• Where to invest $20,000 into ASX shares for strong long term returns

    Money

    At the weekend I looked at how successful $20,000 investments had been in a number of popular ASX shares over the last 10 years.

    But that was then and this is now. So, I thought I would take a look at three shares which I think could generate very strong returns for investors over the next 10 years.

    Here’s why I would invest $20,000 in these ASX shares:

    a2 Milk Company Ltd (ASX: A2M)

    This infant formula and fresh milk company’s shares have been incredibly resilient during the recent market volatility. In fact, they are up around 30% since the start of the year. The good news is that I don’t think it is too late to invest with a long term view. Especially given the demand it continues to experience for its infant formula products in the lucrative China market. I believe this and its expanding fresh milk footprint will continue to underpin strong earnings growth over the next decade.

    Kogan.com Ltd (ASX: KGN)

    Another company to consider investing $20,000 into is Kogan. It is a growing ecommerce company and Australia’s answer to Amazon. I think it is a great long term option for investors due to the continued shift to online shopping in the country. An estimated ~10% of retail spending is made online at the moment in Australia. I expect this number to grow materially over the next decade and beyond, which will only benefit Kogan.

    Xero Limited (ASX: XRO)

    I think this cloud-based business and accounting software provider would be a great place to invest $20,000. This is due to its global market opportunity, the quality and stickiness of its product, and its strong pricing power. The latter two are evident in both its customers numbers and churn rate. During the first half of FY 2020, Xero grew its subscribers by 30% to 2.057 million and reported a churn rate of just 1.1%. This was despite it lifting its prices in some markets. In respect to its market opportunity, it is estimated that less than 20% of the global English-speaking SME market is using cloud-based accounting software. I believe this gives it a massive runway for growth. Though, with its full year result due later this week, it might be worth holding fire until that release.

    In the meantime, here are five dirt cheap shares that could be great options for a $20,000 investment. 

    5 cheap stocks that could be the biggest winners of the stock market crash

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    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium and Xero. 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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  • Broker rates this small-cap ASX cannabis share a buy

    medical marijuana, cannabis, pot, drug, medical

    Phillip Capital has rated ASX cannabis share Althea Group Holdings Ltd (ASX: AGH) a buy with a target price of 57 cents. Shares in the medical marijuana distributor are currently trading at 39 cents. The broker is positive on the company, saying Althea’s execution to date has been excellent. 

    Who is Althea?

    Althea was founded in Melbourne in 2017 and holds licenses to import, cultivate, produce, and supply medicinal cannabis to eligible Australian patients. At the end of March, Althea had supplied medicinal cannabis to 5,800 patients via 509 healthcare professionals. 

    International interests 

    Althea has business interests in Germany and Canada. The company recently signed a 3-year supply agreement with Nimbus Health GmbH, a pharmaceutical wholesaler with 25% medicinal cannabis market share in Germany. 

    Nimbus will sell and distribute Althea’s full suite of medicinal cannabis products under the Althea brand name in Germany. Althea will receive payment for products supplied, as well as 50% of the net profit on sales. In Germany, 120,000 patients have been prescribed medicinal cannabis to date. This number is expected to grow to 1 million by 2024. 

    Althea acquired Canadian company Peak Processing Solutions last year. The company plans to produce edible, extract, and topical cannabis products. A building re-fit of its plant has been completed and regulatory approval is anticipated shortly. 

    What does the broker say? 

    In Australia, each of Althea’s prescribing doctors has an average of 11.4 medicinal cannabis patients, up from 4 a year ago. Althea’s Australia sales have gone from zero in FY17 to $0.8 million in FY18 to a forecast $5 million in FY20. Phillip Capital is forecasting sales of $12.1 million in FY21 and $19 million in FY22. 

    Phillip Capital likes the large market opportunity in Germany and is optimistic on the Canadian opportunity. Althea will target the 2,500+ doctors in Germany who are actively prescribing medicinal cannabis, providing education through its Concierge platform. Based on Althea’s Australian performance, Phillip Capital estimates Althea will achieve 7.5% market share in Germany in year 3. 

    The broker says the German expansion looks to be an excellent move. The market is only 3 years old, has supportive government access rules, and strong reimbursement from health funds in place. In Canada, it is anticipated several initial customers will be announced imminently. Phillip Capital is predicting Peak Processing Solutions will exceed its year 1 target of C$7 million sales by 50%.

    Outlook

    Althea’s international businesses are effectively in start-up mode, and Peak Processing is a contract processing business which is completely new for Althea. This means a wide range of outcomes is possible for the business. Nonetheless, the medicinal cannabis sector is expected to remain resilient through the coronavirus pandemic. 

    For a lucrative investment idea outside of the ASX cannabis space, don’t miss the brand new report below.

    One “All In” ASX Buy Alert, that could be one of our greatest discoveries

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    Returns as of 6/5/2020

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    Motley Fool contributor Kate O’Brien 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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  • 3 counter-cyclical ASX shares to hold during a recession

    Protect your money

    According to just about everyone, Australia and indeed the world economy is going into recession. While there may be a few factors contributing to the global recession, it is clear that the coronavirus pandemic is the primary cause.

    While a recession is not good for most businesses, there are some companies that may fare well and even improve their earnings during a time of economic downturn. This is because their business model allows them to benefit from some of the economic phenomenon occurring around them. For example, during a recession an increase in people not paying their bills can be a boon for debt collection companies.

    If the recession is prolonged, investors may get some security from holding assets that can thrive in a market downturn while other companies suffer.

    Here are 3 ASX companies that are counter-cyclical and could do very well through the pending recession.

    Credit Corp Group Limited (ASX: CCP)

    Credit Corp buys and collects non-performing debts owed by consumers in both Australia and the US. It is the largest debt purchase and collection company in Australia and has been listed on the ASX since 2000.

    The company has announced a capital raising of $150 million in order to take advantage of increased supply of the debts which it purchases and collects, brought about by the coronavirus. It has also announced that its balance sheet will remain secure in a variety of scenarios.

    Credit Corp has cut costs significantly since the onset of the COVID-19 crisis, and its CEO and directors fees have been reduced by 50%. This helps in positioning it well to take advantage of the current situation. The increases in provisions for bad debts recently announced by National Australia Bank Ltd. (ASX: NAB), Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) will provide ample business for Credit Corp as it picks up the scraps of Australia’s bad debts.

    As part of its capital raising, Credit Corp also announced its interest in purchasing competitors’ books. This could provide an opportunity for a significant boost to earnings as it acquires cheap assets brought on by the COVID-19 recession. Credit Corp could also consider expanding into new markets as it finds itself facing a recession with significant cash on hand.

    Cash Converters International Ltd (ASX: CCV)

    Cash Converters is an international personal finance and pawnbroking business, mainly operating in Australia with franchises around the world. The business has a loan book of $224.2 million and achieved $42.4 million in retail sales in the first half of the 2020 financial year.

    The types of personal loans that Cash Converters specialises in, known as payday loans, are likely to be in high demand during a recession as people find themselves short on cash. Payday loans are short term loans of as little as a few weeks, usually with a high interest rate. This type of lending has proven highly profitable for Cash Converters over many years. Additionally, during times of hardship people are likely to hunt for bargains rather than pay full price for retail goods. While this may be bad news for retailers like Harvey Norman Holdings Limited (ASX: HVN), it could provide a boost to Cash Converters.

    Cash Converters has remained quiet about the effects of the coronavirus lockdowns on its business. However, as last reported, 53.9% of its loans originated online. This means that it is likely that the company has seen continued demand for loans during lockdowns.

    While the recession could mean an increase in defaults on existing loans, people are likely to need additional cash while economic times are tough. In the US for example, a report by the Chicago Federal Reserve observed a sharp increase in payday loans during the GFC. If there is a sharp increase in demand for new payday loans in Australia through the pending recession, Cash Converters is likely to have a highly profitable few years ahead.

    Betashares U.S Strong Bear Hedge Fund ETF (ASX: BBUS)

    This exchange-traded fund (ETF) is an interesting one. It aims to provide returns that are negatively correlated to the US S&P 500. This means that as the US enters a bear market, returns will be positive. When the US starts to recover and the S&P 500 rises, returns will be negative. In this way, this ETF is like betting against the S&P 500 index of the 500 biggest US companies.

    During a recession this could be an effective strategy, particularly if share prices drop further. In the long term, however, this is probably not a great strategy and holders will need to consider when a recovery in the S&P 500 is coming to close out their position. Historically, the S&P 500 index has eventually recovered through difficult times.

    During March this year when world financial markets were crashing, this ETF rose from a low of $2.61 to $6.80. That’s a return of 160.53%. It currently sits back at $3.19 due to the recovery in share prices. However, this is one to hold if you believe that this will be a prolonged bear market with further dips in financial markets.

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

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  • Are there any safe havens in ASX aviation shares?

    Plane travel

    One of the hardest-hit sectors on the ASX amid COVID-19 is aviation shares. Australia is carefully opening up the economy. However, the rest of the world is still in crisis. 

    Bleak outlook for ASX aviation shares

    One high profile company to be impacted is Qantas Airways Limited (ASX: QAN). Qantas has seen a dispute with Perth Airport erupt at the same time its flights have dropped to near zero. This has resulted in Qantas receiving termination notices. Even without this conflict, the airline faces near-term uncertainty. Nevertheless, if the terminations are carried out, the entire airline industry could alter. 

    Sydney Airport Holdings Pty Ltd (ASX: SYD) is another high-profile casualty. This airport has seen domestic passengers reduce by 97.4%, while international passengers dropped by 96.1% in the first 16 days of April. Domestic flights and trans-Tasman flights to New Zealand appear possible in the near term. This will provide some income for Sydney Airport. However, it is still a long way from its performance in January.

    Air New Zealand Limited (ASX: AIZ) has seen its share price fall by 59% year-to-date. Air New Zealand is a far smaller company than Qantas and Sydney Airport by market capitalisation. As such, it requires less volume to regain momentum. However, the limited flights across the Tasman sea or domestically within New Zealand are still a long way from its usual international traffic. 

    The safe haven

    Alliance Aviation Services Ltd (ASX: AQZ) is a small-cap ASX aviation share. It operates a number of “wet lease” services for Virgin Australia Holdings Limited (ASX: VAH) which has impacted its revenues. However, the core of its work comes from fly-in fly-out operations for the nation’s resources sectors. All of these flights are continuing.

    Mining and oil and gas companies are the hardened core of our economy. They are responsible for our recent trade surplus and are essential to our short-term survival. Throughout Australia, these companies have made significant changes to adapt to COVID-19. Social distancing within aircraft means reduced passengers per flight and is likely to see an increase in overall flights.

    On 1 May, Alliance announced a new 10-year airline services contract with South32 Ltd (ASX: S32) for the Cannington and Groote Eylandt (GEMCO) mine sites, further cementing its reputation as a provider of choice for fly-in fly-out operations. In fact, Alliance does not even operate from Sydney airport, preferring to service regional centres and smaller airports. 

    I believe that no matter what happens from this point forward, there is little chance Alliance will see any reduction in its fly-in fly-out operations.

    Foolish takeaway

    While there is a reduction in wet lease flights on behalf of Virgin Airlines, Alliance has been able to maintain its momentum through its focus on fly-in fly-out operations. In fact, it is likely to see flights increase to cater for social distancing in distance commuting. As intra-state travel begins to open up, I believe Alliance will see its revenues come back before the large players in the field.

    If the feud between Perth Airport and Qantas escalates further, it may gain further market share.

    Check out the free report below to help you find your next great investment.

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

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  • Musk Foils Tesla Claim It’s Handled Covid-19 Like Everybody Else

    Musk Foils Tesla Claim It’s Handled Covid-19 Like Everybody Else(Bloomberg) — Tesla Inc. asserted late Saturday that restarting its operations in the midst of the coronavirus pandemic didn’t make the company an outlier, nor was it going against the grain.The claim belied the events of the preceding 12 hours. Tesla sued the county that has blocked its car plant from reopening with Elon Musk calling the local health officer — a former infectious diseases professor with a master’s degree in public health — “unelected & ignorant.” The chief executive officer threatened to move Tesla’s headquarters out of California, warning that all its manufacturing may leave the state, too.It was a flare-up without precedent in the three months since the first confirmed Covid-19 death in the U.S. — a resident of Santa Clara County, home to Tesla’s headquarters and neighbor to its factory in Fremont, California. As the nation’s death toll approaches 80,000, Musk has emerged as arguably the loudest voice in corporate America advocating for the economy to reopen.“I’m not messing around,” the 48-year-old billionaire tweeted after Tesla filed its lawsuit against Alameda County. “Absurd & medically irrational behavior in violation of constitutional civil liberties, moreover by *unelected* county officials with no accountability, needs to stop.”Auto RestartTesla does have a case to make for being unexceptional within the auto industry. Ford Motor Co., Fiat Chrysler Automobiles NV, Toyota Motor Corp. and others also have set dates for restarting their operations, only to then call off those plans due to shutdown orders.Daimler AG has reopened a Mercedes-Benz plant in Alabama, as has its German peer BMW AG in South Carolina. Toyota and Honda Motor Co. will resume work at U.S. factories this week, followed by General Motors Co., Ford and Fiat Chrysler on May 18.But no carmaker other than Tesla has publicly attacked local health officials or threatened states over shelter-in-place measures that virtually wiped out North American vehicle production for more than a month.Read more: What you need to know about the U.S. auto industry’s restartDuring GM’s first-quarter earnings call on May 6, CEO Mary Barra said the automaker was having “very constructive” conversations with government officials.“We’re in a good position as we talk to country leaders and state leaders,” she said. “We’ll continue to have dialogue with our unions, as well as with the government leaders, to do the right thing.”Bay Area ExceptionTesla’s handling of the health crisis also has been unique among companies in the San Francisco Bay area. Ajay Shah, the CEO of Smart Global Holdings Inc., last month credited Alameda for allowing the manufacturer of memory modules to continue operating.“We’ve had discussions with the Alameda County health authorities and show them exactly what we’re doing and they’ve been satisfied with it,” Shah said on an April 7 earnings call.Earlier: Tesla’s drive to stay open irked officials who saw health riskFaceboook Inc. CEO Mark Zuckerberg, whose staff can more easily work from home than Musk’s manufacturing employees, has voiced his concern about lifting stay-home measures too soon.“While there are massive societal costs from the current shelter in place restrictions, I worry that reopening certain places too quickly before infection rates have been reduced to very minimal levels will almost guarantee future outbreaks and worse longer-term health and economic outcomes,” Zuckerberg said during Facebook’s April 29 earnings call.Back to WorkOn the same day, Musk called shutdown orders “fascist” and unconstitutional, likening them to forcible imprisonment and saying they were “breaking people’s freedoms in ways that are horrible and wrong.” His comments were embraced by some Silicon Valley venture capitalists and political conservatives.Tesla released a 38-page “Return to Work Playbook” late Saturday laying out the safety protocols it will adopt at all of its facilities. While the company will disinfect work areas, enforce social-distancing precautions and provide personal-protective equipment, among other measures, the document doesn’t include any plans to test workers other than by checking their temperatures.Alameda officials have said more testing needs to come online and that Covid-19 case counts need to drop before they’ll feel comfortable moving to the next phase of reopening.Tesla has signaled it may disregard Alameda’s order, saying in a blog post Saturday that it had “started the process of resuming operations.” Several Fremont workers shared text messages with Bloomberg News in which supervisors were calling them back to the factory.“Our employees are excited to get back to work, and we’re doing so with their health and safety in mind,” the company said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Unreal market

    This market is unreal. I understand the fed and they Their BRR BRR printer is printing away, but for real how much longer can this literally go in a straight line up without another at least small correction. Unemployment is 20% and every day the market goes up 1%. business are starting to open but surely they are not doing anywhere close to what they were doing before the China virus? I feel like at this point people are FOMO buying at this point.

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  • REA Group shares are up 53% since late March. Is it too late to invest?

    online real estate shares

    The REA Group Limited (ASX: REA) share price has risen very strongly by 53% since the ASX started to see the beginning of a market rebound on 23 March.

    In comparison, the S&P/ASX 200 Index (ASX: XJO) has only risen by 19% during that time.

    Has the buying opportunity passed for investors wishing to take a stake in Australia’s largest online real estate portal?

    Solid third-quarter results

    The market reacted very positively to REA Group’s third-quarter results for FY 2020. This was released to the market last Friday morning, with a very strong 7.7% share price rise seen on the day.

    Despite the very tough trading conditions caused by the coronavirus crisis, REA Group still managed to deliver a 1% increase in revenue to $199.8 million and an 8% lift in earnings before interest, tax, depreciation and amortisation (EBITDA). While national residential listings declined 7% for the quarter, they were actually up in Melbourne by 6% and in Sydney by 5%.

    Considering the devastating impact that the coronavirus crisis has had on our property market, with property open for inspections and auctions virtually coming to a halt, I think that this was actually quite a strong result. So I am not surprised that the market reacted so favourably.

    Property inspections and on-site auctions begin to reopen

    Already there are signs of the beginning of a residential property market recovery, and investors appear to be encouraged by the release of the Federal Government’s 3-step plan to reopen Australia last Friday. This plan aims to see the majority of Australian businesses re-opened by the end of July.

    As part of this plan, NSW agents and vendors began traditional property inspections and on-site auctions last weekend after a 6-week limited shutdown due to the coronavirus.

    Is it too late to invest in REA shares?

    Despite the recent rally in the REA Group share price, I don’t believe it is too late for investors with a long-term investment horizon to purchase shares. REA Group shares closed on Friday at $95.17, which is still well below its peak in February of $117.30. I believe there is still potential for more upward movement in its share price, as the further opening up of the nationwide property market in the months ahead is likely to lead to increased property listings.

    I also believe that the long-term outlook for REA Group still looks bright due to the fast-growing Australian residential property market, driven by overseas migration. In addition, REA Group looks set to capitalise over the next few years on its growing international business divisions. In my view, this places it in a better position than its main rival in Australia, Domain Holdings Australia Ltd (ASX: DHG), which only has a local presence.

    5 cheap stocks that could be the biggest winners of the stock market crash

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    Returns as of 7/4/2020

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    Motley Fool contributor Phil Harpur owns shares of REA Group Limited. The Motley Fool Australia has recommended REA 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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  • Tencent Weathers China Slowdown But a Deeper Threat Looms

    Tencent Weathers China Slowdown But a Deeper Threat Looms(Bloomberg) — The Covid-19 pandemic likely barely dented Tencent Holdings Ltd.’s growth, thanks to its dominance of online spheres from gaming to social media. Now that China’s industries are emerging from the worst of the outbreak, the bigger long-term threat may be the growing posse of challengers to its internet leadership.The WeChat operator is expected to unveil 18% revenue rise when it reports earnings Wednesday, offering investors the earliest glimpse into how China Internet Inc. fared in the coronavirus-stricken first quarter. That’s down a tad from 20%-plus in prior quarters but still decent, thanks to its burgeoning cloud and finance services and a billion-plus entertainment-starved players confined to home. It’s why Tencent’s market value has surged more than $28 billion since Covid-19 first broke out, defying a global market rout and a record Chinese economic contraction.But once the dust settles, Tencent will have to contend with a renewed challenge from giants like Alibaba Group Holding Ltd. and ByteDance Ltd., that are increasingly encroaching on its turf. Like in Silicon Valley years ago, when the biggest cash-rich players from Amazon.com Inc. to Facebook Inc. invaded each other’s territories, China’s largest tech corporations can now resume expanding beyond their mainstay businesses and developing services from advertising to gaming and payments in direct competition with Tencent.“These large internet platforms are ambitious and they will try to leverage their scale to go into businesses which are not core to them. Over the years I have seen many of them try to do it, but so far none has succeeded at overtaking the incumbent,” said Bloomberg Intelligence analyst Vey-Sern Ling. “I think large companies will continue to focus on strengthening their core, while engaging in battles with their rivals on the fringe.”TikTok operator ByteDance has been luring users and advertisers away and into its viral social networks. It’s also readying a foray into hardcore gaming. Alibaba-backed Ant Financial is creating its own version of a lite-app universe, taking a leaf from the book of Tencent’s WeChat. And even Pinduoduo Inc. — a Groupon-like platform backed by Tencent itself — has turned to live-streaming and virtual gifts to keep consumers glued to its app.Their efforts coincide with a maturing of Tencent’s gaming business. Tencent’s marquee titles like Honor of Kings and Peacekeeper Elite picked up millions of new players during virus lockdowns — yet not everyone’s a loyal patron. Its mobile game revenue for the first quarter may shrink sequentially due to weak performance from these aging hits, according to Bloomberg Intelligence citing Sensor Tower data. New releases from Alibaba’s gaming unit and Bilibili Inc. jumped in sales in recent weeks, according to the analytics firm, trailing closely behind Tencent’s two offerings.Longer term, ByteDance appears the more significant threat. It’s looking to exploit its social platforms to distribute games where players will splurge on virtual weapons and cosmetics, much as Tencent did more than a decade ago when it first entered the arena. ByteDance has built a gaming division with more than 1,000 people — including hires from Tencent — and is planning to launch two hardcore games this spring, Bloomberg News has reported.Competition at home has spurred Tencent to increasingly look overseas for future growth. It’s taken Honor of King’s global edition to scores of new markets from Russia to the Middle East. International titles contributed 23% of Tencent’s online games revenue in 2019’s final quarter. It’s also planning to launch music app Joox to Africa’s most populous nations.Tencent itself is exploring new markets. Taken together, fintech and cloud services are now Tencent’s fastest-growing division, making up more than a quarter of the company’s revenue in 2019.Its fintech business took a surprising hit in the first quarter, after the brick-and-mortar stores that account for the bulk of WeChat payments shuttered nationwide to contain Covid-19. Ant Financial’s Alipay, meanwhile, is seeking to draw more merchants and transactions partially by replicating the lite-app model WeChat championed. Alipay’s own mini programs — featured more prominently in a recent upgrade and used for everything from hotel booking to tax filing — now have more than 600 million monthly active users, according to Ant Financial.For cloud, the pandemic boosted Tencent’s nascent consumer-facing division as workers stranded at home had to rely on collaborative office software. But enterprise customers — a more significant source of revenue — were forced to delay their projects. Tencent’s cloud service revenues surpassed 17 billion yuan ($2.4 billion) in 2019, versus rival Alibaba’s 35.5 billion yuan. Alibaba said last month it will invest 200 billion yuan on cloud infrastructure such as data centers over the next three years.What Bloomberg Intelligence SaysThe company’s social-ad business could continue to grow strongly, despite challenging industry conditions, on high demand and new inventory released in mid-February, but its fintech and business services segment could deliver slower growth as offline payments declined during the pandemic and some cloud computing projects were delayed.\- Vey-Sern Ling and Tiffany Tam, analystsClick here for the research.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Cochlear share price lower after reporting 60% sales decline in April

    The Cochlear Limited (ASX: COH) share price is edging lower after providing an update this morning.

    At the time of writing the hearing solutions company’s shares are down slightly to $181.22.

    What did Cochlear announce?

    This morning Cochlear released an update on the tough trading conditions it is facing because of the pandemic.

    According to the release, as was forewarned in March, the company has experienced a substantial, temporary negative impact on cochlear implant surgeries in the US and Western Europe as hospitals prioritise their COVID-19 responses.

    During the month of April, sales revenue across the business fell by ~60% on the prior corresponding period. The sales of cochlear and acoustic implants were the most severely affected.

    Cochlear implant unit sales declined by ~80% across developed markets, with most elective surgeries postponed across the US and Western Europe. In addition to this, the company notes that many ear, nose, throat (ENT) surgeons have been diverted to help treat COVID-19 patients.

    Positively, in China things are recovering quickly. Surgeries recommenced in late February and continued to recover throughout April.

    As a result, surgeries are now running close to pre-virus run rates despite Beijing, the largest surgery centre, remaining largely closed to elective surgery. Though, the majority of cochlear implants in China are for children.

    Also being impacted by the pandemic is the Services business, which represents around 30% of business-as-usual revenue. Its sales declined by ~30% during the month of April.

    Management advised that while many recipients have been able to access sound processor upgrades remotely, clinic closures have delayed access for other users.

    In light of these sales declines, Cochlear is currently cash flow negative and expects to continue being so for the coming months.

    However, thanks to its recent capital raising, an increase in its debt facilities, and its cost cutting, management believes its liquidity position is strong enough to navigate these tough times.

    Outlook.

    Management expects the immediate term to be tough for the company but remains very positive on its long term outlook.

    CEO & President, Dig Howitt said, “Longer-term, there remains a significant, unmet and addressable clinical need for cochlear and acoustic implants that is expected to continue to underpin the long-term sustainable growth of the business. Following the capital raising and expansion of debt facilities, we have strengthened our balance sheet and liquidity position, which enables the business to weather the expected temporary decline in demand caused by COVID-19, while continuing to progress the R&D pipeline.”

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    James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Cochlear 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.

    The post Cochlear share price lower after reporting 60% sales decline in April appeared first on Motley Fool Australia.

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  • These ASX 200 shares saw the biggest falls last week

    The market closed higher last week on hopes of an imminent easing in coronavirus restrictions. The S&P/ASX 200 Index (ASX: XJO) finished the week up 2.78% as Scott Morrison announced a staged reopening of the economy. 

    Treasury has estimated the coronavirus shutdown is costing the economy $4 billion a week. The economic hit is due to a combination of unemployment, productivity loss, and a drop in consumption. 

    The unemployment rate is predicted to hit 10% by June. But a recovery in GDP growth is expected by the end of the year, limiting the fall in GDP to 6% over 2020. Unemployment is predicted to improve slightly to 9% by the end of the year. 

    Market conditions remain challenging given COVID-19 uncertainty and the unknown speed of recovery. Nonetheless, ASX travel shares soared as Morrison announced “some” interstate travel would be permissible under stage 2 of the 3-step plan to reopen the economy.

    If all goes well under Morrison’s 3-step plan, 850,000 people will be back in work and around $9 billion pumped into the economy in about 8 weeks’ time. As restrictions ease, we take a look at the ASX 200 shares that fell the most last week. 

    Inghams Group Ltd (ASX: ING)

    Shares in Inghams Group fell 6.5% last week to close the week at $3.19. Last Monday, Inghams refused to draw conclusions around FY20 trading results given changes in volume and channel mix.

    COVID-19 restrictions have had an impact on the food supply chain, and there have been volatile conditions in poultry markets. Inghams had to swiftly realign its operations to manage social distancing requirements at its facilities. This has created additional inefficiencies and costs and led to the suspended production of some products. 

    COVID-19 restrictions caused a temporary surge in retail sales in March and early April but since then, store traffic has decreased and shopping behaviours shifted. Out of home consumption of poultry products has been negatively impacted. Customers supplying hospitality and tourism industries have significantly reduced purchases, leading to weaker conditions in wholesale markets. 

    Inghams is closely managing its working capital and inventory, and remains focused on debtors and cashflow collection. In some circumstances where customers have experienced difficulties, Inghams is working to support them. The company is supported by its lenders and has significant headroom in its covenants. 

    Orocobre Limited (ASX: ORE)

    Orocobre shares ended last week 6.5% lower at $2.03. Its Olaroz lithium facility stopped production during the March quarter due to Argentinian COVID-19 restrictions. The shutdown, combined with planned maintenance, resulted in 21 days of lost production. 

    Production for the quarter was down 11% on the prior corresponding period due to the shutdown. March quarter product pricing was also below that of the December quarter with continuing weak demand and aggressive competitor behaviour. Sales revenue was down 32% QoQ to US$12.1 million.

    The existing challenges in the lithium market were compounded by the spread of COVID-19 which impacted operations throughout the supply chain. Future demand rests on increased appetite for electric vehicles, with Orocobre confident in its long-term prospects given government emission targets and European carbon emissions penalties. 

    Alumina Limited (ASX: AWC)

    Shares in Alumina lost 6.2% last week, finishing the week at $1.525. The price of aluminium has declined 17.7% since the beginning of 2020, and is expected to decline further over the next 12 months. 

    In the March quarter, Alumina reduced cash costs of production by $1 per tonne. Daily production was in line with that of the previous quarter. The average realised alumina price was also broadly in line with the previous quarter despite a decline in the spot price towards the end of the quarter. 

    To preserve cash in the current environment, Alumina has put growth capital expenditure on hold for the rest of 2020. This will reduce spending by $30 million, with Alumina looking to save a similar amount on non-critical sustaining capital expenditure. 

    Qantas Airways Limited (ASX: QAN)

    Qantas shares closed last week down 6.1% at 3.40. A dispute with Perth airport over alleged unpaid aviation and rental fees has led to the airport issuing Qantas with termination notices. Qantas said the notices amounted to eviction notices and could result in operations at the airport stopping within a fortnight. 

    “We understand Qantas needs to keep trading and that the significant profits it is generating from these lucrative FIFO flights are crucial to them,” Perth Airport Chief Executive Kevin Brown told the Sydney Morning Herald. “But paying nothing while using all of the airport’s services is no longer an option.”

    Qantas has struck deals with most airports around Australia and is in negotiations with others. Perth Airport is the exception. Qantas is currently operating around 350 services a week through Perth airport, most headed to Western Australian resource projects. 

    National Storage REIT (ASX: NSR)

    The National Storage REIT finished last week down 5.9% at $1.59. National Storage announced a $330 million equity raising during the week. A $300 million placement was conducted at $1.57 per stapled security, which was a 7.1% discount to the last closing price. A further $30 million will be raised under a security purchase plan. 

    Proceeds from the raising will be used to strengthen the balance sheet, replenish investment capacity and provide additional funding flexibility. National Storage says it has $120 million of acquisition and development opportunities under active consideration. 

    Self-storage markets in Australia and New Zealand are fragmented. National Storage believes the COVID-19 pandemic may provide additional acquisition opportunities over the next 12 to 18 months. With strengthened liquidity as a result of the capital raising, National Storage says it will be in a strong position to capitalise on these opportunities.

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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 Webjet Ltd. 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.

    The post These ASX 200 shares saw the biggest falls last week appeared first on Motley Fool Australia.

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