The Boral Limited (ASX: BLD) share price surged for the second day on rumours that it may be a takeover target.

Shares in the building materials group jumped 6.6% to $3.54 on Tuesday – making it the third best performer on the S&P/ASX 200 Index (Index:^AXJO) after the Perenti Global Ltd (ASX: PRN) and Domain Holdings Australia Ltd (ASX: DHG) share price.

Corporate interest in Boral

The big jump in Boral, which puts its two-day gain to nearly 14%, puzzled many before rumours were published in the Australian Financial Review pointing to a large buyer.

It’s speculated that Kerry Stokes’ Seven Group Holdings Ltd (ASX: SVW) has been a keen buyer of the stock on Friday when 150 million Boral shares changed hands. That’s equivalent to 12% of Boral.

We should know soon if Seven Group is behind the frenzy as it will need to lodge a substantial holder’s notice with the ASX this week – assuming the rumours are true.

Why Seven Group might be interested in Boral

Such a move makes strategic sense. First, Seven Group has a track record of buying businesses, such as construction equipment rental company Coats Hire.

Boral will allow the group to expand vertically into the infrastructure construction sector by providing both materials and equipment.

Seven Group is tipped to win work on the Snowy Hydro 2.0 project, the Western Sydney Airport and WestConnex extensions, according to the AFR.

Wounded animal

Boral is underperforming the market after a series of management missteps that culminated in its chief executive Mike King announcing his exit in August.

Not only is its share price in the doldrums, which makes it an opportunistic target, but its effectively leaderless. All the more enticing for any would be acquirer.

But a full takeover isn’t a sure thing.

Next move may not be a takeover

Boral’s troublesome US business doesn’t quite fit into Seven Group’s portfolio and Boral is facing a class action lawsuit over an accounting scandal involving the group’s US windows business.

Any new owner of Boral would be liable to pay damages if the court rules against the Boral.

So, this means that Seven Group may be buying itself a seat at the table in any carve-up of Boral’s assets.

Boral is under pressure to consider a radical restructure that would involve divesting assets.

Foolish takeaway

I have picked Boral as an ideal tax-loss selling candidate a week ago, before the corporate action was revealed.

This doesn’t change my dim view of Boral as I don’t recommend investors buy shares solely based on takeover hopes.

I rather stick to better quality names in the industry like James Hardie Industries plc (ASX: JHX) and CSR Limited (ASX: CSR).

Further, these stocks are better placed to benefit from the federal government’s new housing grants, which are expected to be announced this week.

More reading

• ASX 200 rises 0.3%, Zip rockets higher
• Why Coles and Woolworths shares were flat in May
• 3 long-term impacts of near-zero interest rates
• 3 things ASX investors need to know about the RBA’s rate decision today
• These ASX shares were among the best performers in May, surpassing the ASX 200

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with me on Twitter @brenlau.

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

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The S&P/ASX 200 Index (ASX: XJO) went up by 0.3% today as the ASX continued its steady climb upwards. The ASX 200 finished at 5,835 points.

The protests in the US are grabbing the attention with the coronavirus currently not at the forefront of people’s minds. This year has been very eventful so far.

Zip Co Ltd’s (ASX: Z1P) big acquisition

The Zip share price flew higher today by 38.7%. The company announced that it’s going to buy the rest of US-based QuadPay by issuing up to 119 million shares to QuadPay shareholders. The deal implies an enterprise value of US$269 million for Quadpay.

Zip described Quadpay as one of the leading BNPL providers in the US. Based on the first quarter in 2020, QuadPay has annualised revenue of $70 million and annualised total transaction value (TTV) of $900 million. It also has a net transaction margin of more than 2%.

The combined ASX 200 business will have $3 billion of annualised TTV and annualised revenue of $250 million.

Zip has also entered into an agreement with CVI Investments to raise up to $200 million with convertible notes and warrants.

Brickworks Limited (ASX: BKW) trading update

The ASX 200 building products business gave a trading update today. Over the past few months it has managed to make a profit from its Australian building products business, but the US division saw negative earnings.

Australian building product revenue was only down by 10% in the four months to 31 May 2020 compared to the prior corresponding period. Development approval has been received for the new $125 million brick plant at Horsley Park in NSW.

Progress continues at the Oakdale site.

Australia and New Zealand Banking Group (ASX: ANZ) sale

ANZ has finally managed to sell its UDC Finance business for NZ$762 million to Shinsei Bank, a large Japanese business.

The sale will provide around $439 million of level 2 group CET1 capital once settled for the ASX 200 bank. It’ll also released more than NZ$2 billion of funding provided by ANZ New Zealand.

Shinsei intends to preserve UDC’s operations, retain employees and grow the business.

More reading

• This embattled ASX 200 company could be the next M&A target
• Why Coles and Woolworths shares were flat in May
• 3 long-term impacts of near-zero interest rates
• 3 things ASX investors need to know about the RBA’s rate decision today
• These ASX shares were among the best performers in May, surpassing the ASX 200

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 ZIPCOLTD FPO. 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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Overall, May was an extraordinary month for ASX shares. The S&P/ASX 200 Index (ASX: XJO) managed to bank an increase of 4.2% for the month, helped in large part by the ASX banks like Commonwealth Bank of Australia (ASX: CBA).

But other some ASX shares weren’t really joining in the party.

Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) are 2 examples.

The Coles share price started May at $15.51 per share but ended the month at $15.36, meaning the company actually went backwards by 0.97% over the month.

Meanwhile, Woolworths shares began the month at $35.75 per share and concluded May at $35.34, again, down 1.15%.

So why have Woolies’ and Coles’ share prices lagged so dramatically over May? And perhaps more importantly, does this mean there might be some buying opportunities right now?

Why Coles and Woolies have been lagging lately

It’s worth remembering that both the Woolworths and Coles share prices were holding up remarkably well during the market crash we saw in March. Between 20 February and 23 March, the ASX 200 lost more than 36% of its value. Over the same period, the Coles share price ‘only’ lost 3.53% and Woolworths was down 16.4%.

It’s this defensiveness that is leading Coles and Woolworths to lag the broader market’s recovery in my view.

If a stock isn’t volatile relative to the ASX 200 during bad times, it typically displays similar inertia during good times.

Are Woolworths or Coles shares a buy today?

It’s worth noting that I think Woolworths shares were getting a little overpriced prior to the March crash, which explains why they performed poorly compared to the Coles share price during the crash.

Thus, I would class both Coles and Woolworths shares as ‘fairly valued’ today, despite their recent market performance.

But ‘fairly valued’ is still a long way from being a ‘bargain buy’.

On current prices, Coles is trading on a price-to-earnings (P/E) ratio of 17.44 and Woolworths on 17.7. Given that the broader ASX 200 P/E is sitting at 18.98 on average, I’m not really too compelled to add these shares to my portfolio today.

But there might be some merit in these 2 ASX giants if you’re a dividend income investor. Unlike many other ASX blue chips, I think both Coles and Woolworths will easily be able to fund their dividend payments in 2020. The grocery business is very defensive and should hold up no matter what happens with the economy for the remainder of the year.

So long story short, I would class both Coles and Woolworths as reasonable ‘buys’ today for dividend income, but not for much else.

More reading

• This embattled ASX 200 company could be the next M&A target
• ASX 200 rises 0.3%, Zip rockets higher
• Smash low interest rates with these ASX dividend shares
• 3 long-term impacts of near-zero interest rates
• 3 things ASX investors need to know about the RBA’s rate decision today

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET 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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The Bubs Australia Ltd (ASX: BUB) share price has been a strong performer over the last few weeks.

Since this time in May, the infant formula and baby food products company’s shares have risen a massive 23%.

And if we go back a further month, then its performance is even more impressive.

The Bubs share price has stormed a remarkable 65% since this time in April.

Why has the Bubs share price surged higher?

There have been a couple of catalysts for this strong share price performance over the last couple of months.

The first was an impressive third quarter update in April, which revealed record quarterly revenue of $19.7 million. This was a 67% jump on the prior corresponding period and a 36% lift on the second quarter.

But perhaps what was most promising with its quarterly update, was news that Bubs is now generating positive operating cashflow. For the quarter, Bubs recorded positive operating cashflow of $2.3 million.

This appears to demonstrate that it has finally reached a scale which means its operations are profitable. Which is a big positive as it has burned through a significant amount of cash in recent years while essentially selling its products at a loss.

Interestingly, this is similar to what A2 Milk Company Ltd (ASX: A2M) experienced back in 2015. Since then it has gone on to become an extremely profitable business.

What else has got investors excited?

Another announcement that got investors excited was a supply agreement with supermarket giant Coles Group Ltd (ASX: COL).

Last month Bubs revealed that its Bubs Organic Grass Fed Infant Formula will be distributed to 482 Coles supermarkets. Initial orders were to be processed in the middle of May, with its products expected on-shelf early this month.

This is in addition to its existing agreement for Bubs Goat Milk Infant Formula (which is ranged in 561 stores) and Bubs Organic Toddler Snacks (which is ranged in up to 804 stores).

Furthermore, within the same announcement the company revealed that fellow supermarket operator Woolworths Group Ltd (ASX: WOW) has increased its supply agreements. This will see Bubs Organic Grass Fed Infant Formula ranged in 800 Woolworths stores and Bubs Goat Milk Infant Formula in 654 Woolworths stores.

Is it too late to invest?

I don’t believe it is too late to invest with a long term view.

Given the progress that Bubs is making with its margins, its increasing footprint, and strong demand in China, it looks well-positioned to deliver strong earnings growth over the next decade.

More reading

• Is the a2 Milk share price too high to buy?
• Top ASX Stock Picks for June 2020
• 10 top ASX growth shares to buy in June for strong returns
• How to make $1,000 a month in dividends
• Where to invest $10,000 into ASX shares immediately

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 BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk, COLESGROUP DEF SET, and Woolworths Limited. The Motley Fool Australia has recommended BUBS AUST FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While it’s too soon to declare the end of COVID-19, most countries have shown signs of flattening the curve and the relaxation of lockdown measures. This bodes well for the following 2 ASX tech shares that provide payment solutions and value-added business banking products. 

EML Payments Ltd (ASX: EML) 

The EML share price went on a spectacular run in 2019, soaring by more than 200%. However, the business has faced significant headwinds given its dependency on shopping centres and gift card consumption.

EML recently updated the market regarding its third-quarter and April performance. The update outlined challenging business conditions, a more diversified business model and expected improvement in trading conditions moving forward. There are many reasons why EML could emerge as a leading S&P/ASX 200 Index (ASX: XJO) tech share coming out of the coronavirus. 

Renegotiated acquisition 

EML’s acquisition of Irish firm, Prepaid Financial Services (PFS) was said to be a game-changer. PFS provides prepaid card and payments technology that offers some of the most flexible and quick to market services in the prepaid payments industry. It has a broad network of partners including governments, mobile network operators, banks and blue-chip organisations. This acquisition allows EML to diversify its earnings away from gift cards and expands its geographical footprint in the European region. 

The coronavirus pandemic has allowed EML to renegotiate the terms of its PFS acquisition. The upfront enterprise valuation was reduced to £131.5 million, down £94.5 million from £226 million. EML was previously criticised for not completing the acquisition soon enough. I believe investors should be grateful that the terms of the acquisition were renegotiated at a cheaper valuation.

Recent business update

EML highlighted a strong financial performance for the 9 months to 31 March 2020. This performance excludes its PFS acquisition which will be included in financial results from 1 April. EML’s gross debit volume (transaction volumes) increased 55% over the prior corresponding period, while revenue increased by 20%. Earnings before interest, tax, depreciation and amortisation (EBITDA) also jumped 24%.

At the end of April, EML held more than $125 million in cash. The gradual opening of malls in various countries during May and June should see an improvement to EML’s trading conditions moving forward. 

Tyro Payments Ltd (ASX: TYR) 

Tyro Payments has provided weekly updates to the market regarding transaction volumes on its EFTPOS terminals. 

In May, the company saw its transaction volumes fall 18% on the prior corresponding period. This marks a significant improvement against April, where transaction values fell 38%. 

The market appears to be very optimistic about how Tyro will perform moving forward. The Tyro share price has rebounded strongly, up 340% since its March lows and more than 10% already in June. 

Tyro’s client base consists largely of Australian small and medium-sized enterprises in the health, hospitality and retail verticals. Most restaurants, cafes and shopping centres in Australia have been allowed to reopen. This should see a general improvement in Tyro’s transaction volumes and potentially year-on-year growth moving forward. While the Tyro share price has soared in June, it is certainly one to watch. 

More reading

• The 3 ASX tech stocks that helped this fund manager outperform in May
• These 5 exciting small cap ASX tech shares rose by up to 70% in May
• Build wealth for life with these 2 ASX 200 shares
• Grow your wealth with these exciting ASX mid cap shares
• 4 ASX fintech shares to make you rich

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited and Tyro Payments. The Motley Fool Australia has recommended Emerchants 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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This afternoon the Reserve Bank decided against cutting the cash rate further and kept it on hold at 0.25%.

While this was a small win for income investors, it certainly doesn’t make life any easier for them.

At present Commonwealth Bank of Australia (ASX: CBA) offers interest rates of 1% per annum on a five-year term deposit. This is broadly in line with what you can find elsewhere with the other big four banks.

This kind of yield makes it very hard for investors to earn a sufficient income from term deposits.

But never fear, because the Australian share market is home to a large number of dividend shares which offer vastly superior yields.

Two which you can use to beat low interest rates are listed below:

Rural Funds Group (ASX: RFF)

The first dividend share to consider buying is this property company. Rural Funds is different to most property companies on the ASX. It has a focus on Australian agricultural assets and owns a diverse portfolio of high quality properties across different industries. These properties have ultra long leases and come with fixed rent increases built into them. This provides Rural Funds with a lot of earnings visibility. As a result, it has been able to provide distribution guidance for FY 2020 and FY 2021. The company plans to pay shareholders a distribution of 10.85 cents per share this year and then 11.28 cents per share next year. The latter equates to a 5.6% distribution yield.

Telstra Corporation Ltd (ASX: TLS)

Another dividend share to buy is Telstra. I think the telco giant is a great option for income investors due to its defensive qualities. These have been on display during the pandemic, with Telstra able to reaffirm its guidance for FY 2020 despite the crisis. In addition to this, with the NBN headwinds beginning to ease, I believe a return to growth is not too far away. In the meantime, I’m confident that its free cash flows are sufficient to maintain its 16 cents per share dividend. This equates to a fully franked 5% dividend yield.

More reading

• How to value the big four ASX banks
• Why I would buy these ASX 200 blue chip shares in June
• 5 winning ASX dividend shares to buy in June
• How bankable are the big four ASX bank shares in 2020?
• This ASX fintech share is up 489% since March

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Telstra 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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