Tag: Motley Fool Australia

In late morning trade the S&P/ASX 200 Index (ASX: XJO) is charging higher and on course to end its losing streak. The benchmark index is currently up 0.7% to 6,048.5 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The IOOF Holdings Limited (ASX: IFL) share price has tumbled 5.5% lower to $4.97 following its fourth quarter update. During the quarter IOOF’s funds under management, advice and administration (FUMA) grew to $202.3 billion. This represents a quarterly increase of $6.7 billion or 3.4%. While that was positive, the same could not be said for its earnings commentary. IOOF advised that it expects to report an underlying net profit after tax of approximately $128 million to $130 million in FY 2020. This will be a sharp decline from $198 million a year earlier.

The IGO Ltd (ASX: IGO) share price is down a further 3.5% to $4.63. The nickel producer’s shares have come under significant pressure this week after its guidance for FY 2020 fell short of expectations. IGO expects its revenue to be $892.4 million and its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to come in at $459.6 million. The latter falls well short of Macquarie’s estimate of $530 million.

The Janus Henderson Group PLC (ASX: JHG) share price has dropped 3.5% to $30.18. This follows the release of its second quarter update after the market close on Wednesday. That update revealed assets under management (AUM) of US$336.7 billion at the end of June. While this was up 14% compared to the prior quarter, it was driven entirely by favourable market movements. The fund manager reported net outflows of US$8.2 billion for the quarter.

The Qantas Airways Limited (ASX: QAN) share price is down 2% to $3.42. Investors appear to have been selling the airline operator’s shares due to concerns over the domestic travel market after more borders were closed. On a more positive note, this morning the ACCC advised that Regional Express Holdings Ltd (ASX: REX) will be allowed to continue to coordinate flight schedules with Qantas and Virgin Australia on 10 regional routes. The competition watchdog has authorised this until the end of June 2021.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Why GUD, IGO, Nitro Software, & St Barbara shares are dropping lower
• ASX 200 flat: Big four banks higher, St Barbara and IGO sinks on Q4 updates
• Why the IGO share price is the worst performer on the ASX 200 today
• Is the oOh!Media share price set to run higher?

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

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In morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to follow the lead of U.S. markets and record a strong gain. At the time of writing the benchmark index is up 0.7% to 6,049.6 points.

Four shares that are climbing more than most today are listed below. Here’s why they are racing higher:

The Afterpay Ltd (ASX: APT) share price is up 3.5% to $70.09. A good number of tech shares are charging higher on Thursday along with Afterpay. This follows a very positive night of trade on Wall Street’s technology-focused Nasdaq index. It recorded a gain of 1.35% overnight after the U.S. Federal Reserve kept rates on hold at close to zero.

The Fortescue Metals Group Limited (ASX: FMG) share price has climbed 3% to $17.34 following the release of its fourth quarter update. Fortescue shipped 47.3 million tonnes (mt) during the quarter, taking its FY 2020 total shipment to 178.2mt. This means the company has outperformed the top end of management’s guidance of 177mt. It is also 6% higher than the previous financial year. In FY 2021 it is aiming to ship 175mt to 180mt.

The Marley Spoon AG (ASX: MMM) share price has rocketed 32% higher to $3.17. Investors have been fighting to get hold of the global subscription-based meal kit provider’s shares following its second quarter update. Thanks to a surge in demand due to the pandemic, the company’s second quarter revenue came in at 73.3 million euros. This was an impressive 129% increase on the prior corresponding period.

The Splitit Ltd (ASX: SPT) share price is up 3% to $1.41. This morning the buy now pay later provider released its second quarter update and revealed record quarterly merchant sales volume of US$65.4 million. This was an increase of 260% on the prior corresponding period. It led to gross revenue of US$2.4 million, which was a sizeable 460% increase on the same period last year.

More reading

• Splitit share price jumps 8% on stellar Q2 update
• Fortescue’s share price in focus as it beats guidance on record quarterly shipments
• Despite the Zip Co share price falling 24% in the last couple of weeks, it remains a popular stock to buy for CommSec investors
• 5 things to watch on the ASX 200 on Thursday
• Marley Spoon share price on watch after 129% jump in Q2 revenue

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

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On Wednesday the Australian Prudential Regulation Authority (APRA) updated its capital management guidance for banks and insurers.

This new guidance eases restrictions around paying dividends and replaces its April recommendation, which advised that banks and insurers should “seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer.”

APRA’s new guidance recommends that banks and insurers restrict their dividend payout ratios to 50% for the remainder of the year.

While this will inevitably mean sizeable dividend cuts, it could have been far worse for investors.

What dividends will the banks pay?

Analysts at Goldman Sachs have been looking over the guidance and the impact that it will have on the banks.

It commented: “On balance, we see ARPA’s revised capital distribution guidelines as constructive, and we believe they will provide the banks with more flexibility to resume paying dividends.”

“On our revised DPS forecasts, the sector still offers >6% 12-month forward yield, grossed up for the value of franking credit. Furthermore, its forward PPOP multiple is trading c.1 standard deviation below its historic average. We therefore continue to have a more positive bias to our bank ratings. Buy NAB (on CL), WBC and BOQ. Sell CBA,” it added.

Here are the dividends the broker expects the big four banks to pay:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

Goldman Sachs expects ANZ to pay a 60 cents per share partially franked dividend in the second half. Which will be the only dividend paid in FY 2020. Next year it expects the bank’s full year dividend to increase to 116 cents per share. This represents a 6.2% FY 2021 yield.

Commonwealth Bank of Australia (ASX: CBA) 

The broker has pencilled in a 90 cents per share fully franked final dividend for CommBank. This lifts its full year dividend to 290 cents per share. Goldman expects this to be reduced to 260 cents per share in FY 2021, representing a 3.5% dividend yield.

National Australia Bank Ltd (ASX: NAB)

Goldman Sachs believes NAB will pay shareholders a fully franked 30 cents per share final dividend to shareholders. This will mean a full year dividend of 60 cents per share. Next year the broker expects it to rebound to 103 cents per share. This equates to a 5.6% FY 2021 yield.

Westpac Banking Corp (ASX: WBC)

Finally, the broker expects Australia’s oldest bank to pay a final fully franked dividend of 45 cents. That will be the same for the full year, as no interim dividend was paid. Looking ahead, Goldman estimates that the bank will reward shareholders with a 108 cents per share dividend in FY 2021. This represents a forward 6.1% dividend yield.

More reading

• 2 top ASX dividend shares to buy for income in 2020
• ASX 200 drops 0.2%, APRA boosts big 4 ASX banks
• ASX big banks stocks outperform even as APRA caps dividends
• APRA eases dividend restrictions, ASX bank shares rally
• ASX 200 flat: Big four banks higher, St Barbara and IGO sinks on Q4 updates

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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 Splitit Ltd (ASX: SPT) share price is pushing higher on Thursday after the release of its second quarter update.

At the time of writing the buy now pay later provider’s shares are up 8% to $1.48.

How did Splitit perform in the second quarter?

As we saw with Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) during their latest quarters, Splitit’s strong growth continued in the second quarter.

According to the release, Splitit delivered record quarterly merchant sales volume (MSV) of US$65.4 million. This was an increase of 260% on the prior corresponding period.

This led to the company recording gross revenue of US$2.4 million, which was a sizeable 460% increase on the same period last year. It is also more than the entire revenue it recorded in FY 2019.

What were the drivers of its growth?

They key drivers of growth during the quarter were its North America and Europe businesses. They reported MSV growth of 261% and 240%, respectively.

This was underpinned by an increase in new and large merchants during the quarter. Management notes that this reflects progress in its strategy to build its presence in key verticals such as homewares, luxury retail, jewellery, sporting & outdoors, and health.

Leading brands signing up to Splitit’s solution included Purple, Daily Sale, Quiet Kat, Bedmart, Tatami Fightwear, Sofa Club and Alpina Watches. At the end of the period, its total merchants had surpassed 1,000, which is up 104% year on year.

Also supporting its growth was a jump in customer numbers. They increased 85% year on year to over 300,000 total shoppers.

Brad Paterson, CEO of Splitit, commented: “Accelerating merchant demand, strong foundations and a great shopper experience have set Splitit on a rapid growth trajectory, with record MSV and revenue during the quarter.”

“We are seeing the benefits of tightening our product-market fit, attracting world-class talent, partnering with Stripe, Visa and Mastercard and supporting our scalable solution with the right merchant funding model. This is an exciting time and we are only just getting started. We expect this growth to continue as we focus on delivering significant benefit and value to our customers,” he added.

Outlook.

Management notes that consumer awareness and preference for Splitit are growing.

And while it intends to watch macro conditions carefully, it remains optimistic about the growth ahead given the shift to ecommerce and its differentiated model which it feels is resonating strongly with both merchants and shoppers.

It concluded: “Splitit will continue to focus on large merchant acquisition in its target verticals to underpin further MSV and revenue growth. Partnerships will also play an important role in the coming quarters especially as new Stripe merchant onboarding functionality is deployed more broadly in Q3. The Company will continue to execute its new strategic partnerships with Mastercard and Visa.”

More reading

• Is CommBank the BNPL killer?
• These BNPL shares have blown up since their IPOs
• Is the Zip share price a buy after falling 20% last week?
• Zip and Openpay were among the most traded shares on the ASX last week
• Which ASX shares will benefit from the second lockdown?

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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All eyes will be on the Fortescue Metals Group Limited (ASX: FMG) share price this morning as investors wait to see if it will break new record highs.

The miner is shaping up to be the capital return hero for the sector during the August reporting season, in my view, after it posted record quarterly shipments of iron ore and announced that it exceeded full year guidance.

The news will lift hopes that management will deliver some form of dividend or capital return surprise next month when it releases its full year profits.

Fortescue share price outperforming

The FMG share price closed at $16.85 on Wednesday after hitting a record high of $16.89 the day before.

High expectations are baked into the price which surged by more than 70% since the S&P/ASX 200 Index (Index:^AXJO) hit its COVID-19 nadir in March.

This is more than double the gains made by its larger rivals. The BHP Group Ltd (ASX: BHP) share price jumped by 38% and the Rio Tinto Limited (ASX: RIO) share price added 31% over the period.

Record shipment and guidance beat

Fortescue shipped 47.3 million tonnes (mt) in the June quarter and this takes its FY20 total shipment to 178.2mt.

That’s above the top end of management’s guidance of 177mt and is 6% higher than the previous financial year.

Management’s FY21 guidance

While the C1 cash costs rose in the final quarter, it’s still at a respectable US$13.02 per wet metric tonne (wmt). Total C1 costs for the full year stood at US$12.94 a wmt and that included increased expenses relating to the COVID-19 pandemic.

This gives Fortescue a healthy margin as it sold its ore at an average of US$81 a dry metric tonne (dmt) in the quarter (average for the year is US$79/dmt).

Management expected to ship 175 million to 180 million tonnes of ore in the current financial year and achieve a C1 costs of US$13.00 to US$13.50 per wmt.

Good margin bolsters cash

The miner’s balance sheet is flushed with cash thanks to supply disruption from Brazilian rival Vale SA and good demand for steel in China.

Fortescue holds around US$4.9 billion in cash and only $300 million in debt. This means management has the financial muscle to return cash to shareholders, should it choose too.

This is despite rising cost for its Eliwana Mine and Rail Project with total capital expenditure expected to range between US$3 billion and US$3.4 billion in FY21.

Will Fortescue pay a special dividend?

Fortescue has the chance to be the capital return hero after Rio Tinto failed to impress on this front when it released its half year results yesterday evening.

But Fortescue’s quarterly production report won’t settle the debate on whether the stock is still cheap after it’s big run up.

If the iron ore spot price holds above US$100 a tonne, there’s still big upside for the FMG share price. But in this unpredictable COVID-19 environment, anything can happen.

More reading

• K2Fly share price on watch after update
• 5 things to watch on the ASX 200 on Thursday
• 2 top ASX dividend shares to buy for income in 2020
• Rio Tinto’s capital return crashes by half on $2.5 billion dividend payout
• ASX 200 drops 0.2%, APRA boosts big 4 ASX banks

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. Connect with me on Twitter @brenlau.

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

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The Macquarie Group Ltd (ASX: MQG) share price will be one to watch on Thursday following the release of its annual general meeting update.

As well as providing investors with a breakdown on its performance in FY 2020, its presentation included an update on its first quarter performance.

How is Macquarie performing in FY 2021?

According to the release, Macquarie has been impacted by mixed trading conditions during the first quarter. As a result, the investment bank’s operating profit during the quarter was slightly down on the prior corresponding period.

While some of its businesses are performing very positively during the pandemic, others are acting as a drag on proceedings.

Macquarie’s Managing Director and Chief Executive Officer, Shemara Wikramanayake, explained: “Macquarie’s annuity-style businesses were up on 1Q20 with Macquarie Asset Management (MAM) up primarily due to the sale of its rail operating lease business, partially offset by lower income in Banking and Financial Services (BFS) which included higher provisions.”

“Macquarie’s markets-facing businesses were down on 1Q20 primarily due to significantly lower investment-related income in Macquarie Capital (MacCap), partially offset by stronger contributions from certain divisions in Commodities and Global Markets (CGM),” she added.

One big positive is the company’s balance sheet strength. The bank’s financial position comfortably exceeds APRA’s requirements, with a group capital surplus of $8.1 billion at the end of the quarter. This means it has a CET1 capital ratio of 13.2%, up from 12.2% at the end of March.

Outlook.

Macquarie expects conditions to remain challenging due to “the significant and unprecedented uncertainty caused by the worldwide impact of COVID-19 and the uncertain speed of the global economic recovery.”

It also warned that the impact that these conditions will have on its overall FY 2021 profitability is uncertain. This is making short-term forecasting extremely difficult.

As a result, Macquarie advised that it is currently unable to provide meaningful earnings guidance for FY 2021.

Ms Wikramanayake concluded: “Macquarie remains well positioned to deliver superior performance in the medium term due to its deep expertise in major markets; strength in business and geographic diversity and ability to adapt its portfolio mix to changing market conditions; ongoing programs to identify cost saving initiatives and efficiency; strong and conservative balance sheet; and proven risk management framework and culture.”

More reading

• Why the IGO share price is the worst performer on the ASX 200 today
• Will Rio Tinto pay a special dividend tomorrow?
• ASX 200 Weekly Wrap: ASX has week of high volatility
• 3 reasons why the Macquarie share price could be a buy
• Emergency funds: Are they still important?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

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The K2FLY Ltd (ASX: K2F) share price is on watch after the company announced a positive update on FY20 performance. K2Fly is a specialist company providing environmental, social and governance (ESG) products and services to the global mining sectors. The company also provides asset management consultancy, system integration, and represents a suite of niche products alongside its own software products. 

Among the company’s own ESG products is a range of software-as-a-service (SaaS) products. This includes the ‘RCubed’ product which is used for mineral resource and reserve governance, compliance, and reporting. In addition, the company provides ‘Infoscope’, a product to help companies maintain their ‘social license’ to operate on land. Uniquely, Infoscope delivers stakeholder, tenement, cultural heritage, native title and environmental management, as well as full life-cycle ground disturbance process.

Why is the K2Fly share price on watch?

The company announced an increase in Q4 FY20 invoices of 28% versus the previous corresponding period. For the full FY20 year, this translated into an increase of 60% against FY19. In addition, the company announced it was cashflow positive for Q4 FY20. The FY20 activities have been largely focused on building annual recurring revenues via the SaaS business model.

FY20 annual recurring revenue stands at $2.36 million, this is running at a compound annual growth rate (CAGR) of 177%. Q4 new clients to the Rcubed product include the Tier 1 miners Kinross Gold, South32 Ltd (ASX: S32), Sibelco and Orano SA. They join a list of announced Rcubed clients including Newmont Corporation and Rio Tinto Limited (ASX: RIO). Many Tier 1 miners have also extended their licensing agreements including AngloGold Ashanti (ASX: AGG), Westgold Resources Ltd (ASX: WGX) and Teck Resources.

In the 13 months since acquisition, the Rcubed product has exceeded its 3 year acquisition performance milestone. The company has been helped by Rcubed’s capability to work across a range of international stock markets. 

Company performance

Along with the Rcubed contracts, the company is also progressing new products. One of these involves an MoU with Decipher Pty Ltd,  a company with an award-winning cloud-based mine rehabilitation platform. K2F and Decipher have partnered to create an integrated monitoring and governance platform for Tailings Storage Facilities (TSF).

This further extends the K2Fly product range in both the environmental and governance areas of ESG requirements. The company is already collaborating with SAP on the development of a Tailings solution. The Decipher partnership adds a further level of detail into the monitoring of facilities.

In December 2019 a new entity, ‘The Place of Keeping’ took over the rollout of Infoscope to Australian Aboriginal groups. ‘The Keeping Place’ is  a secure platform that enables Traditional Owners to unlock social and economic opportunities for current and future generations.

The K2Fly share price has risen by 107.6% since its low point on March 20, valuing it at $24.95 million.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Rio Tinto’s capital return crashes by half on $2.5 billion dividend payout
• ASX 200 drops 0.2%, APRA boosts big 4 ASX banks
• 5 things to watch on the ASX 200 on Wednesday
• Will Rio Tinto pay a special dividend tomorrow?

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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It has been an uncharacteristically disappointing couple of weeks for the Zip Co Ltd (ASX: Z1P) share price. Since peaking at a record high of $7.88 on 13 July, the buy now pay later provider’s shares have tumbled approximately 24% lower to $6.01.

Despite this decline, Zip Co shares remain very popular with investors. This is particularly the case with CommSec investors.

Data released by CommSec reveals that Zip Co has been the most traded ASX share on its platform over both of the last two weeks. In fact, two weeks ago Zip Co shares accounted for a staggering 8.1% of total trades made on the CommSec platform. And according to the data, 70% of these trades were executed by buyers.

Last week Zip Co remained the most traded ASX shares on the CommSec plafform, accounting for 3.2% of total trades. On this occasion, the buying and selling was a little more even.

Why are Zip Co shares so popular?

There has been a sharp uptick in new investors, or Robinhood investors, this year following the market crash. Robinhood is a US-based investment app which has become increasingly popular with millennial investors due to its free brokerage.

But rather than being focused on making long-term investments, many are taking advantage of the free brokerage to trade shares.

The most recent example of this is Kodak. The photography pioneer’s shares rocketed over 500% at one point on Wednesday evening. According to CNBC, over the last 24 hours, more than 60,000 Robinhood users have added the stock to their portfolio. This makes Kodak the most popular stock on the trading app by some distance.

In Australia, Zip Co and its fellow buy now pay later peers Afterpay Ltd (ASX: APT), Openpay Group Ltd (ASX: OPY), and Sezzle Inc (ASX: SZL) have proven to be extremely popular with our own version of Robinhood investors.

So much so, two weeks ago when Zip Co accounted for 8.1% of total trades, all the top five traded shares on the CommSec platform were buy now pay later providers. Combined, they represented 21% of total trades for the week. This means 1 in 5 trades involved a buy now pay later share, which is staggering.

Is Zip Co a share to buy?

I think Zip Co, and particularly Afterpay, would be great buy and hold options. Given the positive tailwinds that the industry is benefiting from and the increasing popularity of the payment method with consumers and merchant, I believe both have enormous potential.

Though, given how popular they appear to be with traders, their shares do carry a lot of risk and are likely to be more volatile than others. As a result, you might want to restrict an investment to just a small part of your portfolio.

More reading

• Short-sellers are targeting these ASX stocks ahead of the reporting season
• WAAAX or FAANG? Which ASX tech shares to buy in 2020
• Xero and 1 other ASX growth share to watch in August
• Earnings season: What’s ahead for the Afterpay share price?
• Are ASX tech shares the only way to protect your portfolio against the coronavirus?

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On a day when the S&P/ASX 200 (INDEXASX: XJO) fell by 14 points, the Orbital Corporation Ltd. (ASX: OEC) share price rose by 11.11%. Orbital is a Perth based defence contractor. In addition, it is the world leader in the design and manufacture of propulsion systems and flight critical components for tactical unmanned aerial vehicles (UAVs).

The company recently saw its share price rise by 19% after a visit from the Minister for Defence, the Hon Linda Reynolds. Moreover, this visit was two weeks after the launch of the Australian Government’s 2020 Defence Strategic Update and 2020 Force Structure Plan. This plan includes potential investment of up to $700 million in tactical UAVs over the next decade. As well as up to $1.3 billion in Maritime Uncrewed Aerial Systems between 2020 and 2040.

What moved the Orbital share price?

The Company yesterday announced it had achieved revenue of $33.8 million. This is an improvement of 121% on the FY19 revenue of $15.3 million. The figure is at the top end of the company’s market guidance range of $25 million to $35 million.

FY20 revenue grew due to the company’s agreement with Insitu Inc., a wholly owned subsidiary of the Boeing Company. In fact, it now has two engine models in continuous production for Insitu. The third of the five engine models is scheduled for production in 2021. Delivering on Insitu commitments remains the company’s highest priority. In addition, it is the most immediate opportunity to grow revenue in FY21.

Orbital UAV’s customer demand remains strong and existing business and projected outlook has not been affected by the coronavirus pandemic. In addition, the company has implemented a comprehensive response and production capacity remains robust.

Management commentary

Todd Alder, the company’s CEO and Managing Director said “Orbital UAV’s excellent progress against our strategic objectives during FY20 is reflected in our strong financial performance. Delivering revenue at the top end of guidance, in spite of the COVID-19 environment, is testament to the commitment of our people and our ability to effectively manage our global supply chain.”

In March 2020, the company signed a new MoU with one of Singapore’s largest defence companies. This was for the design, development and initial production of a multi-fuel UAV engine. In April 2020, it announced a new contract with leading aerospace company Northrop Grumman. This was to develop a hybrid propulsion system for a Vertical Take-Off and Landing UAV.

“The two new engine development contracts announced earlier this year demonstrate Orbital UAV’s growing reputation as a world leading engine manufacturer in the global tactical UAV market.” said Mr Alder. “We will progress these exciting engineering development projects in FY21 while continuing to focus on our production priorities under the Insitu [agreement],” he said.

Share price performance

The Orbital share price is up by 268.4% in year to date trading. It has a market capitalisation of $108.62 million and currently pays no dividends. The company provided guidance for revenue for FY21 of between $40 million and $50 million.

More reading

• 3 surging ASX defence shares to buy next week
• Orbital share price soars by 19%

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Orbital Limited. 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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There are a few ASX shares that I’d buy in a heartbeat.

I can’t say that about many ASX shares right now. COVID-19 is still causing a lot of uncertainty on the share market. The valuations of some businesses like Afterpay Ltd (ASX: APT) have gone through the roof due to good growth and even higher expectations of the future.

Government assistance for the Australian economy will continue with lower jobkeeper payments, but COVID-19 impacts are still hard to predict with the situation constantly evolving.

Regardless of what happens next with COVID-19, I’d be happy to buy these two ASX shares in a heartbeat:

WCM Global Growth Ltd (ASX: WQG)

WCM Global Growth is a listed investment company (LIC) which invests in global shares and excludes ASX shares.

The portfolio is run by WCM Investment Management, a Californian based manager with a focus on high growth businesses in the consumer, technology and healthcare sectors.

A key focus for the LIC is to look for businesses with a growing economic moat. One of the main measures of this is an improving return on invested capital (ROIC). It wants to be invested in business that are strengthening their market positions, rather than businesses that are mature or declining. It’s the ‘direction’ of the moat that is the most important thing to WCM.

The LIC also looks at the management and culture of the business to ensure that they are focused on a positive moat trajectory.

Some of its current big positions include: Shopify, West Pharmaceuticals, MercadoLibre, Visa, Stryker, Tencent, Lululemon Athletica, Taiwan Semiconductor, Crown Castle International and Ecolab.

The ASX share invests with a long-term holding period in mind. The investment approach has led to very strong returns. Over the past three years its portfolio has returned 20.15% per annum after fees, outperforming its global benchmark by 9.4% per annum. I’m not sure the next three years will be as strong as that, but I think the good performance can continue with how it invests.

At the current WCM Global growth share price of $1.26 it’s trading at discount of nearly 16% to the pre-tax net tangible assets per share at 24 July 2020. That’s a nice discount for a strong performer in my opinion. I’d be happy to buy shares today. 

Bubs Australia Ltd (ASX: BUB)

The Bubs share price has dropped by 11% since giving its June 2020 update to the market.

I was a bit unfortunate with the timing of my recent bullish assessment of Bubs but the ASX share looks even better value to me now.

I think it’s a good idea to know businesses well enough that you’d be confident to buy (more) shares when the share price drops. That’s the case for me with Bubs – I’d be happy to buy shares at this lower price.

The infant formula business has an exciting future in my opinion. In the FY20 update, the ASX share said that it grew its revenue by 32% to $62 million. Infant formula revenue increased by 69% during the year. It’s the infant formula segment that I’m particularly interested in because it has a gross profit margin of around 40%, which is much higher than the overall business. As infant formula becomes a larger percentage of total sales, Bubs’ margins will naturally improve – and that’s before the benefit of economies of scale kicks in.

Management are expecting another strong year of growth in FY21. It’s expecting to achieve profitability at the ‘normalised earnings before interest, tax, depreciation and amortisation (EBITDA)’ level.

The recent announcement of the launch of Vita Bubs – a vitamin and mineral supplement range – should help boost longer-term revenue as it can satisfy more of the consumer’s daily nutritional and dietary needs. Hopefully having Jennifer Hawkins as the global ambassador will also help the company’s long-term growth.

I think investors are underestimating how much the company can grow over the long-term. Even if the short-term wasn’t as good as some hoped.

More reading

• Is Bubs Australia the next Blackmores?
• 3 coronavirus ASX shares to buy right now
• Why Bubs, PointsBet, Perpetual, & Waypoint shares are dropping lower
• Got $1,500? Here are 3 ASX shares I’d buy
• 2 top ASX growth shares to buy for long-term growth

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

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