In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a sizeable gain. At the time of writing the benchmark index is up 1% to 5,978.1 points.

Four shares that are climbing more than most today are listed below. Here’s why they are storming higher:

The Galaxy Resources Limited (ASX: GXY) share price has jumped 5.5% higher to 87 cents. Investors have been buying the lithium miner’s shares after it announced an extension to its offtake agreement with Yahua International. According to the release, Yahua has agreed to purchase a further 30,000 dmt of 6% Li2O spodumene concentrate during the remainder of 2020 and 120,000 dmt per annum each calendar year from 2021 to 2025 on a take or pay basis.

The Platinum Asset Management Ltd (ASX: PTM) share price is up 3.5% to $3.83. This follows the release of the fund manager’s funds under management (FUM) update on Friday evening. During the month of June, Platinum’s FUMs increased by $158 million to $21,917 million prior to its annual distribution. It also revealed that it estimates that it is entitled to performance fees of $9 million for the 12 months ended 30 June.

The Sezzle Inc (ASX: SZL) share price has jumped 16% to $8.05. This morning the buy now pay later company announced the successful completion of the institutional component of its capital raising. Sezzle raised $79.1 million via the issue of 14.9 million shares at $5.30 per share. This compares to the underwritten floor price of $5.00 per share. These funds will be used to accelerate its growth strategy and strengthen its balance sheet.

The Treasury Wine Estates Ltd (ASX: TWE) share price is up 3.5% to $10.88. This gain appears to have been triggered by a broker note out of Morgan Stanley this morning. Its analysts have upgraded the wine company’s shares to an overweight rating with an improved price target of $13.50. It suspects that its shares could re-rate higher in the future once its US based operations begin to stabilise.

More reading

• ASX shares tapping into the US market
• Sezzle share price jumps 28% after completing $79.1 million institutional placement
• Why Sezzle and these ASX tech shares just hit record highs
• Here are the 10 most shorted shares on the ASX
• The market is going long on the Afterpay share price but shorting its weaker rival

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia has recommended Sezzle Inc. 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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Australia has a number of companies that are either based in the United States (US) or have significant operations there, yet are still listed as ASX shares. This is a move that buy now, pay later (BNPL) giant Afterpay Ltd (ASX: APT) is trying to make right now. And who can blame them? The size of the US retail market surpassed US$5 trillion in 2017, compared to Australia’s total retail turnover of approximately AU$329.6 billion in 2019.

You see this market size discrepancy play out in almost every area of economic activity, including the healthcare space, defence, aerospace, or the housing industry. However, for some ASX shares, expansion into the US doesn’t always work out for the best.

A cautionary tale 

Servcorp Limited (ASX: SRV) provides serviced offices, virtual offices, coworking spaces, and meeting rooms. Its business had been ailing for a long time in the US market, describing its problems as being too culturally Australian for the American market. Furthermore, it has recently announced a move to halve the company’s US offices, naming the COVID-19 crisis as the last straw.

Treasury Wine Estates Ltd (ASX: TWE) has also been having problems in the US market for well over a year, due to an industry wide glut that has been compounded by the coronavirus crisis. This ASX share has flagged a demerger of its Penfolds business by the end of FY21. In addition, it has been under increasing pressure since the end of January to act on poorly performing US assets, particularly after a raft of departures from its US business had impacted earnings.

The retail space

So, expansion into the US can go badly, but it can also go very well. Sezzle Inc (ASX: SZL) is an ASX share that is a native US BNPL company. In fact, it is not active in the Australian market at all. In my view this provides the company with an immediate advantage over, say, Afterpay, as it already has a head start in the much larger US market.

In fact, Sezzle reported on 7 July that at the end of H2 FY20 the company had a pre-existing network of 1.48 million consumers and 16,112 merchants. Significantly, 87.5% of the company’s consumers were repeat purchasers.

Chasing on Sezzle’s heels in the US is its BNPL competitor, Zip Co Ltd (ASX: Z1P). Zip Co has entered the US via the acquisition of US BNPL company QuadPay. This provides it with a pre-existing network for its additional credit offerings. On completion, this will boost the company’s global network to 3.5 million customers and 26,200 merchants. Of these, 1.5 million, over 3,500 merchants are from the QuadPay network in the US. 

The defence market

There are several Australian defence contractors with active operations in the US. This is a market where $729 billion was spent in 2019 alone – greater than the cumulative defence spending of countries like China, Saudi Arabia, Russia, the United Kingdom, India, France, Japan, Germany, and South Korea. 

Austal Limited (ASX: ASB) is Australia’s largest ASX defence share, as well as being the world’s largest builder of aluminium ships. In June, the company also announced the provision of US$50 million in funding from the US government. This is to maintain, protect, and expand US domestic production of steel shipbuilding capabilities for capital projects over the next 24 months.

In February, Austal had a forward order book of $4.9 billion, most of which is to build ships for the US Navy.

Xtek Ltd (ASX: XTE) is another Australian defence contractor with existing ties to US defence forces. The company has entered the US retail market via the acquisition of HighCom, a US body armour manufacturer. Furthermore, agencies of the United States Department of Defense use the company’s electric-powered, hand-launched unmanned aircraft system. 

I think the potential for XTEK to expand in the US is huge. By purchasing an existing, successful franchise it can leverage that company’s networks and sales channels. XTEK has a range of products for use by security and defence sector entities that can be distributed via these channels.

Foolish takeaway

The US is definitely the place to be for many sectors. However, not all ASX shares that try to enter the US markets are successful. I would look at companies that have either a proven track record of achievement, like Austal or Sezzle. Or alternatively, a company that has acquired a successful US-based business to give themselves a head start, such as Zip Co or XTEK.

More reading

• Why Galaxy, Platinum, Sezzle, & Treasury Wine shares are storming higher
• Can the Afterpay share price go higher from here?
• Sezzle share price jumps 28% after completing $79.1 million institutional placement
• Why Sezzle and these ASX tech shares just hit record highs
• ASX 200 Weekly Wrap: Rocketing BNPL shares fail to stop ASX 200 slide

Daryl Mather owns shares of Austal Limited and Sezzle Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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 Macquarie Group Ltd (ASX: MQG) share price has slumped 11.7% lower in 2020, but where will it finish the year?

Where will the Macquarie share price finish in 2020?

Unfortunately, no one has a crystal ball. However, we can try to piece together what the rest of the year might hold for Macquarie.

The Aussie bank isn’t set to release its FY2021 half-year earnings result until 6 November. Nevertheless, we could get a better picture of the Aussie economy overall during the August earnings season.

I don’t think we’ll see the Macquarie share price surge significantly higher in 2020. However, I don’t see any reason why we won’t see a single-digit gain by the end of December.

What is there to like about Macquarie?

It’s true that the outlook for Aussie banks this year is pretty unclear. However, unlike its big four peers, Macquarie is more of an investment bank than a retail bank.

That means recent market volatility could actually be a good thing for Macquarie’s earnings. While the average investor can panic during uncertain times, experienced investors like Macquarie can do well. Clearly, during periods of high volatility, you have to be able to correctly pick the market or things can turn sour quite quickly.

One such example from another investment bank was seen at Goldman Sachs. Amidst the oil price war earlier this year, Goldman’s traders booked $1 billion in commodities revenue through shrewd trading prior to the collapse of oil prices. 

If Macquarie’s various investment units can generate strong earnings in a choppy market, that could boost the Macquarie share price higher in 2020.

What about the other ASX bank shares?

The Macquarie share price has been under pressure in 2020 but so too have the other ASX bank shares. 

The Commonwealth Bank of Australia (ASX: CBA) share price has fallen a similar 10.1% lower this year. Meanwhile, the National Australia Bank Ltd. (ASX: NAB) share price is down a whopping 26.3%.

I think there are a couple of things weighing on the big four bank shares right now. One is that the coronavirus pandemic has constrained global and domestic economic growth.

That’s not good news for household or corporate earnings. The knock-on effect could be more loan defaults or a weaker housing market. Neither of these things are good news for the ASX banks or their earnings in 2020.

However, the Macquarie share price could be somewhat insulated from these factors. No doubt there are still a lot of risk factors facing the Aussie investment bank. But, if I was looking to buy in the Financials sector this year, I think Macquarie could be one to surprise in 2020.

In the interests of conservatism, I would like to see the company’s half-year earnings in November, but I think some potential gains may be realised before then.

More reading

• ASX 200 Weekly Wrap: Rocketing BNPL shares fail to stop ASX 200 slide
• 2 ASX shares for strong retirement income
• How I’d build a $100,000 share portfolio with ASX ETFs
• 3 ASX shares I won’t hesitate to buy in the next market crash
• Why one top fund manager likes NAB shares, despite preferring other sectors

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie 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 Where will the Macquarie share price close the year? appeared first on Motley Fool Australia.

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The share price of small cap ASX software company RPMGlobal Holdings Ltd (ASX: RUL) has been pretty volatile so far in 2020. After climbing to an all-time high of $1.25 in February, the RPMGlobal share price was savaged during the mass selloffs that occurred at the height of the coronavirus panic in March.

In the space of just a few weeks, more than 50% was wiped off its market cap, and it plummeted to a low of just $0.62. Since then, however, strong underlying results have pushed the company’s share price back up close to 60% to $1.00 as at the time of writing.

About RPMGlobal

RPMGlobal has a long history of providing consulting and advisory services to the Australian mining sector. However, it has also branched out into software development through its Enterprise Planning Framework platform. The software platform helps mining industry customers manage planning and scheduling, maintenance and execution, and simulation and costs at their mine sites. RPMGlobal claims that its platform is the only one currently offered in the mining industry that gives users control over these three key processes, which gives it a strong advantage over its competitors.

In an update to the market released at the beginning of July, RPMGlobal reported some preliminary results for FY20. The company stated that it expected total software subscription contracted value for FY20 to be $34.5 million, more than tripling FY19’s result. It also confirmed annualised recurring revenues from software subscriptions were expected to reach $12.7 million.  

A high proportion of recurring revenues is an especially good sign for RPMGlobal as it expands its software business. Other successful ASX software companies like Altium Limited (ASX:ALU), WiseTech Global Limited (ASX:WTC) and ELMO Software Ltd (ASX:ELO) also have high rates of recurring revenues from subscription-based services.

High rates of recurring revenues are so important – especially in these times of economic uncertainty – because they provide a more dependable income stream. Less volatility in earnings means that company management can create more accurate budgets and forecasts, allowing them to plan better for the future.

It also makes a company more resilient during a downturn. Having a more accurate idea about how much revenue to expect gives a company confidence in its abilities to cover its expenses. In short, high levels of recurring revenues help to reduce risk.

Is the RPMGlobal share price a buy?

Despite the recoveries made since March, the RPMGlobal share price is still well short of its February highs and could offer good value to new investors. In fact, its share price has almost flatlined since mid-April, seemingly unable to push beyond the psychological $1 barrier. This may mean it is still flying under the radar for many investors, even as its underlying fundamentals continue to improve.

This definitely makes RPMGlobal one to add to your watchlists. This is especially true as states like Western Australia, with a local economy heavily reliant on mining, continue to ease their coronavirus restrictions.

More reading

• The rise and rise of ASX SaaS shares
• 3 ASX shares that I’d invest $1,000 into EVERY month
• Why I think the WiseTech share price is in the buy zone
• Fund managers have been buying Costa and this ASX 200 share
• Why buying Altium shares could make you rich

Rhys Brock owns shares of Altium, Elmo Software, and WiseTech Global. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Altium and RungePincockMinarco Limited. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool Australia has recommended Elmo Software and RungePincockMinarco 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 the RPMGlobal share price could be a bargain buy right now appeared first on Motley Fool Australia.

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SaaS, or software as a service, was popularised by United States customer relationship management (CRM) giant Salesforce.com inc. It is a business model under which customers pay to use software hosted on a remote computer. Today, partly due to the proliferation of cloud technologies, some of the fastest growing ASX shares are SaaS companies.

Characteristics of ASX SaaS shares

Xero Limited (ASX: XRO) is arguably the ASX’s most well known SaaS share. It operates an online accounting platform, among other services, principally for small to medium enterprises. Xero is currently valued at $13.14 billion. For context, Santos Ltd (ASX: STO) is valued at $10.89 billion. The meteoric rise of the Xero share price over the last couple of years is largely due to the likely revenue growth the market has priced in. 

To illustrate further, according to a Gartner Group in November last year, the total global revenues from cloud-based services was estimated to reach $266.4 billion in 2020, up 17% from 2019. 

SaaS companies have a number of characteristics I find very appealing. First, most of their revenue is recurring and follows a subscriber-based business model. Second, costs to subscribe are comparatively low. Therefore, if the product works well and the customer service level is high, there is little motivation for customers to change platforms. Third, once the product reaches a mature stage, the company makes a high operating margin. 

Infomedia Limited (ASX: IFM)

Infomedia is an interesting small-cap SaaS share. It is a profitable company, has a global footprint, and currently trades at a price-to-earnings (P/E) ratio of 32.24. From 3 January 2010 until last Friday, the company’s share price grew approximately 18% per year on average. 

Infomedia provides a range of products to automotive service companies. For example, its software includes an electronic parts catalogue, a service-selling product, a lubricant selection product, and a CRM.

The company has 180,000 users across 186 countries and 80% of its revenue is from outside Australia. Greater than 95% of the company’s revenue is recurring and its ten year average operating margin is 43%.

This company is on my watch list.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is a New Zealand-based, ASX-listed donor management system. However, most of its customers are in the United states. The company has a market cap of $2.41 billion with a P/E of 93.3. It is profitable and has clearly had a significant growth trajectory to date. 

The company provides donor and congregation management systems predominantly for churches. Nonetheless, some non-profit organisations and education providers also use its products. 

Pushpay operates web-based software linked to mobile apps, which take subscription fees as well as transaction fees. The company processed an amazing US$5 billion in total processing volumes for the year ended 31 March 2020. In addition, it increased operating revenue by 33% to US$127.5 million while increasing gross margin from 60% to 65%.

Pushpay is also on my watchlist.

Whispir Ltd (ASX: WSP)

I find Whispr to be a very interesting company. Unlike the other two SaaS companies discussed, it is not yet profitable and is aggressively pursuing growth. Whispir provides a communications platform between organisations and people across a whole range of content. It produces 1.5 billion transactions each year. 

The company has many clients across a very diverse spectrum of Australian industries. To illustrate, some of these include Transport for NSW, RACQ, APA Group (ASX: APA), Roy Hill, and the country’s number one health booking app, Health Engine. 

On 26 March, Whispir announced the Victoria Department of Health and Human Services would be using the company’s products as part of its COVID-19 communications. 

Whispir reported a growth in its annual recurring revenue stream of 22% against the previous corresponding period in its H1 FY20 report. As with other SaaS companies, it has a high gross operating margin of 62%, and recurring revenues make up greater than 95% of its income. 

Whispir interests me on a few levels. First, the ‘sticky’ nature of subscriber models and the company’s high operating margins. Second, I believe the massive diversity in the company’s customer base indicates a real versatility, and a genuine growing demand for the product.  

Foolish takeaway

In addition to those mentioned above, I’m also interested in many other ASX SaaS shares. For example, companies like WiseTech Global Ltd (ASX: WTC), TechnologyOne Ltd (ASX: TNE), and HR software ELMO Software Ltd (ASX: ELO) are all on my radar. However, I chose to focus on the three companies above due to the fact they have taken the SaaS model into entirely new areas, not just enterprise management.

Furthermore, all three are pursuing growth, have characteristically high operating margins, and appear to have a lot of open space left to grow into.

More reading

• Why the RPMGlobal share price could be a bargain buy right now
• ASX 200 jumps 0.8%: Big four banks storm higher, TechnologyOne sinks
• Why Domain, OceanaGold, Praemium, & TechnologyOne are tumbling lower
• Pushpay and 1 other ASX tech share to buy right now
• Why Sezzle and these ASX tech shares just hit record highs

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 and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Infomedia, PUSHPAY FPO NZX, Whispir Ltd, and Xero. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool Australia has recommended Elmo Software, PUSHPAY FPO NZX, and Whispir Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Wesfarmers Ltd (ASX: WES) share price jumped with the S&P/ASX 200 Index (Index:^AXJO) on positive offshore leads, but that isn’t the only thing exciting investors.

There’s speculation that the conglomerate might be keen on repeating a winning strategy following the Coles Group Ltd (ASX: COL) spin-off a little more than a year ago.

This time, it’s Wesfarmers’ holdings in its Bunnings Warehouse properties that’s in the spotlight. It’s rumoured that bankers are trying to persuade management to divest its holdings in the $2.5 billion BWP Trust (ASX: BWP), according to the Australian Financial Review.

The Wesfarmers share price jumped 1.9% in early trade to $46.36 when the ASX 200 index gained 1.4%.

Big payday

The sell-down of Wesfarmers’ 25% stake in BWP could net the group more than the $600 million plus that BWP’s market cap might imply. This is because Wesfarmers will also likely have to sell its management rights in the trust.

But this could be a sticking point as Bunnings can effectively management the properties even though it doesn’t own them.

The giant hardware retailer is a big beneficiary from the COVID-19 pandemic as stuck-at-home consumers dust off old DIY projects.

The 20-bagger return

On the other hand, the management rights risk can be managed and the temptation to cash in on the property trust might be too great to resist.

The BWP share price jumped over 2% this morning to $3.92 and is just a tat off its late January pre-coronavirus high of $4.12.

Wesfarmers’ done very well in this investment, which it held since BWP floated in 1998. Back then, the holding was worth a mere $33 million to the conglomerate, reported the AFR. At today’s market price, it’s a near 20-bagger.

What’s more, the group also netted $13.4 million in management fees from the trust in the last financial year.

Can Wesfarmers undertake a capital return

Given that divesting assets is in fashion with the amount of shareholder value added to groups that have undertaken such a manoeuvre, shareholders will be eagerly watching this space.

This is particularly so because the cash bonanza from the sale may flow back to shareholders via some capital return program.

Wesfarmers is already cashed up with more than $5 billion in the kitty. Unless it can find a sizable acquisition to undertake, it will be under pressure to return some love to shareholders.

Meanwhile, Wesfarmers isn’t the only oversized group that is under the divestment spotlight. The Woolworths Group Ltd (ASX: WOW) share price is also on watch as investors ponder the future of its Big W department store.

More reading

• ASX 200 jumps 0.8%: Big four banks storm higher, TechnologyOne sinks
• How does the Fortescue share price compare to its peers?
• Why I’ll be watching the Super Retail share price in August
• St Barbara and 2 more ASX 200 shares to watch this week
• ASX 200 Weekly Wrap: Rocketing BNPL shares fail to stop ASX 200 slide

Motley Fool contributor Brendon Lau owns shares of Woolworths Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The Wesfarmers share price gets support from spin-off rumours appeared first on Motley Fool Australia.

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At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is on course to start the week on a positive note. The benchmark index is currently up 0.8% to 5,967.8 points.

Here’s what has been happening on the market today:

Bank shares storm higher.

The big four banks have started the week with a bang. All four banks are on the rise on Monday and helping to drive the ASX 200 higher. The best performer in the group is the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price with a 2% gain. Bargain hunters appear to be swooping in after bank shares dropped lower last week following a rise in coronavirus cases. 

Oil Search impairment.

The Oil Search Limited (ASX: OSH) share price is tumbling lower on Monday after announcing a sizeable impairment. The energy producer expects to recognise a non-cash, pre-tax impairment charge of US$360 million to US400 million in its first half results. This reflects a reduction in the carrying value of its assets “after taking into account the potential longer-term impact of prevailing economic conditions, the outlook for oil and gas prices and the current status of other factors that could impact on value realisation.”

TechnologyOne responds to short attack.

TechnologyOne Ltd (ASX: TNE) has hit back at Hong Kong-based GMT Research for claiming that the enterprise software company is using accounting tricks to pull forward revenue and profits. The research firm alleges that it is doing this to hide a slowdown in its growth. TechnologyOne has responded by advising that the claims are false and misleading. It intends to refer the matter to ASIC. That hasn’t stopped the TechnologyOne share price from taking a tumble today.

Best and worst ASX 200 shares.

The IGO Ltd (ASX: IGO) share price has been the best performer on the ASX 200 index on Monday with a 4.5% gain. This follows a decent rise in the nickel price on Friday night. The worst performer has been the TechnologyOne share price with a decline of 6%. This follows the aforementioned attack by GMT Research.

More reading

• The rise and rise of ASX SaaS shares
• The Wesfarmers share price gets support from spin-off rumours
• Why Domain, OceanaGold, Praemium, & TechnologyOne are tumbling lower
• How does the Fortescue share price compare to its peers?
• Why I’ll be watching the Super Retail share price in August

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.

The post ASX 200 jumps 0.8%: Big four banks storm higher, TechnologyOne sinks appeared first on Motley Fool Australia.

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