Short-sellers have pared their bearish bets as the S&P/ASX 200 Index (Index:^AXJO) recovered from its COVID-19 meltdown. But these traders have stepped up their attack against a number of popular stocks this month!

The number of shares that are shorted dropped by 4.4% since the market bounced from its bear market low on 23 March.

Short-sellers are those who borrow stock to sell on-market with the aim of buying it back at a lower price later to profit from the difference.

It’s useful to keep an eye on what this group does. While they don’t always get their trades right, they tend to be more sophisticated than the average investor.

ASX stock with largest increase in shorts

One stock that caught their eye is the Southern Cross Media Group Ltd (ASX: SXL) share price after its big surge in May.

The regional broadcaster experienced the largest increase in shorts of any ASX stock this month, according to the latest ASIC data which is always a week behind.

The number of shares in the regional broadcaster that have been short-sold increased a whopping 362 basis points to 7.2% since the start of this month to 15 June.

It seems Southern Cross isn’t a recent favourite. Short-interest in the company jumped 543 basis points (or 5.43 percentage points) since 23 March.

Losing appetite

In second place is Freedom Foods Group Ltd (ASX: FNP). Shares in the nutritional food and drink supplier saw the second biggest increase in shorts this month.

Short interest in the company jumped 185 basis points to 4.8%, and that’s probably something to do with its dismal trading update as it was hit by the coronavirus shutdown.

Management said it was seeing green shoots of recovery but short-sellers don’t seem to share that view.

Looking tarnished

In third spot is the Lovisa Holdings Ltd (ASX: LOV) share price with short-interest in the jewellery chain increasing 164 basis points to 6.3% in the first two weeks of June.

The performance of the retailer stands in contrast to some of its peers who have benefited from the COVID-19 restrictions. These lucky retailers like Temple & Webster Group Ltd (ASX: TPW) and Premier Investments Limited (ASX: PMV), which have seen online sales spike.

But as I reported last week, Lovisa isn’t as well placed due to its weak online presence and expected weak demand as weddings and other social events are unlikely to return to normal anytime soon.

Other notable stocks that have seen big increases in short-interest include fund manager Perpetual Limited (ASX: PPT), consumer finance company FlexiGroup Limited (ASX: FXL) and travel agent Flight Centre Travel Group Ltd (ASX: FLT).

More reading

• ASX 200 up again, ASX retailers make big gains
• These 3 ASX ETFs are yet to recover from the market crash
• Investing experts warn of second ASX market crash
• What’s next for these 4 ASX travel shares?
• Temple & Webster shares continue to grow despite coronavirus restrictions

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia has recommended FlexiGroup Limited, Flight Centre Travel Group Limited, Freedom Foods Group Limited, and Temple & Webster 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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Today, I’m going to discuss 3 ASX shares that I’m absolutely desperate to add to my portfolio in 2020.

I’m not the kind of investor who buys a share just because I like (or love) the company. For me, the price also has to make sense, and preferably offer some kind of margin of safety as well.

So here are the 3 ASX shares that I’m desperate to own by the end of this year, but for which the stars have not yet aligned.

An ASX blue chip staple

Brickworks Limited (ASX: BKW) is a solid ASX blue chip that is primarily in the business of making building materials (yes, including bricks). It’s been around since 1934 and has managed to survive everything thrown at it since – including the Great Depression, World War II and the global financial crisis. Building materials are a cyclical game to be in, but Brickworks tempers this by also leasing out tracts of land it owns for rent. This gives the company a stable and reliable source of income on the side, which helps buttress its finances when things get tough. As such, I would love to own this company for a long-term, buy-and-hold investment in 2020.

An ASX healthcare giant

CSL Limited (ASX: CSL) is another ASX share I would love to see join my portfolio in 2020. It’s that rare combination of an ASX blue chip as well as a growth company, which I find highly desirous to have in a portfolio. Due to its world-class R&D programs, I think CSL will continue to be in the vanguard of the blood and plasma medicine space for the foreseeable future. I also feel confident the Aussie giant will continue to reward its shareholders with strong capital growth as well as growing dividends. As such, CSL is on the top of my 2020 wishlist.

A defensive ASX growth share

How can a company be defensive and a growth share? Well, Cleanaway Waste Management Ltd (ASX: CWY) answers that question, with a highly successful growth strategy to expand in the defensive waste collections/management business. Waste is something we all produce, through thick and thin, in good times and bad times. I don’t see this changing anytime soon either – such is human nature.

Cleanaway has been a high growth share for a while – rising from 75 cents per share in 2015 to $2.12 today. Due to waste being an evergreen and growing industry (from population increases if nothing else), I think Cleanaway is a great, long-term buy. I would love to see an entry point in the Cleanaway share price this year that matches the lows we saw in March. I might have to wait a while, but here’s to holding out hope!

More reading

• Top fund manager reveals some of the best ASX shares to own
• I would buy and hold Kogan and these ASX shares until 2030
• What are the best ASX shares for dividends?
• How the ASX 200 can help first home buyers save for a deposit
• ASX 200 finishes higher by 0.8%, Carsales share price driven up by FY20 guidance

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks. 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 S&P/ASX 200 Index (ASX: XJO) rose by 0.1% to 5,943 points today.

It was retail that dominated the headlines. According to the stats produced by the Australian Bureau of Statistics (ABS), Australian retail sales surged 16.3% in May to $4.03 billion. This is the largest month-on-month rise in 38 years.

On the ASX it was also retailers that had some of the best share price performances:

Nick Scali Limited (ASX: NCK)

The Nick Scali share price climbed by around 20% today, making it one the leading businesses.

The company said that it’s now expecting second half net profit to be up 15% to 20% compared to the second half of FY19, which will help achieve FY20 underlying net profit of between $39 million to $40 million. The underlying profit excludes the impact of the gain of the sale of property and the impact of the adoption of AASB 16.

FY20 revenue is expected to be in the range of $260 million to $263 million. The fourth quarter of FY20 to 14 June 2020 saw written sales order growth of 20.4%.

Nick Scali responded to showroom closures by launching its digital offering, allowing customers to purchase the entire range of Nick Scali products through digital channels. Management see further scope to invest into its digital capabilities, though it’s early days.

Nick Scali estimated that store closures meant $9 million to $11 million of sales were unable to be recorded. However, the range of actions taken by management, plus government support, meant the second half profit should be solid.

The company expects sales revenue for the first quarter of FY21 will be up approximately 30%. This should underwrite profit growth for the first half of FY21.

The Nick Scali board has decided to bring forward the payment of the deferred interim dividend. The deferred 25c per share dividend will be paid on 29 June 2020.

Adairs Ltd (ASX: ADH)

The Adairs share price rose by 10.5% after giving a trading update.

Adairs said that in the 24 weeks to 14 June 2020, like-for-like (LFL) online sales rose by 92.6%. LFL total sales increased by 27.4%.

In the year-to-date numbers, which is for the 50 weeks to 14 June 2020, LFL online sales were up 64% and total LFL sales were up 15.7%.

The managing director and CEO of Adairs, Mark Ronan, said: “Since Adairs stores re-opened we have seen strong sales across both the store network and online channel as customers return for the in-store service and experience they expect from Adairs. Pleasingly, Mocka’s online sales growth has continued at high levels. Both businesses have also remained disciplined on inventory and margin management.

“Our omni channel strategy and focus on the home decorating and furnishing category has served us well during this period where our customers have spent significantly more time at home.”

In terms of final FY20 guidance, the company is now expecting the Adairs division to generate between $358 million to $362 million of revenue (with around 27% of this total being online). Mocka is expected to contribute $27 million to $28 million of sales. Overall, the company is expecting to report $385 million to $390 million of revenue in FY20.

Other noteworthy movements of the day

The ASX 200 gold miner Evolution Mining Limited (ASX: EVN) share price dropped around 1% after giving a Mt Carlton update.

Sydney Airport Holdings Pty Ltd (ASX: SYD) suffered a share price drop of 2% after releasing another monthly update of a huge decline of passenger numbers.

Buy now, pay later business Splitit Ltd (ASX: SPT) saw its share price end 6.9% higher at $1.47, though it reached $1.88 in early trading. Yesterday the company announced it had made an agreement with Mastercard.

The Orora Ltd (ASX: ORA) share price dropped 15.7% today after going ex-dividend.

There were some impressive gains today at the top end of the ASX 200. The AP Eagers Ltd (ASX: APE) share price went up almost 10%, the Netwealth Group Ltd (ASX: NWL) share price rose 9% and the Avita Medical Ltd (ASX: AVH) share price climbed 8.3%.

More reading

• These 3 ASX ETFs are yet to recover from the market crash
• Investing experts warn of second ASX market crash
• 3 ASX shares I think are super cheap right now
• Why the Splitit share price has shot up 135% in 2 days
• ASX stock of the day: Nick Scali share price leaps 21% on sales numbers

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 Avita Medical Limited and Netwealth. The Motley Fool Australia has recommended Avita Medical 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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ASX big bank dividends are a write-off in FY20 but are set to rebound as we head into the new financial year.

The question is which of the big four dividend favourites will generate the best yield for income seeking investors in FY21?

The answer isn’t quite as straightforward to work out. While we are very likely to see a dividend recovery in the near-term, the payouts are unlikely to match pre-COVID-19 levels for at least a few years.

How to value the big banks

But trying to work out what the dividend is going to be is important as dividends are the primary driver for the sector, in my opinion.

Morgan Stanley throws in credit quality and capital on top of dividends as key considerations for the sector as it calculates what is a sustainable payout for the sector.

The risk of loan defaults and capital adequacy are important in so much as how they relate to dividends though, but that’s just my opinion.

Key things you should know about ASX bank dividends

On that note, there are some interesting findings from Morgan Stanley. Firstly, the broker doesn’t believe dividends will return to FY19 levels until sometime after FY22 as dividends forecast for that year will still be around 25% lower than last financial year.

However, it believes that dividends will trough in FY20 before staging a gradual recovery. This means dividends are set to rise over the next few years.

Further, the average dividend payout ratio in FY22 is estimated to be 64%. That’s well below the 80% plus range that the big four were coughing up during in their heydays.

But the 64% is still high by global standards as US and UK banks are only expected to pay out 32% and 47% of their profits as dividends, respectively, according to Morgan Stanley’s estimates.

The ASX big bank with the best yield

Coming to the main event, the ASX big bank with the best forecast dividend for FY21 is Westpac Banking Corp (ASX: WBC).

The broker is tipping a $1.05 a share distribution for the next financial year, and that increases to $1.20 in FY22.

This gives Westpac a net yield of 5.8% in FY21 and 6.6% the following year. Throw in the franking and the gross yield shoots up to 8%-9%.

How the other banks’ dividends compare

Next on the dividend leader board is Australia and New Zealand Banking GrpLtd (ASX: ANZ). The stock is sitting on an expected net yield of 5.6% in FY21 and 6.7% in FY22.  

National Australia Bank Ltd. (ASX: NAB) is in third place with a net yield of 5.1% next year and 5.9% in FY22, while Commonwealth Bank of Australia (ASX: CBA) is sitting on an expected yield of 4.9% and 5.4% for the two years, respectively.

Foolish takeaway

I won’t necessarily say that the big bank with the best yield right now is the top buy. The yields can change as bank share prices fluctuate, so WBC may not hold on to its crown next week.

What I will say is that even CBA’s gross yield (lowest of the lot) of 7% is looking quite appealing in this record low interest rate environment.

CBA has the strongest balance sheet and is arguably the best placed big bank. So, while it’s the most expensive of the big four and has the skinniest yield, it remains my top pick in the sector given the uncertain times we live in.

More reading

• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high
• Where to invest for reliable dividend shares
• Diversify your portfolio with 3 top ASX 200 shares from 3 sectors
• Beat the cash rate cuts with these top ASX dividend shares
• How the ASX 200 can help first home buyers save for a deposit

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. 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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How different the world of investing is today than it was back in March… At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is motoring along at 5,942 points. At these levels, we are now up more than 30% from the lows we saw in March, although still aways from the all-time highs we were seeing in February.

But some investments have done one better. Just this week, the BetaShares Nasdaq 100 ETF (ASX: NDQ) made a new all-time high. This ASX exchange-traded fund (ETF) tracks the US Nasdaq exchange and counts some of the biggest tech companies in the world (like Microsoft and Amazon.com) as constituents.

But not all ETFs are flying so high.

Here are 3 that are still substantially below their early 2020 highs, and that might make good investments today for long-term returns:

A top global shares ASX ETF

The iShares Global 100 ETF (ASX: IOO) is an ETF that tracks the 100-largest global companies across the advanced economies of the world. These are largely made up of American shares like Apple, Microsoft, Facebook and Alphabet, but the United Kingdom, Canada, Japan and even Australia get exposure, too.

Despite the recovery in global markets since March, this ETF is still trading around $77 a unit – a fair distance from the $85+ price tag it was asking back in February. Thus, it might be a good time to consider this blue chip bastion today.

Consumer staples shares

The iShares Global Consumer Staples ETF (ASX: IXI) is another ASX fund that hasn’t yet fully recovered from the shellacking it saw in March. This ETF houses a basket of globally-listed companies that dwell in the consumer staples space. This includes makers of packaged foods, drinks, household essentials and cleaning products, as well as ‘sin stocks’ like alcohol and tobacco companies. You’ll find our own Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) here, as well as global giants like Procter & Gamble, Nestle and Unilever.

Ishares’ Global 100 units have recovered well since March. Coincidently, these shares also hover around $77, below their $85 February range. For one of the safest ETFs around (in my opinion), today could also be a good day to add this ETF to your portfolio.

Emerging markets opportunity?

The Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE) is our final ETF to consider today. It tracks shares from those economies that are deemed to be ’emerging’. You’ll find shares from China, Taiwan, India and Brazil here, amongst others. These markets are riskier, but also offer potentially higher long-run returns in my opinion if demographics are anything to go by.

VGE units were asking close to $75 earlier in the year, but today are going for around $64.80. If you want to add some exotic spice to your portfolio with this ETF, today is as good a time as any in my view.

More reading

• Investing experts warn of second ASX market crash
• Australian retail sales up 16.3% in May
• 3 ASX shares I think are super cheap right now
• Brokers just upgraded these ASX 200 stocks to “buy” today
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of COLESGROUP DEF SET, iShares Global Consumer Staples ETF, and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With the S&P/ASX 200 Index (ASX: XJO) today recording yet another day of gains and, once again, pushing over 6,000 points, investors will no doubt be celebrating. The ASX 200 is now more than 30% above the lows we saw in March. And there is definitely more goodwill in the markets today than fear (from where I’m standing, anyway).

But could this be the calm before another storm, aka, an ASX market crash? Or more dramatically, are we in the eye of the storm, the calm lull between 2 tempests?

Well, that’s what a growing list of investing experts are hinting at. Today we’ve heard from 2 investing legends – Ray Dalio and Howard Marks – on the dangers they see in the markets right now.

Experts warn of danger ahead

Dalio is the most successful hedge fund manager in history and an expert on market cycles. His fund, Bridgewater Associates is the largest of its kind with hundreds of billions in assets under management.

Marks, of Oaktree Capital, is another ultra-successful hedge fund manager, respected by investors as great as Warren Buffett.

In an article by the Australian Financial Review (AFR), it’s reported that Dalio’s Bridgewater is warning of a ‘lost decade’ for global share markets:

“Even if overall profits recover, some companies will die or their shares will devalue along the way. Left with lower levels of profits and cash shortfalls, companies are likely to come out on the other side of the coronavirus more indebted.”

It’s this indebtedness that Bridgewater is warning could weigh on share market returns for years to come.

In separate reporting by AFR, the publication also quoted Howard Marks. The investor warns that the unprecedented intervention by the US Federal Reserve is the only thing currently pushing markets higher:

“[Investors have] no reason to believe the Fed insists on good value, high prospective returns, strong creditworthiness to protect it from possible defaults, or adequate risk premiums…The higher the market went, the more people believed that it was the goal of the Fed to keep it going up, and that it would be able to.”

Marks notes that passive investments and index exchange-traded funds (ETFs) are exacerbating the problem. Marks said they ‘just buy everything’, they are not value-sensitive and do not bring price discovery to the table.

What should investors make of these ASX market crash warnings?

I think all investors should take the remarks of these 2 seasoned and experienced investors seriously. Thus, I think we may see adverse consequences in the American financial markets from its government’s intervention. If this was to occur, it would almost certainly flow into ASX shares.

Therefore, I think the importance of investing prudently and at prices that make sense is as high as ever – as is keeping some cash on the sidelines.

More reading

• 3 ASX shares I think are super cheap right now
• Brokers just upgraded these ASX 200 stocks to “buy” today
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high
• Is the Downer EDI share price in the buy zone?
• Looking to buy ASX technology shares? Here are 4 to consider

Motley Fool contributor Sebastian Bowen 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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Mesoblast limited (ASX: MSB) has been one of the standout performers on the ASX over the past three months. The company’s share price dropped as low as $1.02 on 23 March amid the economic fallout from the coronavirus pandemic.

Since then, however, the Mesoblast share price has really soared and is currently trading at $4.18. That’s a massive 310% growth in the company’s share price in just three months. This includes a 4.5% increase so far today.

Mesoblast has become a world leader in developing allogeneic, off-the-shelf, cellular medicines. The ASX listed biotech has successfully leveraged its proprietary cell therapy technology to establish a range of commercial products and late-stage product candidates.

So, what is behind this strong recent rally in the Mesoblast share price?

Helping win the fight against coronavirus

It’s pretty likely that the recent rise of the Mesoblast share price is linked to some promising progress the company is making with its treatment for COVID-19 patients.

In early May, Mesoblast commenced Phase 2/3 trials in the United States of its remestemcel-L treatment. The trials encompassed patients with moderate to severe coronavirus symptoms who required ventilator support.

The trial achieved an 83% survival rate and reported that 75% of patients managed to come off ventilator support within a ten day period. The remestemcel-L product works by counteracting the inflammatory process in the lungs caused by COVID-19. These initial encouraging results were first revealed back in late April at a New York hospital.

Further encouraging results were revealed at the end of May. Phase 2 trial results concluded that remestemcel-L, given in four monthly intravenous doses, significantly improved the outcome for patients with inflammatory lung disease, such as that suffered by COVID-19 patients.

Strong financial performance

Mesoblast’s recent financial performance has also been strong.

The company recorded an 113% increase in overall revenues to US$31.5 million for the first 9 months of FY 2020, compared to the prior corresponding period.

Mesoblast also recorded a 127% increase from milestone revenues involving strategic partnerships.

Where to now for the Mesoblast share price?

With the Mesoblast share price rising by over 300% in the last few months, only time will tell if it can continue this strong performance moving forward. Judging by today’s price, the market is likely expecting further promising clinical trial results to come from this dual listed biotech.

More reading

• Why A2 Milk, Afterpay, Mesoblast, and Temple & Webster are pushing higher
• Why Zip Co and these All Ords shares have doubled in 12 months
• ASX 200 down 2.2%: Westpac tumbles, TPG reveals special dividend plans
• S&P quarterly rebalance: A2 Milk added to ASX 50 & NEXTDC in the ASX 100
• Here are all the ASX 200 companies that announced capital raisings in May

Motley Fool contributor Phil Harpur 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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Australian retail sales surged 16.3% in May to $4.03 billion. This is the largest month-on-month rise in 38 years. The release by the Australian Bureau of Statistics showed a surge in sales right across the retailing industry. This is good news for retail ASX shares and the broader economy. 

However, does this mark a turning point that ASX retailers had been dreaming about? Let’s begin with a dive into the impact on retail shares and the economy.

Impact on retail ASX shares

Wesfarmers Ltd (ASX: WES) will benefit as hardware, building and garden supplies, clothing, electronic goods and footwear experienced large increases in sales. This is good news for its Bunnings, Target, Kmart and Officeworks brands. 

Similarly, JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) will benefit from sales increases in household goods. Products such as furniture, floor covering, houseware, textile goods, electrical and electronic goods saw an increase in turnover. 

In addition, there is positive news for supermarkets owned by Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Metcash Limited (ASX: MTS) with food retailing rising solidly. 

Impact on the economy

A rise in retail sales is good news for the broader economy as it illustrates consumers are feeling more optimistic about their finances. Government intervention in terms of Jobkeeper and Jobseeker could also explain the spark for retail sales. Increased foot traffic to retailers is also marked by the easing of restrictions. Also, strong retail sales is a positive development for jobs in the industry.

Does this mark a turning point for Australian retail?

Many retailers are hoping so. Unfortunately, the 16.3% increase in May follows a 17.7% fall in April.  More light will be shed on whether there is a recovery playing out in the industry as retail data is released over the coming months.   

The shift in how we work and study could also explain the surge in retail sales.  Working and studying from home has prompted a sharp rise in demand for office-related furniture and equipment. Furthermore, the reduction in time travelling to work meant we have more time to do DIY projects at home. This may shift with a return back to the office.

While the strong rebound in retail sales is excellent news for the ASX retailers mentioned above, cautious optimism is needed. Jobkeeper has an estimated expiry date of September which will be a hit to consumers discretionary income and Jobseeker payment is set to revert back to levels pre-crisis. As a result, the consumer’s optimism may quickly evaporate and tighten their wallets. 

More reading

• Temple & Webster shares continue to grow despite coronavirus restrictions
• 5 ASX dividend shares that could potentially smash term deposits
• Where to invest for reliable dividend shares
• Why the Wesfarmers share is beating the ASX 200
• How the ASX 200 can help first home buyers save for a deposit

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

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Despite some relaxation of coronavirus restrictions, travel remains largely off the cards. This is impacting the ASX travel shares, which have seen mixed recoveries since the market meltdown in March. 

Borders were closed in late March in an effort to combat coronavirus. According to the Australian Bureau of Statistics (ABC), overseas arrivals in March fell 60%, with just 331,900 short term visitors arriving in Australia. Overseas arrivals to Australia collapsed in April following the border closures, with ABS data revealing that overseas visitors decreased 99.3% to just 2,200 trips (compared to March). The Australian tourism industry, which was already hurting from the summer bushfires, began to sustain heavy economic damage. 

ASX travel shares fell out of favour with investors in late February as the scope of the pandemic became clearer. While there is hope Australians will be able to travel between states in the coming weeks, international travel may be off the cards until next year. Some estimate it may take up to 3 years for international travel to return to pre-COVID levels.

With this in mind, we take a look at how the ASX travel shares are travelling. 

Corporate Travel Management Ltd (ASX: CTD)

The Corporate Travel Management share price has bounced over 160% from its March low, but remains 44% down from its 2020 high. The travel agent is one of the few that has not yet raised capital to shore up the liquidity. 

Corporate Travel benefits from its business  model in which a high proportion of costs are variable. With a small physical footprint, the business saves on rent with about 70% of costs people-related. This enabled a swift resizing of the business. 

When the crisis hit, Corporate Travel Management embarked on a comprehensive cost reduction program. The company’s cost base has been reduced to $10–$12 million a month, down from $27–$27 million a month. This has been achieved through a combination of retrenchment, temporary stand downs, government initiatives such as JobKeeper, the elimination of non-essential expenditure and reduced capex. 

Domestic travel restrictions are likely to ease prior to international restrictions. This will benefit Corporate Travel, which is leveraged to the domestic market – about 60% of its total transaction volumes are domestic in nature. Domestic activity is highly profitable for Corporate Travel, particularly in Australia/New Zealand and Europe. 

Corporate Travel Management is positioning itself for a domestic recovery. It says it has the ability to operate a high performing domestic only business with a reduced cost base until international recovers. Staff capacity in each region is ready to be deployed back to full time as required. 

Flight Centre Travel Group Ltd (ASX: FLT)

The Flight Centre share price is up 55% from its March low but remains down 65% from 2020 highs. The travel operator closed stores and raised emergency funds in the wake of the pandemic. It raised $700 million in equity to provide liquidity during the coronavirus crisis. 

Flight Centre is aiming to reduce its cost base to $65 million per month by the end of July 2020. Prior to COVID-19, the cost base was around $226 million a month. CEO Graham Turner says the equity raising and cost saving initiatives will enable Flight Centre to trade through the current period of global disruption to the travel industry. 

To reduce costs by 70%, Flight Centre is closing half its stores and reducing its workforce. The cost saving measures will themselves cost the company $210 million in redundancies, lease breakages and the like. 

Travel shutdowns meant Flight Centre’s total transaction value fell to a low of 20% of normal levels in March. Uncertainty around how long travel restrictions will remain in place means Flight Centre will want a buffer of funds to protect its business in the interim. 

The equity raising and additional funding lines give Flight Centre around $1.6 billion in additional liquidity. This should fund the company well into 2021 with minimal revenues before a significant uplift in business will be required. 

Qantas Airways Limited (ASX: QAN)

The Qantas share price has risen 107% from its March low but remains nearly 40% down from its earlier highs. The airline has extended flight cancellations from May through to the end of July. Capacity can be added back if domestic and Trans-Tasman restrictions ease. 

Qantas raised $1.05 billion in debt funding secured against seven Boeing 787-9s in March. It has now secured an additional $550 million in funding secured against three wholly owned 787-9s. Net debt is $5.8 billion, which is in the middle of the airline’s target range. Qantas has no financial covenants on its debt facilities and no significant debt maturities until June 2021. 

Qantas says it has sufficient liquidity to respond to a range of recovery scenarios, including where conditions persist until December 2021. It also has $2.7 billion in unencumbered aircraft assets and can raise funds against these if required. 

Qantas acted quickly to slow cash burn early in the crisis. This was achieved through employee stand downs, revised agreements with suppliers, and pauses on virtually all capital and operating expenditures based on current conditions, Qantas expects to reach a net cash burn rate of $40 million per week by the end of June 2020. 

The airline is currently operating around 5% of its pre-crisis domestic passenger network and 1% of its international network. 

Regional Express Holdings Ltd (ASX: REX)

Regional Express Holdings shares are trading on par with levels pre-coronavirus. Shares in the airline operator were boosted by speculation it could start flying between capital cities. This would see Regional Express compete with Qantas and Virgin Australia. 

Regional Express said it is considering the feasibility of commencing domestic airline operations. This would involve flying between capital cities and not just to them. The airline has been approached by several parties interested in providing the equity needed for it to start regional operations in Australia. 

The airline estimates it would need $200 million to expand its operations. According to the Australian Financial Review (AFR), the business plan would involve leasing 10 narrow-bodied jets. With airlines globally struggling due to the travel downturn, Regional Express should be able to access aircraft at distressed prices. 

With a sufficient capital injection, the Regional Express board believes, “there is a confluence of circumstances which render the start of domestic operations by Rex to be a particularly compelling proposition.” If the board decides to proceed with the expansion, domestic operations are expected to commence on 1 March 2021. 

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

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