Tag: Motley Fool Australia

Last week, Trade Minister Simon Birmingham announced the Comprehensive Economic Partnership Deal between Australia exporters and Indonesia markets takes effect from 5 July 2020. This could not have come at a better time given the economic impacts from COVID-19.

Australia’s balance of payments surged to a record $10.6 billion in March. The largest in recorded history. This is due to strong export demand for iron ore and surging demand for gold. The lowest Australian dollar for almost 2 decades has also helped increase revenues.

Lastly, we have had the largest sudden fall in imports in our nation’s history. The deal will help Australian manufacturers to increase market share in our closest neighbour, extending our national trade surplus.

I believe the following ASX shares are the most likely to benefit immediately.

Targeted Indonesian market

GrainCorp Ltd (ASX: GNC) will see tariff-free exports of up to 500,000 tonnes of wheat, barley and sorghum to Indonesia each year. This will grow by 5% annually. This defensive share has become more important to our national economy during the pandemic than at any time in its history.

GrainCorp has rebuilt itself over the past 3 years after exports to Indonesia collapsed by over 70% amid drought and intense competition. This provides an opportunity to further rebuild markets into what used to be Australia’s largest wheat customer.

Other agricultural companies to benefit in this space include those in the red meat sector of beef and sheep. In this sector, tariffs will be immediately halved to 2.5% and eliminated totally over 5 years. This is likely to provide tangible benefits for Australian Agricultural Company Ltd (ASX: AAC) as well as Elders Ltd (ASX: ELD).

Dairy producers will also see tariffs eventually removed from their products. This creates an opportunity for market leaders like A2 Milk Company Ltd (ASX: A2M), as well as rising challengers such as Synlait Milk Ltd (ASX: SM1).

Steel producers will have annual tariff-free access for 250,000 tonnes of rolled steel coil, exposing additional market share for companies such as BlueScope Steel Limited (ASX: BSL).

Foolish takeaway

Our nation’s ability to maintain an overall trade surplus is going to be crucial in the coming months and years. Many countries are set to see dramatic declines in economic activity as a result of the COVID-19 pandemic.

For Australia, free trade deals such as these providing increased access to Indonesian markets are likely to be the difference between a crushing depression and a swift path back to prosperity. 

More reading

• Where to invest $20,000 into ASX shares for strong long term returns
• These ASX shares booked the biggest gains last week
• 5 things to watch on the ASX 200 on Monday
• 3 of the best ASX 200 shares to buy and hold for 10 years
• How to make a $1 million share portfolio by investing $1,000 a month

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended Elders 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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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.

More reading

• Indonesian market boom for 6 ASX shares
• REA Group shares are up 53% since late March. Is it too late to invest?
• These ASX 200 shares saw the biggest falls last week
• These ASX shares booked the biggest gains last week
• Is Santos the best ASX 200 energy share?

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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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. 

More reading

• How did ASX cannabis shares perform in the latest quarter?
• Can ASX cannabis shares survive coronavirus?

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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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.

More reading

• Here are all the ASX 200 companies that have announced capital raisings so far in 2020
• Market close: ASX 200 jumps over 2%
• The new hunting ground for ASX value buys isn’t where you’d expect
• ASX 200 up 1.2%: ANZ defers its dividend and Woolworths reports sales surge
• Why Credit Corp, IOOF, Mesoblast, & Oil Search are surging higher

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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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.

More reading

• These ASX 200 shares saw the biggest falls last week
• ASX 200 Weekly Wrap: New ASX bull run continues
• 3 ASX 200 shares to buy before the market rebounds
• 3 ASX dividend shares for income investors to buy next week
• These were the worst performing ASX 200 shares last week

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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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.

More reading

• These ASX 200 shares saw the biggest falls last week
• These ASX shares booked the biggest gains last week
• Is Santos the best ASX 200 energy share?
• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues

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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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.”

More reading

• 3 top ASX 200 shares to buy right now
• 2 blue chip ASX healthcare shares to buy right now
• Here are all the ASX 200 companies that have announced capital raisings so far in 2020
• 3 small cap ASX healthcare shares with enormous potential
• Broker calls time on this top performing ASX healthcare stock

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.

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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.

More reading

• REA Group shares are up 53% since late March. Is it too late to invest?
• These ASX shares booked the biggest gains last week
• Is Santos the best ASX 200 energy share?
• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues

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.

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The homegrown investment bank is not regarded as a competitor to Commonwealth Bank of Australia (ASX: CBA) before, but that may be about to change.

I am not talking about Macquarie Group Ltd (ASX: MQG) vying to overtake CBA in home loans or market cap. CBA’s position in both these fronts look unassailable.

But I am referring to the hearts and minds of investors. CBA dominated investor perception of what is a high-quality financial institution for so long, and some of this gloss is wearing off.

CBA’s leadership losing its shine

CBA commands a market premium as it’s the undisputed leader when it comes to these revered qualities. This is also why mum and dad investors are fiercely loyal shareholders that are hooked in its dividends.

I am not suggesting for a moment that CBA isn’t a quality institution. But Australia’s largest home lender’s reputation could take a hit this Wednesday when it releases its quarterly update.

This will stand in contrast to Macquarie’s full year results unveiled on Friday that triggered a 6% jump in the Macquarie share price to a two-month high of $105.19.

This is despite the investment bank posting an 8% drop in FY20 profit, the halving of the dividend and withdrawing of its profit guidance.

Macquarie vs. big banks

But the profit outlook for the big four domestic banks makes Macquarie’s “bad” news look delectably good!

The three big banks turned in big double-digit profit crashes in the first half. Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) even went as far as suspending their dividends.

Meanwhile, National Australia Bank Ltd (ASX: NAB) slashed its interim dividend by more than two-thirds to 30 cents a share while pleading with investors to provide a $3.5 billion in extra cash via its cap raise.

Talk about a reverse capital return – big bank style!

Better protected

Further, Macquarie’s provisioning of a little over $1 billion is modest compared with what the big banks have to set aside for bad debts amid the COVID-19 pandemic.

CBA is tipped to announce total provisioning of $3 billion this week and a significant fall in quarterly cash profit that will make Macquarie look like the king of the banking hill.

Macquarie isn’t seen to be a direct rival to other ASX Australian banks as its income mix is different, even though it’s aggressively moved into home lending recently.

Foolish takeaway

The bank’s commercial lending and asset management business helped buoy its results with a 12% increase over FY19, while its commodities, markets and capital divisions, took a 29% profit hit.

While Macquarie isn’t immune to the coronavirus economic fallout, its better spread of income, which also includes offshore operations, means it may hold up better than our domestic banks.

For these reasons, some of the premium gloss from CBA could well rub-off on Macquarie – at least for the interim.

More reading

• ASX 200 Weekly Wrap: New ASX bull run continues
• 3 top ASX dividend shares to buy right now
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• Which is the cheapest ASX bank stock on the market?
• What to watch on the ASX 200 next week

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Macquarie Group Limited, National Australia Bank Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Macquarie 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 How Macquarie Group is vying to unseat CBA appeared first on Motley Fool Australia.

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The market closed higher last week on hopes of an imminent easing of coronavirus restrictions. The S&P/ASX 200 Index (ASX: XJO) finished the week up nearly 3% as Scott Morrison announced a staged reopening of the economy. 

Treasury estimates 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.

Unemployment 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 the uncertainty around COVID-19 and 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. Shares in Flight Centre Travel Group Ltd (ASX: FLT) rose by 8.1% on Friday while Webjet Limited (ASX: WEB) shares were up by 9.3%. 

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 shares that gained the most last week. 

Afterpay Limited (ASX: APT)

Shares in Afterpay gained 36.8% last week to finish the week at $39.88. Afterpay shares have now gained a massive 348% from their March low. The buy now, pay later provider reported March was its third-largest underlying sales month on record. Underlying sales in the March quarter increased 97% compared to Q3 FY19. 

Afterpay reported underlying sales of $7.3 billion for the year to the end of March, growing at 105% compared to the prior corresponding period. Healthy growth in merchant and customer numbers was recorded during the quarter – active customers grew to 8.4 million, up 122% on the prior corresponding period. Merchant numbers grew to 48,400 globally, up 78% on the prior corresponding period. 

Afterpay has made pre-emptive adjustments to risk settings which have had a positive impact on loss performance lead indicators in the second half of March and early April. The company has a strong balance sheet and liquidity position, meaning there should be no requirement to raise capital in the foreseeable future. 

EML Payments Ltd (ASX: EML)

EML Payments shares closed last week up 28.7% at $3.41. The payment solution company provides gift card and incentive programs, reloadable value cards, and virtual accounts for business payments. 

In the 5 years to FY19, EML Payments’ earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 82% on a compound annual basis. Revenue increased 37% in FY19 to $97.2 million. Approximately 87% of revenue was generated from recurring revenue streams. 

EML completed its acquisition of Prepaid Financial Services in April. Prepaid is a provider of white-label payments and banking-as-a-service technology. The terms of the acquisition were renegotiated with the enterprise value reduced by £94.5 million to £131.5 million. 

PolyNovo Ltd (ASX: PNV)

PolyNovo shares rose 28.1% last week to close the week at $2.55. The medical company released a presentation last week which estimated its near-term total addressable market at $7.5 billion. 

PolyNovo produces NovoSorb BTM, an implantable dressing that can be absorbed into the body as it heals. Currently used as a dermal scaffold, PolyNovo is also exploring the use of the technology in hernia repair, breast augmentation and reconstruction, and drug elation. 

PolyNovo recorded record sales of the NovoSorb BTM product in the US in March. The product has received CE mark approval and has launched in Europe with excellent results. A factory is being built in Port Melbourne to produce hernia products with the global hernia market estimated to be worth $3.1 billion. 

Appen Limited (ASX: APX)

Shares in Appen lifted 18.3% last week to finish the week at $30. Appen shares have now lifted 75% from March lows with the company benefitting from increased demand for its services due to the increasing importance of artificial intelligence for businesses. 

Appen develops human-annotated datasets for machine learning and artificial intelligence. The company recorded a massive 42% increase in EBITDA in FY19 and has forecast EBITDA of $125 million to $130 million in FY20. 

A pandemic-led increase in the use of search, social media, and eCommerce platforms is likely to support FY20 performance. The weaker Australian dollar and greater availability of crowd workers may also assist. Appen maintains a healthy balance sheet with cash resources in excess of $100 million so is well placed to weather the pandemic and respond to opportunities that arise. 

Qube Holdings Ltd (ASX: QUB)

Qube Holdings shares finished last week up 15.9% at $2.52. Qube was reinstated to official quotation last week after a $500 million equity raising. The raising provides Qube with significant balance sheet flexibility with over $1,150 million in liquidity. 

Qube Holdings provides import and export logistics services across Australia, New Zealand, and South-East Asia. Funds from the equity raising will be used to support continued investment in its core business. This includes capital expenditure on recent contract wins and strategic acquisitions. Additional opportunities are expected to arise in the current environment. 

Qube expects to spend a minimum of $420 million on capital expenditure (capex) between April 2020 and June 2021. This will cover maintenance capex, capex to support contracts with BlueScope Steel Limited (ASX: BSL), Shell, and BHP Group Ltd (ASX: BHP), and the purchase of new equipment to support growth and productivity. 

Qube has experienced a number of near-term impacts associated with COVID-19, but its investment in long-term strategic growth priorities remains unchanged. The business model remains resilient and continues to generate solid earnings from its diversified logistics activities. 

More reading

• Is Santos the best ASX 200 energy share?
• These ASX 200 shares are up over 1,000% in just 3 years
• ASX 200 Weekly Wrap: New ASX bull run continues
• 5 things to watch on the ASX 200 on Monday
• Which is the cheapest ASX bank stock on the market?

Kate O’Brien owns shares of Appen Ltd, BHP Billiton Limited, and POLYNOVO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. 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.

The post These ASX shares booked the biggest gains last week appeared first on Motley Fool Australia.

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