The Sonic Healthcare Limited (ASX: SHL) share price is pushing higher on Wednesday after the release of a trading update.

At the time of writing the healthcare company’s shares are up almost 3% to $29.76.

What did Sonic Healthcare announce?

After withdrawing its FY 2020 guidance in March because of the pandemic, this morning the company revealed that it is now in a position to provide guidance once again.

Management notes that its trading results in March and April were substantially below forecast, but things have picked up since then. In May, its performance was stronger than expected and in June this positive trend has continued.

As a result of the above, the company expects to report statutory earnings before interest, tax, depreciation, and amortisation (EBITDA) at a similar to level to what it achieved in FY 2019 (excluding the impact of the new lease accounting standard AASB 16). In FY 2019 Sonic reported statutory EBITDA of $1.075 billion.

Sonic’s CEO, Dr Colin Goldschmidt, was pleased with the way the company performed during the crisis.

He commented: “Sonic’s global leadership teams have responded magnificently to the Covid crisis, making use of established executive experience, trusted culture, team spirit and wide-open Sonic collaboration channels at national and international level.”

“Our leaders have shown great flexibility and have adapted rapidly to an entirely new operating environment. Sonic continues to play a crucial frontline role in combating the pandemic, with our laboratories in Australia, the USA and Europe testing thousands of patients per day for Covid-19,” he added.

What about FY 2021?

Due to the uncertainty caused by the pandemic, Sonic advised that it is not in a position to provide guidance for FY 2021 at this time. Though, it does intend to provide a further update with the FY 2020 results release in August 2020.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare 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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Buying and holding ASX 200 shares can be a powerful way to build wealth and retire early.

If equities are to form a crucial part of your retirement plans, obviously selecting the right shares to buy today is extremely important.

For example, the Xero Limited (ASX: XRO) share price has rocketed more than 400% higher over the last 5 years. Xero is a leading Australian tech company with a specialist, easy-to-use accounting software platform.

If you’re a long-term investor in this ASX 200 tech share, you’d be sitting on a tidy capital gain right now.

But Xero isn’t the only company with long-term growth potential on my radar. Here are a couple of my other favourite picks in the current market.

ASX 200 shares that could help you retire early

I like the look of NextDC Limited (ASX: NXT) for its potential growth trajectory.

The NextDC share price is up 51.7% this year alone and 333.9% in the last 5 years. Whilst this could mean NextDC has been overbought, I still think there’s further growth ahead for this Aussie data centre operator.

NextDC is a leader in the Australian data storage and security space. The ASX 200 tech share has been surging in 2020 as demand for its services has increased.

NextDC posted a $4.9 million half-year loss in February as it continues to re-invest in the business and fuel expansion plans.

It’s a risky play, but one that could have a big payoff if successful in the decades ahead.

Outside of the tech sector, I also like the prospects of Polynovo Ltd (ASX: PNV) right now.

Polynovo is an ASX 200 company that specialises in the treatment of burns and which also produces other biotechnology solutions. 

The Polynovo share price is up an impressive 2,644% in the last 5 years including a 25.4% gain in 2020.

I think despite these gains, Polynovo shares could be set for more growth over the next decade. 

Polynovo’s NovoSorb product is already active in an addressable $1.5 billion market, but planned applications for hernia devices and breast implants could boost this towards the $7.5 billion mark.

That leaves a lot of potential growth for the ASX 200 biotech share if it can execute its strategy and capture a larger market share.

Foolish takeaway

These are just a couple of ASX 200 growth shares on my radar for building a comfortable retirement. As always, it’s important to consider your own investment horizon and lifestyle goals when it comes to purchasing shares. Also, ensure you maintain a balanced portfolio to help maximise your return whilst minimising your risk exposure.

More reading

• Where to invest $10,000 in ASX 200 shares for 2030
• Why this fund manager believes PolyNovo shares are undervalued
• Best growth shares to buy with $4,000
• How to try and beat the market with ASX shares
• ASX 200 Weekly Wrap: ASX back in the green

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 Xero. 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 Serko Ltd (ASX: SKO) share price is tumbling this morning after the ASX small-cap reported its full-year results for the year ending 31 March 2020.

At the time of writing, Serko shares have fallen 3.96% to $2.91. This drop takes the company’s year-to-date share price loss to around 40%.

About Serko

Serko is an Auckland-based online travel and expense management technology provider. The company’s core software, Zeno, addresses two main functions: corporate travel and expense management.

Zeno Travel is an online travel platform that delivers AI-powered end-to-end travel itineraries, cost control and travel policy compliance to corporate customers.

Meanwhile, Zeno Expense provides finance teams with intelligent technology to automate and streamline the expense administration function, identify out-of-policy expense claims and prevent fraud.

What the numbers say

Starting at the top line, total operating revenue came in at NZ$25.9 million. While this result represented 11% growth over the prior corresponding period (pcp), it was substantially lower than Serko’s initial guidance range of 20% to 40%.

In light of COVID-19, Serko revised its revenue expectations in late February and then withdrew guidance completely in mid-March.

Turning to expenses, operating costs increased 59% to NZ$37.1 million. This reflected a full-year of InterplX operating costs, an expense management software provider Serko acquired in late 2018, and the scale-up of the company’s international presence.

This increase in operating costs led to Serko reporting a full-year net loss after tax of NZ$9.4 million, compared to an FY19 profit of NZ$1.6 million.

Serko capitalised NZ$11 million of development costs in FY20 compared to NZ$6.7 million in FY19. Total research and development amounted to NZ$13.6 million, representing 53% of net operating income compared to 39% in the pcp.

Following the company’s NZ$45 million capital raising in November 2019, Serko remains well-funded with NZ$39.9 million cash on its books as at 31 May 2020. Serko’s net cash burn for the year, including capital development, was NZ$16.5 million.

Moving forward, Serko is targeting a maximum cash burn average of no more than NZ$2 million per month.

Bookings growth

Serko achieved year-on-year bookings growth each month through to February 2020. The Australian and New Zealand markets generated most of Serko’s total bookings, the majority of which were domestic.

With this, the number of corporates transacting through Serko’s platforms continued to grow, increasing by more than 700 compared to the prior year.

In February, a peak of over 24,000 bookings were processed in a single day. This compares to a peak of 21,000 bookings in the same month in the prior year.

However, as detailed in previous trading updates, Serko noted that a gradual decline in bookings became evident in mid-February, which was followed a rapid decline in March.

As a result, total bookings for FY20 were up only 2% over the pcp.

What next?

Looking forward, Serko believes that the Australian and New Zealand domestic and trans-Tasman travel markets, which represents most of its revenue, are poised to recover more quickly than international routes outside of Australasia.

Serko noted that travel volumes gradually started to recover in May in light of the easing of domestic travel restrictions in New Zealand. However, it is yet to see any material increase in domestic travel in Australia.

Despite the uncertain outlook, the company anticipates that its core Australasian markets will be operating at 40% to 70% of their pre-COVID-19 activity levels by March 2021.

Commenting on the results, acting chair Claudia Batten said:

“The first three quarters of the financial year ended 31 March 2020 were characterised by monthly revenue growth and the achievement of a number of key milestones.”

“However, Serko’s performance was impacted in the fourth quarter of the financial year as the Covid-19 pandemic became widespread, significantly affecting booking volumes. This resulted in an adverse impact on the full-year result.”

More reading

• ASX 200 finishes flat, ASX travel shares drop
• ASX 200 falls 2%, ASX travel shares drop heavily
• 3 exciting small cap ASX shares to watch very closely
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Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia has recommended Serko Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The ASX dividend share game has changed in 2020 – markedly so. This time last year, we were likely discussing which ASX banks had the largest dividend yield, or how safe Transurban Group‘s (ASX: TCL) payouts are.

Fast forward to 2020 and we’re now asking which ASX bank will pay a dividend this year, or how low Transurban’s payouts will be.

So here are 3 ASX shares that I think are great choices for strong dividend income within this new paradigm.

The resources dividend giant

BHP Group Ltd (ASX: BHP) is an ASX mining behemoth. It would be our largest ASX company if it wasn’t for its multiple listings across London and New York. BHP has massive global operations across 4 key commodities: copper, oil, iron ore and coal. It’s this diverse earnings base that I think lends strength to BHP by enabling it to balance commodity pricing swings in any one area.

On current prices, BHP is offering a trailing dividend yield of 5.97% – or 8.53% grossed-up with full franking. I think this dividend is well funded today, and could even increase if iron ore prices stay above US$100 a tonne for an extended time. Either way, I think BHP is a top contender for a strong dividend in 2020.

The listed investment company

WAM Capital Limited (ASX: WAM) is a listed investment company (LIC) that has been around since 1999. Since that time, it has handily delivered investors outperforming returns, which stand at an average of 15.7% per annum. WAM’s focus is normally on growth-orientated, mid-cap ASX shares, which are bought when the company identifies a ‘growth catalyst’.

On current prices, WAM shares are offering a dividend yield of 8.42%, 12.03% grossed up with full franking. However, this LIC’s profit reserves are looking a little bare. It’s possible this dividend won’t be maintained at its current level moving forward.

The dark horse ASX bank

Commonwealth Bank of Australia (ASX: CBA) is our final dividend pick – and a long-shot. I, for one, don’t have massive expectations on the bank’s final dividend for 2020, due to be paid in September. However, I also don’t think CBA will follow its banking compatriots Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) and ditch the dividend entirely.

Although the ASX banking sector is facing a number of headwinds as a whole, CommBank is unquestionably our strongest bank and therefore the most likely to return to its former glory as a dividend kingpin, in my view. Thus, I think on current pricing, you could be picking up a great deal for a long-term dividend share winner.

More reading

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

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The PolyNovo Ltd (ASX: PNV) share price may have jumped 56% over the last 12 months, but one fund manager believes it can still go higher.

Who is bullish on PolyNovo?

According to a recent update by the DNR Capital Australian Emerging Companies Fund, it has recently initiated a position in PolyNovo.

PolyNovo is the medical device company behind the NovoSorb technology, which was developed by CSIRO following the Bali bombings.

NovoSorb is a biodegradable material that can be used to aid the repair of bone fractures and damaged cartilage, and in skin grafts.

The key product in its portfolio is the NovoSorb Biodegradable Temporising Matrix (BTM) product. NovoSorb BTM is a wound dressing intended for treatment of full-thickness wounds and burns where the dermal structure has been lost to trauma, or damaged requiring surgical removal.

Why is PolyNovo undervalued?

DNR Capital believes that PolyNovo is undervalued based on its future cash flows.

It commented: “We believe Polynovo shares are undervalued based on our assessment of long-term cash flows. The company has a leading product that is in the early phase of its penetration into a large addressable market of $1.5b.”

It’s worth noting that DNR Capital isn’t including other markets that the company has its eyes on. Adding these into the equation would increase its addressable market opportunity to an estimated $7.5 billion per year according to management.

DNR Capital explained: “We don’t ascribe value to the hernia and breast opportunities given the limited visibility on cash flows, as these products need to pass certain milestones before they become commercial.”

In addition to this, the fund manager notes that PolyNovo’s earnings growth potential is very strong and its outlook is increasingly positive.

“With the business now at a cash-flow break even run-rate, we expect significant earnings growth as it penetrates a large addressable market estimated at $1.5b. The business generates attractive gross margins of 90%, which will lead to high returns on invested capital.”

“The company continues to reinvest into research and development with a number of new products to be launched targeting the hernia and breast market, with the combined opportunity valued at $6b,” it added.

Should you invest?

I think DNR Capital makes some great points and PolyNovo could be well worth considering with a long term view. Though, given the premium that its shares trade at, you might want to consider limiting an investment to just a small part of your portfolio.

More reading

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• Where next for the PolyNovo share price?

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.

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I believe the Telstra Corporation Ltd (ASX: TLS) share price could hit $4 in 2020.

Let’s be clear, this isn’t an earth-moving price target. Telstra shares have been at $4 before, most recently in August last year. Before then, the ASX telco giant actually spent between 2012 and 2017 above $4 per share, even hitting $6.50 at one point in 2015. We were getting close to $4 in January this year (Telstra touched $3.90), but then the coronavirus pandemic hit and Telstra has been stuck in a rut at around $3.20 ever since. Right now, one Telstra share will set you back just $3.17.

So why do I think Telstra shares can make it back to $4 and potentially beyond in 2020?

There are two reasons:

Telstra shares and dividends

The first is Telstra’s dividend. This company has quite an infamous history when it comes to dividend payments. Some shareholders might still not have forgiven Telstra for slashing its dividend back in 2017 from 31 cents per share (annually) to 16 cents today. It’s my view, this was partly behind Telstra’s massive re-valuation between 2015 and 2018.

But Telstra has managed to keep it’s dividend steady at 16 cents per share for close to two years now, and I don’t believe there is any danger this will be cut down any further. For one, the dividend is comfortably covered by Telstra’s free cash flow. And two, the company is close to putting the damage done to its earnings by the NBN behind it.

So what’s so good about Telstra’s dividend then? Well, at 16 cents per share (which includes 6 cents in ‘special’ NBN dividends), Telstra is offering a 5.05% dividend yield. If you include the full franking that Telstra shares also come with, this grosses-up to 7.21%. That’s not a bad yield in a zero interest rate environment.

What about 5G?

The second reason I believe Telstra shares could reach $4 this year is the rollout of the new 5G mobile technology. 5G is the next generation of mobile network and promises unprecedented speeds, low latency and increased applications. We don’t know for sure just how many benefits 5G will bring to the table, but if the rollout of 4G a few years ago is anything to go by, it looks likely to be good news for all ASX telco companies. And Telstra looks set to be in prime position for this shift. It is investing more into 5G than its competitors, from what I can see, which could see better speeds and range for Telstra’s 5G network compared with anything Optus or TPG Telecom Ltd (ASX: TPM) delivers.

Foolish takeaway

All in all, I think Telstra’s healthy dividend policy, as well as its investment in 5G technology, could well see the Telstra share price hit $4 again in 2020. As such, Telstra is a share that I’m very happy to own, and I don’t anticipate this changing anytime soon.

More reading

• 3 safe and strong ASX dividend shares for retirees to buy
• ASX 200 Weekly Wrap: ASX back in the green
• Beat low interest rates with Telstra and these ASX dividend shares
• What is the price/earnings (p/e) ratio?
• Consider these blue chip ASX shares for strong dividend yields

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended 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.

The post Why I think the Telstra share price could hit $4 in 2020 appeared first on Motley Fool Australia.

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