The Praemium Ltd (ASX: PPS) share price is rocketing higher on Thursday after announcing an agreement to acquire smaller rival Powerwrap Ltd (ASX: PWL).

At the time of writing the Praemium share price is up 13.5% to 42 cents and the Powerwrap share price is up over 51% to 26.5 cents.

What did Praemium announce?

Praemium and Powerwrap have entered into a bid implementation agreement under which the former will make an off-market conditional takeover bid for all of the Powerwrap shares it does not presently hold.

According to the release, Praemium has offered 7.5 cents per Powerwrap share in cash and 1 Praemium share for every 2 Powerwrap shares held.

Combined, this values Powerwrap at an indicative price of 26.44 cents per share or $55.6 million. This represents a 51.1% premium to the last closing price of Powerwrap shares.

What now?

The Powerwrap board of directors unanimously recommend that its shareholders accept the offer. They have indicated that they will be doing so with the shares they own, in the absence of a superior proposal.

The board notes that shareholders will have the opportunity to participate in the benefits of a merged group, which will be one of Australia’s largest independent specialist platform providers with combined funds under administration (FUA) of over $27 billion.

In addition to this, it feels Powerwrap shareholders will be able to participate in the expected upside from the realisation of potentially significant synergies. It expects full year EBITDA operating cost synergies on a preliminary basis to total $6 million by FY 2022.

Furthermore, it believes the likelihood of a competing proposal emerging is low given Praemium’s existing 15.1% interest in Powerwrap.

An “exciting opportunity”.

Praemium’s Chair, Barry Lewin, sees a lot of positives from the combination of the two investment platform businesses.

He said: “The merger is an exciting opportunity for Powerwrap and Praemium shareholders alike. For many years, Praemium has been on a growth trajectory with a recent history of generating steadily growing profitability. This merger adds increased scale and significant synergies. Powerwrap shareholders can now gain exposure to Praemium’s strong financial position and advanced technology, to realise compelling benefits via the creation of one of Australia’s leading independent specialist platform providers on a combined FUA basis.”

This view was echoed by Powerwrap’s Chair, Anthony Wamsteker.

He said: “The board of Powerwrap believes the Offer presents an excellent opportunity for Powerwrap shareholders to participate in the upside of a merged group that stands to benefit from significant potential synergies. With Powerwrap’s strong customer base and Praemium’s track record of profitability and cutting-edge technology, the benefits to Powerwrap shareholders are clear to the board and we encourage Powerwrap shareholders to take the next step in the company’s journey.”

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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 Praemium Limited. The Motley Fool Australia has recommended Praemium 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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On Wednesday, the S2 Resources Ltd (ASX: S2R) share price rose by 23.81% to $0.13 after the company announced that it had commenced drilling at its Finland site. 

What was in the announcement?

The company announced that initial diamond drilling had commenced at its 100% owned Aarnivalkea East gold target on the large Paana tenement in Finland. The mine is located 20km northwest of a 9 million ounce gold mine that is owned by another company.

The first drill test had revealed gold grades of up to 10.7 grams per tonne, accompanied by arsenic and bimuth, which can help in identifying a path to gold.

Drilling had been scheduled to start in March but had been delayed due to the effects of the coronavirus pandemic. The drilling is being undertaken by the company’s European-based workers, with virtual oversight by its Australian personnel until they are able to resume international travel.

The initial drilling program will consist of approximately ten diamond core holes, these are to be drilled on 3–4 traverses across the previously identified trend. The initial drilling will take about 3–4 weeks to be completed. According to the announcement, the site can be accessed year round for follow up drilling. 

About the S2 Resources share price 

S2 resources is a greenfields gold and base metals explorer. The company has exploration activities in Australia and Finland. According to the company, its exploration is based in mine-friendly areas. The S2 team primarily consists of former directors from Sirius Resources, which had success in nickel exploration.

The company recently discovered two gold prospects in Finland, one of which is being drilled currently.

At the end of the March quarter, S2 resources had $7.3 million cash plus 31% ownership of Todd River Resources Ltd (ASX: TRT). The company continued drilling for gold in Finland while drilling for nickel at two sites in Western Australia.

The S2 Resources share price is up 97% from its 52 week low of $0.066, and while it is flat on the start of 2020 it is up 18% since this time last year.

More reading

• Todd River Resources share price up 50% in 2 days after acquisition news

Motley Fool contributor Chris Chitty 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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If you’re planning to invest your money into the Australian share market, then one of the shares listed below could be worth considering whether you’re looking for growth, income, or value.

Here’s why I think these shares are in the buy zone:

Lendlease Group (ASX: LLC)

I think this international property and infrastructure company could be a top option for income investors. Although it has just released its unaudited results for FY 2020 and revealed a sharp decline in profit, I’m confident that the worst is now behind the company. In light of this, I think investors should focus on its long term outlook, which looks very positive thanks to its burgeoning global development pipeline. One broker that is positive on the company is Goldman Sachs. It recently declared its shares as a buy and forecast a 57 cents per share dividend next year. Based on the current Lendlease share price, this equates to a 4.8% dividend yield.

Telstra Corporation Ltd (ASX: TLS)

This telco giant could be a good option for value investors. At approximately 20x estimated full year earnings, I think Telstra’s shares are trading at an attractive level. Especially given its improving outlook and generous dividend yield. In respect to its outlook, I believe a return to growth could be on the cards in the near future thanks to its T22 strategy and the easing NBN headwind. In the meantime, I’m confident its 16 cents per share fully franked dividend is sustainable for the foreseeable future. Based on the latest Telstra share price, this works out to be a generous 4.7% dividend yield.

Xero Limited (ASX: XRO)

Finally, if you’re a growth investor, you might want to consider buying this cloud-based business and accounting software provider. I believe Xero is one of the best growth shares on the ASX and capable of generating very strong returns for investors over the 2020s. This is thanks to its high quality and sticky platform, high retention ratio, and massive global market opportunity. Combined, I expect them to result in strong earnings growth in the coming years.

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

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The PointsBet Holdings Ltd (ASX: PBH) share price has been a strong performer on Thursday.

In morning trade the sports betting company’s shares are up over 10% to $6.09.

Why is the PointsBet share price storming higher?

Investors have been buying PointsBet’s shares after it announced an agreement with BetMakers Technology Group Ltd (ASX: BET). That agreement will see it offer fixed odds betting on horse racing in New Jersey, subject to the receipt of all necessary regulatory and other approvals.

This follows BetMakers signing an exclusive 10-year agreement with New Jersey Thoroughbred Horsemen Association and Darby Development in February to deliver and manage fixed odds horse racing in New Jersey.

According to the release, the agreement sees Pointsbet offer fixed odds betting to New Jersey clients on all Monmouth Park race meetings. After which, it intends to expand the offering into New Jersey to include races and vision from other domestic and international jurisdictions, as and when such content is approved.

In addition to this, the agreement also provides the option for PointsBet to offer fixed odds betting on horse racing to clients in other US states via BetMakers in the future should the opportunity arise.

“Significant opportunity.”

PointsBet Group CEO and Managing Director, Sam Swanell, was pleased with the agreement.

He said: “Securing an agreement with BetMakers is a major step in what we believe to be an important strategy for our US plans. As a Company, we understand thoroughbred, harness and greyhound racing and we intend to capitalise on the expertise we have gained in Australia as we roll out racing products into the US market where legal, starting in New Jersey.”

“We see this as a significant opportunity. Annually, there are twice as many horse races in the US as there are in Australia, with a much larger total prize pool, however the amount wagered per capita in the US on horse racing remains a fraction of that in Australia,” he concluded.

BetMakers CEO, Todd Buckingham, spoke positively on the agreement. He commented: “BetMakers sees Pointsbet as a perfect partner to launch Fixed Odds in the US. We have a great working relationship with Pointsbet, which is one of the fastest growing bookmakers in Australia and the burgeoning US market.”

This news has gone down well with BetMakers shareholders as well. At the time of writing the BetMakers share price is up over 10% to 42 cents.

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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 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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The gold price hit a nine-year high and could re-test its record highs later this year even as growing risk appetite pushed share markets higher in overnight trade.

The positive trading session on Wall Street sets up the S&P/ASX 200 Index (Index:^AXJO) for early gains with the futures market tipping a 0.8% rally.

It’s not normal for gold to run higher when risk assets are in vogue, but we aren’t living in normal times.

Gold heading to new highs

The price of the precious metal gained over a dollar to trade at US$1,810 an ounce, the best it’s been since 2011.

This means commodity has returned a little over 30% over the past year, and that’s a little ahead of the outperforming tech-laden Nasdaq Composite (INDEXNASDAQ: .IXIC).

If it can consolidate around the US$1,800 mark, there’s a good chance it can push towards its all-time peak of US$1,920 an ounce that it reached in September of that year.

COVID-19 cure won’t kill the gold bull

I think there’s a good chance we could see the precious metal try to re-take the record over the coming months.

Even if the COVID-19 pandemic was to die down, I don’t think that’s enough to kill gold’s bull run!

Don’t get me wrong, the devastating impact of COVID-19 on the world’s economy is a big supportive factor for the safe haven asset.

The fact that no one knows how the coronavirus playbook ends will continue to put the yellow metal on a pedestal.

Bigger drivers for ASX gold stocks

However, the pandemic is not the biggest driver for the gold price, which was already on an uptrend since late 2018 – long before anyone’s even heard of COVID.

What’s really driving gold is low interest rates and big cash injections by central banks into the financial system.

These stimuli will remain long after a vaccine for the virus is found because the path to economic recovery always takes longer than the fall into recession.

Why gold can keep outperforming post crisis

What will take even longer to fix are government deficits and debt. I am not referring only to Australia but to the US, and that will weigh on the US dollar, particularly once the coronavirus emergency is over.

I believe this explains why the gold price only peaked more than two years after the GFC as the greenback remained weak for a number of years after the financial crisis.

The outlook for the Newcrest Mining Limited (ASX: NCM) share price, Evolution Mining Ltd (ASX: EVN) share price and St Barbara Ltd (ASX: SBM) share price shines bright.

But don’t just buy one or two gold miners. You should buy a basket of them as production issues and company-specific risks can cause you to lose money even if you got the macro call right.

More reading

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Motley Fool contributor Brendon Lau owns shares of Evolution Mining Limited and Newcrest Mining Limited. Connect with me on Twitter @brenlau.

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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Retail vacancies are on the rise in Australian cities, but will this hurt the Vicinity Centres (ASX: VCX) share price this year?

Are retail vacancies really climbing in 2020?

They are according to an article in yesterday’s Australian Financial Review. The Australian Retailers Association says vacancy rates hit record levels of more than 20% in Melbourne’s Chapel Street and Bridge Road shopping strips.

Sydney hasn’t been immune either, with vacancies climbing in Oxford Street among other areas.

CEO of the Association, Paul Zahra, said retail strip landlords were ‘living in a different world’ and had ‘continued to hike up rents’.

So, are rising retail vacancies a red flag for retail real estate investment trusts (REITs) in 2020?

What does this mean for the Vicinity Centres share price?

Vicinity Centres shares have been under pressure in 2020. In fact, after slumping 3.7% lower in yesterday’s trade, the Aussie REIT is down 47.2% for the year. That means Vicinity is significantly underperforming the S&P/ASX 200 Index (ASX: XJO).

I don’t necessarily think rising vacancies in retail strips is a worrying sign for Vicinity Centres. The REIT owns and operates large shopping centres including Chadstone in Melbourne and DFO Homebush in Sydney.

On the other hand, it is quite likely these trends are a symptom of wider difficulties for Aussie retail. There is certainly an accelerating trend of online shopping due to the coronavirus pandemic. However, we could also see shopping centres capture some trade from retail strips if vacancies continue to climb.

So.. it’s all good news for Vicinity Centres?

Not so fast. While rising retail strip vacancies could be a minor positive for Vicinity Centres shares, there are still plenty of headwinds.

Retail REITs like Vicinity and Scentre Group (ASX: SCG) are struggling in 2020. Investors are wary of buying in with so much uncertainty surrounding operations and shopper demand on the horizon.

I think it’s hard to see a strong rebound in Aussie retail REIT funds from operations (FFO). That’s especially the case with Victoria re-entering lockdown as of last night. I’d expect to see a careful approach towards re-opening retail stores to their full capacity over the next 12-24 months.

Coronavirus restrictions are certainly a headwind for the Vicinity Centres share price in 2020. Less foot traffic means more trouble for tenants and their landlords. There’s also the unknown around consumer spending patterns in the short to medium term.

Given the Aussie REIT is trading down 47.2% this year, a significant discount has been baked into the price. However, I’m not bullish enough on retail real estate to buy in, given the uncertainty facing the industry right now.

More reading

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre 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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The Recce Pharmaceuticals Ltd (ASX: RCE) share price is on watch today after the company announced it has entered into an antiviral Sars-CoV-2 screening program. Recce (pronounced ‘recky’) is pioneering a new class of synthetic antibiotics to overcome the urgent global health threat posed by drug-resistant superbugs and secondary bacterial infections associated with viruses such as COVID-19.

These antibiotics are called bactericidal. Therefore, they kill bacteria instead of inhibiting their growth. Consequently, they can still be effective even with repeated use. 

Recce’s intellectual property portfolio consists of 30 issued patents and patent applications. These span the world’s major markets including the United States, Europe, Japan, China and Australia.

Why is the Recce share price on watch?

Following a trading halt that began on Monday afternoon, yesterday Recce announced it has entered into an antiviral SARS-CoV-2 screening program agreement. The agreement is with The Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the University of Melbourne at The Peter Doherty Institute for Infection and  Immunology (Doherty Institute).

Two of Recce’s compounds were selected in the Priority 1 candidate group for the SARS-CoV-2 antiviral screening program. To clarify, for those of us without medical doctorates, SARS-CoV-2 is the virus that leads to the COVID-19 disease. 

A panel of scientific experts in virology, antivirals, and medicinal chemistry assessed submissions, in addition to clinical trials. Moreover, only compounds with the highest likelihood of antiviral or antiseptic impact received Priority 1 status. This means they are eligible for stage 1 laboratory screening trials. 

The two compounds selected are RECCE® 327 and RECCE® 529. The Program is part of the Australian Government’s efforts to identify promising anti-viral candidates and fast-track research into potential treatments for COVID-19. The antiviral focus of the compounds may also see potential benefit against secondary bacterial infections.

Management comments

Dr. John Prendergast, Recce Pharmaceuticals Non-Executive Chairman said, “We are very pleased to have been selected by the CSIRO, one of the largest and most diverse scientific research organisations in the world, to investigate the efficacy of two of our promising compounds against SARS-CoV-2. The compounds’ unique, universal mechanisms of action indicate potential to attack a broad range of viruses and as well, overcome the threat of viruses’ typical hyper-mutation into new and deadly pathogens.”

Recce share price

The company’s primary focus for its RECCE® 327 compound has been to address the unmet need for an effective treatment for sepsis. Sepsis is a life-threatening, inflammatory response to infection that has spread in the body.

To illustrate the size of Recce’s potential addressable market, sepsis kills more people in the US than prostate cancer, breast cancer and HIV/AIDS combined. According to the company, there have been 48.9 million reported cases of sepsis and 11 million associated deaths worldwide. 

The Recce share price has increased 100% year to date and closed at 68 cents on Monday before the pause in trading. This values the company at $92.53 million. The company’s shares, which currently do not pay dividends, resume trading this morning. 

More reading

• Praemium share price rockets after agreeing $55.6 million Powerwrap takeover
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Motley Fool contributor Daryl Mather 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 Treasury Wine Estates Ltd (ASX: TWE) share price will be on watch on Thursday after the release of a business update.

What did Treasury Wine announce?

This morning Treasury Wine provided the market with an update on its performance in FY 2020.

According to the release, the wine company expects its earnings before interest, tax and the agricultural accounting standard SGARA (EBITS) to be between $530 million and $540 million in FY 2020. This compares to its EBITS of $662.7 million in FY 2020.

Management advised that this reflects the impact of the COVID-19 pandemic, which has had a significant impact on its trading performance across all geographies throughout the second half.

Things would have been worse had it not been for cost management initiatives. These initiatives have seen reductions in costs of doing business, including no payment of any discretionary employee incentives which relate to FY 2020 performance outcomes.

The main drag on its performance has been its Americas business, which is expected to report a 37% decline in segment EBITS in FY 2020.

Elsewhere, Treasury Wine expects ANZ segment EBITS to decline 16%, EMEA segment EBITS to fall 18%, and Asia segment EBITS to fall 14%.

Current trading conditions.

Treasury Wine also provided investors with an update on current trading conditions. In China, the company advised that it continues to see positive signs in relation to both consumption and sales depletion recovery following the continued reopening of the country.

But while recent trends are positive, management remains cautious on the short to medium term outlook. It notes that gatherings and social occasions, which drive consumption of luxury wine, are yet to fully recover to previous levels.

In the Americas, and the United States in particular, the company revealed that the retail channel has seen strong value and volume growth across all price points since March. It notes that continued premiumisation is driving 20%+ value and volume growth in luxury and masstige portfolio price points versus the prior year.

Australian vintage update.

The company also revealed that its 2020 Australian vintage (V20) has been impacted by extreme heat during key stages of the growing season.

This has resulted in a smaller volume, higher cost vintage for the company, with total intake approximately 30% lower than the prior year.

Cost impacts from V20 are expected to lead to higher commercial and masstige costs in FY 2021. This is expected to impact all of its sales regions, but will be most notable in the ANZ and EMEA regions.

Strategic update.

Management advised that it has completed the implementation of its new operating model in the United States and expects it to deliver annualised cost savings of at least $35 million in FY 2021. It has also commenced the potential divestment of selected commercial wine brands, which are expected to deliver an acceleration in its premiumisation strategy in the Americas.

And finally, the company continues to look into the potential demerger of its Penfolds business. It advised that recent work supports the view that value will be created by the demerger.

Treasury Wine’s new Chief Executive Officer, Tim Ford, commented on today’s update.

He said: “The second half of fiscal 2020 has been a unique period for the industry and all of the communities in which we operate. I am proud of the way that our people, customers and suppliers have managed through the disruptive impacts of the COVID-19 pandemic giving me continued confidence in our team, brands and operating models and their combined strength.”

“While it is right to remain cautious on the near-term outlook, given uncertainty remains around the timing and pace of recovery in our key markets, we remain optimistic around our return to both margin and profit growth,” he added.

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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 Treasury Wine Estates 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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