Tag: Motley Fool Australia

If you’re wanting to add some dividend shares to your portfolio this week, then you’re in luck. The Australian share market is home to a number of top options for income investors.

Listed below are two top ASX dividend shares which I think are in the buy zone right now. Here’s why I would buy them:

Aventus Group (ASX: AVN)

The first ASX dividend share that I would suggest income investors consider buying is Aventus. Although retail property shares are having a tough time right now, Aventus appears to have been less impacted than most in the sector. This is because Aventus specialises in large format retail parks and has a reasonably high rental income weighting towards everyday needs. I believe this leaves it better positioned than others in the sector to navigate through the difficult trading conditions. Based on the current Aventus share price, I estimate that it offers an FY 2021 yield of at least 6%.

Fortescue Metals Group Limited (ASX: FMG)

I think Fortescue could be a great option for income investors that aren’t fazed by investing in the resources sector. This is because of the quality of its operations and the high prices that iron ore is commanding at present. These have been caused by supply disruptions and robust demand in China. Given that iron ore prices remain comfortably above US$110 a tonne at present, I believe Fortescue is well-placed to generate high levels of free cash flow in FY 2021. This is likely to be returned to shareholders in the form of dividends. If iron ore prices remain favourable, then, based on the current Fortescue share price, I would expect a forward fully franked dividend of at least 6%.

More reading

• Top ASX dividend shares to buy in August 2020
• Broker sees top returns for iron ore miners BHP and Rio
• Has the ASX 200 finally taken off?
• ASX iron ore miners jump on broker upgrades
• Are ASX lithium shares the next big thing?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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 lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) is on course to record a decline. The benchmark index is currently down 0.3% to 6,118.5 points.

Here’s what has been happening on the market today:

CBA delivers robust FY 2020 result.

The Commonwealth Bank of Australia (ASX: CBA) share price is flat at lunch following the release of a robust full year results for FY 2020. The banking giant reported operating income of $23,758 million, up 0.8% on the prior corresponding period. This reflects volume growth in home lending and deposits, which offset a 2 basis point decline in its net interest margin to 2.07%. CBA’s cash net profit after tax from continuing operations was down 11.3% to $7,296 million. This was driven largely by higher COVID-19 loan impairment expense. A 98 cents per share final dividend was declared.

SEEK outlook disappoints.

The SEEK Limited (ASX: SEK) share price has tumbled lower today after the release of its full year results. In FY 2020, the job listings giant’s earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 9% to $414.9 million. This was driven by a 17% decline in AP&A EBITDA to $295 million, which offset a 20% increase in SEEK Investments EBITDA to $151.7 million. While this decline was expected, SEEK’s outlook appears to have underwhelmed. Due to the negative impact of the pandemic, SEEK has suggested that its EBITDA could drop 20.5% in FY 2021.

Gold miners sink lower.

Australia’s leading gold miners are sinking into the red on Wednesday after the gold price crashed almost 6% lower overnight. The likes of Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) are all under significant pressure. This appears to have been driven by improving economic data and a potential Russian coronavirus vaccine. The S&P/ASX All Ordinaries Gold index is down 5.5% at the time of writing.

Best and worst ASX 200 shares.

The best performer on the ASX 200 at lunch is the Unibail-Rodamco-Westfield (ASX: URW) share price with a 5% gain. Bargain hunters may be buying the shopping centre operator’s shares after a heavy decline in 2020. The worst performer is the SEEK share price with a 10% decline. This follows the release of its aforementioned full year results.

More reading

• ASX investors have been buying these international shares
• As CBA slashes its dividend, the brutal reality is bank shares have been dogs for 5 years, with more pain ahead
• Why Mesoblast, Northern Star, SEEK, & WiseTech Global shares are sinking lower
• Coronavirus: SkyCity share price falls as NZ restrictions tighten
• SEEK share price on watch after COVID-19 profit hit

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK 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 A2 Milk Company Ltd (ASX: A2M) has been the gift that keeps on giving. However, the company’s hefty share price may make it difficult for A2 Milk to continue its exponential growth and capital returns.

Could these 2 ASX dairy shares be suitable A2 Milk replacements? 

1. Bubs Australia Ltd (ASX: BUB) 

ASX dairy share Bubs has a mere $524m market capitalisation compared to the $14 billion A2 giant. However, its products often neighbour A2’s on the shelves of many supermarkets and international sales channels.

Looking at the company’s growth figures, its Q4 FY20 quarterly activities highlighted a 32% increase in FY20 gross revenue and $26m in cash reserves as at 30 June 2020.

I expect Bub’s full year reporting to be consistent with its Q4 commentary, with Bubs Infant Formula driving performance and an expected strong growth trajectory. The company has achieved significant domestic retail distribution gains for a variety of its goat and grass-fed infant formula products across major retailers Coles, Woolworths, Chemist Warehouse, Big W and Baby Bunting. 

The coronavirus pandemic has surfaced as a consistent challenge across most infant formula stocks. A reduction in Chinese tourists and students, increasing costs and longer delivery times for international logistics and pantry stocking in Q3 has curbed the earnings potential of outbound Daigou channels.

These challenges remain a wildcard for the upcoming earnings season as domestic growth may be subdued in this volatile environment. With that said, China consumer demand has remained strong and supported via increased marketing investment across online channels. Bubs has also focused more on emerging markets outside of China to de-risk and meet new consumer demand. 

Bubs is well-capitalised and expects to achieve profitability at normalised EBITDA level in FY21. I believe the risks associated with Bubs applies to all ASX dairy shares in today’s volatile environment. This represents a high risk/high reward play instead of the A2 Milk share price. 

2. Nuchev Ltd (ASX: NUC) 

Nuchev listed on the ASX on 13 December 2019 and sells premium goat nutritional products. Its flagship product is its Oli6 branded goat infant formula.

Despite its initial public offering (IPO) late last year, on 29 July the ASX dairy share initiated a $15m capital raising at an offer price of $2.33 per share. This is quite a significant raise given its ~$100m market capitalisation. The capital will ensure Nuchev can operate effectively in an uncertain environment while leaving it well-placed to capitalise on opportunities and remain nimble in adapting efficiently in these unusual times. 

In Nuchev’s Q4 trading update, its net revenue of $17.8m came slightly below prospectus expectations, achieving 99% of prospectus forecasts. This revenue represents a 98% increase on FY19. It expects a material revenue increase in Fy21, particularly in key CBEC channels. However, the rate of growth is expected to moderate relative to FY20. It believes travel restrictions are likely to impact on the speed the company can develop new business and markets. 

I think Nuchev is too speculative and unpredictable right now. The ASX dairy share does not yet have a roadmap to profitability and still pending the approval of its SAMR brand registration which will enable it to sell products in China.

More time is needed to evaluate whether or not Nuchev can successfully penetate the Chinese market and if new markets can be realised. While the ASX dairy share and its products are niche, I would rather have my money in the A2 Milk share price. 

More reading

• Why a new CEO is good for the A2 Milk share price
• If you have $12,000, you should invest in these 3 ASX shares now
• 5 quality ASX shares to buy in August
• ASX 200 up 1%: Challenger disappoints, Sydney Airport to raise $2bn, a2 Milk names new CEO
• If you invested $10,000 in Afterpay shares last year, you’d have this much today…

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk, COLESGROUP DEF SET, and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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We Fools like to look at the kinds of shares that ASX investors have been buying in recent weeks. Not only does it give an insight into what the market finds ‘hot’ right now, but it’s also just plain interesting. Yesterday, my Fool colleague James Mickleboro looked at the top ASX shares investors have been buying recently.

So today, we’re going to be checking out the most traded international shares. The data comes from Commonwealth Bank of Australia (ASX: CBA)’s CommSec brokering platform and covers the period from 3–7 August. Since CommSec is the most widely used broker in the country, I think its data gives us a good snapshot of the entire ASX investing community.

Most popular international shares:

1) Apple Inc. (NASDAQ: AAPL)

Taking out the crown last week was the one and only Apple, famous for its iPhone line as well as its Mac and iPad products. Apple reported some mind-blowing numbers on 30 July, which included an 11% year-on-year increase in revenue. That’s a big deal for a ~US$1.9 trillion company and is probably why ASX investors were keen to get their hands on Apple shares. The announced 4-for-1 stock split probably didn’t hurt either.

2) Microsoft Corporation (NASDAQ: MSFT)

The old Apple–Microsoft rivalry is continuing on the CommSec servers it seems. Yes, the purveyor of the Windows operating system and the Office suite can’t be held down it seems. Although Microsoft has already run up more than 30% this year, it seems ASX investors don’t mind at all.

3) Tesla Inc. (NASDAQ: TSLA)

Never far from the headlines this one, Tesla (of course) makes this week’s list at number 3. Shares of Elon Musk’s electric car and battery manufacturer has seemingly stopped climbing (for now) after rising around 350% between March and July. Although 1 Tesla share will set Aussies back nearly $2,000, that doesn’t seem to have got in investors’ way last week.

4) Amazon.com Inc. (NASDAQ: AMZN)

Speaking of expensive shares, it’s only fitting that this eCommerce juggernaut slid in at fourth place last week. Amazon shares continue to defy gravity at more than $US3,000 (A$4,200) each. But again, that doesn’t seem to bother Aussie investors, who can’t get enough of the Bezos, it seems. And that’s despite a trailing price-to-earnings (P/E) ratio of 121 and a market capitalisation of more than US$1.5 trillion.

5) Square Inc. (NASDAQ: SQ)

Last but not least, we have payments company Square. Square was founded by Twitter’s Jack Dorsey, who remains CEO. Aussies might not be familiar with this company, but its card readers and Cash app are very popular over in the USA. Square shares are also popular with investors right now, perhaps as a result of the company exploding from around US$40 a share in March to around US$140 today. Too late to invest? Clearly ASX investors don’t think so.

More reading

• ASX 200 down 0.3%: CBA delivers $7.3bn cash profit, gold miners sink, SEEK’s outlook disappoints
• As CBA slashes its dividend, the brutal reality is bank shares have been dogs for 5 years, with more pain ahead
• Tesla plans five-for-one stock split
• MoneyMe share price surges, but is it sustainable?
• CBA delivers $7.3bn cash profit and declares 98 cents per share final dividend

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Microsoft, Square, and Tesla and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short September 2020 $70 puts on Square, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon and Apple. 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) is on course to snap its winning streak. At the time of writing the benchmark index is down 0.3% to 6,121.4 points.

Four shares that have not let that hold them back are listed below. Here’s why they are pushing higher:

The Aurizon Holdings Ltd (ASX: AZJ) share price is up 3.5% to $4.74. This appears to have been driven by a positive broker note out of UBS this week. In response to its full year results, the broker has retained its buy rating and $5.55 price target on the rail operator’s shares. While its FY 2021 outlook wasn’t overly positive, it believes its shares are good value at the current level.

The Cochlear Limited (ASX: COH) share price is up 4% to $201.53 despite there being no news out of the hearing solutions company. However, with Russia claiming to have successfully developed a coronavirus vaccine, investors may believe that the tough trading conditions the company is facing could soon ease. Though, it is worth noting that there are many doubts over Russia’s claims.

The Magellan Financial Group Ltd (ASX: MFG) share price is up 2.5% to $63.31 after the release of the fund manager’s full year results. For the 12 months ended 30 June 2020, Magellan delivered a 20% increase in adjusted net profit after tax to $438.3 million. This allowed the company to declare a final dividend of 122 cents per share, up 10% on the prior corresponding period. Magellan also announced the proposed launches of MFG Core Series and the Magellan Sustainable Fund.

The Westpac Banking Corp (ASX: WBC) share price is up almost 2% to $18.10. This appears to have been driven by a reasonably robust full year result by rival Commonwealth Bank of Australia (ASX: CBA) this morning. CBA reported an 11.3% decline in cash net profit after tax from continuing operations to $7,296 million.

More reading

• The latest ASX stocks leading brokers are urging you to buy today
• Flight Centre and Zip Co were among the most traded shares on the ASX last week
• Why this reporting season is different, and now’s a great time for ‘buy to hold’ investors in ASX shares
• Should you buy CBA shares before the dividend announcement?
• ASX 200 jumps 1.2%: Big four banks rise, Qantas update, Mesoblast surges

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia has recommended Aurizon Holdings Limited and 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 Commonwealth Bank of Australia (ASX: CBA) share price is down 0.80% this morning after the bank slashed its dividend. The bank released its full year results this morning revealing an 11.3% decline in cash profits thanks to higher loan impairment expenses due to COVID-19. 

What were CBA’s full year results?

Australia’s largest lender reported a decline in cash net profit after tax (NPAT) from continuing operations, which fell 11.3% to $7,296 million, largely due to higher loan impairment expenses. As at 31 July, the bank had 135,000 COVID-19-related home loan deferrals and 59,000 business loan deferrals. Loan impairment provisions increased to $2,518 million, a $1,317 million increase on FY19. Surprisingly, statutory NPAT increased 12.4% to $9,634 million, thanks to gains on the sale of divestments. 

Commonwealth Bank was able to report a strong underlying business performance with volume growth across its core businesses. Above market growth was achieved in home lending and deposits. Home lending grew at 1.3x system growth while household deposits grew by $25 million or 9.8%. Business lending increased 5.1% over FY19 showing momentum due to investments in new products, service, and technology. 

What happened to the dividend? 

Bank shares have long been a staple of dividend investors, but these same investors have been disappointed by falling bank dividends in recent times. There had been speculation CommBank might even fail to pay a final dividend. This morning the bank declared a final dividend of 98 cents per share, fully franked.

This means investors received total dividends of $2.98 from the bank over the year, a 31% decrease on FY19. The reduced dividend reflects APRA’s guidance that banks should retain at least 50% of earnings. The final dividend payout ratio was 49.95% of second half statutory earnings. 

What’s next for Commonwealth Bank? 

The bank has now substantially completed the divestment of its wealth management businesses in line with its simpler, better bank strategy. Commonwealth Bank says it has prepared for a range of economic scenarios as the economy moves from crisis to recovery. Operational performance remains strong despite the challenging environment. The group has a strong capital position with a capital ratio of 11.6%, above APRA’s 10.5% benchmark. Commonwealth Bank intends to focus on retail, business, and digital banking to deliver long-term performance and returns for shareholders. 

More reading

• MoneyMe share price surges, but is it sustainable?
• CBA delivers $7.3bn cash profit and declares 98 cents per share final dividend
• 5 things to watch on the ASX 200 on Wednesday
• Why this reporting season is different, and now’s a great time for ‘buy to hold’ investors in ASX shares
• ASX reporting season reveals some upside surprises

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.

The post As CBA slashes its dividend, the brutal reality is bank shares have been dogs for 5 years, with more pain ahead appeared first on Motley Fool Australia.

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After a positive start to the day, the S&P/ASX 200 Index (ASX: XJO) has given back its gains and is dropping lower. In late morning trade the benchmark index is down 0.3% to 6,118.2 points.

Four shares that are falling more than most today are listed below. Here’s why they are sinking lower:

The Mesoblast limited (ASX: MSB) share price has continued its slide and is down 8.5% to $3.07. Investors have been selling the biotechnology company’s shares amid doubts over the likelihood that the U.S. FDA will approve its remestemcel-L product candidate as a treatment for paediatric steroid-resistance acute graft versus host disease. Mesoblast is due to meet with the Oncologic Drugs Advisory Committee (ODAC) on Thursday evening. The ODAC is a key player in the regulation of cancer drugs and plays a big role in whether a drug gets approval or not.

The Northern Star Resources Ltd (ASX: NST) share price has fallen 6% to $14.38 after the gold price crashed lower overnight. Increasing investor risk appetite because of improving economic data and a potential coronavirus vaccine led to the precious metal losing almost 6% of its value during overnight trade. It isn’t just Northern Star sinking lower. The S&P/ASX All Ordinaries Gold index is down 4.8% at the time of writing.

The SEEK Limited (ASX: SEK) share price has sunk over 10% to $19.21 following the release of its full year results. The job listings giant reported a 51% decline in net profit after tax to $90.3 million for FY 2020. While this was largely expected by the market, its outlook for FY 2021 appears to have underwhelmed. Due to the pandemic, SEEK has suggested that its EBITDA and net profit after tax could drop 20.5% and 78%, respectively.

The WiseTech Global Ltd (ASX: WTC) share price has fallen 6% to $19.40. This appears to have been driven by a broker note out of Citi this morning. Its analysts have downgraded the logistics solutions company’s shares to a sell rating with a reduced price target of $18.40. It made the move after revising its earnings estimates lower due largely to the tough macroeconomic environment.

More reading

• SEEK share price on watch after COVID-19 profit hit
• Is the CSL share price the best ASX biotech buy right now?
• ASX gold miners on watch after gold price crashes lower
• ASX 200 rises 0.5%, Mesoblast plunges
• Mesoblast share price crashes 29% lower on FDA doubts

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia owns shares of WiseTech Global. The Motley Fool Australia has recommended SEEK 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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Plus-size women’s clothing retailer City Chic Collective Ltd (ASX: CCX) has emerged as a surprising success story. 

Despite retail being one of the hardest hit sectors during COVID-19 lockdowns in Australia and New Zealand, City Chic has remained profitable by pivoting to e-commerce sales channels.

How has the City Chic share price fared?

In a May COVID-19 trading update, City Chic reported a 57% increase in online sales versus the same period last year, with online sales now making up two thirds of the company’s total global sales.

Prudent cost-cutting – such as working capital efficiencies and lower rental agreements negotiated across its retail stores – means the company is emerging from this crisis with a solid foundation for future growth.

This is reflected in the City Chic share price. After crashing to a low of around $0.80 back in March, the City Chic share price has skyrocketed 320% to $3.31 at the time of writing. The company has also successfully completed an $80 million institutional placement and announced the potential acquisition of US-based plus-size women’s brand Catherines.

Can the growth story continue?

By pivoting away from traditional brick and mortar retailing and embracing online sales channels, City Chic has laid the foundation for a more resilient long-term business model. Other companies in the consumer discretionary space, like health and beauty specialist McPherson’s Ltd (ASX: MCP), have adopted a similar strategy.

City Chic reported unaudited sales revenues for FY20 of $194.5 million, an increase of 31% year-on-year. Underlying unaudited earnings before interest, tax, depreciation and amortisation expenses (EBITDA) has come in at $26.5 million. These are strong results for a company operating in challenging retail conditions.

Should you invest?

Despite the recent rally in the City Chic share price, I think the company still offers some great long-term growth potential. The company’s market cap is still only around $760 million, which is about the same as struggling outdoor clothing brand Kathmandu Holdings Ltd (ASX: KMD).

But City Chic is still a small player in a big industry: it estimates the value of the global plus-size women’s clothing market to be more than $50 billion annually.

I think there is much to recommend about City Chic. It has shown it can remain profitable in difficult market conditions. It has a large addressable international market. And it has flagged its intentions to continue to expand internationally.

In addition, after its $80 million institutional placement, City Chic has a significant war chest to spend on growth initiatives and acquisitions.

More reading

• Are ASX retail shares buys right now?
• 3 ASX shares to buy and hold for the next decade
• Leading brokers name 3 ASX shares to buy today
• ASX marching higher despite COVID-19: Where should you invest?
• My ASX share of the week

Motley Fool contributor Rhys Brock 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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As the pandemic wears on, ASX travel shares that went into hibernation in March remain in a state of suspended animation. With predictions a vaccine may not be widely available until well into 2021, international travel remains off the cards for the foreseeable future. Domestic travel is severely restricted thanks to the ongoing coronavirus outbreak in Victoria. So where does this leave ASX travel shares? We take a look at how they are managing. 

Sydney Airport Holdings Pty Ltd (ASX: SYD)

Sydney Airport launched a capital raising yesterday alongside the release of its half year results, which revealed the unprecedented impact of the pandemic. The airport saw 9.4 million passengers in 1H20, a 56.6% decline from 1H19. Revenue fell 35.9% to $511 million, resulting in a 35.4% decline in earnings before interest, taxes, depreciation and amortisation (EBITDA), which fell to $300.4 million. No distribution was declared, and none is expected to be declared for 2020 given the current outlook. 

Sydney Airport is a crucial component of Australia’s infrastructure. As the country’s largest airport, accounting for almost half of Australia’s air cargo by weight, Sydney Airport serves as an international gateway. International passengers contribute approximately 70% of passenger generated revenues, a source of funds that will remain missing for the foreseeable future.  

In order to reinforce its balance sheet and ensure it remains well capitalised for a range of recovery scenarios, Sydney Airport launched a $2 billion entitlement yesterday. Funds will be used to reduce net debt to $7.1 billion from $9.1 billion. The company took action early in the pandemic to put in place extra liquidity, however after six months of pandemic impacts, significant uncertainty continues as to how long aviation markets will take to recover to pre-COVID-19 levels. 

The Sydney Airport share price took a nosedive with the introduction of travel restrictions in February and March. As coronavirus cases rose, the Sydney Airport share price plummeted, falling 45% from a February high of $8.63 to a March low of $4.70. Sydney Airport was trading at $5.39 prior to yesterday’s announcement and trading halt. Shares are being offered under the entitlement offer at $4.56. 

Corporate Travel Management Ltd (ASX: CTD) 

Corporate Travel Management is due to report its full year results on Wednesday 19 August. The travel company last updated the market about the impacts of the pandemic in May, revealing it had reached agreement with its banking group to waive all financial covenants for calendar year 2020. At that point, Corporate Travel had a net cash position of approximately $30 million. When combined with low cash burn and revised banking facility terms, this left the company “in a strong liquidity position and well placed to rebound once travel resumes,” according to Managing Director, Jamie Pherous. 

One of the few ASX travel shares not to raise capital in the current downturn, Corporate Travel Management implemented comprehensive cost reductions at the start of the pandemic. These actions combined with the company’s strong liquidity position should enable it to withstand an extended period of reduced activity. The company has no retail footprint and uses technology to deliver its services, meaning a high proportion of its cost base is variable. 

In March, the company said that many of its clients across all regions are continuing to travel, albeit at low levels. Nonetheless, Corporate Travel chose to delay payment of the interim dividend of 18 cents ($19.62 million) until October. The decision is to be reviewed closer to the time, however with no signs of travel resuming, it seems unlikely the dividend will be paid. In stress testing performed at the start of the pandemic, the company presumed no international travel for a period of six months. With six months past and no signs of a resumption of international travel, the company’s revenues will no doubt take a hit when it reports full year results. 

Flight Centre Travel Group Ltd (ASX: FLT)

Flight Centre cancelled its interim dividend in March as the pandemic spiralled out of control. The 40 cent per share dividend would have seen a total of $40.1 million flow to shareholders. Uncertainty meant the company felt it appropriate to preserve cash in order to protect long-term shareholder value. Shares were suspended for two days while the travel operator developed its response to travel restrictions and engaged in discussions with stakeholders on how to manage the financial impacts. 

Flight Centre then hit the market with a $700 million capital raising in April, designed to shore up the balance sheet. The company confirmed its cost control measures were anticipated to reduce annualised operating expenses by approximately $1.9 billion. Operating expenses were to be reduced to $65 million per month by the end of July 2020. Flight Centre reported total transaction values in April were just 5% – 10% of normal levels. 

The Flight Centre share price plunged from a high of over $40 in January to a low of $8.92 in March. Although the share price has since recovered somewhat to $11.48, at the time of writing, Flight Centre’s future depends on the lifting of government travel restrictions. The company says it has continued to win new corporate accounts during the shutdown period, which should help drive growth when conditions recover and normalise. 

In May, Flight Centre agreed to sell its Melbourne head office located in St Kilda Road, with the $62.15 million sale completed in July. The company acquired the property in 2008 for $32 million. The sale, along with government support initiatives, is expected to have a net positive cash impact. In July, the company secured access to a debt facility of up to 65 million British pounds. The funding was made available by the Bank of England’s COVID Corporate Financing Facility, which is designed to support short-term liquidity as firms work to overcome disruption caused by the pandemic. 

Foolish takeaway

ASX travel shares are still largely stuck in limbo – existing in a state of suspended animation as the pandemic prevents them from plying their trade. Investors will no doubt be hoping for a lifting of restrictions sooner rather than later to give the recovery of ASX travel shares a boost. 

More reading

• Up 30% in a week, is the Webjet share price a strong buy?
• ASX 200 rises 0.5%, Mesoblast plunges
• Flight Centre and Zip Co were among the most traded shares on the ASX last week
• ASX 200 up 1%: Challenger disappoints, Sydney Airport to raise $2bn, a2 Milk names new CEO
• Sydney Airport to raise $2 billion after COVID-19 profit collapse

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 Corporate Travel Management Limited. 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 Computershare Limited (ASX: CPU) share price has dropped by 1.5% in early morning trade following the release of the company’s full year financial results.

Total revenue and EBITDA decline in FY 2020

Computershare reported total revenue for FY 2020 of $2.3 billion. This was slight decline on 1.9% on the prior year. Full year earnings before interest, taxes, depreciation and amortisation (EBITDA) declined by 3.7% to $650 million, while EBIT declined by 15.2% to $500.2 million. Margin income for Computershare was impacted by significant headwinds during the 12 month period, falling by 18.3% to $201 million.

Computershare revealed that it had been operating ahead of its internal forecasts during the financial year up until March. However, since then, revenues in its market-facing and event divisions had been impact by lower activity levels. In particular, falling interest rates had negatively impacted Computershare’s margin income.

A final dividend of 23 cents per share was declared by Computershare, as had been anticipated. This took the company’s full year dividend distribution to 46 cents per share.

Growth is anticipated to pick up in early FY 2021

On a positive note, Computershare commented that it had seen improved performance during May and June. The company is hopeful that it will see further operating profit growth during the initial part of the current financial year.

Computershare forecasts that EBIT (excluding margin income) for FY 2021 to be up around 10%. However, management earnings per share (EPS) is anticipated to decline by around 11%.

Stuart Irving, CEO said, “I am pleased to report that our operating business has proven its resilience, continuing to perform during the last few months of the financial year despite the deepening impact of COVID-19 and the associated volatility it’s brought to our markets.”

Strong balance sheet fuelling expansion strategy

Pleasingly, Computershare has been able to maintain a strong balance sheet. $506 million of free cash flow was generated during FY 2020. The company has been using some of this cash to fuel its expansion strategy. This includes its investment in US mortgages services business that will provide the company with a base for additional scale in the years to come. In addition, Computershare completed the acquisition of Corporate Creations. It also completed the necessary diligence for its acquisition of Verbatim Global Compliance.

Net debt remains unchanged

Net debt at the end of the financial year remain unchanged on FY 2019. Computershare’s leverage ratio ended up below the midpoint of its target range at 1.93x. Computershare also successfully refinanced its US$500 million debt facility and extended the debt’s duration to 2024.

How has the Computershare share price performed lately?

The Computershare share price has lost ground over the last 12 months, particularly during the early phase of the pandemic. It fell from $15.05 a year ago to now be trading at $13.46.

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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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