Tag: Motley Fool Australia

Jumbo Interactive Ltd (ASX: JIN) is an Australian-based company that resells OzLotto and Powerball lottery tickets online. In 2019, Jumbo Interactive was a market darling, with the company’s share price rallying more than 114% for the year.

However, the same buying enthusiasm has not been seen in recent times. Since hitting a low of $6.99 in mid-March, the Jumbo Interactive share price has only managed to bounce 54% to $10.76 at the time of writing. Although this is not a small move, it dulls in comparison to the share price recovery of other tech shares on the ASX.

So why has the Jumbo share price failed to bounce to pre-pandemic highs and is now the time to buy shares in the company?

How has Jumbo Interactive handled the pandemic?

In early April, Jumbo Interactive provided the market with an update on the company’s performance during the COVID-19 pandemic. The company assured investors that operating conditions have remained consistent and noted that Jumbo Interactive is well positioned for an increase in online lottery demand. In addition, the company noted its healthy financial position, citing no debt and boasting $65.5 million cash on hand.

Why are ASX investors showing little interest?

The COVID-19 pandemic has seen the share price of many online retailers surge as consumers move from shopping in physical stores to online channels. Given the migration online, Jumbo Interactive is well positioned to capitalise on these structural trends with approximately 25% of Australian lottery sales coming from online.

Despite the optimism and potential, investors have remained reserved as indicated by the performance of the Jumbo Interactive share price of late. Firstly, from a fundamentals point of view, many investors may be turned off by the company’s valuation, with Jumbo Interactive currently trading on a forward price-to-earnings (P/E) ratio of 27 times.

Tabcorp Holdings Limited (ASX: TAH) also has an 11% ownership of Jumbo Interactive, with the two companies recently completing a new reseller agreement for the next 10 years, until July 2030. Under the agreement, Jumbo Interactive will pay an upfront extension fee of $15 million to Tabcorp, in recognition of the fundamental value of its lottery licenses to Jumbo. The agreement has not attracted much interest from investors, who may perceive that the deal favours Tabcorp more than Jumbo Interactive.

Should you buy at today’s Jumbo Interactive share price?

Jumbo Interactive was actually removed from the S&P/ASX 200 Index (INDEXASX: XJO) in the June rebalance, indicating that many institutions are finding the company less attractive at the moment. However, despite these factors I actually think that Jumbo Interactive has great potential.

With the pandemic changing consumer behaviour and pushing many people online, I think that Jumbo Interactive is well poised to benefit from these structural changes. However, with a weaker economy it is not known how lotteries will perform, therefore I’m happy to wait on the side lines until the economic tide starts to turn.

More reading

• 2 hidden ASX shares to benefit from coronavirus
• Top brokers name 3 ASX shares to buy next week
• Why UBS thinks now is the time to be buying this underperforming ASX 200 stock
• Tabcorp share price up 5% as CEO and chair succession plan announced
• ASX 200 rises 0.3%, investors bet on Tabcorp

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive 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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In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) has given back its morning gains and is dropping lower. At the time of writing the benchmark index is down 0.2% to 6,006.8 points.

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

The GUD Holdings Limited (ASX: GUD) share price is down 3.5% to $11.33. This decline appears to have been caused by a broker note out of Citi this morning. According to the note, the broker has downgraded the products company’s shares to a neutral rating with a slightly reduced price target of $12.75. The broker made the move on valuation grounds after not seeing enough in its FY 2020 result to warrant the premium its shares trade at.

The IGO Ltd (ASX: IGO) share price has crashed 13% lower to $4.81 after its guidance for FY 2020 fell short of expectations. Management 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 is well short of Macquarie’s estimate of $530 million.

The Nitro Software Ltd (ASX: NTO) share price is down 8% to $1.89. This follows the release of the software company’s second quarter result. For the six months to 30 June 2020, Nitro’s cash receipts from customers were $19.1 million. This represents a 7% increase compared to the prior corresponding period. Although this has met its pre-COVID forecasts, it appears to have fallen short of the market’s expectations.

The St Barbara Ltd (ASX: SBM) share price has fallen 6.5% to $3.55. As well as being weighed down by general weakness in the gold mining industry, the release of its fourth quarter update appears to have underwhelmed. Although St Barbara achieved its production and cost guidance for FY 2020, its outlook for the year ahead may have been softer than hoped. The gold miner is expecting production and costs to remain largely the same in FY 2021.

More reading

• 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
• St Barbara share price tumbles lower on Q4 update and FY 2021 guidance
• GUD Holdings share price storms higher on FY 2020 result
• ASX 200 rises 0.3%, Perpetual reveals large US acquisition

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Nitro Software 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 Ecofibre Ltd (ASX: EOF) share price briefly leapt 7.6% this morning after the hemp products producer announced a strategically important acquisition. The company will acquire a portfolio of businesses and assets of a key manufacturing partner. The portfolio includes five businesses with deep technical expertise across a range of textile disciplines. This will help accelerate the transition of the company’s Hemp Black products from R&D to commercialisation. At the time of writing, the Ecofibre share price had been sold down to currently trade at $2.50. This is level with the company’s share price at Friday’s close. Ecofibre shares were placed in a trading halt on Monday pending today’s announcement. 

What does Ecofibre do? 

Ecofibre is a producer of hemp products in Australia and the United States. Its Hemp Black business is focused on developing naturally anti-microbial, hemp-based textiles and composite materials. Its Ananda Hemp Food brand produces Australian grown hemp food products. The Ananda Health and Professional brands produce nutraceutical products for humans and pets.

Why has Ecofibre made the acquisition? 

Ecofibre is acquiring the business and assets of TexInnovate which comprises a portfolio of five businesses that work as an integrated manufacturing platform. This will drive innovation and delivery for a range of products envisaged for Hemp Black. The acquisition creates an integrated value chain for Hemp Black’s key intellectual property and technology processes. 

Ecofibre will pay US$42 million for the business. This is comprised of US$10.5 million cash, US$10.5 million in Ecofibre shares and an earnout with a value of up to US$21 million. Completion is scheduled to occur on 1 September 2020 with the acquisition funded via a $29.5 million share placement at an issue price of $2.50. 

How has the Ecofibre share price been performing? 

The Ecofibre share price fell throughout June but has been on an upward trajectory in July. As mentioned, the share price leapt more than 7% on opening this morning but has since pulled back with shares now trading at $2.50. In FY20, Ecofibre grew revenues by 42% to over $50.7 million with growth in sales across all businesses. Net profit after tax grew 119% to $13.2 million, above the $12.5 million previously forecast. 

Ecofibre says it is in a strong financial position with cash and equivalents of $18.3 million and no debt. The company is developing the industrial hemp market through the Hemp Black business, which recently tapped into demand for personal protective equipment (PPE). Hemp Black sold around 135,000 face masks in May and June contributing $2.4 million to revenue. Mask manufacturing capacity is expected to double this quarter. 

What’s the outlook for Ecofibre?

Ecofibre’s businesses are performing strongly. Ananda Health is the number one hemp brand for US pharmacies, and is on track to launch in CVS in 2Q21. CVS is the largest retail pharmacy chain in the US with some 10,000 outlets. Ananda Food has seen steady growth and is building a quality customer base for the long term. This latest acquisition will speed the commercialisation of Hemp Black products. 

More reading

• ASX cannabis shares adjust to coronavirus environment
• Why Afterpay, Ecofibre, Mesoblast, & Zip Co shares are racing higher
• Stock of the day: Ecofibre share price jumps on profit guidance

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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Could ASX growth shares outperform in 2020? I think some strong tailwinds make for an exciting earnings season ahead.

Why ASX growth shares could outperform this year

The dividends versus growth argument is as old as the share market itself.

However, I think 2020 has a compelling argument for ASX growth shares.

The preference for ASX dividend shares is often centered around the ‘bird in the hand’ argument. That basically suggests investors prefer a certain cash flow today compared to an uncertain, potential payoff in the future.

However, many companies have slashed dividends this year. That means 2020 could be the year that ASX growth shares outperform within the S&P/ASX 200 Index (ASX: XJO).

I’m excited about the upcoming August earnings season and I think there’s good reason why.

Why I like Xero and 1 more strong performer to watch in August

Shares in top ASX tech shares like Afterpay Ltd (ASX: APT) have been rocketing higher this year.

However, there have been a number of top ASX growth shares quietly outperforming the benchmark index.

The first company on my watchlist is Xero Limited (ASX: XRO). The Xero share price is up 14.7% and continuing to climb.

Xero provides an accounting software platform targeted at small and medium enterprises. 

That may not seem like a great business at the moment. However, Xero has some big customers locked in and that could help recurring revenue figures. 

I also think that added complexity in business accounting over the short to medium term could be a serious tailwind. Government stimulus programs are good for cash flow but also create some accounting headaches.

Add in the simplicity and low-cost Xero model and I think Xero’s FY20 earnings could receive a serious boost. Notably, Xero does not release its earnings alongside many of its ASX peers.

The Kiwi accounting group is set to announce its results in November at a similar time to the ASX banks. That means the Xero share price could have further to run compared to some of its ‘WAAAX’ tech peers.

It’s not just tech shares like Xero that I’ll be watching in August. Another New Zealand company that has caught my attention, and I’ll be keeping an eye on the A2 Milk Company Ltd (ASX: A2M) earnings result next month.

A2 Milk shares have rocketed 35.6% this year and are also part of the 2020 share price outperformers’ group.

Strong supermarket sales and steady international growth have underpinned the ASX growth share gains this year. 

I think the technical environment remains strong for the Kiwi dairy group. Farmgate milk prices remain low and the A2 Milk brand’s expansion into other product lines has proven to be a hit.

While a lot of future growth may already be priced in, I think A2 Milk’s earnings may be surprisingly strong next month.

That means the ASX growth share is worth watching to see if it can propel the Kiwi dairy company’s shares to a new record high.

More reading

• 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
• How to turn $20,000 into $100,000 with ASX ETF shares
• Earnings season: What’s ahead for the Afterpay share price?
• Is the AFIC share price a buy after a 41% drop in profit?

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of A2 Milk and 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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In a media release today, the Australian Prudential Regulation Authority (APRA) updated its capital management guidance for banks and insurers.

Updated guidance

The guidance eases restrictions around paying dividends. As a result, this replaces its April recommendation, in which it advised that banks and insurers should be “seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer.”

However, in today’s release, APRA has indicated boards should seek to retain at least half of their earnings when making decisions on capital distributions, conduct regular stress tests, and make use of capital buffers to absorb impact of stress.

APRA Chair Wayne Bryes said, “today’s announcement strikes a balance in recognising the strength of the financial system, while at the same time acknowledging the difficult path ahead.”

“APRA has therefore set an expectation that dividend payout ratios for authorised deposit-taking institutions (ADIs) will be maintained below 50% for this year,” he added.

APRA believes that, despite the environment being risky, it is now more confident in terms of how Australia’s economy and financial institutions are being impacted by the coronavirus pandemic.

Banks rally

Bank share prices have rallied on the back of the news (at time of writing):

• Australia and New Zealand Banking Group Ltd (ASX: ANZ) up 1.88%
• National Australia Bank Ltd (ASX: NAB) up 1.56%
• Westpac Banking Corp (ASX: WBC) up 1.43%
• Commonwealth Bank of Australia (ASX: CBA) up 1.47%

In other bank news

Westpac Bank announced today it will be bringing 1,000 jobs back to Australia from overseas. The decision follows a surge in demand for customer assistance. This action is expected to initially increase the bank’s costs by around $45 million per annum by the end of FY 2021.

Commonwealth Bank released a technology update yesterday. It announced 2 strategic partnerships with Square Peg and Zetta Venture Partners to support new banking ventures in artificial intelligence, data and analytics. In addition, the bank’s technology venture building entity X15 has launched an app called Backr to help small business owners launch new digital-enabled businesses. 

In addition, Commsec (an online broker offered by Commonwealth Bank) has seen a surge in retail investor activity in FY20 with 400,000 new accounts, which is 2.5 times that of its typical average. The increase in trading accounts could point to strong trading revenues for brokers.

Last month, ANZ announced the sale of UDC Finance to Japan’s Shinsei Bank for NZ$762 million. This transaction is subject to regulatory approval and is expected to be completed in the second half of 2020 calendar year.

National Australia Bank will release its Q3 trading update on Friday 14 August 2020.

More reading

• ASX 200 flat: Big four banks higher, St Barbara and IGO sinks on Q4 updates
• Why AP Eagers, CIMIC, NAB, & Virgin Money shares are charging higher
• Why the Westpac share price is storming higher today
• CBA and 2 more ASX shares to buy and hold forever
• Are ASX tech shares the only way to protect your portfolio against the coronavirus?

Motley Fool contributor Matthew Donald owns shares of National Australia Bank 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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At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) has given back its strong morning gains. The benchmark index is currently flat at 6,020.6 points.

Here’s what is happening on the market today:

Bank shares pushing higher.

The big four banks are all pushing higher on Wednesday and doing their part to support the ASX 200 index. Investors have been buying Westpac Banking Corp (ASX: WBC) and the rest of the big four after APRA provided guidance on dividends. While APRA still wants the banks to retain at least half of their earnings when making decisions on capital distributions, this is not as bad as some feared.

St Barbara Q4 update.

The St Barbara Ltd (ASX: SBM) share price is dropping lower on Wednesday after the release of its fourth quarter update. During the quarter, St Barbara delivered an 18.6% quarter on quarter increase in gold production to 108,612 ounces. This was achieved at an all-in sustaining cost (AISC) of A$1,301 per ounce. This meant that St Barbara achieved its full year guidance for both production and costs. I suspect its guidance for FY 2021 could be the reason for the selling. It has guided to similar production and costs next year.

IGO update disappoints.

The IGO Ltd (ASX: IGO) share price has crashed lower today after the release of its quarterly update. During the fourth quarter, the nickel producer delivered revenue and other income of $231 million and underlying EBITDA of $113 million. This result would have been stronger had its Nova and Tropicana operations not reported a material rise in costs quarter on quarter. This appears to have led to its full year earnings falling short of expectations.

Best and worst ASX 200 shares.

The best performer on the ASX 200 on Wednesday has been the AP Eagers Ltd (ASX: APE) share price with an 8% gain. This follows the release of the auto retailer’s annual general meeting update. The worst performer on the index by some distance is the IGO share price. Its shares are down 14% after the release of its quarterly update.

More reading

• Xero and 1 other ASX growth share to watch in August
• APRA eases dividend restrictions, ASX bank shares rally
• Why the IGO share price is the worst performer on the ASX 200 today
• Why AP Eagers, CIMIC, NAB, & Virgin Money shares are charging higher
• Why the Westpac share price is storming higher today

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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It is a challenging time for investors looking for ASX 200 dividend shares that are still paying reasonable dividends. Earnings tailwinds and economic uncertainty has forced many companies to cut dividends or opt to pay none at all. Here are three blue-chip ASX 200 dividend shares with solid cash flows and a history of reliable dividend payments that you could buy for the medium to long term. 

1. WAM Capital Limited (ASX: WAM) 

WAM Capital is a listed investment company (LIC) that provides investors with exposure to an actively managed diversified portfolio of undervalued growth companies listed on the ASX. The company has more than a decade of stable or increasing dividend payments and currently has a dividend yield of 8.07%. 

In the company’s June portfolio update, it cited that its portfolio continued to increase as coronavirus restrictions began easing and the Australian economy showed signs of recovery. Significant contributors to its positive investment portfolio performance included leading Australian healthcare and diagnostics services company Healius Ltd (ASX: HLS), service station operator Viva Energy Group Ltd (ASX: VEA) and Afterpay Ltd (ASX: APT). In my opinion, WAM is not only one of the most reliable and consistent ASX 200 dividend shares, but also does the hard yards for investors with active portfolio management. 

2. BHP Group Ltd (ASX: BHP) 

Despite getting hit with a broker downgrade, I believe the recent surge in iron ore prices will continue to position BHP as a leading ASX 200 dividend share. The iron ore spot price is currently around its 12-month highs at US$105.59 per tonne which will convert to high margins for Australia’s low cost producers. BHP currently pays fully franked dividends with a yield of 5.70%. 

3. Tassal Group Limited (ASX: TGR) 

Tassal Group is a diversified seafood producer engaged in the provision of Atlantic salmon and prawns. The company trades at a relatively cheap price-to-earnings (P/E) ratio of just 10.55 and currently pays a dividend yield of 4.89%. I believe Tassal could be a steady, future ASX 200 dividend share, having delivered a compound annual growth rate of 16.7% for revenue and 12.8% for net profit after tax over the past five years. The company sees early positive trends in customer behaviour in a COVID-19 world whereby consumers are more health conscious, want to trust what they are eating and also opt for easy to prepare meal solutions. Salmon and prawns meet such needs as healthy and sustainable proteins and Tassal has the opportunity to help increase seafood’s percentage share of plate. 

More reading

• Downer share price lower despite contract wins
• Will Rio Tinto pay a special dividend tomorrow?
• Top broker warns earnings expectations for the ASX reporting season are too high
• Are ASX iron ore shares doomed?
• These shares were the ASX 200’s biggest losers last week

Motley Fool contributor Lina Lim 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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With the word ‘COVID‘ on the tip of almost everyone’s tongue, hospitals under pressure to keep up with demand and companies racing to find a vaccine, is it time to think about investing in health?

The ASX healthcare sector contains more than 100 companies. When I talk about healthcare, I am including healthcare equipment, services, pharmaceuticals, biotechnology and even life-science companies. Given the breadth of the sector, it can certainly be daunting to try and choose a healthcare company to invest in. Here are 3 of my favourite ASX healthcare shares to consider adding to your portfolio.

CSL Limited (ASX: CSL)

CSL (formerly known as Commonwealth Serum Laboratories) was founded over 100 years ago in Melbourne. Among the many achievements CSL has celebrated, the most recent is the development of the world’s first human papillomavirus vaccine, known as Gardasil.

Earlier this month, CSL announced it is working to fight COVID-19 as well, by joining an industry partnership known as the CoVIg-19 Plasma Alliance. Needless to say, with the history of success CSL has, I’m interested to see what happens next. With its strong background in vaccines, I’m glad CSL is looking for solutions to our current pandemic.

The CSL share price is selling at around $271.73 (at the time of writing) and although this is a littler lower that its previous high of $343 before the March crash, its returns for investors over time have been spectacular. CSL shares are up more than 700% over the last decade. Current prices represent a 20% discount on the previous high, which is another reason I feel CSL shares are worthy of portfolio consideration.

Ramsay Health Care Limited (ASX: RHC)

Ramsay Health is another Aussie success story. Founded in 1964 in Sydney, Ramsay is a private healthcare provider. It has operations across multiple countries and specialises in surgery, rehabilitation and psychiatric care. Ramsay is the largest operator of private hospitals in the country, boasting 70 hospitals and day surgery units.

Trading at around $63 (at the time of writing), Ramsay’s current share price represents a 20% discount on previous highs. Ramsay shares have grown in value approximately 370% over the last decade.

One of the issues Ramsay has faced during the COVID-19 crisis is the suspension of elective surgeries. The company has announced that it is gradually reintroducing elective surgery now, implementing new safety measures for patients. With its strong portfolio and the recent resumption of elective surgeries, it could be a good time to consider adding Ramsay Health shares to your portfolio.

Nanosonics Ltd. (ASX: NAN)

Founded in 2001 and based in Sydney, Nanosonics is an innovator in infection prevention. Recognising a problem with healthcare-associated infections, Nanosonics has developed many solutions, including its signature product, the ‘trophon EPR’. This product provides a safe, simple solution to prevent ultrasound probe cross-contamination. For patients, this ensures high level disinfection and kills human papillomavirus (HPV), which is known to cause cancer. Nanosonics technology is used around the world, including countries such as America, Canada, France, Germany, Singapore and many others.

Trading around $6.20 (at the time of writing), the Nanosonics share price represents a 19% discount to previous highs. More importantly, over the last decade, Nanosonics shares have delivered a more than 1,000% return to investors. I feel that Nanosonics is a strong contender for portfolio inclusion.

Foolish takeaway

I’ve selected these 3 ASX healthcare shares as I feel that they are well positioned in the market and relevant to the COVID-19 crisis. Healthcare is an industry that is here forever, in some form or another. With CSL developing vaccines, Ramsay operating hospitals and Nanosonics preventing infections, they all offer a high value proposition to the healthcare space. The current pandemic only adds to that value.

More reading

• Are ASX tech shares the only way to protect your portfolio against the coronavirus?
• What would deflation mean for your ASX shares?
• Afterpay and Immuron were among the most traded shares on the ASX last week
• Why PolyNovo and these ASX healthcare shares could be long term market beaters
• Leading brokers name 3 ASX shares to sell today

Motley Fool contributor Glenn Leese has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics Limited and Ramsay Health Care 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 IGO Ltd (ASX: IGO) share price crashed this morning even as the miner forecasted a big uplift in revenue and earnings.

The nickel miner’s (formerly known as Independence Group) share price tumbled 9% to $5.03. This makes it the worst performer on the S&P/ASX 200 Index (Index:^AXJO) at the time of writing.

The slump is nearly twice that of the second worst performer, the GUD Holdings Limited (ASX: GUD) share price which tanked 4.9% to $11.16.

In case you are wondering, in third spot is the NRW Holdings Limited (ASX: NWH) share price with its 3.6% loss to $1.72.

Big uplift in revenue

But it’s IGO that’s worse for wear as its full year forecasts fell short of market expectations. Management said that FY20 revenue would hit $892.4 million after fourth quarter sales jumped 23% quarter on quarter (QoQ) to $230.6 million.

The full year figure is nearly $100 million ahead of what it posted last year and is the pleasing part of the update, in my view.

The problem is that IGO is forecasting full year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $459.6 million.

High earnings bar

While that’s around 35% ahead of the previous year’s result, it falls short of analysts’ expectations.

For instance, Macquarie Group Ltd (ASX: MQG) was expecting management to post an operational EBIDTA of $530 million.

Investors may have also been put off by IGO’s FY21 production guidance as the miner is expecting to produce less of its key commodities.

Falling production in FY21

IGO is guiding to produce between 27,000 to 29,000 tonnes of nickel in concentrate at its flagship Nova mine this financial year. This compares to the 30,436 tonnes it produced in FY20.

The amount of copper it’s hoping to mine is also lower for FY21 at 11,000 to 12,500 tonnes when it recorded 13,772 tonnes last financial year.

Its Nova project was a real star performer in the June quarter as it delivered ahead of expectations. This perhaps created an expectation that it will keep surprising on the upside. Shareholders will be hoping management is just being conservative.

Is IGO share price a buy?

Forecasted gold production at IGO’s Tropicana JV mine will also fall short of FY20. The mine produced 463,100 ounces of the precious metal in total but this is expected to fall to 380,000 to 430,000 ounces in FY21. So much for capitalising on the record high gold price.

But I suspect IGO will soon draw in bargain hunters if its shares fall much further. The outlook for nickel is bright thanks to the growth in electrified vehicles and the miner holds a strong balance sheet.

More reading

• Xero and 1 other ASX growth share to watch in August
• ASX 200 flat: Big four banks higher, St Barbara and IGO sinks on Q4 updates
• Is the AFIC share price a buy after a 41% drop in profit?
• 5 things to watch on the ASX 200 on Wednesday
• GUD Holdings share price storms higher on FY 2020 result

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) has given back its early gains and is dropping lower. At the time of writing the benchmark index is down 0.2% to 6,007.6 points.

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

The AP Eagers Ltd (ASX: APE) share price has jumped 7% to $7.56 on the day of its annual general meeting. In its presentation, management confirmed that trading conditions are difficult. However, it remains confident it will report an underlying profit from continuing operations of $40.3 million during the first half. This represents a 23.6% decline from the prior corresponding period.

The CIMIC Group Ltd (ASX: CIM) share price is up 3% to $23.03. This morning the engineering company signed an exclusivity agreement with funds advised by Elliott Advisors UK. This is in relation to the potential investment by Elliott into 50% of the share capital of CIMIC’s Thiess business. Management notes that introduction of an equity partner into Thiess would capitalise on the robust outlook for the mining sector and provide capital for Thiess’ continued growth.

The National Australia Bank Ltd (ASX: NAB) share price is up 1.5% to $18.12. This follows news that APRA has eased restrictions around paying dividends. APRA notes that it has had the opportunity to review banks’ and insurers’ financial projections and stress testing results. Although it still wants the banks to retain at least half of their earnings when making decisions on capital distributions, this is not as bad as some feared.

The Virgin Money UK (ASX: VUK) share price is up 2% to $1.82. Investors have been buying the UK-based bank’s shares following the release of its third quarter update after the market close on Tuesday. Virgin Money UK reported a 4.8% increase in customer deposits to £67.7 billion and a 5.7% increase in Business lending growth to £8.8 billion. It also revealed no material provisions related to the pandemic.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Virgin Money UK share price on watch after Q3 update
• Top broker warns earnings expectations for the ASX reporting season are too high
• These were the ASX 200’s biggest share gainers last week
• ASX 200 Weekly Wrap: ASX has week of high volatility

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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