November.

In the end, it may be logistics that prove to be the winning stroke for Moderna. mRNA-1273 can remain stable at -20 degrees Celsius (about -4 Fahrenheit)  for six months, at temperatures of 2 to 8 degrees Celsius (about 35 to 46 degrees Fahrenheit) for 30 days, and at room temperature for 12 hours. Hence, this vaccine can be easily distributed using existing transportation and storage infrastructure. Pfizer’s BNT162b2 vaccine candidate, however, has to be stored at -70 degrees Celsius (-94 degrees Fahrenheit), making it pretty difficult to transport and store even in developed countries.

mRNA therapeutics are a big opportunity

Moderna is a key player in the mRNA vaccines and therapeutics landscape, a global market expected to be worth $9.4 billion by the end of 2021.  Investors are showing increasing confidence in Moderna’s other clinical programs, such as vaccines for cytomegalovirus (CMV) and Zika, personalized cancer vaccines for solid tumors and melanoma, and other vaccines and treatments for a range of rare diseases.

In September, Moderna announced positive interim results for its CMV vaccine candidate, mRNA-1647. The company estimates the vaccine’s peak sales in the range of $2 billion to $5 billion per year , considering that CMV is the leading cause of birth defects in developed countries and there is no approved vaccine against this infection.

An increase in cash will boost R&D

Moderna plans to produce 20 million doses of the coronavirus vaccine by the end of 2020 in the U.S. and 500 million to 1 billion doses worldwide in 2021. The company plans to price mRNA-1273 in the range of $25 to $37 per dose, depending on purchase quantity. Moderna has already secured a $1.5 billion contract from the U.S. government to supply 100 million doses, with an option for an additional 400 million. The company has also received $1.1 billion in cash payments from governments around the world.

Moderna currently has cash and investments worth $4 billion and zero debt on its balance sheet. A significant sales ramp-up in 2021 will add to the company’s cash reserve, which in turn can fuel the research and development (R&D) pipeline.

There are risks to be considered

Moderna is trading at a forward price-to-earnings (P/E) multiple (calculated by dividing share price by forecasted earnings per share for the next fiscal year) of 22.4. Other far more diversified and less risky COVID-19 vaccine players — such as Pfizer, AstraZeneca, and Johnson & Johnson (NYSE: JNJ) — are trading at forward P/E multiples of 12.9, 21.9, and 16.3, respectively. Moderna is definitely a more expensive pick than any other coronavirus vaccine player.

Moderna’s share price depends heavily on the potential success of mRNA-1273. The company has not disclosed information about the time period for which the vaccine protects individuals after dosage and whether it prevents transmission from one person to another. Moderna also did not include children in its phase 3 trial, which may limit use of the vaccine in this population. Investors are concerned about the insider trading activity of some high-ranking Moderna executives, and excessive stock selling by insiders is a potent threat to the company’s share prices.

Despite all of these uncertainties, Moderna is essentially a play on the future of mRNA technology. Taking on a big position in this stock right now may prove risky. However, interested healthcare investors with above-average risk appetite can find enough reason to start a small holding in Moderna — especially on any pullback in stock price.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• With the Moderna (NASDAQ:MRNA) share price blasting up, have the forward-looking markets got it right?
• Here are the US shares that CommSec customers are buying
• ASX energy shares surge ahead as oil rises to 9-month high
• Why fund manager optimism is at almost 3-year highs
• Here’s why Moderna’s coronavirus vaccine could outsell Pfizer’s

Manali Bhade has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Johnson & Johnson. 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 Moderna Is Less Risky Than You Think appeared first on Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Thorn Group Ltd (ASX: TGA) share price has risen by more than 6% to 18.5 cents in morning trading, after the company reported an improved first half loss of $1 million, compared to a net loss of $24.6 million at the same time last year.

What else moved the Thorn Group share price

The company says it was able to improve its bottom line in the first half despite revenue falling by 44.9% from $104.9 million to $57.8 million.

Thorn says that it achieved more than $40 million of annualised cost savings during the half, and commenced a rapid transformation of the Radio Rentals business to a digital model. 

It also says that it meticulously managed the impact of COVID-19 on the Thorn Business Finance segment by repaying its $10 million corporate debt facility and focusing on maximising cashflow.

However, Thorn’s provisions for the impact of COVID-19 pandemic and the Radio Rentals’ store closure program have increased from $39.4 million to $50.9 million. These provisions comprise $13.6 million for the Radio Rentals business, and $37.3 million for the Business Finance Division.

The company announced that a special fully franked dividend of 7.5 cents per share was paid to shareholders after the end of the half, on 3 November 2020.

Thorn continues its previously announced position of not providing profit guidance.

What management said

Thorn Group chief executive Pete Lirantzis explained the transformations in the business, saying:

Over the last six months the new management team and board have executed major initiatives to set Thorn Group up for success, while navigating through the COVID pandemic.

Thorn is now on a path to growth with Radio Rentals transforming from bricks and mortar to digital. Radio Rentals will be expanding its product range to offer greater choice to customers, digitising and automating processes to improve customer experience and reduce costs, and enhancing customers’ end-to-end experience.

Meanwhile in Thorn Business Finance, we have a deeper understanding of the needs of our customers and are developing new value propositions, leveraging disruptive technologies, to target specific SME segments.

What does Thorn Group do

Thorn is a financial services company providing financial solutions to consumers and businesses. Thorn’s consumer leasing business, Radio Rentals, is a leader in the household goods leasing market, operating since 1937.

Thorn Business Finance is a provider of leasing and other financial services to small and medium enterprises. The company has been listed on the ASX since 2006

In July, the company announced the full closure of its Radio Rentals stores. The company had initially closed its stores temporarily due to the coronavirus pandemic, later deciding to close them permanently.

The Radio Rentals business will instead utilise a purely online model that will onboard customers digitally. 

About the Thorn Group share price

The Thorn Group share price has lost almost 20% of its value in 2020 due to difficult market conditions. The company had earlier reported an $81 million loss for its full year FY20. 

The Thorn Group share price listed in 2006 at a price of 72 cents. At its current price of 18.5 cents, it has a market value of $59 million.

More reading

• Why has the PointsBet (ASX:PBH) share price gone nowhere since August?
• Why Moderna Is Less Risky Than You Think
• Why the ikeGPS (ASX:IKE) share price is lifting today
• Why the Advance NanoTek (ASX:ANO) share price is storming 4% higher
• Bega Cheese (ASX:BGA) share price jumps 10% on Lion Dairy & Drinks acquisition

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

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The Thorn Group Ltd (ASX: TGA) share price has risen by more than 6% to 18.5 cents in morning trading, after the company reported an improved first half loss of $1 million, compared to a net loss of $24.6 million at the same time last year.

What else moved the Thorn Group share price

The company says it was able to improve its bottom line in the first half despite revenue falling by 44.9% from $104.9 million to $57.8 million.

Thorn says that it achieved more than $40 million of annualised cost savings during the half, and commenced a rapid transformation of the Radio Rentals business to a digital model. 

It also says that it meticulously managed the impact of COVID-19 on the Thorn Business Finance segment by repaying its $10 million corporate debt facility and focusing on maximising cashflow.

However, Thorn’s provisions for the impact of COVID-19 pandemic and the Radio Rentals’ store closure program have increased from $39.4 million to $50.9 million. These provisions comprise $13.6 million for the Radio Rentals business, and $37.3 million for the Business Finance Division.

The company announced that a special fully franked dividend of 7.5 cents per share was paid to shareholders after the end of the half, on 3 November 2020.

Thorn continues its previously announced position of not providing profit guidance.

What management said

Thorn Group chief executive Pete Lirantzis explained the transformations in the business, saying:

Over the last six months the new management team and board have executed major initiatives to set Thorn Group up for success, while navigating through the COVID pandemic.

Thorn is now on a path to growth with Radio Rentals transforming from bricks and mortar to digital. Radio Rentals will be expanding its product range to offer greater choice to customers, digitising and automating processes to improve customer experience and reduce costs, and enhancing customers’ end-to-end experience.

Meanwhile in Thorn Business Finance, we have a deeper understanding of the needs of our customers and are developing new value propositions, leveraging disruptive technologies, to target specific SME segments.

What does Thorn Group do

Thorn is a financial services company providing financial solutions to consumers and businesses. Thorn’s consumer leasing business, Radio Rentals, is a leader in the household goods leasing market, operating since 1937.

Thorn Business Finance is a provider of leasing and other financial services to small and medium enterprises. The company has been listed on the ASX since 2006

In July, the company announced the full closure of its Radio Rentals stores. The company had initially closed its stores temporarily due to the coronavirus pandemic, later deciding to close them permanently.

The Radio Rentals business will instead utilise a purely online model that will onboard customers digitally. 

About the Thorn Group share price

The Thorn Group share price has lost almost 20% of its value in 2020 due to difficult market conditions. The company had earlier reported an $81 million loss for its full year FY20. 

The Thorn Group share price listed in 2006 at a price of 72 cents. At its current price of 18.5 cents, it has a market value of $59 million.

More reading

• Why the ikeGPS (ASX:IKE) share price is lifting today
• Why the Advance NanoTek (ASX:ANO) share price is storming 4% higher
• Bega Cheese (ASX:BGA) share price jumps 10% on Lion Dairy & Drinks acquisition
• Evolve (ASX:EVO) share price lifts after turning loss to profit
• What happened to the NextDC (ASX:NXT) share price in November?

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

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The Ikegps Group Ltd (ASX: IKE) share price is up slightly today following the release of mixed half-year results for 2021. At the time of writing, the ikeGPS share price is trading at $1.13, up 0.89%.

Ike designs, markets and sells integrated GPS data capture devices, related software and consulting solutions. The group’s sales activities is divided into two segments: utility & communications, and new business. Key products include ikeGPS and Spike.

What’s driving the ikeGPS share price lower

For the period ending September 30, Ike reported revenue of $4.4 million, down 15% over the prior corresponding period (pcp). The company said despite the drop in revenue, this was a solid result during a Q1 period disrupted by COVID-19.

Ike noted that no customers or material pipeline contracts were lost, but rather network projects had been deferred.

Gross margin came to $2.9 million, around 67%, which was lower than the 72% attained over the first half of FY20. Fixed costs from Ike’s analysis segment were maintained, with the left-over capital used to improve operating efficiency going forward.

Operating expenses increased to $6.3 million compared to the $4.9 million spend on the comparable period. The additional splurge related to the company’s investment strategy focusing on growing the capability for its sales, solutions engineering, delivery and marketing teams. In-turn, this is expected to support its sales pipeline, customer onboarding and the overall customer experience for large infrastructure clients.

The group made an operating loss of $2.5 million for the first-half of the 2021 financial year. This compares to a $1.1 million loss in the pcp.

Ike recorded $21.9 million in cash and receivable at the end of September, with no debt.

Outlook for FY21

With focus now on the second-half of the year, Ike remains committed to delivering contracts on time. Furthermore, the company will also seek to push revenue opportunities through upselling its products to existing customers.

Ike revealed that significant tailwinds in the industry have the potential to flow through the company. It has predicted that more than $350 billion will be invested into fibre and 5G infrastructure during the next five years. This translates to more than 3,000 electric utilities needed for network build and maintenance.

About the IkeGPS share price

The IkeGPS share price has increased by almost 40% since the start of August. While the company has been positioning itself for future growth, its field data collection product and laser measurement tools are proving successful. Ike reached a 52-week high of $1.24 on Tuesday.

More reading

• Why the Advance NanoTek (ASX:ANO) share price is storming 4% higher
• Bega Cheese (ASX:BGA) share price jumps 10% on Lion Dairy & Drinks acquisition
• Evolve (ASX:EVO) share price lifts after turning loss to profit
• What happened to the NextDC (ASX:NXT) share price in November?
• Why the Viva Leisure (ASX:VVA) share price is in a trading halt

Motley Fool contributor Aaron Teboneras 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 Advance NanoTek Ltd (ASX: ANO) share price is pushing higher on Friday after the release of a sales update.

At the time of writing, the advanced materials company’s shares are up 4% to $4.80.

What did Advance NanoTek announce?

This morning the company revealed that it has experienced an improvement in sales in the US over the last few months.

This follows a difficult period where demand for sunscreen ingredients dropped off a cliff because of the pandemic.

According to the release, the company has been informed by its US distributor that over 50% of its original 180T stock holdings in XP powder has been sold in the past four months.

In addition to this, the distributor intends to start ordering new stocks of dispersions in December.

Things aren’t quite as positive in Europe, with new orders down materially compared to a year earlier. For the five months to 30 November, European new orders are down 55% on the prior corresponding period.

Management advised that this is a consequence of restrictions relating to the second and third waves in key markets on the continent.

What about the future?

The company is hoping to get a boost in the second half from manufacturing sunscreens on behalf of companies that lack the necessary equipment to manufacture sunscreens using its ZinClear XP powders and dispersions.

This follows its recent investment in its own manufacturing facility. However, this remains subject to TGA approval, which is expected in February or March.

Outlook.

Management continues to expect its profits to be down significantly in the first half, with only a small profit result being forecast.

However, it remains hopeful for a stronger second half as demand picks up.

It commented: “We are optimistic of a much improved profit result for the second half FY21. ANO already has stock in US and Europe to meet the anticipated increase in demand for products, with further shipments to continue throughout December.”

More reading

• Why the ikeGPS (ASX:IKE) share price is lifting today
• Bega Cheese (ASX:BGA) share price jumps 10% on Lion Dairy & Drinks acquisition
• Evolve (ASX:EVO) share price lifts after turning loss to profit
• What happened to the NextDC (ASX:NXT) share price in November?
• Why the Viva Leisure (ASX:VVA) share price is in a trading halt

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 Advance NanoTek 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 Bega Cheese Ltd (ASX: BGA) share price has returned from its trading halt and is surging higher on Friday.

At the time of writing, the food company’s shares are up 10% to $5.57.

Why is the Bega Cheese share price surging higher?

Investors have been buying the company’s shares this morning after it completed the underwritten institutional placement and the institutional component of its 1 to 4.5 pro-rata accelerated non-renounceable entitlement offer.

This will allow the company to push ahead with its plan to purchase Lion Dairy & Drinks for $534 million.

Bega Cheese has raised approximately $284 million at a 9.1% discount of $4.60 per new share. This comprises $181 million via its placement and $103 million via its institutional entitlement offer.

It will now push on with the retail component of the entitlement offer, which aims to raise a further $117 million. This will bring the total raised to $401 million.

The acquisition.

Bega Cheese has agreed to acquire Lion Dairy & Drinks for $534 million. This will expand its offering with a whole host of popular brands.

These include milk-based beverages such as Dare and Farmers Union, Yoplait yoghurts, Pura milk, and Juice Brothers juices.

In addition to this, Lion Dairy & Drinks has Australia’s largest national cold chain distribution network supplying food service and convenience stores. It also has a national manufacturing footprint comprising 13 sites.

Management expects the combined business to generate annual revenues in excess of $3 billion. This compares to the revenue of ~$1.5 billion Bega Cheese generated in FY 2020.

The acquisition is expected to generate significant synergies. Management’s base case is for synergies of $41 million per annum. This is primarily from milk network optimisation, indirect procurement, and a corporate reorganisation.

In light of this, the deal is expected to be double digit earnings per share accretion in FY 2022.

Upon announcing the deal, Bega Cheese’s Chief Executive Officer, Paul van Heerwaarden, commented: “We are very pleased with the performance of acquisitions made in recent years which are achieving or exceeding our profit targets. The recent company restructure and ERP implementation will allow us to integrate this Acquisition and take advantage of the various synergies and growth opportunities across domestic and international markets.”

More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 falls on Thursday
• ASX 200 flat: Bega Cheese announces major acquisition, WiseTech reaffirms guidance
• Bega Cheese (ASX:BGA) announces $534 million Lion Dairy & Drinks acquisition

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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The Evolve Education Group Ltd (ASX: EVO) share price lifted to a 52-week high of 18.5 cents early today, after the company released its interim half year report. Evolve reported net profit after tax (NPAT) of NZ$6.23 million for the six months to 30 September, a significant turnaround from the loss of NZ$1.44 million for the same period last year. The Evolve share price has since retreated slightly to it current price of 18 cents.

What else did Evolve report

The company realised an increase in net profit despite booking 6% less revenue at NZ$65 million for the same period. It attributed the revenue drop to the impact of closure and disruption to its centres arising from COVID-19. 

Evolve reported underlying earnings before interest, tax, depreciation, and ammortisation (EBITDA) for the six months of NZ$12.4 million.  This compares well with the NZ$3.9 million it reported for the six months prior.

The company says it was able to record strong earnings despite lower revenue due to operational improvements and efficiencies achieved both at its centres, and at the support office. In addition, the 10 Australian centres acquired in calendar year 2019 have been performing well.

Evolve says it is on track to resume its acquisition activities in 2021.

What is Evolve Education

Evolve Education is a New Zealand company that provides care and early childhood education to children until they attend primary school. Evolve offers both centre-based and home-based services, and is operating under brands that include Lollipops, Active Explorers, Little Lights, Little Wonders and Pascals.

The company operates 127 childcare centres across New Zealand and Australia. Its centres had to close during various periods throughout the pandemic, which affected its revenue.

However the company was able to receive wage subsidies support from the New Zealand government for an amount of NZ$11.8 million. In Australia, the company was also eligible to receive the government’s Early Childhood Education and Care Relief package, as well as JobKeeper payments.

About the Evolve share price in 2020

The Evolve share price has doubled since news of successful vaccine came out in early November. For the year, the Evolve share price is higher by 22%. Today’s share price of 18.5 cents is a 52-week high. The company commands a market cap of $200 million. 

More reading

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

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The Nextdc Ltd (ASX: NXT) share price seemed to be the gift that keeps on giving. Its share price only slumped 23% from peak to trough during the initial March sell-off to a low of $6.59 before running to a record all-time high of $14 in early November. 

However, its success came to a halt in the latter half of November. The NextDC share price is down 15% this month. This compares to the 10% gain for the S&P/ASX 200 Index (ASX: XJO) and 0.62% increase for the S&P/ASX All Technology Index (ASX: XTX) sector.

Growth to value rotation 

ASX data centre companies trade at eye watering valuations despite low double digit revenue growth. NextDC boasts a market capitalisation of $5 billion but in FY20 delivered $205.2 million, $104.6 million earnings before interest, tax, depreciation and amortisation (EBITDA) and a net loss after tax of $45.2 million. Trading at 24 times FY20 revenue places the company in a similar valuation bracket as Zip Co Ltd (ASX: Z1P). 

The recent rotation from growth and tech stocks to value and cyclical stocks such as banks, travel and resources is likely to blame for weakness in the NextDC share price. But even then, the company is underperforming the broader information technology sector. 

Buy now, pay later style valuations

Data centres have been able to maintain premium valuations due to the increasing relevancy of cloud and anticipated long term growth for the sector. In the NextDC annual general meeting held on 13 November, the company noted that global investment in public cloud services and infrastructure will more than double from 2019 to 2023. The COVID-19 pandemic has pushed the digital transformation initiatives for many organisations to adapt to the new ways of doing business. 

Despite the excitement and sustained growth expected for the cloud sector, NextDC’s growth can appear lacklustre at face value. In FY20 its revenue from data centres increased 18% to $200.8 million and underlying EBITDA increased 23% to $19.5 million. This compares to many ASX 200 tech shares such as Altium Limited (ASX: ALU) and WiseTech Global Ltd (ASX: WTC) that deliver revenue growth in the range of 20-40%. 

Megaport Ltd (ASX: MP1) slumped on quarterly results 

Despite earnings growth that may appear to be lacklustre at face value, the NextDC share price has been able to hold up well during earnings updates. 

Megaport on the other hand experienced a sharp sell off after its quarterly update. On 21 October, the company highlighted that revenue for the quarter had only increased 2% quarter-on-quarter to $17.3 million. Its shares fell as much as 15% on the day. 

More reading

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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium and MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool Australia has recommended MEGAPORT 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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