On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three ASX shares that have just been given sell ratings by brokers are listed below.

Here’s why these brokers are bearish on them:

Adbri Ltd (ASX: ABC)

According to a note out of the Macquarie equities desk, its analysts have retained their underperform rating but lifted the price target on this building products company’s shares to $2.20. Although Adbri delivered a better than expected half year result, the broker isn’t in a hurry to change its rating. It notes that the company is facing structural issues and a very competitive market environment. The Adbri share price finished the day at $2.41.

Blackmores Limited (ASX: BKL)

Analysts at Credit Suisse have retained their underperform rating and $65.00 price target on this health supplements company’s shares. According to the note, the broker has downgraded its earnings estimates to reflect the company’s weakening outlook. It also appears underwhelmed by its FY 2020 result and notes that costs are growing quicker than revenue. The Blackmores share price last traded at $65.80.

Lovisa Holdings Ltd (ASX: LOV)

A note out of Citi reveals that its analysts have retained their sell rating but lifted the price target on this jewellery retailer’s shares to $6.25. According to the note, the broker is concerned that Lovisa could be left behind by the shift to online shopping. This is because it traditionally relies heavily on foot traffic to drive its sales. It suspects that the company may have to increase its marketing spend to achieve the same level of sales per store in the future. The Lovisa share price ended the day at $7.35.

More reading

• Lovisa share price falls as fashion retailer reports sharp drop in profits
• ASX 200 rises, Bingo jumps after reporting
• Why Blackmores, MNF Group, Nanosonics, & Seven West Media are dropping lower
• ASX 200 up 0.7%: Big four banks storm higher, Blackmores disappoints, Xero acquisition
• Blackmores share price in focus after sharp profit decline in FY 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores 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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There aren’t too many ASX shares that offer an attractive mix of income and growth.

Some ASX shares are known for growth like Xero Limited (ASX: XRO). Others are known for income such as Telstra Corporation Ltd (ASX: TLS). But there aren’t many businesses offering a good mix of both.

Here are two ASX shares I’d buy that offer a mix of income and growth:

Citadel Group Ltd (ASX: CGL)

I think that Citadel is a very compelling ASX share with good growth potential.

The FY20 result was announced today. The statutory result was a little messy with a few ‘significant items’ which included costs relating to the Wellbeing acquisition. When looking at the underlying result, Citadel had a strong year with revenue growth of 29.4%, gross profit growth of 24% and earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 25.3%. I think these were solid numbers. 

FY21 is set up to be a strong year with a full year contribution from Wellbeing, a UK health software business. Not only is there at least $1.5 million of annualised cost savings from a synergy program, but there is a number of good cross-selling opportunities. Citadel says that the majority of health software has recurring revenue – around 77% – and it is at a high margin (approximately 79%).

I’m excited by the prospect of the company expanding in several different sectors such as construction, local government and health. The ASX share revealed that it has a “strong” merger and acquisition pipeline focused on scalable software opportunities that build on existing capabilities.

The Citadel board declared an annual dividend of 10.8 cents per share for FY20. At the current Citadel share price that equates to a grossed-up dividend yield of 3.4%. As profit grows the company will be able to grow its dividend whilst also investing for growth.

I think the Wellbeing acquisition is transformational for Citadel. The Citadel share price is currently trading at under 14x FY22’s estimated earnings. Compared to plenty of other ASX tech shares, I think this is attractive value.

WAM Global Limited (ASX: WGB)

WAM Global is a listed investment company (LIC) that is operated by the high-performing outfit, Wilson Asset Management.

The idea behind WAM Global is to bring the investment strategy that has worked well for WAM Capital Limited (ASX: WAM) to the global share market. So it’s aiming for undervalued global growth companies.

WAM Global sometimes goes for smaller businesses than some other globally-focused Australian fund managers may go for.

At 31 July 2020, some of its biggest holdings included: CME Group, Electronic Arts, Hello Fresh, Hasbro, Edwards and Dollar General. However, it also owns some larger businesses like Tencent, Microsoft and Lowe’s. These are high quality ideas. 

Over FY20, the WAM Global portfolio’s gross return was 3.1%, outperforming the MSCI World SMID Cap Index in AUD terms by 5%. Over the longer-term I expect WAM Global will be able to produce solid gross returns.

As a LIC, WAM Global can generate investment returns. It can then steadily pay out some of that profit as a smoothed dividend for shareholders.

The ASX share grew its FY20 final dividend by 100% to 4 cents per share, bringing the full year dividend to 7 cents per share. This is more than I was expecting, I was only thinking it would be 6 cents per share.

WAM Global had a profit reserve of 30.1 cents at 31 July 2020. This is 4.3 years of dividend coverage for shareholders.

At the current WAM Global share price it has a grossed-up dividend yield of 4.6% and it’s trading at a 6% discount to the net tangible assets (NTA) per share at 31 July 2020.

Foolish takeaway

I think both of these ASX shares offer an attractive combination of potential growth and income despite global COVID-19 impacts. I think WAM Global will be a pleasing ASX dividend share. Citadel has plenty of capital growth potential in my opinion. I think Citadel will produce the stronger total returns over the next five years, so it would be the one I’d pick with a decent starting dividend.

More reading

• Volatile day for the Citadel share price following FY 2020 results
• 3 small cap ASX growth shares to buy right now
• This is where I’d invest $1,000 right now into ASX shares
• The smartest 7 ASX shares to buy if you have $2,000
• A LIT time: LITs, LICs prove popular with ASX investors

Tristan Harrison 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. The Motley Fool Australia has recommended Citadel 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.

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Afterpay Ltd (ASX: APT) is yet again the talk of the investing town this week. Depending on whether you’re an Afterpay shareholder, you’ll probably either be opening yet another bottle of champagne or performing another eye-roll at what’s been happening with the Afterpay share price of late.

Let’s roll through the numbers just so we’re all on the same page here.

The Afterpay share price started the year at $30.63. In the pandemic-induced March share market crash, Afterpay shares plummeted, reaching a low of $8.01 on 23 March. Since then, Afterpay hasn’t looked back. The shares quickly rebounded back to $20, then $30. Then news broke that Chinese e-commerce giant Tencent Holdings had acquired a 5% stake in the company and the shares went ballistic. A series of record highs fell like dominoes. $50, $60, $70… for a while there, it seemed like the Afterpay share price had found a ceiling. Between 21 July and 18 August, the shares just hovered around $75 without too much movement.

But then reporting reason came and the shares took off again. Afterpay told investors last week that it expected its net transaction loss (NTL) as a percentage of underlying sales to come in better than previously anticipated. It also told the market that earnings would come in around $44 million instead of the $20-25 million previously flagged.

And it was off to the races yet again. Since that announcement was made public last Wednesday, the Afterpay share price is up another 21% and has reached a new, all-time high of $95.97 just this morning.

Now for the part you’ve all been waiting for. Since 23 March, Afterpay shares are up an eye-watering 1,098%, going off today’s new all-time high. Yes, we have on our hands a 5-month 10-bagger stock.

Afterpay shares: to the moon or back to earth?

So where to from here? Well, I’ve looked at Afterpay from both sides now, and still, somehow, it’s fairly easy to label Afterpay as either the ASX’s biggest bubble or a future $200 share. Yes, the company is growing gangbusters. Yes, it has an incredibly large potential growth runway. But it is still priced at ~$25.5 billion without any profits yet rolling through the door. This morning, Afterpay reported a statutory loss of $22.9 million. Saying that, with net income growth of 97% year on year, it won’t be long until Afterpay’s books are in the green.

The bottom line is that Afterpay is a great company and one growing at breakneck speed. It is now being fully priced as such though, with perhaps some sugar and cherries on top. I’m not interested in buying such a frothy and feverish share price at a record high, but if you are prepared to, you’d better be strapped in for the long run, in my view. I think there is a fair chance the Afterpay share price will experience a pull-back at some time down the road, so you might want to wait for such a situation.

But perhaps you shouldn’t listen to me, I’ve been wrong on this company far too many times in the past. Maybe I don’t know Afterpay at all…

More reading

• Afterpay reckons this 1 number shows its ‘moat’
• What Prospa’s share price reaction and profit results mean for ASX banks
• Where to invest in a ‘rip-roaring’ share market rebound
• ASX 200 jumps 0.7%: Afterpay reaches 9.9 million customers, Woolworths strong sales growth
• Afterpay share price in focus after stellar FY 2020 result

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

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The Alcidion Group Ltd (ASX: ALC) share price dropped today after the company released its FY20 results. Despite revenue growth in challenging market conditions, Alcidion’s share price dropped 2.14% to 14 cents at close of trade.

Alcidion aims to transform healthcare with smart, intuitive technology solutions for hospitals and allied healthcare providers worldwide. 

What did Alcidion report?

The Alcidion share price fell heavily this year as the coronavirus pandemic disrupted business. Despite this, Alcidion was able to grow its revenue to $18.6 million, up 10% on the previous corresponding period. Notably, the recurring revenue base was $10.5 million, an increase 35% compared to FY19.

In the past year, the company has clinched significant contracts in each of its markets, and boosted its customer base. It reported that 307 hospitals in the United Kingdom, Australia and New Zealand now used an Alcidion product.

Operationally, the healthcare company invested in the expansion of its sales and marketing capabilities in the UK and ANZ. As a result, net operating cash outflows were $2.0 million in FY20. Alcidion delivered a net loss after tax of $3.1 million.

Despite this, the company maintained a healthy cash balance, with cash reserves of $15.9 million at the end of June. In November 2019, Alcidion raised $16.2 million via an oversubscribed placement to institutional investors.

Looking ahead

The Alcidion share price has entered FY2021 in a strong position, with $12.8 million sold revenue already contracted to be recognised in FY2021, and a healthy sales pipeline. Alcidion noted that it needed to sustain investments already committed in FY20 and to invest further in FY21 to complete the process of scaling the business. It expected to complete this investment phase during FY21 with the group cost-base stabilising. 

Alcidion CEO Kate Quirk said the company had a tremendous growth opportunity ahead.

“While COVID-19 has presented short-term challenges, it has also served to underline the important role that Alcidion’s solutions can play, enabling them to make informed decisions quickly and drive better outcomes for patients,” she said. “Our technology is a key component of our customers’ transition to digital healthcare.”

More reading

• 3 exciting small cap ASX shares to watch in FY 2021
• 2 exciting small cap ASX shares to watch

Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Alcidion Group Ltd. The Motley Fool Australia has recommended Alcidion 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.

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The Citadel Group Ltd (ASX: CGL) share price certainly had a rollercoaster of a day on Thursday following the release of its full year results.

After being down as much as 10% in morning trade, the information management software company’s shares climbed 2.5% in afternoon trade before ending the day with a 2% decline to $4.46.

What happened in FY 2020?

Citadel was a positive performer in FY 2020 and delivered strong sales and operating earnings growth over the year.

For the 12 months ended 30 June 2020, Citadel posted a 29.4% increase in total revenue to $128.4 million. This was driven by a 35.7% increase in software revenue to $47.5 million and a 26.7% lift in services revenue to $80.1 million.

The company experienced a slight contraction in its earnings before interest, tax, depreciation and amortisation (EBITDA) margin to 22.7% during the year due to the Noventus acquisition. Nevertheless, Citadel still delivered strong EBITDA growth of 25.3% to $29.2 million in FY 2020.

However, this didn’t flow through to the bottom line. It recorded a 90.8% decline in statutory net profit after tax from continuing operations to $1 million. This was the result of a 53.8% increase in depreciation and amortisation to $12.3 million and a 110% lift in finance costs to $2.1 million, which was offset slightly by a lower tax expense.

On an underlying basis, net profit after tax would have been $11.6 million, up 6.4% year on year.

Despite the decline in statutory profit, the Citadel board has held firm with its 6 cents per share final dividend. This brings its full year dividend to a fully franked 10.8 cents per share, which is flat year on year.

“A transformational year”.

Commenting on the FY 2020 results, Citadel’s CEO and Managing Director, Mark McConnell, said: “FY20 was a transformational year for Citadel. In April 2020 we acquired and have successfully integrated Wellbeing Software, accelerating our shift in earnings mix towards long term global enterprise software contracts with high quality recurring revenue streams.”

“An oversubscribed equity raising supported the acquisition, and we have successfully navigated through the global COVID-19 pandemic without accessing the Federal JobKeeper program. Throughout this period of global instability, we have delivered a strong financial result for our shareholders,” he added.

FY 2021 outlook.

While no guidance was given for the year ahead, the company’s CEO spoke broadly about its longer term targets.

Mr McConnell said: “We are targeting top line organic growth from our Software division of 15% plus over the long term, and 5-10% organic growth from our Services division. Our large and qualified pipeline of opportunities now exceeds $800 million, 90% of which is software in nature. We also have a strong M&A pipeline focused on scalable software opportunities that build on our current capabilities.”

“I am very pleased with the way our team has responded to the significant challenges that FY20 has presented. Our ongoing transformational program is resulting in a clear shift in the earnings mix to high quality recurring software revenue. Our dedicated executive team are driving this change strategy to deliver a business with a high percentage of recurring software-based revenues across a diverse and global client base that over the medium term will lead to improved margins,” he concluded.

More reading

• 2 great ASX shares I’d buy for income and growth
• 3 small cap ASX growth shares to buy right now
• This is where I’d invest $1,000 right now into ASX shares
• The smartest 7 ASX shares to buy if you have $2,000
• Where I’d invest $10,000 today into ASX shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Citadel 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.

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The Resolute Mining Limited (ASX: RSG) share price is down 22.9% since 27 July, despite gaining 1% in late afternoon trading today. That gives Resolute the ignoble position as the third worst performer on the S&P/ASX 200 Index (ASX: XJO) for the past month.

The ASX 200, by comparison, is up 1.3% over that same time.

Year to date, the Resolute Mining share price was in positive territory as recently as last Tuesday 18 August. Since then, it’s fallen sharply, leaving Resolute’s shares down 10.5% in 2020.

Like most shares on the ASX, Resolute shareholders were ravaged by the COVID-19 market rout earlier this year. From 24 February through to 16 March, the Resolute Mining share price fell 50%.

Despite the past month’s losses, Resolute’s share price is still up 79% from that March low.

What does Resolute do?

Resolute is a miner exploring for gold, and developing and operating gold mines in Australia and Africa. To date, Resolute’s mines have produced more than 8 million ounces of gold.

The company’s premier gold mine is its Syama Gold Mine in Mali, capable of producing more than 300,000 ounces of gold annually. Resolute plans to commence using an automated mining system at Syama which should decrease costs and improve output. Its second high quality gold mine in Senegal, the Mako Gold Mine, can produce around 140,000 ounces of gold per year. The company is also active in Ghana. 

Resolute shares first traded on the ASX in 1999.

Why is the Resolute share price down 23% over the past month?

Resolute isn’t the only ASX 200 gold producer seeing its share price tank over the last month.

The Gold Road Resources Ltd (ASX: GOR) share price is down more than 18% since 27 July, and the Saracen Mineral Holdings Limited (ASX: SAR) share price is down over 19%.

And it’s not just them. Three other ASX 200 gold shares make the list of worst 10 share price performers for the past month.

Gold’s 6% drop from its 6 August peak hasn’t helped the gold miners. Though today’s price of US$1,943 per troy ounce is right where gold was trading on 27 July. Some of the price falls can be blamed on disappointing guidance for the year ahead, or disappointing results for the year gone by.

But Resolute ran into a stickier problem this month when Mali’s president, Ibrahim Keïta resigned on 19 August. With the potential for political turmoil in Mali — where Resolute operates its premier Syama Gold Mine — investors were quick to hit the sell button. Resolute’s share price is down over 18% since then.

Looking ahead, Resolute Mining’s CEO, John Welborn, is hosting two conference calls for investors, analysts and the media tomorrow, 28 August, to discuss Resolute’s half year results for the year ending 30 June.

The Resolute share price will be one to keep any eye on tomorrow following those calls.

More reading

• Is it finally time for ASX investors to buy gold?
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• Is it still the time to be greedy for ASX gold shares?
• Meet the group reaping the biggest profit from the gold bull run

Motley Fool contributor Bernd Struben 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 Mach7 Technologies Ltd (ASX: M7T) share price is up almost 5% higher today after delivering its first full year profit result.

The company develops innovative enterprise imaging and informatics solutions for image viewing, storage, and workflow management. 

What were the FY20 results?

The company has delivered an increase in revenues of $18.9 million, up 102% on the prior corresponding period (pcp). This was driven mainly by higher software licence fees. 

Earnings before interest, taxation, depreciation and amortisation (EBITDA) was $3.3 million, up 181% compared to the pcp. 

Mach7 delivered positive free cash flow, up 225% to $4.7 million. The company said the acquisition of Client Outlook demonstrated the scalability of the business and enabled less reliance on investor funding.

The company’s successful completion of a cost-reduction program was a key contributor to profit.

Sales orders were up 115% as a result of 29 new sales order contracts. These were from new and existing customers who ordered licence extensions, expansion licences or new products.  The 29 orders have contributed $13.3 million to the group’s revenues.

Furthermore, contracted annual recurring revenue (CARR) has increased to $9 million, representing growth of 14% on the pcp. However, CARR growth was impacted by delayed purchasing decisions in 2H20 due to the coronavirus pandemic.

Outlook for Mach7

Mach7 Technologies expects the growth in CARR to resume and even accelerate during the 2H21 due to expected increased demand. This is reflected in the sales pipeline. 

In light of the Client Outlook purchase, the company is well-positioned for continued profit growth in a substantially larger addressable market. It’s now a clear market leader in the provision of complete enterprise imaging solutions. 

Mach7 Technologies is in a strong financial position with more than $15 million cash in the bank and is debt free. In the future, it expects to deliver continued double-digit revenue growth, EBITDA growth and positive free cash flows. 

Mach7 CEO Mike Lampron said Mach7 was well-positioned to continue delivering great outcomes for customers, employees and investors.

“I am proud of what the Mach7 team has achieved this year – from new customer deployments of our software, the recent acquisition and early integration of Client Outlook, to delivery of proftable high growth earnings and positive free cash flow,” he said.

After surging to a high of $1.15 in early afternoon trade today, the Mach7 Technologies share price is currently trading at $1.10, up 4.76% at the time of writing. It has a market capitalisation of $263.7 million.

More reading

• 4 exciting small cap ASX shares to watch closely
• Could these exciting ASX shares be future stars?
• 2 exciting small cap ASX shares to watch

Matthew Donald 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 MACH7 FPO. The Motley Fool Australia has recommended MACH7 FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This morning the Coles Group Ltd (ASX: COL) share price traded ex-dividend for its upcoming 27.5 cents per share fully franked dividend.

Eligible shareholders can now look forward to being paid this dividend in just over a month on 29 September.

While many shareholders will no doubt use these funds as a source of income in this low interest rate environment, others may wish to reinvest them into the share market.

But which shares should you reinvest these funds into? Here are a couple to consider:

Dicker Data Ltd (ASX: DDR)

If you’re interested in earning more income in the future, then you might want to consider buying Dicker Data shares. It is a leading wholesale distributor of computer hardware and software in the ANZ region. It has been an exceptionally strong performer in FY 2020 thanks to a surge in demand for remote and virtual working solutions.

This has put the company on course to deliver stellar profit and dividend growth in FY 2020. Pleasingly, due to its strong market position, favourable tailwinds, and its growing number of vendors, I believe its growth can continue for the foreseeable future. Based on the current Dicker Data share price, it offers investors an attractive forward 4.7% fully franked dividend yield.

Xero Limited (ASX: XRO)

Those looking to reinvest these funds into growth shares might want to consider Xero. It is one of the world’s leading cloud-based business and accounting software providers. I’ve been very impressed with the way the company has consistently grown its sales and subscriber numbers at a strong rate over the last few years. This was once again the case in FY 2020, with Xero delivering more explosive growth.

A 26% jump in subscribers to 2.285 million underpinned a 30% increase in operating revenue to NZ$718.2 million and a 29% lift in annualised monthly recurring revenue (AMRR) to NZ$820.6 million. The good news is that Xero still has a very long runway for growth over the next decade. Especially given its modest market share in the United States market. At the end of FY 2020, Xero had just 241,000 subscribers in North America. This compares to 914,000 subscribers in a significantly smaller ANZ market.

More reading

• Is the Xero Ltd share price a buy at $100?
• ASX giants say cutting staff hours will save jobs
• 2 top ASX shares I would buy now for shareholder value and dividend growth
• ASX 200 up 0.7%: Big four banks storm higher, Blackmores disappoints, Xero acquisition
• Xero share price hits record high following $80 million Waddle acquisition

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 Dicker Data 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.

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There are a number of defensive ASX shares that I’d be happy to buy for my portfolio.

However, plenty of them are trading quite expensively, so I’d only want to buy businesses that are trading at a good price.

Here are three quality ASX share options:

TPG Telecom Ltd (ASX: TPG)

It’s now one of Australia’s biggest telecommunications businesses. TPG and Vodafone Australia recently merged – the combined business now has a strong presence in both home internet and mobile connections.

The combined business should be able to extract pleasing cost synergies. One big bonus is that it only needs to build one 5G mobile network, rather than two. The business will also be able to cross-sell its mobile offering to broadband customers, and the broadband customers can be offered a mobile deal.

Telecommunications is a defensive industry, so TPG could be called a defensive ASX share with steady monthly revenue from customers.

I think TPG could become the most efficient big telco with the influence of the former TPG business. The combined business plans to pay out larger regular dividends for investors, which will boost total returns.

TPG’s share price has fallen 9% since 30 June 2020, so this could be a good time to buy. 

Magellan Global Trust (ASX: MGG)

Magellan is a listed investment trust (LIT) which is focused on global shares. The LIT is operated by the high-performing Magellan Financial Group Ltd (ASX: MFG).

It aims to invest in the highest-quality shares in the world. It doesn’t go for ASX shares. Some of its biggest investment include technology companies like Alibaba, Alphabet, Microsoft, Tencent, Facebook, Visa and Mastercard. These businesses are in the right industries to weather the terrible global impacts of COVID-19.

However, Magellan Global Trust also owns a number of defensive positions to protect the portfolio against negative market movements. Magellan Global Trust owns businesses like Atmos Energy, Eversource Energy, Xcel Energy and Reckitt Benckiser.

At the end of July 2020 it had a relatively large cash position to defend against downside market movements. It had a cash weighting of 18% at 31 July 2020. 

Its net returns over the longer-term have been quite strong. Since inception its portfolio has produced net returns of 11.8% per annum, outperforming the MSCI World Net Total Return Index by 1.7% per annum.

I like the global diversification offered by this ASX share and it generally performs better than the index.

As a bonus, the LIT targets a 4% distribution yield which is decent for income investors.

The Magellan Global Trust share price is trading at a 3.4% discount to its current indicative net asset value (NAV).

Rural Funds Group (ASX: RFF)

Real estate investment trust (REITs) generate defensive regular rental income from tenants.

However, this COVID-19 period has been difficult for most REIT sectors including shopping centres and office buildings.

But farmland is more defensive, everyone needs to eat food after all. However, as the landlord, Rural Funds doesn’t have the operational risks like the tenant does. Even so, Rural Funds owns sizeable water entitlements which can be used by tenants.

The ASX share generates attractive cash rental profit whilst steadily investing in its farms to improve them to create higher rental earnings. The defensive ASX share also benefits from contracted rental increases which are either a fixed 2.5% per annum, or it’s linked to CPI inflation, plus market reviews.

Rural Funds aims to increase its distribution by 4% per annum, which is more than inflation.

At the current Rural Funds Group share price it offers a distribution yield of 5.1%.

Foolish takeaway

Each of these defensive ASX shares have attractive defensive attributes. I think Rural Funds is the most defensive, but it’s trading at a decent premium to its NAV whereas Magellan Global Trust is trading at a discount, so it would be the one I’d go for first.

More reading

• 2 quality ASX dividend shares to buy
• Beat ultra low interest rates with these top ASX dividend shares
• 3 ASX dividend shares that have increased their payouts in 2020
• Rural Funds share price rises on FY20 results
• Why I would buy CBA and this top ASX dividend share

Motley Fool contributor Tristan Harrison owns shares of MAGLOBTRST UNITS and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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 Damstra Holdings Ltd (ASX: DTC) share price is today falling as the company released its results for the financial year ended 30 June 2020 (FY20). Damstra’s share price is currently trading 5.64% lower at $1.84 per share.

Damstra is an Australian-based provider of integrated workplace management solutions to multiple industry segments across the globe. The company develops, sells and implements integrated hardware and software-as-a-service (SaaS) solutions in industries where compliance and safety are important.

How did Damstra perform in FY20

In Damstra’s FY20 results, the workplace management provider delivered a record full-year performance with revenue and other income of $23.5 million – a 47% increase on FY19.

The company also announced pro forma earnings before interest, taxes, depreciation and amortisation (EBITDA) of $6.8 million, significantly higher than the prior corresponding period’s $1.8 million.

Damstra points to existing client project rollout, multiple new clients, new product sales and international revenue growth as drivers for the strong numbers. This has seen the company’s revenues grow 42% per year over the last 3 years.

The number of clients the company services increased to 279, representing a 116% increase. This increase was likely in part due to Damstra’s acquisition of Vault.

Damstra reported there was no reduction in demand for its services even during the height of the pandemic. 

Also of note was Damstra’s continued strong spending on research and development (R&D). The company spent $2.2 million on research to position itself well for future growth. Using R&D and acquisitions, Damstra has already increased its number of products from 14 (2018) to 28 this year. Some of the products developed include topical temperature detection software and fever detection integrated with facial recognition.

However, despite impressive reporting growth, investors were clearly expecting more as the Damstra share price is currently trading 5.64% lower.

Balance sheet strength

Damstra’s balance sheet increased to $9.4 million, following its capital raise and strong underlying operating cash flow in FY20. The increase in receivables and income received in advance reflected the revenue growth generated in the period. Damstra continues to operate on a long-term, debt-free basis, as its strong availability of cash underpins its ongoing growth.

On that note, the company announced there would be no dividend, with cash to be reinvested in growth.

Outlook

Looking forward, the company anticipates an increase in demand for its services and an expanded product offering. In FY21, this is expected to be underpinned in Australia by federal and state funding for major infrastructure projects, whilst increased pressures to manage COVID-19 will support a North American expansion.

The company has provided guidance of $33 million–$35 million for FY21 revenue.

At the time of writing, the Damstra share price is almost 6% lower for the day, although it is up 49% on this time last year. 

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Daniel Ewing owns shares of Damstra Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Damstra Holdings Ltd. The Motley Fool Australia has recommended Damstra 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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