After releasing its FY20 results yesterday, the Charter Hall Retail REIT (ASX: CQR) share price fell 2.9%. Nonetheless, the real estate investment trusts REIT‘s share price is still up 6.5% since last Friday.

Charter Hall Retail specialises in convenience retail properties, often in regional and sub-regional locations. Supermarkets are the anchor clients of these properties. Additionally, it has diversified to the point where 5 major tenants take up 53% of its portfolio.

In FY20, Charter Hall recorded $142.7 million in operating earnings, 11.3% higher than FY19. However, after booking a value reduction of $41 million from investment properties, it ended with a statutory profit of $44.2 million, down 16.8% on FY19.

Operational highlights

Charter Hall’s business mix includes convenience stores such as supermarkets and chemists, as well as speciality retail. During the initial lockdown convenience sales and footfall improved as customers shopped closer to home. In fact, the growth in moving average total for convenience was 5.2%, up from 4% in FY19. Nevertheless, this was offset by tenant assistance of $10.7 million in rent support for speciality retailers during the lockdown.

In December 2019, proceeds from the sale of shopping centre assets were used to purchase of a 30% stake in a portfolio of BP service stations. Charter Hall raised $100 million of equity in February 2020 to increase its stake to 47.5%. In total, the company’s property portfolio increased by $270 million. Lastly, post FY20, the REIT also purchased a 52% stake in a high quality distribution facility leased to Coles Group Ltd (ASX: COL) for 14 years. 

During the same period, most retail REITs were devaluing properties – by as much as 11% in the case of Vicinity Centres (ASX: VCX). Meanwhile, Charter Hall saw its shopping centres reduce in value by a mere 2.4%, which was then partially offset by a 6% increase in the valuation of BP assets. 

Capital management

Due to uncertainty around the impact of COVID-19, Charter Hall also raised $304.2 million in equity during April to reduce gearing and provide stability. Accordingly, the company has reduced its overall gearing to 32.3%, as opposed to 35.9% in FY19. Consequently, net borrowings stand at $750 million, as opposed to $946 million last financial year. Lastly, the company has cash and undrawn liquidity of $443 million.

The purchase of the BP portfolio of convenience petrol stations has helped the company to increase its weighted average lease expiry (WALE) from 6.5 years to 7.2 years. 

The future of the Charter Hall share price

At the close of business on Thursday, the Charter Hall share price was $3.30. This is 88% of the company’s net tangible asset value (NTA) per unit. So without considering any future performance, the company is selling at a discount to the assets it owns, minus debts. However, it is the future performance that is really interesting to me. 

The REIT has accumulated a portfolio of convenience shopping centres and petrol stations that are provably resilient to the impacts of the pandemic. In the report, the company stated that property worth approximately 2.5% of annual revenues was in lockdown in Victoria, which has the harshest lockdowns the country has seen to date. Moreover, it has started to purchase long WALE assets such as the Coles distribution centre and the BP portfolio. This gives the company more predictable earnings over a far longer period of time.

I think the decline in share price yesterday was due to a pullback in the distribution. This has reduced from a payout ratio of 92.4% of earnings to 80.2% of earnings to reflect reduced cash flow generated during the period. Personally, I think this is a financially wise move given the times we live in. 

Foolish takeaway

I think the Charter Hall share price remains a very good investment. Specifically, as it is currently selling at a discount to NTA per unit I think it is fair to expect capital growth over the next 2–3 years. The final distribution of 10 cents per unit in August provides a yield of 3% at the current price. When combined with the interim distribution, this raises the trailing 12 month distribution yield to 7%.

With such a resilient portfolio, I think it is very likely the dividend will either stay as it is, or increase further. All of these factors make this an excellent medium-term investment in my assessment.

More reading

• Forget CBA and buy these quality ASX dividend shares
• Metcash share price and these ASX stocks just got upgraded by leading brokers
• If an ASX share announces a demerger, here’s why you should listen
• Fiji Kava share price soars 90% on Blackmores subsidiary agreement, trade paused
• Brokers have upgraded 3 ASX shares to the buy zone. Here’s why

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. 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.

The post Is the Charter Hall share price a buy, post-earnings? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3arQ3VR

Magellan Financial Group Ltd (ASX: MFG) shares jumped 1.2% higher on Thursday as the wealth manager announced plans to offer exchange-traded funds (ETFs).

Why Magellan shares jumped higher

According to an article in the Australian Financial Review (AFR), Magellan is looking to launch a series of low-cost investments.

Magellan is reportedly planning to launch an MFG Core series of 3 listed international equity funds offering low-cost strategies.

The management fees are set to be just 50 basis points (bps) and no performance fees.

Now, I think this is big news for Magellan shares. Magellan has been a wildly successful active fund manager for decades.

However, its offering does come at a hefty cost, which has turned off some would-be investors.

However, Magellan moving into the ETF space could be a game-changer.

What other ETF options are out there?

In the domestic space, both Vanguard Australian Shares Index ETF (ASX: VAS) and BetaShares Australia 200 ETF (ASX: A200) are popular choices.

The Vanguard fund charges just 10 bps per year while the BetaShares ETF has a fee of just 7 bps p.a.

Internationally, there are some other good options. Magellan shares provide exposure to international share management indirectly through its performance.

However, in terms of ETFs, the Vanguard MSCI Index International Shares ETF (ASX: VGS) is a popular choice.

The Vanguard ETF aims to track the return of the MSCI World ex-Australia, tracking approximately 1,500 large-cap and mid-cap companies.

There’s also the iShares Global 100 (AUD Hedged) ETF (ASX: IRU).

This iShares ETF aims to track the S&P Global 100 Hedged AUD Index with 100 multinational, blue-chip companies.

Foolish takeaway

I think this is good news for Magellan shares. More passive investment options open up new avenues for the Aussie fund manager.

However, it does risk cannibalising some of its current offerings. Just how well Magellan walks that tightrope will be the key to success in the years to come.

More reading

• ASX 200 drifts 0.1% lower, CBA reports solid FY20 result
• Why the Magellan share price might be a post-earnings buy today
• Is BetaShares Australia 200 ETF the best ASX ETF?
• Earnings season: Magellan share price climbs higher after positive annual report
• Why Aurizon, Cochlear, Magellan, & Westpac shares are pushing higher

Motley Fool contributor Ken Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is now a good time to buy Magellan shares? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3fQzsMt

There are a number of ASX shares that could be good to invest $500 into.

Plenty of beginner investors may be well suited to an exchange-traded fund (ETF) like BetaShares Global Quality Leaders ETF (ASX: QLTY) and Vanguard MSCI Index International Shares ETF (ASX: VGS).

But I think there are ASX shares that could be better choices than that. Here are two options:

Growth: Bubs Australia Ltd (ASX: BUB)

The best way to beat the market over the longer-term is with ASX growth shares. Smaller businesses have much more growth potential than large blue chips which are already mature businesses.

It’s much easier to double profit from $10 million to $20 million than it is for a blue chip to grow profit from $1 billion to $2 billion.

Bubs is one of those ASX shares that I think has great growth potential for a few key reasons.

Bubs is an infant formula business, which specialises in goat milk products. But it also sells other products like baby food and organic grass-fed cow milk infant formula. The company also recently announced the launch of Vita Bubs – a range of vitamin and mineral supplements.

It’s the international growth and rising margins which particularly excite me. A2 Milk Company Ltd (ASX: A2M) has shown how overseas growth can really add to the bottom line.

In FY20 the ASX share grew its total revenue by 32% to $62 million. The FY20 fourth quarter showed Chinese direct sales increase by 26% and other export market sales increased by 71%. Asia alone is a huge market which Bubs can tap into over many years.

Bubs has reported that its gross profit margin has steadily grown over the past few results to 24%. I think it can grow much higher considering the infant formula gross profit margin is around 40% – and infant formula is becoming a larger part of the business.

Over the next five or ten years, I think Bubs could become a much larger business.

Dividends: Future Generation Investment Company Ltd (ASX: FGX)

Future Generation is a listed investment company (LIC) with a major difference. There are no management fees or performance fees involved with this ASX share. Most LICs have fund managers that charge fees.

Future Generation is actually invested in the funds of around 20 fund managers that invest in ASX shares. These fund managers work for free so that Future Generation can donate 1% of its net assets each year to youth charities. Hence the name ‘Future Generation’.

As a LIC, Future Generation has the option of paying out a lot of the underlying investment returns as a growing dividend to shareholders. That’s exactly what Future Generation has been doing. In the recent FY20 half-year result it increased its interim dividend by 8.3%.

At the current Future Generation share price it offers a grossed-up dividend yield of 6.9%. I think that’s a solid yield in the current environment where the RBA interest rate is so low. I’d happily buy it for yield.

During the six months to 30 June 2020 the ASX share’s gross portfolio return outperformed the S&P/ASX All Ordinaries Accumulation Index by 3.3%. Over the prior 12 months the gross portfolio return was 6% better than the index. That’s a solid outperformance during COVID-19 in my opinion.

At the current Future Generation share price it’s valued at a 7% discount to the June 2020 net tangible assets (NTA) per share. There’s a fair chance the NTA will have risen since then.

Foolish takeaway

I think both of these ASX shares would be a solid long-term investment with $500. At the current prices I’d probably go for Bubs as it has fallen back a bit since its FY20 fourth quarter update. However, Future Generation offers a lot of attractive diversification considering it’s a fund of funds.

More reading

• Should you buy these 2 ASX dairy shares instead of A2 Milk?
• If you have $12,000, you should invest in these 3 ASX shares now
• 3 ASX shares to buy and hold for the next decade
• A2 Milk and 1 other top ASX growth share to buy this month
• Can the Bubs share price go higher in 2020?

Motley Fool contributor Tristan Harrison owns shares of FUTURE GEN FPO. The Motley Fool Australia owns shares of and 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.

The post 2 ASX shares you could invest $500 into appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3iEV1Bu

The Mesoblast Limited (ASX: MSB) share price could be set to surge after the Aussie biotech company had a huge regulatory breakthrough.

What was the big breakthrough?

Investors were holding out ahead of the US Oncologic Drugs Adviosry Committee (ODAC) meeting to vote on Mesoblast’s remestemcel-L treatment (Ryoncil) for paediatric patients with acute-graft versus host disease (aGHVD).

According to an article in the Australian Financial Review (AFR), the ODAC meeting voted 8 to 2 in favour of the Mesoblast drug this morning.

That’s good news for the Mesoblast share price, which had tumbled 37% in just 2 days earlier this week.

Investors were pessimistic on the ODAC meeting after a US Food and Drug Administration (FDA) briefing note on Tuesday.

That note questioned how strong the evidence of the treatment’s effectiveness was. That caused many to believe the ODAC would come to a similar conclusion.

However, today’s news could mean the Mesoblast share price rockets higher. According to the article, the final decision on the Ryoncil drug for marketing is expected to be made by the FDA before 30 September.

That looms as another important milestone, but todaý’s vote should boost investors’ confidence.

How has the Mesoblast share price performed?

This week alone has been a wild ride for investors.

The Mesoblast share price climbed 9.9% on Monday before freefalling 30.60% on the back of Tuesday’s news.

Wednesday saw a further decline of 9.5% before tactical investors picked up the stock cheaply, sparking a 10.1% rally in yesterday’s trade.

Despite the volatility, the Mesoblast share price has jumped 64.9% higher in 2020. That’s a significant outperformance against the S&P/ASX 200 Index (ASX: XJO), which is down 9.0% this year.

Mesoblast’s fellow ASX biotech shares have also had a strong year in the Aussie share market.

Polynovo Ltd (ASX: PNV) shares are up 15.1% this year while the CSL Limited (ASX: CSL) share price has edged 1.0% higher.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why Tabcorp is the latest “conviction buy” recommendation from this top broker
• ASX 200 drops 0.7%, Telstra falls 7.7%
• Metcash share price and these ASX stocks just got upgraded by leading brokers
• Broker reveals its expectations for the Mesoblast FDA meeting

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

The post Mesoblast share price on watch after US regulatory approval appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3iASWqn

While I think that Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four banks remain great options for income investors in this low interest rate environment, not everyone is a fan of them.

For those investors, I have picked out three ASX dividend shares which I think could be great alternatives to the big four banks. Here’s why I like them:

BWP Trust (ASX: BWP)

BWP is a real estate investment trust with a focus on commercial properties throughout Australia. The vast majority of BWP’s warehouses are leased to the Bunnings business, which is owned by Wesfarmers Ltd (ASX: WES). I believe Bunnings is the highest quality retailer in the country and well positioned for growth. In light of this, I feel it is a great tenant to have in these uncertain times.

In fact, its quality was on display for all to see during BWP’s recent full year results. At a time when retail properties are being devalued, BWP’s properties appreciated materially in value. Overall, I believe the company is well-placed to continue growing its distribution at a steady rate over the coming years. Based on the latest BWP share price, I estimate that it offers investors a forward 4.6% yield.

Coles Group Ltd (ASX: COL)

Another dividend share to consider buying is Coles. I’m a big fan of the supermarket giant due to its solid long term outlook and defensive qualities. The latter has been on show this year during the pandemic. Coles has been experiencing a surge in sales during the crisis and looks set to deliver a very strong profit result later this month.

I expect more of the same in FY 2021, especially given recent lockdowns. After which, I’m confident its growth will continue over the next decade and beyond, albeit at a more modest rate. Another positive is its favourable dividend policy which sees it pay out between 80% and 90% of its earnings to shareholders. Based on the current Coles share price, I estimate that this will mean a 3.1% fully franked dividend yield in FY 2021.

More reading

• Metcash share price and these ASX stocks just got upgraded by leading brokers
• If an ASX share announces a demerger, here’s why you should listen
• Top brokers name 3 ASX shares to sell today
• Fiji Kava share price soars 90% on Blackmores subsidiary agreement, trade paused
• Brokers have upgraded 3 ASX shares to the buy zone. Here’s why

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

The post Forget CBA and buy these quality ASX dividend shares appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3fWDSBu

On Thursday the S&P/ASX 200 Index (ASX: XJO) was out of form and dropped lower again. The benchmark index fell 0.7% to 6,091 points.

Will the market be able to bounce back from this on Friday? Here are five things to watch:

ASX 200 expected to edge lower.

The ASX 200 looks set to edge lower this morning after a disappointing night of trade on Wall Street. According to the latest SPI futures, the ASX 200 is set to edge a single point lower at the open. In the United States the Dow Jones fell 0.3%, the S&P 500 dropped 0.2%, and the Nasdaq index rose 0.3% higher.

Newcrest results.

The Newcrest Mining Limited (ASX: NCM) share price will on watch today when it releases its full year results. Expectations are high for the gold miner after the recent spike in the gold price. According to a note out of Goldman Sachs, it expects Newcrest to post EBITDA of $1,816 million and net profit after tax of $744 million.

Oil prices fall.

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could come under pressure on Friday after oil prices softened. According to Bloomberg, the WTI crude oil price is down 0.75% to US$42.35 a barrel and the Brent crude oil price is down 0.8% to US$45.06 a barrel. Oil prices dropped lower after the IEA lowered its demand forecast.

Mesoblast FDA update.

The Mesoblast limited (ASX: MSB) share price could return from its trading halt later today. It requested the halt on Thursday ahead of its meeting with the Oncologic Drugs Advisory Committee (ODAC) overnight. This meeting is to discuss its remestemcel-L product candidate as a treatment for paediatric steroid-resistance acute graft versus host disease (paediatric SR-aGvHD).

Gold price rebounds.

Gold miners Evolution Mining Ltd (ASX: EVN) and Saracen Mineral Holdings Limited (ASX: SAR) could push higher today after the gold price rebounded. According to CNBC, the spot gold price is up 0.75% to US$1,963.60 an ounce. A weakening U.S. dollar and underwhelming economic data helped lift the price of the precious metal.

More reading

• Why Tabcorp is the latest “conviction buy” recommendation from this top broker
• ASX 200 drops 0.7%, Telstra falls 7.7%
• Metcash share price and these ASX stocks just got upgraded by leading brokers
• Woodside share price edges lower on half year results
• Broker reveals its expectations for the Mesoblast FDA meeting

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

The post 5 things to watch on the ASX 200 on Friday appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3iDAvkH

The Navigator Global Investments Ltd (ASX: NGI) share price skyrocketed 39.35% in Thursday’s trading. That came on a day where the All Ordinaries Index (ASX: XAO) slumped 0.6%.

That will come as welcome news to shareholders, who watched the Navigator share price plummet 67% from17 February through 28 April. Since then, the share price of the alternative investment manager has regained 63%, though year-to-date Navigator shares remain down 31%.

At its current price of $1.93 per share, Navigator Global has a market cap of $312 million.

What does Navigator Global do?

Navigator Global Investments provides alternative investment management products and services to investors around the world via Lighthouse Investment Partners, LLC. Based in the United States, Lighthouse creates and manages global hedge fund solutions with a focus on diversification and absolute return.

What sent the Navigator share price flying today?

Navigator released an announcement to the ASX on Thursday morning stating that it had entered into a definitive agreement to acquire a portfolio of strategic investments from funds managed by Dyal Capital Partners. Dyal is a division of Neuberger Berman.

The portfolio is comprised of a diversified group of established firms with a history of delivering results through numerous market cycles. The firms manage a combined US$35 billion (AU$49 billion) of assets under management across 26 diversified investment strategies.

Management commentary

Navigator’s chair Michael Shepherd said:

We believe this is a compelling transaction with strong commercial logic. The acquisition is an important development in the evolution of Navigator. We have long targeted high-quality opportunities to grow and diversify our holdings to generate strong long-term shareholder returns. We are excited to be invested with these six excellent businesses.

Dyal has established themselves as the pre-eminent partner to growing alternative asset managers globally. We are excited to partner with the Dyal team and welcome their expertise as we grow the company over time.

Michael Rees, head of Dyal Capital, added:

Dyal looks forward to an ongoing involvement with Navigator as a long-term partner of the company. We are happy that these six managers will remain part of the Dyal ecosystem and view our indirect interest in the Lighthouse business as an attractive addition which is expected to contribute positively to our investment in the years to come.

Navigator stated that it expects to complete the transaction between December 2020 and January 2021. It remains subject to shareholder approval.

After gaining nearly 40% on the announcement, the Navigator share price will be one to keep an eye on throughout Friday.

More reading

• 3 ASX shares that could grow rapidly during the 2020s
• Why Tabcorp is the latest “conviction buy” recommendation from this top broker
• Should you invest in Splitit shares?
• Could these exciting ASX shares be future stars?
• Xero share price higher following AGM update

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.

The post Here’s why the Navigator Global share price surged 39% today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3kF7Duj

One thing the Australian share market certainly isn’t short of is growth shares. But with so many to choose from, it can be hard to decide which ones to buy.

To narrow things down for you, I have picked out three ASX growth shares which I think would be top options for investors today. They are as follows:

Appen Ltd (ASX: APX)

The first ASX growth share to look at is Appen. It is a leading developer of high-quality, human annotated datasets for the machine learning and artificial intelligence markets. Appen has been growing at a very strong rate over the last few years thanks to the growing importance of machine learning and artificial intelligence for big businesses. The good news is that these markets are expected to continue their rapid growth for many years to come. I feel this bodes well for Appen’s industry leading Content Relevance services.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

Another growth share that I would buy is Domino’s. I think the pizza chain operator’s shares could climb notably higher over the next decade thanks to its positive long term outlook. This is thanks to its strong market position, positive sales targets, and its expansion plans. In respect to its sales targets, Domino’s is targeting same store sales growth of 3% to 6% per annum over the next 3 to 5 years. But even better, over the same period the company is aiming to grow its global store network by 7% to 9% per annum. If it can deliver on both these targets, the company’s earnings growth should be very strong.

Nanosonics Ltd (ASX: NAN)

A final growth share to consider buying is infection prevention company Nanosonics. Although the company has been a bit of a one trick pony with its trophon EPR disinfection system for many years, it won’t be for much longer. Management is planning to launch a series of new products targeting unmet needs in the coming years. If they are anywhere near as successful as the best in class trophon product, then it could have a very bright future ahead of it.

More reading

• Brokers have upgraded 3 ASX shares to the buy zone. Here’s why
• Is BetaShares Australia 200 ETF the best ASX ETF?
• Whatever happened to WAAAX shares?
• 3 stellar ASX tech shares to buy for the long term
• 5 quality ASX shares to buy in August

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

The post 3 ASX shares that could grow rapidly during the 2020s appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2Fkt3wG

There’s big upside to the embattled Tabcorp Holdings Limited (ASX: TAH) share price, according to UBS which added the stock to its “APAC key call list”.

Shares in the wagering and lotteries slumped by 22% since the start of the year when the S&P/ASX 200 Index (Index:^AXJO) shed a more modest 9%.

The fallout from the COVID-19 pandemic hit the sector hard with social distancing impacting on gaming venues and the curtailment of key sporting events limiting betting opportunities.

Tabcorp isn’t the only one in the sector that’s suffering. The Crown Resorts Ltd (ASX: CWN) share price and Star Entertainment Group Ltd (ASX: SGR) share price also taking a battering.

Tabcorp share price to jump in recovery

But Tabcorp might be better leveraged to the eventual COVID-19 recovery and UBS is urging investors not to worry about its full year results next Wednesday.

“While the upcoming result will be negatively impacted by the closures of pubs and clubs (and a difficult comp in lotteries), the next 2-3 years should see higher profit than what was experienced in FY19,” said the broker.

“We also see little chance of a negative surprise in the short term, with the company pre-releasing its results and the management and board changes already underway.”

Smaller than expected COVID impact

Further, the impact of coronavirus on customer behaviour hasn’t been as bad as initially feared. Gaming spend is already recovering and there’s little sign of negative “structural” changes. That’s more than what we can say for other sectors like office or retail property.

This isn’t to say that punters may shun physical venues either by choice or otherwise in the post pandemic world.

But only 5% of the group’s earnings before interest and tax is related to retail wagering. Also, Tabcorp’s digital business seems to be gaining good traction thanks to aggressive promotions.

Digital gaining market share

These promotions have driven new punters to Tabcorp’s digital platform in recent times, according to UBS.

“The pandemic has highlighted the resilience of Lotteries (where revenue trends have not changed),” said the broker.

“This adds to strong business fundamentals arising from its monopoly licences, online margin expansion and potential for changes to game maths/pricing.”

Growth and income boost for the TAH share price

In other words, investors may not need to wait long to see Tabcorp’s earnings recover to FY19 levels with the broker predicting this will happen in the next financial year.

UBS’ 12-month price target on Tabcorp is $5 a share. This implies a 41% upside for the stock, which closed at $3.54 on Thursday.

If that isn’t enough to excite investors, the broker is forecasting a 22 cent a share dividend for the stock in FY21. That puts the stock on a yield of nearly 9% in that year if you included franking credits.

More reading

• ASX 200 drops 0.7%, Telstra falls 7.7%
• Metcash share price and these ASX stocks just got upgraded by leading brokers
• ASX down 0.55%: Telstra maintains its dividend, Treasury Wine shoots higher, AMP’s special dividend
• Why the Telstra share price has tumbled 5% this morning
• Northern Star share price falls 1.6% on trading update

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

The post Why Tabcorp is the latest “conviction buy” recommendation from this top broker appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3kErn16

With the share prices of buy now, pay later (BNPL) financial services companies like Afterpay Ltd (ASX: APT) and Zip Co Limited (ASX: Z1P) both soaring to new all-time highs in July, many investors may now be looking around for the next hot stock in the consumer lending space.

Along with Zip and Afterpay, there are a number of other junior players currently trading on the ASX that offer alternatives to the traditional forms of personal lending offered by the major banks. One such industry disruptor is New York-based BNPL fintech Splitit Payments Ltd (ASX: SPT).

Compared to Afterpay and Zip, which both now have market caps in the billions, Splitit is still relatively small potatoes, with a market cap barely touching $500 million. However, it is already a global company with operations in Europe and North America. The June quarter saw rapid growth across all the company’s key financial metrics, with gross revenue a record US$2.4 million, an increase of 460% year-on-year and 246% quarter-on-quarter.

What is Splitit?

Splitit operates differently to both Afterpay and Zip, in that it doesn’t actually provide customers with new lines of credit. Instead, it operates more like a budgeting tool, allowing customers to use their existing credit cards to make online purchases and then setting up automated repayment plans. Customers can tailor these plans so that they can pay for their purchases in smaller, more manageable instalments over time.

With Splitit, there are no credit applications for the customer to complete – because it utilises existing credit – and approvals are instantaneous. Additionally, Splitit charges no additional interest or late fees to the customer. Essentially, Splitit finances customer purchases and helps them repay them using plans that better suit their individual circumstances.

As it charges no interest to the customer, Splitit makes money by charging merchants a fee for its services. It markets itself as a service that can help business grow by expanding their potential customer-base, increasing checkout conversions and maximising average order value. Similar to the marketing for Afterpay or Zip, the idea is that customers will buy more when they have the option to manage their repayments over time.

Should you buy Splitit shares?

Splitit’s business model is fairly unique amongst the BNPL crowd. It seeks to market itself as a more responsible alternative to other short-term lenders as it doesn’t offer customers new forms of credit. Instead, it simply helps them manage their repayments.

It already has key strategic partnerships with both Mastercard and Visa, and its service is offered at a range of global online stores. This makes it well-positioned to benefit from consumer trends towards ecommerce emerging out of the COVID-19 pandemic.

But while there’s a lot to recommend about Splitit over the short-term – its growth trajectory is hard to ignore – it still feels like it could easily be superseded by a similar offering from one of the major credit card companies themselves.

While it does offer a nifty, unique service, I think Splitit shares are a risky investment in the already crowded buy now, pay later sector. Personally, I’d stick with the bigger companies that already have the market penetration and brand name recognition.

More reading

• 2 exciting high-growth ETFs to buy for high returns today
• Is BetaShares Australia 200 ETF the best ASX ETF?
• 4 ASX shares to buy now for a post-coronavirus world
• Whatever happened to WAAAX shares?
• 3 stellar ASX tech shares to buy for the long term

Rhys Brock owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. 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.

The post Should you invest in Splitit shares? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3kFM3G5