Is the REA Group Limited (ASX: REA) share price a buy?

The real estate property portal business saw its share price fall 43% from 21 February 2020 to its low of $65 on 23 March 2020. Since then it has risen 64% to today’s $106.60.

Where to now for REA Group? It’s being priced as though conditions have almost returned to normal.

The worst of the COVID-19 period across Australia saw a severe drop in the number of property listings, as you’d expect.

FY20 third quarter

When REA Group announced its profit for the quarter ending 31 March 2020, the company also revealed that residential listings were down 33% across the country with Sydney showing an 18% fall and Melbourne with a 27% fall.

Obviously REA Group is quite dependent on volume for generating its earnings. And the earnings should be important for the direction of the REA Group share price.

In that third quarter of FY20, REA Group said that national listings were down 2% over the three months due to COVID-19. This led to revenue after broker commissions dropping 4% to $640.2 million, operating earnings before interest, tax, depreciation and amortisation (EBITDA) falling 3% to $390.8 million and free cash flow declining 14% to $195.2 million.

REA Group did what it could to offset the problems such as ‘digital inspections’ with digital video tours and 3D tours.

However, some measures that the company announced will cause lower earnings in the short-term. It gave customers subscription discounts and also increased the advertising duration which will extend the revenue recognition period. However, cost reductions will help with offsetting the revenue reduction. FY20 fourth quarter operating expenses are expected to be 20% lower than the fourth quarter in FY19.

Balance sheet

Many businesses have had to do a capital raising to ensure that their balance sheets remain strong during this tough period. But these capital raises have been done at a low share price, which dilutes existing shareholders. Raisings from the likes of Webjet Limited (ASX: WEB) and Qantas Airways Limited (ASX: QAN) were necessary but existing shareholders will now only get a smaller share of the earnings when they recover.

Thankfully, REA Group hasn’t had to raise capital because of its strong balance sheet. At 30 April 2020 it had low levels of debt and a cash balance of $135 million. It also entered into an additional $149 million debt facility as well as a $20 million overdraft facility with National Australia Bank Ltd (ASX: NAB).

In short, REA Group is in a great financial position and shouldn’t need to raise capital.

So is the REA Group share price a buy?

A balance sheet is important for a business, but it isn’t the main thing in my opinion. Apple has a fantastic balance sheet, but there’s more to Apple than its huge cash pile.

The renewed Melbourne lockdown will make it harder for REA Group to bounce back quickly if listings remain lower in Victoria for the next few months. The Sydney property market could also come under pressure if COVID-19 gets out of control there.

REA Group is now trading at 44x FY21’s estimated earnings. I don’t think that represents good value in the current share market because it relies on there being a return to normal listing activity. If there are numerous forced property sellers over the next six months due to jobkeeper and payment holidays coming to a close thenperhaps  REA Group may see that required activity bounce.

But the combination of lower listings volume and more attractive listing options for vendors makes me believe that, at today’s share price, I don’t think REA Group is going to be a market-beating buy in the medium-term. If I had to go for something property related it would be Brickworks Limited (ASX: BKW).

More reading

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks and Webjet Ltd. The Motley Fool Australia has recommended REA 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.

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The Azure Minerals Limited (ASX: AZS) share price has rocketed higher today after the mineral exploration company announced acquisition plans. Azure announced that it is set to acquire a number of high quality gold and nickel projects in Western Australia. Since the announcement, the Azure Minerals share price has soared 24% to 16 cents.

What does Azure Minerals do?

Azure Minerals is a mineral exploration company focused on the development of nine mineral projects in Mexico and now in Australia. The company maintains a primary focus on developing the high grade, zinc, lead, silver Oposura project in Mexico, with full scale production expected by early to mid 2021.

The company often looks to leverage partnerships with major resource companies to develop advanced stage projects with potential for large scale, long life mining operations. 

What has caused the Azure Mineral share price to move today?

Azure has entered into tenement sale and joint venture agreements with entities controlled by the Creasy Group on several Western Australian gold and nickel projects. These projects include;

• The Turner River gold project (70% Azure/30% Creasy Group). It is located adjacent to De Grey Mining Limited (ASX: DEG)‘s Mallina project. The project hosts 12 kilometres of very fertile strike zone for gold discovery.
• The Andover nickel and copper project (60% Azure/40% Creasy Group). The mine hosts nickel-copper mineralisation discovered by the Creasy Group in 2018, however there has been no drilling since the initial discovery in 2018.
• The Meentheena and Coongan gold projects (70% Azure/30% Creasy Group). The Meentheena site has been drilled for epithermal gold mineralisation and has been explored by Creasy Group since 1994.

Commenting on the background to the acquisition, Azure’s managing director Mr. Tony Rovira said: “Due to the severity of the COVID-19 pandemic in Mexico and the uncertainty of future field operations, Azure sought gold and nickel projects in Western Australia to enable the Company to continue exploration activities.”

Azure Minerals capital raise

Another factor pushing the Azure Minerals share price up today is the news it has received binding commitments from institutions and investors to raise $4 million. The raise will occur at 10 cents per share via a share placement. The money will be put to use supporting the initial exploration activities on the new Western Australian projects.

About the Azure Minerals share price

With the Azure Minerals share price up to 16 cents today, the company continues its resurgence this year. The share price is up by 60% from this time last year, which is impressive considering the almost 10% drop in the All Ordinaries (INDEXASX: XAO) across the same period.

More reading

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

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I like to keep an eye on the substantial shareholder notices that are released to the ASX. This is because these notices give you an idea of which shares large investors, asset managers, and investment funds are buying or selling.

Two notices that have caught my eye this week are summarised below. Here’s what these fund managers have been buying:

Adairs Ltd (ASX: ADH)

A notice of initial substantial holder reveals that Commonwealth Bank of Australia (ASX: CBA) has been buying this homewares retailer’s shares. According to the notice, the banking giant and its subsidiaries have been building a position in the company since the middle of March. This was at a time when the Adairs share price had crashed lower at the height of the market volatility. In fact, the bank was able to pick up a large parcel of shares for as low as 63 cents each.

It has continued to buy through the recovery and was buying shares as recently as 15 July. That purchase brought its holding to just over 8.6 million shares, which represents a 5.09% stake in the company. At the time of writing the Adairs share price is trading at $2.37, which isn’t overly far from its 52-week high of $2.77. This certainly appears to have been a successful investment by Commonwealth Bank.

Uniti Group Ltd (ASX: UWL)

Another notice of initial substantial holder shows that Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) has become a major shareholder of this telecommunications company. According to the notice, the investment house has made a series of share purchases between 1 June and 13 July. The most recent purchase at the start of the week was for $4 million worth of shares and took its holding to a total of 24,906,745 shares. This equates to a 5.05% stake in Uniti Wireless.

I estimate that the average price it paid for the shares in this notice was approximately $1.65. So with the Uniti Wireless share price currently trading at $1.46, Washington H. Soul Pattinson clearly sees a lot of value in them at this level. And given its long track record of successful investments, it could pay to follow this trade.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Investors may feel like they have missed a significant buying opportunity with both the S&P/ASX 200 Index (ASX: XJO) and All Ordinaries (ASX: XAO) bouncing back more than 30% since their March lows. While the market may continue to crawl higher, here are two ASX shares that I feel have remained dirt cheap.

2 ASX shares that are still dirt cheap

1. Money3 Corporation Limited (ASX: MNY) 

Money3 provides automotive finance for the purchase and maintenance of vehicles in Australia and New Zealand. The company estimates that 1 in every 500 vehicles in Australia and 1 in every 800 vehicles in New Zealand have current Money3 loans. Despite the economic uncertainty amidst COVID-19, the company highlighted in late April that its cash collections over Easter were superior to the prior corresponding period (PCP) and had not been materially impacted by the pandemic to date. 

Money3 believes that it is well positioned to be patient and opportunistic in M&A activity or originating new organic growth when demand returns to pre-pandemic levels. In Australia, government stimulus will have a positive impact on its customers’ ability to continue paying their loans, while new loan originations are continuing to customers with income. The company’s New Zealand business believes that demand for automotive finance will return as restrictions are lifted. 

In its YTD March 2020 unaudited financial results, Money3 saw revenues increase 44.4% on the PCP while normalised NPAT increased 49.2%. A 5 cent dividend was paid out following strong earnings, representing a dividend yield of approximately 5.90%. The Money3 share price trades at a relatively low price-to-earnings (P/E) ratio of just 10.4. Given its growth potential and market leading dividend, I believe Money3 is one of the cheapest ASX shares out there. 

2. Bell Financial Group Ltd (ASX: BFG) 

Bell Financial Group is an Australian-based provider of stockbroking, investments and financial advisory services to private, institutional and corporate clients. On 10 July, the company advised that it expects to report a first half 2020 profit before tax of approximately $23.5m, an increase of around 5% on the PCP. The key drivers of growth were its subsidiaries, Bell Potter Capital and Third Party Platform, delivering 120% and 140% respective increases in unaudited profit before tax ($2.4 million and $3.3 million respectively). 

I believe Bell Financial’s services will continue to be highly sought after despite challenging economic conditions. Demand may be driven by factors such as increased trading volumes from all types of investors, companies requiring additional capital/capital raisings and access to financial advisory services for things such as potential M&A activity. Much like Money3, the Bell Financial Group share price trades at a P/E of just 12.08 while paying a dividend yield of approximately 6.5%.

More reading

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Motley Fool contributor Lina Lim 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 tech sector has once again been one of the best places to invest your money over the last 12 months.

Despite the pandemic, during this time the S&P/ASX 200 Info Tech index has generated a return of over 22% for investors.

As a comparison, the S&P/ASX 200 Index (ASX: XJO) has fallen 10% over the same period.

The good news is that I believe this outperformance can continue for many years to come, which could make investing in the tech sector a great idea.

But which ASX tech shares should you buy? Two to consider buying are as follows:

Altium Limited (ASX: ALU)

The first ASX tech share to consider buying is Altium. I think it is a great long-term investment option due to its position as the leading electronic design software provider in an Internet of Things (IoT) industry which is expected to grow materially in the future.

According to research by McKinsey, the worldwide number of IoT-connected devices is projected to increase to 43 billion by 2023. This will be an almost threefold increase from 2018. I expect this to lead to increasing demand for its software, which should drive strong earnings growth over the long term.

Appen Ltd (ASX: APX)

Another ASX tech share which has exposure to a rapidly growing market is Appen. It is a global leader in the development of high-quality, human-annotated training data for machine learning and artificial intelligence (AI).

According to a recent presentation, management expects the AI market to grow to be worth upwards of US$191 billion per annum by 2025. With approximately 10% of this spending estimated to relate directly to data labelling, I believe it is well-placed to continue its impressive earnings growth for many years to come. This could make the Appen share price a market beater over the 2020s.

More reading

• Top ASX dividend shares to buy in July 2020
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• Top brokers name 3 ASX 200 shares to buy today

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 Altium. The Motley Fool Australia owns shares of Appen 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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At present the base rate on an Australia and New Zealand Banking GrpLtd (ASX: ANZ) term deposit is just a paltry 0.75% per annum

With a rate as low as that, it is almost impossible for investors to generate a sufficient income to live from.

For example, even if you were to invest $2 million into these term deposits, you’d only receive $15,000 back at the end of the term.

Fortunately, better yields can be found on the Australian share market.

Two ASX dividend shares that I would buy are listed below. Here’s why I like them:

BWP Trust (ASX: BWP)

I think BWP Trust would be a great alternative to a term deposit. It is the largest owner of Bunnings Warehouse sites in Australia with a portfolio of 68 stores leased to the hardware giant. I think Bunnings is a quality tenant to have, especially given how it has thrived during the pandemic. Combined with government stimulus, which is supporting the home improvement market, I believe there is a very low risk of rental defaults or stores closures in the near term. This should mean BWP is in a position to continue growing its income and distribution at a solid rate for the foreseeable future. Based on the current BWP share price, I estimate that it offers a generous 4.7% FY 2021 distribution yield.

Transurban Group (ASX: TCL)

Another ASX dividend share to consider buying instead of a term deposit is Transurban. While it has had a tough few months because of the pandemic, with restrictions now easing, traffic volumes and toll revenues have been recovering. I’m not overly confident the company will pay a final distribution in FY 2020, but I expect its distributions to return to attractive levels next year. I now expect the company to pay shareholders a 44 cents per unit distribution next year. Based on the current Transurban share price, this equates to a 3.2% distribution yield.

More reading

• BKI Investment share price rises despite 35% drop in FY20 profit
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• Why Goldman Sachs’ revenue surge bodes well for the Macquarie Group share price

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

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Most investors will be sitting on their hands with the reporting season this close, but top brokers are urging you to buy these S&P/ASX 200 Index (Index:^AXJO) shares today.

The profit results season kicks off in just two weeks and many are understandably nervous due to the uncertainty caused by the COVID-19 pandemic.

While this isn’t usually the time to be making big bets, there are two ASX stocks that most leading brokers are recommending investors buy.

Conviction buy

The QBE Insurance Group Ltd (ASX: QBE) share price is one that’s expected to outperform with Goldman Sachs putting the insurer on its conviction buy list.

While the broker acknowledged the “great deal of uncertainty” as we head into QBE’s result, it’s confident the stock is cheap after undertaking a mark-to-market assessment of QBE’s investments in the June quarter.

Goldman’s 12-month price target on the stock is $11.26 a share.

Restarting dividends

Citigroup is also bullish on the stock as it reiterated its “buy” rating on QBE yesterday. The broker believes conditions have improved enough for the insurer to issue a token 2 cents a share dividend next month.

“QBE has a number of transitory uncertainties causing the market some concern,” said Citigroup.

“However, we see ongoing improvements in the rate environment, which should ultimately lead to underlying margin improvement, as likely to be a more lasting share price driver.”

Citigroup lifted its price target on QBE to $11 from $10.55 a share.

Regaining its shine

Another ASX 200 stock that’s shaping up to be a popular “buy” rated stock among brokers is the Alumina Limited (ASX: AWC) share price.

Credit Suisse become the latest believer in the stock as it upgraded Alumina to “outperform” from “neutral” today.

Demand for aluminium is improving, imports of alumina into China remains strong and the price increase in aluminium is running ahead of Alumina’s share price.

“No disputing the global macro outlook remains uncertain and we still expect volatility,” said Credit Suisse.

“That said, we see enough indicators to suggest AWC can perform well over the next 12 months.

“In the very least the assets and balance sheet provide a reasonable hedge to the downside if conditions and pricing turn for the worse again.”

Potential upgrade cycle

UBS is another bull. The broker reiterated its “buy” call on the stock after Aloca (Alumina’s joint venture partner) posted a second quarter result that was well ahead of expectations.

What’s more, UBS said that Alumina’s earnings before interest, tax, depreciation and amortisation (EBITDA) margin would jump to US$70 a tonne from US$64 a tonne if the spot commodity price was used.

The broker’s 12-month price target on AWC is $2 a share.

More reading

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• BlueScope’s earnings to halve as it takes $200m write-down
• Why Alumina, BWX, Life360, & Perpetual shares are charging higher
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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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