The Australian share market ended last week slightly lower. Uncertainty over economic recovery both domestically and abroad, as well as geopolitical tensions with China, dampened sentiment despite some better than expected earnings results. The S&P/ASX 200 Index (ASX: XJO) ended the week 0.2% lower while the All Ordinaries Index (ASX: XAO) performed marginally better, down just 0.02% for the week. 

Earnings season has laid bare the economic damage of the coronavirus pandemic. The Westpac Banking Corp (ASX: WBC) share price slumped after the bank cancelled its interim dividend. BHP Group Ltd (ASX: BHP) shares also fell after the miner’s profit and dividend came in below expectations. Let’s take a look at some of the worst performing shares on the ASX last week. 

Treasury Wine Estates Ltd (ASXL: TWE) 

The Treasury Wine Estates share price fell 22.82% last week to close the week at $9.91. The winemaker has become embroiled in geopolitical tensions with China, which has accused Australia of dumping cheap wine in the country. China has moved to impose significant import duties on Australian wine and is investigating all Australian wine imported in containers of two litres or less.

China is a priority market for Treasury Wine Estates, which said it would cooperate with any requests for information received from Chinese or Australian authorities. 

Treasury Wine Estates had a difficult FY20 with NPAT falling 25% to $315.8 million. The fall reflected challenging conditions in the US wine market and the impact of COVID-19 on trading across all geographies. A final dividend of 8 cents per share was declared, taking full year dividends to 28 cents per share, a 26% decline in FY19. Treasury Wine Estates says it is positioning for the next phase and was optimistic about its ability to return to sustainable profit and margin growth over the medium to long-term. 

Unibail-Rodamco-Westfiield (ASX: URW) 

The Unibail-Rodamco-Westfield share price fell 12.89% last week to finish the week at $3.21. Rumours began circulating about a rights issue by the shopping centre operator last week. The company was forced to issue an announcement stating no decision had been taken. Deleveraging is a priority for Unibail, which has taken a number of steps to strengthen its balance sheet and liquidity in response to the pandemic. The second dividend installment was cancelled, non-essential capital expenditure deferred, and the development pipeline reduced. 

Unibail has disposed of €4.8 billion in assets since 30 June 2018 and intends to sell an additional €4 billion of assets in the next couple of years. Management continues to weigh the merits of potential strategies to strengthen the company’s financial profile, but Unibail says no decision has been made. Having been forced to close its shopping centres for an average of 67 days from March, Unibail saw recurring earnings per share decline 27.2% in 1H20. 

Cooper Energy Ltd (ASX: COE) 

The Cooper Energy share price fell 10% last week to close the week at 36 cents. Cooper Energy is an oil and gas company supplying customers like AGL Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG). Cooper Energy announced an agreement with APA Group (ASX: APA) last week to work together to complete commissioning of the Orbost Gas Processing Plant. The agreement provides a practical and commercial way forward for both entities to deliver much needed additional gas to south-east Australia. 

Commissioning of the plant has taken much longer than anticipated. But despite the plant’s variable processing rates and 21 days offline, the company was able to deliver a 61% increase in gas revenue in the June quarter. Quarterly production was up 118% giving FY20 production of 1.56 million boe, a 19% increase. A substantial increase in production is expected in FY21 through improvements to output thanks to the plant upgrade. 

Resolute Mining Limited (ASX: RSG) 

The Resolute Mining share price dropped 9.88% last week to finish the week at $1.14. The gold miner issued an operational update during the week after Mali president Ibrahim Keïta resigned. Resolute’s Syama Gold Mine is located in the country. The president’s resignation and the subsequent dissolution of government follows action by the military seeking to resolve the recent political crisis. Resolute advised that operations at the Syama Gold Mine were continuing as normal with no impact on production. Resolute has operated the mine since 2003 under the well-established mining laws of Mali. 

In the June quarter, Resolute produced a total of 107,183 ounces of gold, placing the company in a strong position to deliver full year guidance of 430,000 ounces of gold. The gold price has outperformed in 2020, and was trading close to $2850 an ounce earlier this month. It has since pulled back, and is now trading below $2750 an ounce. Plans are in place to improve production and deliver lower costs at Syama in the second half while exploration opportunities are evaluated. 

GWA Group Ltd (ASX: GWA) 

The GWA Group share price fell 9.42% last week to close the week at $2.50. The industrial company delivered its full year result last week revealing a drop in earnings and profits. The company’s top line was significantly impacted by lower construction activity and the impact of the COVID-19 pandemic. Earnings before interest and taxes EBIT from continuing operations declined 8% to $71.8 million. The lead to a 12% decrease in net profit after taxes from continuing operations, which was down to $44.9 million. Statutory profit, which was $94 million in FY19, fell to $43.9 million in FY20. However FY19 results included $50.8 million profits from the sale of the door and access systems business. 

CEO Tim Salt said: “While markets were challenging and compounded by the unforeseen impact of COVID-19, our focus continues to be on controlling those elements within our control.”

The company’s cost out program has delivered $5 million savings in FY20 and further short-term cost reduction delivered an additional $10.5 million in savings. 

More reading

• Fortescue and 2 more ASX 200 shares to watch this week
• G8 Education share price on watch after $239 million loss
• These ASX shares were top performers last week
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of APA 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 St Barbara Ltd (ASX: SBM) share price is one to watch this morning as the Aussie gold miner reported a 24% drop in underlying net profit after tax (NPAT).

Why is the St Barbara share price on watch?

St Barbara reported total gold production up 5.4% to 381,887 ounces at an all-in sustaining cost (AISC) of $1,369 per ounce, up 26.8% from the year prior.

The Aussie gold miner sold 381,105 ounces of gold at an average realised price of $2,123 per ounce, generating sales revenue of $827.7 million.

Lower output from the group’s Leonara and Simberi operations were offset by strong production from St Barbara’s Atlantic Gold acquisition.

This comes as global gold prices continue to surge to new record highs amid the uncertainty created by the coronavirus pandemic.

Gross profit and earnings before interest, tax, depreciation and amortisation (EBITDA) both jumped 26.1% higher to $442.9 million and $415.7 million, respectively.

However, a significant increase in depreciation and amortisation expenses affected the company’s bottom line, resulting in underlying NPAT of $108.5 million.

Cash contribution from operations totalled $273.2 million with net operating cash flow climbing 16.1% to $279.5 million.

The St Barbara share price has been rocketing higher this year and is up 24.2% prior to this morning’s open. The group’s FY20 return on equity came in at 10% with a 7% yearly change in closing share price.

The Aussie miner reported a $98 million net cash position as at 30 June 2020. That comprises cash and term deposits of $450.5 million offset by $307 million of debt.

Dividend

All eyes will be on the St Barbara share price this morning as management announced a 4 cents per share (cps) final dividend.

Including the 4 cps interim dividend, St Barbara will pay out a full-year dividend of 8 cps. Based on Friday’s closing price of $3.39 per share, that translates to a dividend yield of 2.4% per annum.

Outlook

Unlike many ASX companies this earnings season, St Barbara did provide FY21 guidance.

The Aussie gold miner expects gold production of 370,000 to 410,000 ounces this financial year. St Barbara is forecasting an AISC of $1,360 to $1,510 per ounce for those production levels.

Sustaining capital expenditure of $97 million to $115 million is expected with growth capital of $49 million to $57 million. Management is expecting exploration expenditure of between $30 million to $35 million.

COVID-19 continues to present challenges with St Barbara citing a focus on liquidity and capital management in the short-term.

More reading

• Expert warns that record-breaking gold price is facing painful correction
• Up 21% in a month, is the Northern Star share price a buy?
• Why this ASX miner that’s missing the rally is one of my key picks for FY21
• Leading fundie says the ASX gold share boom is just beginning
• Should you buy ASX gold shares or FAANG stocks in August?

Motley Fool contributor Ken Hall 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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It was another wild ride for the S&P/ASX 200 Index (ASX: XJO) last week as the benchmark index edged 0.2% lower to 6,111.20 points. There were a number of ASX 200 shares under pressure as the August earnings season continued to surprise.

Here’s why I’m keeping an eye on Fortescue Metals Group Limited (ASX: FMG) and 2 more ASX 200 shares in the week ahead.

Why I’m watching Fortescue and 2 more ASX 200 shares

I think this could be a good week for the Fortescue share price. Fortescue is set to announce its full-year results on Monday and I’m hoping for a strong result.

Iron ore prices have been surging and fellow miner BHP Group Ltd (ASX: BHP) reported a solid result in its iron ore segment.

The Fortescue share price is up 66.9% this year but could break its current all-time high of $18.92 on the back of a strong annual report.

Other than Fortescue, I think the buy now, pay later (BNPL) industry is worth watching. Both Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) are reporting their results on Thursday.

The Afterpay share price is certainly one to watch after the ASX 200 fintech share rocketed to a new all-time high of $82.00 last week.

Online retail sales have exploded during the coronavirus pandemic which has been good for Afterpay earnings. There are high expectations for the Aussie company in August but I’m hoping they can deliver this week.

Speaking of retail, the Scentre Group (ASX: SCG) share price is on my watchlist. The ASX 200 real estate investment trust (REIT) owns and operates Westfield shopping centres across Australia and New Zealand.

Unlike the online sector, bricks and mortar retail sales have been hit hard by COVID-19 restrictions. The Scentre share price has dropped 46.5% this year and is under pressure coming into the August earnings season.

I don’t have high expectations for strong funds from operations (FFO) or asset valuations. However, if Scentre management can chart a potential recovery and provide a strong growth outlook, the ASX 200 REIT share could be on the move.

More reading

• Last week’s worst performing ASX shares
• Afterpay share price on watch after announcing European expansion
• G8 Education share price on watch after $239 million loss
• These ASX shares were top performers last week
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 Afterpay Ltd (ASX: APT) share price will be on watch on Monday after it announced its expansion into mainland Europe.

What did Afterpay announce?

This morning Afterpay announced that its wholly owned subsidiary, Clearpay, has entered into a share purchase agreement with NBQ Corporate to acquire 100% of the shares outstanding in Pagantis SAU and PMT Technology SLU (collectively, Pagantis).

According to the release, the two parties have agreed a minimum consideration of 50 million euros. This comprises an upfront payment of 5 million euros in cash upon completion and a deferred consideration of 45 million euros in cash, payable 3 years post completion.

The deferred consideration can exceed 45 million euros, with any excess being payable in cash or Afterpay shares, provided the equity value of Pagantis exceeds 45 million euros three years post completion.

Completion of the acquisition is expected to occur in or before December 2020. It remains subject to Bank of Spain regulatory approval for the proposed change of control.

What is Pagantis?

Pagantis provides a range of buy now pay later and traditional credit services across Spain, France, and Italy. It also has regulatory approval to operate in Portugal. The addressable ecommerce market in these four countries exceeds 150 billion euros or $247 billion.

It has ~1,400 active merchants and ~150,000 active customers. Merchants and customers that are relevant to Clearpay’s European launch strategy will be invited to transition onto the re-configured product upon launch in the third quarter of FY 2021.

Why Europe?

Afterpay revealed that it is expediting its expansion into new markets to capitalise on strong consumer and merchant demand and to increase its global footprint. And it has identified the European Union (EU) as the next logical step for its international expansion. This is due to its large millennial population, vast fashion and beauty retail markets, and significant debit card usage.

Management estimates that the total addressable ecommerce market in the EU exceeds 300 billion euros or almost half a trillion dollars.

As rival Zip Co Ltd (ASX: Z1P) did with its U.S. expansion, the company believes acquiring its way into this new market is the best option. It feels it will both accelerate and de-risk the roll out of its Clearpay branded platform across the EU market.

It also notes that the acquisition provides a fully staffed and experienced team, an existing technology stack and intellectual property, as well as an immediate regulatory right to operate across all EU member states (subject to regulatory approval).

Management also advised that the expansion into the EU is consistent with demand from its marquee global retailers. It notes that the ability to service its retailers in all their key markets strengthens its relationships and contributes to its competitive moat.

Management commentary.

CEO And Managing Director, Anthony Eisen, commented: “Our momentum to date has given us the confidence to expedite our expansion into new global regions. Entering into such internationally relevant markets like the US and the UK and seeing our growth outpace what we experienced in our more mature Australian market, validates the appeal of our product on a global scale.”

“Acquiring Pagantis provides us with the necessary regulatory licencing, resourcing and infrastructure to expedite the launch of Afterpay into key countries in Southern Europe and beyond,” he added.

Mr Eisen concluded: “The new markets we will be entering will provide our global retailers with the opportunity to offer Afterpay in more regions and for us to provide a whole new customer base with access to our differentiated and customer centric model.”

More reading

• Fortescue and 2 more ASX 200 shares to watch this week
• 2 of the best ETFs for investing in ASX shares
• Why Afterpay and these ASX shares just hit record highs
• Top brokers name 3 ASX shares to buy next week
• 5 things to watch on the ASX 200 next week

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 ZIPCOLTD FPO. 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 G8 Education Ltd (ASX: GEM) share price is one to watch today after posting a half-year statutory net loss after tax of $239 million.

What does G8 Education do?

G8 Education is Australia’s largest private provider of quality early childhood education and care, with more than 58,000 children attending one of its 470+ Australian centres every day. 

Why is the G8 Education share price worth watching today?

The G8 Education share price is worth watching after reporting a 28.4% decrease in half-year revenue to $308.3 million. This was largely due to the impact of the coronavirus pandemic and subsequent restrictions on the early childhood industry.

Underlying earnings before interest and tax (EBIT) fell 44.4% to $28.7 million thanks to the pandemic but offset by significant government support.

That flowed through to the bottom line with the educator posting a $239.2 million net loss, inclusive of a $237 million non-cash impairment expense. Underlying net profit fell by 55.9% to $11.6 million for the year.

Total expenses reduced by 24% from FY19 on a pro-forma basis largely thanks to reduced employee expenses during the year.

The group’s current occupancy is 69% with attended occupancy of 50% as at 30 June 2020. 

No interim dividend for shareholders

The G8 Education share price will be worth watching as management declined to pay an interim dividend. This comes at a time of significant uncertainty in terms of future earnings with management instead focusing on capital management.

The company’s dividend policy remains temporarily suspended with the deferred FY19 final dividend to be paid on October 30.

However, a dividend may be paid in respect of calendar year 2021 depending on subsequent financial performance.

Outlook

Management was unable to provide guidance for FY21 given the significant uncertainty the company is facing right now.

G8 will perform a strategic portfolio review to address underperforming centres. However, management cited the company’s “financial flexibility” in dealing with current challenges to emerge from COVID-19 as a “stronger business”.

The G8 Education share price is down 45.5% in 2020 while the S&P/ASX 200 Index (ASX: XJO) has fallen 8.7% lower this year.

More reading

• Last week’s worst performing ASX shares
• Fortescue and 2 more ASX 200 shares to watch this week
• These ASX shares were top performers last week
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Ken Hall 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 Australian share market ended last week slightly lower as reporting season began to draw to a close. The S&P/ASX 200 Index (ASX: XJO) ended the week 0.2% lower with the All Ordinaries Index (ASX: XAO) performing marginally better, down just 0.02% for the week.

Uncertainty over economic recovery both at home and in the US, as well as geopolitical tensions with China, have dampened sentiment, despite some better than expected earnings results. 

This earnings season has laid bare the economic damage of COVID-19. But some ASX shares have been surprisingly resilient, and are flourishing in pandemic conditions. Wesfarmers Ltd (ASX: WES) reported stronger than expected results as Bunnings and Officeworks saw sales surge in lockdown. Afterpay Ltd (ASX: APT) advised earnings for the full year would be 96% higher than forecast just last month thanks to better than expected collections. Let’s take a look at some of the best performing shares on the ASX last week. 

Phoslock Environmental Technologies Ltd (ASX: PET) 

The Phoslock Environmental Technologies share price gained a whopping 48.94% last week to finish the week at 35 cents. The share price has been trending upwards since hitting a low of 19 cents earlier in the month when Phoslock advised first half revenues were substantially down on the prior period.

Flooding has impacted key projects in China and COVID-19 has impacted a number of projects across the globe. In Europe, several projects have been delayed where authorities have cited more pressing expenditure priorities in the face of the pandemic. While these projects have been delayed, none have been cancelled, and Phoslock believes they will proceed in due course. 

Phoslock has advised that its global pipeline remains strong with a current contract value of $380 million. Projects in Brazil are continuing as planned, with positive feedback on the efficacy of Phoslock’s technology. Work in North America is proceeding, with the company building a strong and widespread portfolio of treatments in the US. This provides a positive basis for confidence in developing US business activity. Although there have been challenges to the development of the China business, many ongoing projects are unaffected including the South Beijing canals. 

WiseTech Global Ltd (ASX: WTC)

The WiseTech Global share price soared 39.99% last week to close the week at $27.90. The logistics technology company released its full year results during the week, revealing solid revenue growth despite COVID-19 headwinds. Revenue increased 23% to $429.4 million, in line with guidance, with recurring revenue accounting for 89% of revenue, up from 88% in FY19. FY20 Statutory NPAT was $160.8 million, up 197% on FY19. This included a non-cash fair value gain of $110 million thanks to the renegotiation of earn out obligations. Excluding this gain underlying NPAT was flat at $52.6 million. 

Founder and CEO Richard White said: “Notwithstanding the unprecedented challenges of COVID-19, our business has remained resilient, delivering solid revenue and EBITDA growth in FY20 in line with guidance.” Acquired businesses contributed 29% of growth, driven predominantly by the full-year impact of the 14 acquisitions completed in FY19 and five acquisitions completed in FY20. 

Idp Education Ltd (ASX: IEL) 

The Idp Education share price gained 31.64% last week to close the week at $18.43. IDP Education provides international education services helping students to study in English speaking countries. Border closures have disrupted Idp Education’s business, but the company nonetheless reported strong results for the full year. Earnings before interest and tax (EBIT) increased 11% to $107.8 million. Net profit after tax and amortisation (NPATA) was $70.4 million, up 3%. 

CEO Andrew Barkla said: “Our results reflect strong momentum in the first half of the year followed by a pivot towards disciplined capital management and product innovation in the second half.” The pandemic prompted the company to accelerate its digital strategy delivery which enabled an agile response to COVID-19 restrictions. Disciplined cost control measures also delivered $35 million in overhead savings in the second half compared to the first. 

Monadelphous Group Limited (ASX: MND) 

The Monadelphous Group share price rose 29.26% last week to close the week at $11. The share price surged during the week when the engineering group delivered better than expected results. Although second half performance was significantly impacted by COVID-19, Monadelphous managed to record revenue of $1.65 billion for the full year, a 2.6% increase on FY19. Net profit after tax was $35.5 million, a decrease on FY19’s $57.4 million profit. 

Disciplined financial management practises were instituted as a result of the uncertainty created by the pandemic. This resulted in strong cash flow from operations of $119.1 million in FY20, with Monadelphous ending the year with a cash balance of $208 million. The company has secured approximately $1.2 billion in new contracts and extensions since the beginning of the financial year. This means Monadelphous enters the new financial year with a solid forward workload and well positioned to capitalise on opportunities in the resources sector which are expected to arise over coming years. 

Codan Limited (ASX: CDA) 

The Codan share price gained 26.67% last week to finish the week at $10.45. The technology company also released its full year results last week, revealing record sales, profits, and dividends. The company, which manufactures technology used by mining companies, security and military groups, governments, humanitarian organisations, and adventurers, recorded the highest full year sales in its history of $348 million. This flowed through to a record statutory net profit after tax of $64 million, a 40% increase. Results were driven by the strength of gold detector sales, continued growth of recreational metal detectors, and major contracts delivered by the communications business. 

Codan announced a final dividend of 11 cents a share, fully franked. This brought full year dividends to 18.5 cents, a 32% increase on the prior year. Codan has been diversifying its revenues by releasing more new products, transitioning to a full solutions provider and broadening its geographic footprint. This has resulted in more evenly distributed demand across international markets with the company saying it is well-placed to deliver another strong performance in FY21. 

 

More reading

• Last week’s worst performing ASX shares
• Fortescue and 2 more ASX 200 shares to watch this week
• G8 Education share price on watch after $239 million loss
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• 2 of the best ETFs for investing in ASX shares

The post These ASX shares were top performers last week appeared first on Motley Fool Australia.

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The NIB Holdings Limited (ASX: NHF) share price will be in focus today following the release of its full year results.

How did NIB perform in FY 2020?

For the 12 months ended 30 June 2020, the private health insurer reported a 3.4% increase in total revenue to $2.5 billion. This was driven by premium increases in 2019 and all of its health insurance businesses growing their membership numbers. The latter saw the company report policyholder growth of 1.9% for the year, compared to industry growth of 0.4%. This means NIB accounted for more than 41% of total industry growth for the year.

Things weren’t as positive for its earnings due to a sizeable increase in claims expense. NIB’s claim expense (including a deferred claims provision of $98.8 million) was up 6.7% to $1.9 billion in FY 2020. This ultimately led to its underlying operating profit falling 25.6% to $150.1 million for the year.

Also weighing on its profits were volatile markets, which led to net investment income falling 54% to $16.6 million over the period. This led to the company posting a net profit after tax of $89.2 million, down 40.3% on the prior corresponding period. According to CommSec, the market was expecting a net profit after tax of $95.02 million. So this profit result is a little short of expectations.

Despite the sizeable profit decline, the company has still declared a final dividend. It will pay shareholders a fully franked 4 cents per share final dividend, down from a final dividend of 13 cents per share last year. This brought its full year dividend to 14 cents per share, compared to 23 cents per share in FY 2019.

Outlook.

NIB advised that it continues to target net organic policyholder growth of 2% to 3% in Australian residents health insurance business. And while it is wary about macroeconomic threats, current market conditions look conducive.

In addition to this, it notes that the sector outlook in New Zealand is similar and market conditions in other businesses remain challenging. Though, for the latter, it feels the longer-term fundamentals are good.

The company’s Managing Director, Mark Fitzgibbon, commented: “COVID-19 remains a confounding factor in our planning and forecasting. It’s implication for sales, claims, expenses, investment income and earnings is enormous. Nevertheless, we have cause to have confidence in our arhi and New Zealand businesses and we’re adjusting strategy in other parts of the Group to adapt to current circumstances,”

More reading

• 5 things to watch on the ASX 200 on Monday
• Where to now for the NIB share price?

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

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Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) has become the most shorted share on the ASX with short interest of 13.1%. Short sellers have been increasing their positions following its full year results release last week. They appear to believe the Webjet share price is severely overvalued based on its medium term outlook.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest reduce slightly week on week to 11.9%. Short sellers appear to believe the pandemic is going to undo the hard work the department store operator has put into its turnaround plans.
• Speedcast International Ltd (ASX: SDA) has short interest of 11.7% again. The communications satellite technology provider’s shares remain suspended while it declares itself bankrupt. It has recently made progress and announced that it has received a US$395 million equity commitment to complete its chapter 11 recapitalisation.
• Inghams Group Ltd (ASX: ING) has 10.3% of its shares held short, which is up week on week once again. Last week the poultry producer released a disappointing full year result. Inghams reported a 68.2% drop in profits for FY 2020.
• Orocobre Limited (ASX: ORE) has seen its short interest remain flat week on week at 8.9%. Short sellers have been going after the lithium miner due to an oversupply of the battery making ingredient and weak demand.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has also seen its short interest remain flat this week at 7.8%. Short sellers appear concerned that lockdowns will weigh heavily on demand for its SCENESSE product. This product is used to prevent skin damage from the sun in people with erythropoietic protoporphyria.
• InvoCare Limited (ASX: IVC) has short interest of 7.7%, which is down slightly week on week. Last week the funerals company released its half year results and revealed a sharp decline in profits. InvoCare’s performance was hit by social distancing restrictions.
• Corporate Travel Management Ltd (ASX: CTD) has entered the top ten with short interest of 7.6%. As with Webjet, short sellers appear to believe this travel company’s valuation is expensive given its medium term outlook.
• Nearmap Ltd (ASX: NEA) is back in the top ten with short interest of 7.5%. Short sellers may believe the aerial imagery technology and location data company is going to struggle in FY 2021 because of the pandemic.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest fall slightly to 7.45%. Short sellers continue to close their position after a series of better than feared updates out of the banking sectors.

More reading

• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• Are these ASX shares future millionaire makers?
• Top brokers name 3 ASX shares to sell next week
• Top brokers name 3 ASX shares to buy next week
• These were the best performing ASX 200 shares last week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Nearmap Ltd., and Webjet Ltd. The Motley Fool Australia has recommended InvoCare 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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Exchange-traded funds (ETFs) are a great way to invest into ASX shares.

ETFs allow us to invest in many different businesses at once in a single investment. I think it’s an attractive way to passively be invested in the share market and benefit from the long-term capital growth.

ASX shares are a good place to invest. Australia is a good country for businesses to operate in and it’s a good base for some mid-cap ASX businesses to launch their global plans from.

So which ETFs are good options to invest into ASX shares? Here are two of the best in my opinion:

BetaShares Australia 200 ETF (ASX: A200)

This is the lowest-costing ETF for ASX share investors. BetaShares offers this ETF for an annual cost of just 0.07% per annum – that’s great value. It’s even cheaper than the Vanguard ASX option. The lower the costs of an ETF, the higher the net returns.

It aims to track the returns of the S&P/ASX 200 Index (ASX: XJO). That means a sizeable amount of the returns of the ETF are influenced by the ASX’s biggest blue chips.

Looking at the latest holdings, BetaShares Australia 200 ETF’s biggest exposures are: CSL Limited (ASX: CSL), Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Wesfarmers Ltd (ASX: WES), Australia and New Zealand Banking Group (ASX: ANZ), Woolworths Group Ltd (ASX: WOW), Macquarie Group Ltd (ASX: MQG) and Transurban Group (ASX: TCL).

The fact that you get exposure to 200 businesses in a single investment is good diversification, although it’s not as attractive as other ETFs. When you look at the sector allocation, around half of the ETF is invested in just financial and resource businesses.

However, in normal times – when COVID-19 isn’t around – the ASX normally offers an attractively-high dividend yield because banks and miners usually have higher dividend payout ratios than other sectors.

Betashares S&P ASX Australian Technology ETF (ASX: ATEC)

However, what the ASX 200 offers in income, it seems to lose in growth potential. Most ASX blue chip shares have limited growth prospects, but ASX technology shares tend to offer more profit growth potential with higher margins and global growth aspirations.

Software can be replicated for new customers at a very low cost. New revenue tends to come with a higher profit margin, more of it is added to the bottom line.

This ETF gives exposure to many of the ASX’s leading technology companies in segments like information technology, consumer electronics, online retail and medical technology.

It was only launched in March 2020, but it has been a strong performer since then. Since 4 March 2020 it has risen in value by 31.8%. The recovery since the COVID-19 crash has been strong. Over the past three months the ETF has produced net returns of 25.2%.

Some of its largest holdings right now are: Afterpay Ltd (ASX: APT), Xero Limited (ASX: XRO), SEEK Limited (ASX: SEK), REA Group Limited (ASX: REA), Nextdc Ltd (ASX: NXT), Carsales.Com Ltd (ASX: CAR), Altium Limited (ASX: ALU), Appen Ltd (ASX: APX) and WiseTech Global Ltd (ASX: WTC).

Many of the above names are leaders in their industries and are among the best businesses on the ASX.

This ETF’s annual management fee, at 0.48% per annum, is more than BetaShares Australia 200 ETF. But the most important number for investors is the net return figure, not the annual cost figure. The Betashares S&P ASX Australian Technology ETF return has been strong so far, which has been driven by its biggest position – Afterpay.

Foolish takeaway

Both of these ETFs are good investment options for ASX investors to consider. If you want to get the cheapest ETF to track the ASX 200, then you could go for the one I have written about in this article. However, for medium-to-long-term growth I think the Betashares S&P ASX Australian Technology one will be the better performer because of the underlying investments.

More reading

• Why Afterpay and these ASX shares just hit record highs
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• Are these ASX shares future millionaire makers?
• 3 ASX growth shares to buy in September
• Top brokers name 3 ASX shares to buy next week

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd., WiseTech Global, and Xero. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, Transurban Group, and Wesfarmers Limited. The Motley Fool Australia has recommended carsales.com Limited, REA Group Limited, and SEEK 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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If I had to pick which ASX share I’d buy this week, other than last week’s pick, it would be Bubs Australia Ltd (ASX: BUB).

A quick overview of Bubs

Bubs is best known as an infant formula business. The company was set up in 2006 by current-CEO Kristy Carr.

The ASX share’s main range of products is a goat milk derived infant formula. Three years ago Bubs acquired NuLac Foods, Australia’s largest producer of goat milk products, including CapriLac, a leader in goat milk, powder and yoghurt, and Coach House Dairy, a premium range of Jersey milk products. That acquisition guaranteed exclusive supply of locally sourced fresh goat milk from Australia’s largest herd of milking goats.

Bubs also owns its a Chinese-approved manufacturing facility called Deloraine.

I think Bubs is a great buy for a number of reasons:

International growth

Entering the global market can turn a consumer business from being a decent opportunity to one with much larger potential. Look how much further A2 Milk Company Ltd (ASX: A2M) has grown because it is servicing the Asian and USA markets.

Bubs is doing a really good job of getting its foot into the door of international markets. We can see the growth in the ASX share’s June 2020 update a few weeks ago.

In June 2020 we saw Bubs’ China direct sales increase by 37% – this now represents around a fifth of total sales. Its ‘other export’ sales were up 71% in the fourth quarter of FY20, largely helped by the launch into Vietnam. Other international sales accounted for 9% of total sales in FY20.

Asia is a much larger total addressable market for Bubs compared to Australia. This region alone could be enough for the company to be a long-term market outperformer.

I like the ASX share’s recent moves of launching grass-fed organic cow infant formula as well as a range of vitamin and mineral supplements. Both of these segments could become material for Bubs in the next few years as their distribution grows across various stores.

Defensive, essential product

I think this COVID-19 period has shown us how important Bubs’ products are to families. Nutrition is essential, it’s not a discretionary item. I think Bubs’ existing revenue base is more defensive than some investors may give it credit for.

We saw in the FY20 third quarter how much demand there was for Bubs’ products when households were stocking up. The ASX share’s revenue grew by 67% compared to the prior corresponding period and it went up 36% on the previous quarter.

Rising profit margins

An ASX share can generate strong returns when there is a combination of strong revenue growth and rising profit margins.

In FY20 the total revenue rose by 32% to $62 million and the ‘normalised’ gross profit margin improved by 3 basis points, according to Bubs.

What’s most exciting is that infant formula, which has a gross profit margin of around 40%, is becoming a bigger part of Bubs’ total sales. In FY19 it made up 43% of total revenue, in FY20 it was 55% of total revenue. In FY20 infant formula revenue increased by 69%.

Margins could rise further as Bubs grows into Singapore, Hong Kong and Malaysia.

Near-term profitability

Reaching profitability is one of the most important things for a business to convince investors that it’s on the right path.

In FY21, excluding any residual COVID-19 adverse impacts, The ASX share expects to achieve profitability at the normalised earnings before interest, tax, depreciation and amortisation (EBITDA) level. That would be a very promising step. 

Bubs thinks the group margin will be further enhanced by optimised product mix, the highest and best use of the milk pool allocation and enhanced value chain.

Foolish takeaway

Bubs could see growth in every segment and every geographic region in FY21. I think there’s a lot of promise for Bubs over the next 12 months and particularly the next five to ten years. I think Bubs is a very exciting business which is worth owning for the long-term, I’d be happy to buy it this week.

More reading

• The smartest 7 ASX shares to buy if you have $2,000
• Should you buy the beaten down shares of Bubs and Webjet?
• 2 five-star ASX growth shares to buy in August
• 2 ASX shares you could invest $500 into
• Should you buy these 2 ASX dairy shares instead of A2 Milk?

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 BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BUBS AUST 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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