Tag: Motley Fool Australia

The Vocus Group Ltd (ASX: VOC) share price fell as low as $1.80 in mid-March. Since then the company’s share price has rallied strongly, regaining a substantial portion of its losses since late February.

Vocus has been working hard to turn around its business after a challenging few years.

So does the Vocus share price make it a solid long-term buy right now?

Vocus’ position in the telco market

Let’s first take a recap on exactly how Vocus fits into the Aussie telco landscape.

Vocus is a specialist fibre and network solutions provider. Its services include broadband, fibre, data centre services and Unified Communications.

The telco mainly targets the enterprise, government, wholesale and small business markets. It also has a smaller presence in the residential sector offering fixed broadband.

Vocus operates fibre networks connecting most regional centres in Australia, which then connect with Asia. Vocus also operates a network in New Zealand.

Challenging years for the Vocus share price

Founded in 2008, Vocus grew significantly in scale during 2015 and 2016. During that time, it merged with retail telco M2 Communications and also acquired Amcom and Nextgen Networks. Both of these telcos target the corporate market.

The last few years have been challenging for the company. The Vocus share price rose strongly through the last decade up until mid 2016. However, it subsequently dropped sharply over the following 12 months into 2017. Since then, it’s never really recovered to its previous highs.

Vocus reported a 7% decline in total revenue to $902 million for H1 FY2020. Retail in particular was hit hard, suffering a 12% decline to $382 million. The Retail business was impacted by a loss of market share in its National Broadband Network (NBN) segment.

Over the past few years Vocus’s retail division has struggled. This has been mainly due to the tight margins offered to retail fixed broadband operators under Australia’s NBN.

Turnaround strategy on track

Despite this performance, I believe the company is now becoming better positioned for solid growth over the next few years which could be good news for the Vocus share price. The group is just beyond the mid-point of a 3-year turnaround strategy. This includes investments in new capabilities to grow its Network Services division. This division has continued to see strong sales momentum through a solid pipeline of new opportunities.

EBITDA for H1 FY 2020 increased by 2% to $179.3 million for H1 FY2020, driven by a stronger performance in its Network Services and New Zealand businesses. Vocus is also providing stimulus to its retail segment to help turn it around.

On another positive note, Vocus recently reiterated its FY 2020 guidance. The group expects its FY 2020 EBITDA to be in the range of $359 million to $369 million. Vocus also expects its core Network Services business to deliver EBITDA growth of 10% in FY 2020.

Is the Vocus share price a long-term buy?

As a specialist fibre and network services provider, I believe that Vocus is well positioned to capitalise on the rollout of 5G services over the next few years. Also, moving forward, NBN Co will place greater emphasis on making efficient use of existing fibre infrastructure. Vocus is well placed to capitalise on this opportunity which it could potentially exploit by using its existing telco networking infrastructure to partner with NBN Co.

However, the company’s retail division still faces challenges, despite encouraging signs of revenue stabilisation. In addition, the Vocus share price has rallied strongly since mid-March.

Having said that, on balance, I still think Vocus offers investors a reasonably solid, long-term buy and hold opportunity. 

More reading

• Top broker tips the Vocus share price to zoom higher
• 5 things to watch on the ASX 200 on Friday
• ASX 200 hits 6,000 points: Westpac provide AUSTRAC update, Vocus reaffirms guidance
• Why Corporate Travel Management, SKYCITY, Vocus, & Westpac are pushing higher
• Why this ASX 200 telco share is storming higher today

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

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The Stavely Minerals Ltd (ASX: SVY) share price is flying higher today after the miner reported “another monster copper-gold hit” at its flagship project in western Victoria.

At the time of writing, Stavely Minerals shares are surging by 33.33% after being up by as much as 44.44% in early trade.

Stavely Minerals is a small-cap ASX mineral exploration company. It was formed in 2014 to acquire early to advanced-stage exploration projects with demonstrated high potential for additional discovery.

The company’s assets are located in Victoria, Queensland, and Tasmania. Its flagship project is the Stavely Project in western Victoria where the company is targeting a Cadia-style gold-copper porphyry and Lake Cowal-style gold mineralisation.

Why the Stavely Minerals share price is spiking

This morning, Stavely Minerals reported new assay results from the ongoing resource drilling program at the Thursday’s Gossan prospect, part of the company’s flagship copper-gold Stavely Project.

The drilling program is aimed at uncovering high-grade, near-surface copper-gold-silver mineralisation over a significant strike extent in the Cayley Lode.

Standout results from diamond drill hole SMD087 in the northern part of the Cayley Lode include:

• 87 metres at 1.74% copper, 0.57 grams per tonne (g/t) gold and 20 g/t silver from 140 metres down-hole, including:
  • 24 metres at 4.19% copper, 1.27 g/t gold and 53 g/t silver from 163 metres; and
  • 9 metres at 4.09% copper, 1.83 g/t gold and 39 g/t silver from 218 metres.

The drilling returned individual interval grades of up to 24.1% copper, 10.05 g/t gold and 249 g/t silver.

Meanwhile, the base of the 24-metre interval hosted strong polymetallic mineralisation. This graded at 2 metres at 9.95% copper, 0.71 g/t gold, 107 g/t silver, 3.87% zinc, 1.18% lead, 0.89% nickel, 0.90% chromium and 0.05% cobalt.

In addition, diamond drill hole SMD085, the south-easternmost drill hole drilled so far in the Cayley Lode, returned:

• 23 metres at 1.07% copper and 0.11 g/t gold from 339 metres, including:
  • 4 metres at 4.44% copper, 0.26 g/t gold and 7.9 g/t silver from 375 metres.

According to the company, the intercept in SMD085 increases the defined strike extent of the Cayley Lode to 1.5 kilometres, with the deposit remaining open along strike in both directions and down-dip.

Stavely Minerals noted that the resource drill-out at the Cayley Lode is progressing well and is now more than 50% complete. This paves the way for a maiden JORC Mineral Resource estimate targeted for the second half of 2020.

Management commentary

Commenting on these latest results, executive chair Chris Cairns said:

“We continue to be surprised by the incredible consistency and continuity of mineralisation in the Cayley Lode, with the results reported today including significant intervals of strong copper-gold mineralisation in the northern portion of the deposit.”

“Due to the large overall interval of strong copper, gold and silver mineralisation in SMD087 and the significant gold grades in the high-grade sub-intervals, we consider this intercept to be on a par with the assays from the discovery drill hole SMD050,” he added.

Mr Cairns closed out his comments by saying, “the drilling continues to reveal local variations in the widths of the mineralisation, as we expected from the outset, but generally speaking the deposit is behaving exactly as we had hoped – with the resource drill-out now well advanced and generating some excellent data that will feed into our maiden JORC Mineral Resource estimate later this year.”

With a share price of 72 cents at the time of writing, Stavely Minerals’ current market capitalisation is sitting at around $154 million.

More reading

• ASX 200 down 0.3%: Big four banks mixed & Healius rockets on medical centre sale
• One often overlooked tax tip that could save you thousands
• Is the Vocus share price a good long-term buy right now?
• Sezzle shares and 2 other ASX techs soared up to 50% in the past 4 weeks
• Why Appen, Healius, IDP Education, & Propel shares are racing higher

Motley Fool contributor Cathryn Goh 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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Australia’s tech sector is tiny and relatively immature compared to the much larger US tech sector market. However, Australia has some vibrant and fast-growing techs listed on the ASX including Redbubble Ltd (ASX: RBL), Nearmap Ltd (ASX: NEA), and Sezzle Inc (ASX: SZL) shares. 

These companies have seen strong share price gains over the past few weeks – up to a 50% increase, in fact.  

Nearmap shares

The share price of fast-growing aerial imagery and specialist location data company, Nearmap has grown strongly over the past few months. Over the past 4 weeks alone, this ASX tech share has seen its share price increase by 32.5%.

In a May market update, Nearmap noted that it is continuing to grow its subscriber base. This is particularly the case in the North American market. The company’s subscription revenue per subscriber also continues to rise. This trend is leading to improving overall margins.

Nearmap has also recently launched its new artificial intelligence (AI) product to subscribers in Australia and North America.

Redbubble shares

Another ASX tech share to watch out for is Redbubble. It owns and operates a leading global marketplace for independent artists. Its share price has risen by an impressive 36.8% over the past 4 weeks. This follows on from a share price rally that began in late March.

In a market update back in early April, Redbubble revealed that it believes it is well placed to endure the coronavirus outbreak. In a further market update in late April, Redbubble revealed that its marketplace revenue totalled $246 million for the year-to-date. That amounted to an impressive year-on-year growth of 25%. Redbubble is benefiting from the trend of consumers moving to the online environment for their shopping experience.

Sezzle shares

Speaking of another company benefitting from consumers shopping online, Sezzle is a buy-now-pay-later fintech provider listed on the ASX but based in the US. Its main competitors include Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P).

Sezzle shares have grown by 50.2% in the past 4 weeks. In addition, they’ve grown by over 500% since late March.

During the quarter containing March, underlying merchant sales (UMS) surged 321% year-on-year. April was a particularly strong month for Sezzle. UMS came in at $57.9 million, a monthly record, despite the challenge of the coronavirus pandemic.

Sezzle mainly targets the Gen Z and millennial consumer demographics. Both these large and fast-growing age segments are very tech-savvy. Therefore, this type of online lending appeals to them.

In addition, Sezzle added 114.4K active customers in April. In further positive news, merchant fees remained resilient during that month.

Top recent performing categories for Sezzle include leisure, outdoor, electronics, sport and medical.

More reading

• ASX winners and losers from last week
• These are the 10 most shorted ASX shares
• The most explosive ASX tech shares you can buy today
• Why the Nearmap share price and one other are on my buy list
• How I would build a balanced portfolio worth $100,000 with 10 ASX shares

Phil Harpur owns shares of AFTERPAY T FPO and Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap Ltd., REDBUBBLE FPO, and Sezzle Inc. 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) has given back its earlier gains and dropped lower. At the time of writing the benchmark index is down 0.5% to 5,817.1 points.

Four shares which haven’t let that hold them back are listed below. Here’s why they are racing higher:

The Appen Ltd (ASX: APX) share price is up 3.5% to $30.48. This appears to have been driven by a broker note out of Macquarie this morning. According to the note, the broker has commenced coverage on the artificial intelligence company with an outperform rating and $38.00 price target. Macquarie believes that Appen’s Relevance segment is well placed for strong long term growth.

The Healius Ltd (ASX: HLS) share price has jumped 11% to $2.81. This follows an announcement by the healthcare company this morning which revealed that it has agreed to sell its medical centres to BGH Capital. Healius has agreed a fee of $500 million with the private equity firm. Completion of the transaction is expected to occur before the end of 2020. It remains subject to a number of conditions including approval by the Foreign Investment Review Board.

The IDP Education Ltd (ASX: IEL) share price is up 2% to $16.66. Investors have been buying the student placement and language testing company’s shares after analysts at Morgan Stanley retained their overweight rating and $17.50 price target. It appears confident in its long term outlook despite the difficult trading conditions it is currently experiencing.

The Propel Funeral Partners Ltd (ASX: PFP) share price is up 3% to $2.97 after the funeral company released a trading update. According to the release, Propel experienced an 8% increase in its average revenue per funeral metric during the month of May. This follows the easing of social distancing limits. As a result, the company is on track for another record year and expects revenue of $110 million and operating earnings of $32 million in FY 2020.

More reading

• ASX 200 down 0.3%: Big four banks mixed & Healius rockets on medical centre sale
• Propel Funeral share price climbs higher after providing FY20 guidance
• 5 things to watch on the ASX 200 on Monday
• The most explosive ASX tech shares you can buy today
• Why the Healius share price will be in the spotlight tomorrow morning

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 Idp Education Pty Ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Propel Funeral Partners 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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My ASX share for the week is Brickworks Limited (ASX: BKW), the building products business.

Overview of Brickworks

Brickworks is among some of the oldest businesses on the ASX. It was formed in 1934 during the depression to bring 26 brick manufacturers together to save them and create a combined business with a better performance. The new company was better able to market and distribute bricks and clay products.

These days Brickworks has a much wider range of building products on offer. It sells bricks and pavers, masonry and stone, roofing, specialised building systems, precast and cement. It’s a diversified group of products. Selling a wider range means the ASX share has the potential for more total revenue if it can take decent market share for that particular product.

The company has a few key brands including Austral Bricks, Austral Masonry, Bristle Roofing and Australia Precast.

Brickworks is the biggest clay brick manufacturer in the country. Austral Masonry is the second largest masonry manufacturer. Bristle Roofing has a strong presence in all major states.

The ASX share owns a 50% stage of a growing industrial property trust along with Goodman Group (ASX: GMG). Brickworks also owns 39.4% of investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Brickworks hasn’t cut its dividend in over 40 years. It currently has a grossed-up dividend yield of 5.5%.

Why Brickworks is my ASX share for the week

At the time of writing, the Brickworks share price is down around 26% since 20 February 2020. It’s actually around the price that it was at on 23 March 2020 when many ASX shares hit their COVID-19 low.

Being 26% down is an attractive decline in my opinion. It shouldn’t be too surprising that Brickworks is down because there are predictions of a construction slowdown over the next 6-12 months due to COVID-19.  

I’m not too worried about a slowdown though. Construction goes through cycles. This will be painful in the short-term. But we should be long-term investors, look through the negativity and see the long-term value offered by this Brickworks share price. I think the Australian construction industry will bounce back by 2022. The $25,000 HomeBuilder scheme could also help Brickworks in the shorter-term.

Brickworks recently acquired three brickmakers in the US. That move was smart in my opinion, it’s now the market leader in the north east of the US. This opens up a very large market opportunity for Brickworks. Not many ASX shares have been successful at expanding into the US, Brickworks can bring its efficiency expertise to the less efficient US plants.

I think Brickworks looks good value even if you value the building products side of the business very cheaply. Its stake of the industrial property trust was worth $710 million at 31 January 2020. The Soul Patts shareholding is worth $1.83 billion. Together, that’s an asset value of $2.54 billion. Brickworks has a market capitalisation of $2.25 billion.

The Brickworks share price rose by 13% over May and I think it could keep going up if investors see today’s value and think about the likelihood of a longer-term construction recovery. The future return of immigration to a more normal level should also be beneficial for the construction industry.

Foolish takeaway

I think Brickworks is a high-quality ASX share with a lot of attractive assets and brands. I’d be very happy to buy shares at Brickwork’s current share price of under $15. It’s a robust business with a very attractive dividend track record. I believe it can comfortably endure whatever happens next with the economy.

More reading

• If I won the lottery I’d buy these 6 ASX shares
• 12 top ASX dividend shares to buy in June 2020
• ASX shares I’d buy if this decline is a second COVID-19 crash
• Have $1,000? You should pick one of these 8 ASX shares
• Here are another 2 insanely cheap ASX 200 shares to buy right now

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

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The Super Retail Group Ltd (ASX: SUL) share price won’t be going anywhere on Monday.

This morning the retail group requested a trading halt while it undertakes an equity raising.

What did Super Retail announce?

This morning Super Retail announced that it is launching an underwritten accelerated pro-rata non-renounceable entitlement offer to raise approximately $203 million at $7.19 per share. This represents an 8% discount to its last close price.

Management believes this equity raising will allow the company to continue to execute its strategy and pursue strategic growth initiatives.

It will also put Super Retail in a position to take advantage of changing consumer trends by returning capital expenditure to historic levels of ~$90 million per annum, even if a softer trading environment emerges.

This includes the company investing in its omni-retail digital customer experience and analytics, the supply chain to facilitate omni-channel sales growth, the further simplification of its business model, footprint optimisation and organic market consolidation, and increased supplier promotional activity.

Trading update.

Super Retail also provided the market with an update on its performance since the reopening of its stores.

Following a sharp decline in April, the company’s group sales rebounded strongly in May. Group like for like sales increased 26.5% in May compared to the prior corresponding period. As a comparison, group like for like sales fell 26.2% in April.

The Supercheap Auto and Rebel businesses have been doing the heavy lifting. Their sales are up 4.6% and 2.1%, respectively, for the 47 weeks to May 2020. This has offset 0.6% and 10% declines, respectively, in the sales of the BCF and Macpac businesses over the same period.

“Robust trading performance.”

Super Retail’s Chief Executive Officer and Managing Director, Anthony Heraghty, was pleased with the company’s performance during the pandemic.

He said: “We are very pleased with the robust trading performance of the Group despite COVID-19 and thank our team members for their dedication to the business during the pandemic. The execution of our strategy has continued during COVID-19, with our four core brands well positioned to take advantage of shifts in consumer behaviour that have been observed through the pandemic. The equity raising enables us to continue the execution of our strategy, further strengthen our omni-retail capabilities and continue to organically grow our four core brands.”

More reading

• These are the 10 most shorted ASX shares
• Cheap ASX 200 retail shares to buy today
• These are the 10 most shorted ASX shares
• Leading brokers name 3 ASX 200 shares to buy right now
• These are the 10 most shorted ASX shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail 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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It was another rollercoaster week for ASX shares as the recent bull run came to an end. The S&P/ASX 200 Index (ASX: XJO) closed the week 2.5% lower at 5,847.8 points.

But as always, a falling share market creates some great buying opportunities. Here are a couple of top ASX shares that I think could be trading cheaply today.

The Webjet Limited (ASX: WEB) share price 

One ASX share that got hit pretty heavily last week was Webjet Limited . Investors have been bullish on Aussie travel shares in recent weeks with the Webjet share price climbing 108.8% between 23 April and 9 June.

That strong momentum came to an end last week as Webjet shares crashed 12.03% lower. No one knows quite what the travel industry will look like in 2020 and beyond.

This means the ASX travel share could continue to be volatile in the weeks ahead. I still think its a speculative buy, especially given the recent share price doubling.

However, if travel rebounds quickly and Aussies are happy to spend their spare cash, Webjet could turn out to be a bargain at its current price of $3.94 per share (at the time of writing).

The Woodside Petroleum Limited (ASX: WPL) share price

I’ve also got my eye on ASX oil shares after some of the heavy falls we saw last week. In particular, The Woodside Petroleum share price slumped 8.52% lower to $21.37 per share. 

However, I think there are some positive signs for the Aussie oil and gas producer. With coronavirus restrictions easing and the economy warming up again, demand for oil could be set to surge.

Higher demand means higher oil prices which is good for corporate earnings. This could mean the Woodside share price is a cheap buy at its current price.

Foolish takeaway

These are just a couple of ASX shares that could be trading at ridiculously cheap prices in the current market.

More reading

• Gold mining shares – these are the facts and myths
• Is the Transurban share price a secret bargain?
• 3 ASX shares with 6% dividend yields to buy for income
• 50% off: these ASX 200 shares are dirt cheap today
• ASX winners and losers from last week

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet 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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More reading

• My ASX share for the week
• Why the Super Retail share price is in a trading halt
• Is the Webjet share price ridiculously cheap?
• Gold mining shares – these are the facts and myths
• Propel Funeral share price climbs higher after providing FY20 guidance

The post Live Coverage of The Australian Share Market – 15 June 2020 appeared first on Motley Fool Australia.

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Gold mining shares are widely misunderstood. Myths abound and many investors lose money. However, investors can protect their stake if they understand a few basic truths about gold and the companies that mine it.

Trying to work out which gold explorer is likely to see explosive growth is not for the faint-hearted. It takes considerable years of experience. You need to understand markets, currencies, metallurgy, as well as understanding who is who in the gold mining game.

Buy the breakout not the speculation

Instead of trying to pick winners before the event, invest in gold mining shares during the event. The investing community is filled with very smart and knowledgeable people. When they move, you should consider moving, too. In other words, the point where a gold mining share starts to rise is, perhaps, the perfect time to buy-in.

For example, within 1 month of its low point on 16 March, Gold Road Resources Ltd (ASX: GOR) had risen by more than 118%. At least double most other S&P/ASX 200 (INDEXASX: XJO) gold miners. Recognition of the company’s value as the newest producing gold company on the ASX.

Bellevue Gold Ltd (ASX: BGL) likewise burst forth from its COVID-19 low on 19 March to be 100% up within 1 month. The Bellevue share price, in particular, has risen another 71% up to last Friday. I personally expect Bellevue to be one of the great ASX performers over the next decade. 

Gold mining shares go up when everything goes down

Between 8 January 2010, and 10 January 2010, the ASX 200 rose by around 41% in a nearly continuous upward trend. During this exact same period, the gold price rose by 84% despite the absence of a sharp or prolonged downturn.

In fact, the best-performing ASX investment of the decade was Northern Star Resources Ltd (ASX: NST). The Northern Star share price rose by 375 times the initial investment between 10 January 2010 and 2 January 2020. The core truth here is that a good company is always a good company regardless of the commodity prices.

Over 90% of the world’s gold has been mined

This is definitely true given what we know of the disclosed gold reserves. Unfortunately, though the exact location and trading of most above-ground gold is a bit of a mystery. In addition, there are signs that several large central banks have been building their positions in gold recently.

As investors turn their interest to gold as part of a more balanced portfolio we will see more and more money chasing lower and lower levels of available gold. In addition, it pays to remember that gold doesn’t come from the earth.

Foolish takeaway

For me, physical gold is savings not investing. When I want to invest in gold I buy gold mining shares. The facts above should help to understand the gold market. For instance, buy the breakout, not the speculation. A good company is always a good company. Lastly, gold is becoming increasingly rare with much of it coveted and held by institutions and central banks. 

More reading

• Is the Transurban share price a secret bargain?
• 3 ASX shares with 6% dividend yields to buy for income
• 50% off: these ASX 200 shares are dirt cheap today
• ASX winners and losers from last week
• Where to invest $10,000 into ASX 200 shares immediately

Motley Fool contributor Daryl Mather owns shares of Bellevue Gold Ltd. 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 Propel Funeral Partners Ltd (ASX: PFP) share price is climbing this morning after the company delivered a trading update and provided FY20 guidance.

At the time of writing, Propel Funeral shares are up 4.51% to $3.01, reducing the company’s year-to-date share price loss to 11.47%.

What did Propel Funeral announce?

As previously disclosed, COVID-19 restrictions in Australia and New Zealand affected Propel’s ability to offer a full range of services to its clients.

As a result, the company’s comparable average revenue per user (ARPU) in the month of April fell by approximately 10% on the prior corresponding period.

However, the easing of funeral attendee limits in both countries contributed to an ~8% increase in ARPU in May compared to the previous month.

Propel expects ARPU to continue to increase as attendance limits at funeral services are progressively eased in Australia. Funeral attendance limits have now been increased to at least 50 mourners in most Australian states. Meanwhile, limits have been removed altogether across the pond in New Zealand.

As for funeral numbers, Propel’s total funeral volumes were approximately 1% higher in May compared to April. Additionally, the company expects to exceed 13,000 funerals in FY20, up from 11,304 in FY19. This includes part contribution from the acquisitions of Gregson & Weight and Grahams Funeral Services which were completed in November 2019.

In terms of cost-cutting, Propel’s previous trading updates in late March and early May detailed a number of strategies intended to mitigate the potential financial impacts of COVID-19. These measures included the deferral of non-essential capital expenditure, managing staff costs, and raising its liquidity position. Accordingly, at the end of April, Propel had $49 million cash on its books compared to just $6.7 million as at 31 December 2019. 

The company also revealed this morning that some of its businesses have received government subsidies.

FY20 guidance

Along with the trading update, Propel also shed some light on FY20 guidance this morning.

Stating it is on track for another record year, Propel quantified its expectations by providing revenue guidance of approximately $110 million. This compares to $95.1 million revenue achieved in FY19.

The company also provided guidance for earnings before interest, tax, depreciation and amortisation (EBITDA). It is expecting full-year operating EBITDA of approximately $32 million, up from $23.8 million in FY19.

Propel is set to release its FY20 full-year results in late August 2020. In the meantime, the company stated it will continue to monitor the impacts of COVID-19 on its teams, trading and suppliers.

More reading

• 3 ASX shares to buy and hold for the 2030s

Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Propel Funeral Partners 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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