The Tabcorp Holdings Limited (ASX: TAH) share price is bucking the downtrend after UBS urged investors to buy the underperformer.

Shares in the wagering and lottery business held flat at $3.62 in after lunch trade when the  S&P/ASX 200 Index (Index:^AXJO) tumbled 1.2%.

The Tabcorp share price also outperformed yesterday when it shot up around 5% after announcing the replacement of its chairman Paula Dwyer and upcoming departure of chief executive David Attenborough.

Tabcorp and friends lagging the ASX 200

However, this doesn’t change the fact that the stock is a woeful performer. Tabcorp shed more than 20% of its market value over the past year when the ASX 200 is down by 9%.

It’s been a tough time for most gambling related large cap stocks. The Crown Resorts Ltd (ASX: CWN) share price and Star Entertainment Group Ltd (ASX: SGR) share price lost around 30% each, while Jumbo Interactive Ltd (ASX: JIN) slumped 40%.

Punter survey provides ray of hope

But the tide could be turning for Tabcorp, so says UBS which reiterated its “buy” recommendation on the stock after it undertook a survey with 1,000 Australia punters.

“COVID-19 has had a positive impact for digital operators with almost 40% of respondents increasing their wagering spend,” reported the broker.

“While Sportsbet remains the clear market leader in brand awareness and customer experience, the use of Sportsbet as the primary betting app fell slightly to 28% (still #1 followed by Tabcorp at 19%, up 1% y/y).”

Better odds but poor payoff

Tabcorp’s aggressive promotions are helping it win market share with survey respondents citing this as the main reason for placing bets with Tabcorp for the first time.

But in some sense, this is a pyrrhic victory. Intense online competition is squeezing margins while the coronavirus restrictions is having a big negative impact on its gaming venues.

The silver lining is that retail cash betting only contributed 5%, or $40 million, to the group’s earnings before interest and tax (EBIT) in FY19. Surely the very modest income generating business can’t be seen as being a core asset to Tabcorp.

Divestment could trigger re-rating

UBS thinks now is the time for the group to consider divesting its retail division, particularly in light of management changes.

“This scenario would result in a variable contribution margin in line with the corporates; an initial decline in EBIT of over $100m but an outlook which is highly likely to see steady growth of 5-10% pa,” said UBS.

Earnings upgrade

The broker lifted its earnings per share forecast by 14% in FY21 and an additional 4% for each of the following two years.

This is to reflect a faster than expected recovery of retail closures and a stronger outlook for wagering.

“While the upcoming result will be negatively impacted by the closures of pubs and clubs and a difficult comp in lotteries, the next two to three years should see higher profit than what was experienced in FY19,” added UBS.

“Ultimately, we don’t believe that the pandemic will have a material impact on medium-term cash flow and underperformance represents an attractive entry point into the shares in our view.”

The broker’s 12-month price target on Tabcorp increased to $5 from $4.60 a share.

More reading

• Tabcorp share price up 5% as CEO and chair succession plan announced
• ASX 200 rises 0.3%, investors bet on Tabcorp
• Why Coca-Cola Amatil, Newcrest, QBE, & Tabcorp shares are pushing higher
• Why this leading fundie thinks ASX bank shares are undervalued
• Nanosonics and these ASX shares could be fantastic long term options

Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Crown Resorts 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 UBS thinks now is the time to be buying this underperforming ASX 200 stock appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2ZV68Qj

Investing in shares on the ASX could be great way to build your wealth for the long-term. You don’t need $10,000 to start investing. You can start with $1,000 (or even just $500).

There are lots of potential ideas, whether you go for individual ASX shares or a portfolio investment like an exchange-traded fund (ETF).

Here are three potential ideas to invest $1,000 into:

Share 1: BetaShares Global Quality Leaders ETF (ASX: QLTY)

ETFs are an easy way to invest into the share market. But you don’t want diversification just the sake of it, that may lower your potential returns for no real benefit. There are some ETFs that just invest in high quality businesses like the BetaShares Global Quality Leaders ETF.

It doesn’t invest in ASX shares, it invests in global leaders which rank highly on four quality metrics. Those metrics are: return on equity, debt to capital, cash flow generation ability and earnings stability. It’s these qualities that can combine to make good shareholder returns.

The quality theory has certainly been proven with the returns of the ETF. Since inception in November 2018, the ETF has returned an average of 19.75% per annum.

There are around 150 businesses within this ETF. Some of the biggest holdings are: Nvidia, Accenture, Intuitive Surgical, L’Oreal, Adobe, Apple, Cisco and Alphabet.

I think it would be possible for this ASX share to be your only investment, if you wanted it to be. It’s quality and diversified.

Share 2: Pushpay Holdings Ltd (ASX: PPH)

Pushpay is one of the most exciting ASX shares in my opinion. It’s a digital giving business that enables people to electronically donate. Its biggest customer base is the large and medium church sector. This provides Pushpay a somewhat consistent level of donations on an annual basis – indeed, the average donation is actually growing.

The ASX share has done a good job of offering all of the tools that its clients may need.

COVID-19 conditions are causing more people to donate electronically due to shutdowns and social distancing. The option of livestreaming church services is very useful.

The company steadily increased its guidance during its FY20. It’s now expecting FY21 earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to at least double. That’s very strong guidance, in my opinion.

The company is aiming for US$1 billion of annual revenue from the US church sector. But American Christians are not the only people that Pushpay can aim to service in the future. There are plenty of other countries and indeed other philanthropic causes that Pushpay can become a market leader of. 

It’s trading at 33x FY21’s estimated earnings.

Share 3: Magellan Global Trust (ASX: MGG)

This is a listed investment trust (LIT) which only invests in high quality global shares.

I like investing in closed-end investment vehicles because you can sometimes buy them for a cheaper price than their assets. In other words, you can buy $1 of assets for $0.90, or whatever the discount is. Magellan Global Trust is trading at a 5% discount to its net assets value (NAV). That’s a solid discount, though occasionally it does trade at larger discounts.

Some of its current top positions include: Alibaba, Alphabet, Atmos Energy, Eversource Energy, Microsoft, Tencent, Facebook, Visa, Mastercard and Reckitt Benckiser.

I think that the Magellan Global Trust strategy of investing in both defensive and growth shares is a good mix. It should mean that it can outperform in most share market conditions.

Since inception in October 2017 it has returned 11.4% per annum after fees, outperforming the MSCI World Net Total Return Index by 1.2% per annum.

As a bonus, the ASX share aims for a 4% distribution yield. This is a solid starting yield that should grow as the NAV grows over time.

Foolish takeaway

I like all three of these ASX shares. It’s hard to pick a winner, I think all three can deliver strong returns over the long-term. If I had $3,000 I’d want to invest $1,000 in all three. At the current prices if I had to pick one I’d go for Pushpay for the potential growth of the next few years.

More reading

• 3 ASX growth shares that could be long term market beaters
• Got $1,000? You should buy 1 of these 6 ASX shares
• The smartest ASX shares to buy if you have $2,000
• My top 5 ASX growth shares to buy in FY 2021
• 3 five-star ASX shares to buy

Tristan Harrison owns shares of MAGLOBTRST UNITS. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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 Where should you invest $1k into ASX shares? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2ORHk5s

The CSL Limited (ASX: CSL) share price could be in the spotlight as the Australian Government backs the biotech giant to produce COVID-19 vaccines. With new cases of the virus still growing in Australia, the need to access a vaccine has never been higher.

Here’s how CSL could save Australia from the COVID-19 pandemic as well as a look at whether you should invest.

Producing vaccines for the whole country

According to an article in yesterday’s Sydney Morning Herald, the federal government has backed biotech giant CSL to make enough vaccines for the entire Australian population. If a locally produced vaccine is not first to market, the government will have to broker licencing deals with international developers. CSL would then manufacture the vaccine at its Broadmeadows facility.  

Last month, CSL noted that the company had established a partnership with the Coalition for Epidemic Preparedness Innovations (CEPI) and the University of Queensland to fast-track the development of a COVID-19 vaccine.

In addition to manufacturing a potential vaccine, CSL has also been working on additional potential therapies by collecting plasma from recovered patients. In conjunction with other global biotech companies, CSL has launched a campaign in the United States encouraging recovered COVID-19 patients to donate plasma. In partnership with the Australian Red Cross Lifeblood Service, CSL is also collecting plasma in Australia from recovered COVID patients.

How has CSL performed?

In a trading update released in early April, CSL acknowledged that plasma collection volumes are expected to be impacted by the COVID-19 pandemic. In order to mitigate these challenges, the company’s plasma collection centres have been designated as ‘essential and critical’ services.

As a result of reduced volumes, there are fears that supply issues could result in increased production costs. Despite these fears, the company recently acquired global licence rights from uniQure to commercialise a gene therapy program for the treatment of haemophilia B.

Should you invest?

In my opinion, CSL is one of the highest quality companies listed on the ASX. The company has assured shareholders that it’s in a strong capital position with more than $1 billion in available liquidity. CSL has also reaffirmed its profit guidance for FY20.

Despite the optimism of possibly manufacturing a vaccine, the CSL share price has remained relatively flat for 2020. This muted price action could reflect portfolio rotation and concerns about a decline in plasma collection volumes.

Personally, I think that the CSL share price won’t be suppressed for much longer, particularly if there continues to be positive news about a potential vaccine. I think a prudent strategy would be to wait until August when CSL reports its full-year results to get a better picture of where the company stands.

More reading

• Value stocks to rise on strong A$ and broker picks the cheapest ASX stocks to buy today
• Why weakness in the CSL share price could be a buying opportunity
• 5 things to watch on the ASX 200 on Friday
• What to do if your ASX shares hit a record high
• How you can take advantage of the surging Australian dollar

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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 How CSL could save Australia from COVID-19 appeared first on Motley Fool Australia.

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

Earlier today Insurance Australia Group Ltd (ASX: IAG) became the latest company to cancel its final dividend because of the tough trading conditions it is facing.

I suspect this could become a common occurrence during earnings season in August.

In light of this, if you’re looking for dividends in the immediate term, you may want to consider buying the dividend shares listed below.

Due to the strength of their business models, I believe these companies are well-positioned to continue paying their dividends as normal during the pandemic.

They are as follows:

Coles Group Ltd (ASX: COL)

This supermarket giant is arguably the safest dividend share to buy. It is one of only a handful of blue chip shares which has accelerated its growth during the pandemic. While not all of its sales growth is likely to flow through to the bottom line, I still expect Coles to report strong earnings and dividend growth next month. Looking ahead, I feel confident that its growth can continue thanks to its defensive earnings, refreshed strategy, and strong market position. Based on the current Coles share price, I estimate that its shares offer a fully franked 3.5% FY 2021 dividend.

Telstra Corporation Ltd (ASX: TLS)

Another safe option for investors to consider buying is Telstra. While it hasn’t been a successful investment for income investors over the last five years, I’m optimistic that its dividend cuts have now bottomed. This is because even when accounting for the end of the NBN compensation, Telstra’s forecast free cash flow looks sufficient to maintain its 16 cents per share dividend. Furthermore, once the NBN headwind is gone, I believe the new and improved Telstra operating model will be positioned for growth once again. As a result, I think now would be an opportune time to make a patient investment in its shares. Based on the current Telstra share price, it offers investors a fully franked 4.8% dividend yield.

More reading

• 3 ASX shares to benefit from huge growth in streaming subscriptions during lockdown
• ASX 200 sinks 1%: IAG cancels final dividend, tech shares tumble, IGO jumps
• Why Afterpay, Evolution, IAG, & Vicinity Centres shares are dropping lower
• Insurance Australia Group share price sinks 4% lower after cancelling final dividend
• How are 2019’s tech IPOs performing?

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. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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 Fed up of dividend cancellations? Buy these safe ASX dividend shares appeared first on Motley Fool Australia.

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

The shift to eCommerce was given a shove by the onset of coronavirus. Consumers are increasingly moving their shopping activities online, including for necessities such as groceries. According to Ibis World, online shopping grew by 15.5% per year in the five years to 2020. It was forecast to continue growing strongly, but the pandemic has fueled that growth, pushing even more customers online. We take a look at 2 ASX shares leveraged to this trend. 

Kogan.com Ltd (ASX: KGN)

The Kogan share price has more than quadrupled from its March low with the online retailer reporting record sales. Kogan benefitted from a spike in sales during the first lockdown while many bricks and mortar stores were forced to close. Gross sales increased 103% year on year in April and May. This drove a 130% increase in gross profit across the period. 

Kogan added 126,00 active customers in May, growing active customer numbers to 2,074,000 at the end of the month. Sales then almost doubled in June, rising 95% to more than $94 million. Kogan’s online success has pushed the company’s share price well up with its current price-to-earnings (P/E) ratio sitting at 89.95. 

Nonetheless, Kogan stands to benefit from the long-term shift to eCommerce which has been accelerated by current events. As founder Ruslan Kogan told the Australian Financial Review, “our business is booming as more customers than ever choose Kogan.com”.

Temple & Webster Group Ltd (ASX: TPW)

Online home furnishings retailer Temple & Webster has seen both sales and its share price rise as consumers eschew physical shopping. The Temple & Webster share price has climbed nearly 400% from its March lows. The company traded strongly in the second half with revenue growing by 90% compared to the prior corresponding period. 

In the financial year to 31 May, Temple & Webster reported year to date revenue of $151.7 million which was up 68% on the prior corresponding period. Active customer numbers increased by the same percentage to 440,257. The company is well placed to take advantage of the structural shift to online in the furniture and homewares market. 

CEO and co-founder Mark Coulter said, “we remain bullish about the longer-term shift from offline to online driven by changing consumer preferences and demographics. Customers are experiencing the benefits of our channel, including range, convenience, and value”. 

More reading

• Extended jobkeeper: Which ASX shares to buy?
• Kogan share price up 360% since March. Is it too late to buy?
• 3 ASX growth shares that could be long term market beaters
• What to do if your ASX shares hit a record high
• 4 trends to invest in before August earnings season

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com 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 2 ASX shares leveraged to the eCommerce shift appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3323IS7

Earlier today I picked out three small cap shares which I think have very bright futures. You can read about them here.

Now I thought I would focus on a couple of shares which are a little larger in size. With market capitalisations approaching $1 billion, I would class these as mid cap ASX shares.

Though, this might not be for long, as I feel these companies have the potential to grow into much larger entities in the future. This could make them great long term investment options.

Here’s why I like them:

Electro Optic Systems (ASX: EOS)

The first mid cap share to look at is Electro Optic Systems. It is an aerospace company and the largest defence exporter in the Southern Hemisphere. It has a highly experienced team, high quality portfolio of products, and long-established partnerships with major global aerospace giants.

I believe a testament to the quality of its offering is a recent announcement by Electro Optic Systems. That announcement revealed that it has entered into contract negotiations with the Australian Government for 251 Remote Weapon Stations and related materiel. Together with its massive backlog of work, I believe this puts the company in a strong position to deliver solid earnings growth over the next few years.

Objective Corporation Limited (ASX: OCL)

Another mid cap ASX share to consider buying is Objective Corporation. It has a suite of software products that help government agencies and financial services organisation respond to information requests, provide secure file sharing, streamline and improve processes, and strengthen corporate governance practices. Given the nature of its offering, demand has remained strong during the pandemic and allowed it to deliver a very strong full year result.

Last week Objective revealed a 22% increase in unaudited net profit after tax to $11 million for FY 2020. This was driven by a 21% lift in annual recurring revenue to $56.6 million, which now represents 75% of total revenue. Next year the company’s growth looks set to continue and be given an additional boost from the recent acquisition of government regtech solution specialist Itree for $18.5 million. Management certainly believes this will be the case and expects “a material lift in revenue and profitability.”

More reading

• 2 ASX shares I’d buy if the market crashes again
• Where to invest your first $500 into ASX shares
• Why the Electro Optic Systems share price fell 16% in June
• 3 ASX shares that could benefit from Australia and Japan deepening ties
• 3 ASX shares for the $270 billion defence plan

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

The post 2 fast-growing mid cap ASX shares that could be destined for big things. appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3fW6OKT