Tag: Motley Fool Australia

The Newcrest Mining Limited (ASX: NCM) share price has been in the spotlight this week, and in a good way too. It’s only Tuesday, but already Newcrest shares are up around 5% this week, and 15.8% over the past month. Investors seem to be scrambling to get a hold of the ASX’s largest gold miner’s shares. Why? Well, as a gold miner, Newcrest is an obvious beneficiary of a higher gold price. And that’s exactly what we’ve seen in recent times. So is there still time to buy Newcrest shares?

All that is gold does glitter

Watching the gold price this week has been extraordinary, to say the least. Gold was trading for around US$1,820 per ounce just last week. But this week, the yellow metal has moved decisively higher and has broken through its previous all-time high of US$1,921 per ounce, going as high as US$1,977 over the last day or two.

As a gold miner, the Newcrest share price is somewhat leveraged to the price of gold. That’s because a gold miner has a relatively fixed cost of extracting an ounce of gold for sale. Thus, if the gold price rises, the miner’s profit will rise by a multiple of that rise.

Let’s look at Newcrest as an example. In its 2019 annual report, Newcrest told investors its average cost of extracting one ounce of gold was around US$738. When gold was asking US$1,820 per ounce, it gave Newcrest a profit of US$1,082 per ounce. But now that gold has risen 8.6% to US$1,977, Newcrest’s profit margins theoretically rise by 14.5% to US$1,239 per ounce.

Using this methodology, we can understand why Newcrest shares have been shooting through the roof recently.

Is the Newcrest share price a buy today?

Of all the ASX gold miners, Newcrest is my favourite. According to the 2019 annual report, the company has estimated gold reserves of approximately 54 million ounces, which implies the company can sustain its current production levels for at least another 20 years without new supplies coming online. And on current gold prices, these 54 million ounces have a theoretical value of US$106.76 billion (~A$150 billion). Even after the recent run in Newcrest shares, the company is valued at around A$30 billion. Not a bad deal, in my opinion!

Of course, it’s probably only advantageous to invest in Newcrest shares today if you think the gold price will either stay at its current levels or mover higher over the next few years. I happen to think there is a strong possibility this will occur, given the current state of the global economy and the levels of monetary easing that governments around the world are undertaking. But predicting commodity prices is a very difficult game, so keep that in mind if you’re considering an investment in Newcrest right now.

More reading

• UBS picks the best ASX gold miners to buy today
• 3 ASX shares to cash in on the record high gold price
• Gold hits record high! Is it too late to buy this gold miners ETF?
• ASX 200 up 0.25%: Lynas rockets on U.S. deal, gold miners surge, bank shares tumble
• Why the gold price just stormed to a record high

Motley Fool contributor Sebastian Bowen owns shares of Newcrest Mining 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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The GUD Holdings Limited (ASX: GUD) share price was on form and charged higher on Tuesday following the release of its full year results.

The specialist products company’s shares rose 4% to end the day at $11.73.

How did GUD perform in FY 2020?

For the 12 months ended June 30, GUD reported a 0.9% lift in revenue over the prior corresponding period to $438 million.

This comprised revenue of $330.7 million from its Automotive segment and $107.3 million from its Davey segment. The latter was the driver of growth in FY 2020, reporting a 3% increase year on year. Whereas Automotive revenue was largely flat on the prior year.

Things weren’t quite as positive for its earnings. On a reported basis, GUD posted a 15.4% decline in earnings before interest and tax (EBIT) to $74.3 million and a 22.1% reduction in net profit after tax to $43.7 million.

Management advised that this reflects $6.5 million of significant items. Approximately $4.9 million of these items were non‐cash and relate to implementing the Davey’s Product Cycle Plan and organisational restructuring plan. There was also an impairment to the Monarch brand, as well as restructuring costs associated with AA Gaskets ceasing manufacturing and relocating to the Ryco facility in Altona North.

On an underlying basis, its EBIT fell 9.9% to $80.7 million and its net profit after tax dropped 16.3% to $48.2 million.

The decline in its underlying earnings was largely due to the impact of the pandemic on demand following partial and total lockdowns. Reseller destocking also weighed on its operating leverage. And while cost savings were made from government COVID-19 subsidies, these were offset by higher operating costs under COVID‐19, second half factory load utilisation, and foreign exchange impacts.

This reduction in profitability ultimately led to the company slashing its final dividend by almost two-thirds from 31 cents per share to 12 cents per share.

Managing Director, Graeme Whickman, commented: “FY20 was certainly a year of two parts and the result demonstrated the relative resilience of the GUD businesses. After a solid first half, in February we began to see impacts from COVID‐19 at the supplier level. Pleasingly, we successfully navigated these first challenges, but from late March we saw revenue impacts from partial or full lock downs in Australia, New Zealand and Europe impact on underlying demand exacerbated by resellers reducing inventory levels as they sought to preserve their balance sheets.”

Outlook.

Its FY 2020 performance might have underwhelmed because of the pandemic, but its outlook for the year ahead was a lot more positive.

Management notes that Automotive sales in June and the first part of July are above the prior comparable period and show strong double‐digit demand growth.

Though, it does expect this demand to moderate as the year progresses and pent up demand reduces and the consequences of changes in government stimulus impact through FY 2021.

Management also spoke positively about the Davey segment. It notes that the potential recovery of export markets and a continuation of very early but encouraging demand in Australia, means it sees scope for unit and revenue growth in FY 2021.

Mr Whickman concluded: “We have recently seen encouraging revenue improvements but remain mindful that it may be assisted by pent up demand and government stimulus. The demand environment is too dynamic to provide reliable guidance with evolving government stimulus, social distancing and mobility restrictions.”

The company intends to provide a further update at its annual general meeting on 27 October 2020.

More reading

• 3 of the best ASX tech shares to buy and hold until 2030
• Is the Newcrest share price a buy?
• Why the ALS Ltd share price is up again today
• 3 unstoppable ASX shares to buy right now
• 3 coronavirus ASX shares to buy right now

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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The ALS Ltd (ASX: ALQ) share price is on a tear today. Again.

In today’s trading, the share price is up 5.4%, bringing the company’s market capitalisation to $3.87 billion.

Today’s gains follow a steady string of successes after the ALS share price hit a low of $4.64 on 24 March. At the current share price of $8.03, that represents a 73.1% gain in just over 4 months.

It’s worth noting that despite that meteoric rise, the share is still down 12.5% year-to-date. That’s due to the share price falling nearly 49% from 2 January until hitting its trough on 24 March.

I bring this up as an important risk management reminder. Remember, if a share falls by 50%, it needs to rise by 100% to recover its original price.

What does ALS do?

ALS — which stands for Australian Laboratory Services — has a long history in Australia, starting out as a chemical company way back in 1863.

These days, it has a global reach focusing on testing, inspection and certification in sectors that include pharmaceuticals, agriculture and construction. It’s also listed on the S&P/ASX 200 Index (ASX: XJO).

Why today’s big rise in the ALS share price?

ALS investors likely have Morgan Stanley to thank for today’s 5.4% gain.

The broker resumed its overweight weighting, setting a price target of $8.80. That represents another 9.6% gain from the current price.

But beyond the welcome nod from the big-name broker, ALS looks to have made a smart move by refocusing a new effort on COVID-19 safety.

According to the company’s website, its ‘Safe by Choice’ platform allows customers to ‘reopen and continue to operate your business safely’. The new services ALS is providing include COVID-19 surface sampling and testing as well as facility hot spot mapping.

With the lethal virus sadly unlikely to fade away anytime soon, this pivot should continue to support the ALS share price growth in the months to come. This is certainly a share I recommend looking into.

More reading

• 3 of the best ASX tech shares to buy and hold until 2030
• Is the Newcrest share price a buy?
• GUD Holdings share price storms higher on FY 2020 result
• 3 unstoppable ASX shares to buy right now
• 3 coronavirus ASX shares to buy right now

Motley Fool contributor Bernd Struben 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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There are some ASX shares that just seem unstoppable. I think they could be worth buying right now.

There are some shares that just keep growing and growing. I believe these three stocks could be long-term buys and it would be good to just ride the wave with them:

A2 Milk Company Ltd (ASX: A2M)

A2 Milk has been delivering strong result year after year ever since it listed. I don’t think that strong performance is going to go anywhere any time soon. A business that (operationally) performs well is probably going to keep going. The infant formula company is one to watch in my opinion.

The ASX share recently entered the ASX 50 thanks to its earnings and share price growth. In FY20 the company is expecting revenue in a range of NZ$1.7 billion to NZ$1.75 billion. FY20 fourth quarter sales may not be that strong due to pantry stocking in the FY20 third quarter, but I think the long-term is very promising. The earnings before interest, tax, depreciation and amortisation (EBITDA) margin target of 30% is a healthy mix of profit and investing for long-term growth in my opinion.

A2 Milk is building its distribution network in the US and its market share in China continues to grow.

At the current A2 Milk share price it’s trading at 30x FY22’s estimated earnings.

Pushpay Holdings Ltd (ASX: PPH)

The electronic donation business is seeing enormous growth as people change to giving digitally due to the COVID-19 conditions that the world is facing. Large and medium US churches receive enormous amounts of annual donations. Pushpay wants to tap into that market. It’s aiming for annual revenue of US$1 billion from the US church sector.

Pushpay’s technology also offers its church client the ability to livestream to its congregations. That’s very useful for people who are staying away from in-person masses.

The ASX share is now expecting to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) in FY21. There are few companies that are expecting that type of growth in these difficult times.

Over the longer-term, Pushpay could expand into new geographies or other charitable sectors.

At the current Pushpay share price it’s trading at 29x FY23’s estimated earnings.

City Chic Collective Ltd (ASX: CCX)

City Chic is one of the most exciting ASX share retailers in my opinion. It’s a retailer of plus-size women’s apparel and accessories.

I really like that the company is trying to capitalise on the current difficult trading conditions by making opportunistic acquisitions in the US. The United States is a huge market, but COVID-19 is making it difficult for bricks and mortar retailers to stay afloat. City Chic sees an opportunity to just run those acquisition targets as online-only operations – this would bring costs down significantly.

Catherines is the latest target. This is brand is targeted at mature value-conscious women. It has been operating since 1960. It had online sales of US$67 million in the 12 months to April 2020. Other recent City Chic acquisitions include Avenue and Hips & Curves.

The ASX share recently carried out a $80 million institutional capital raising to fund the potential Catherines acquisition. It may also make other acquisitions with the money.

In FY20 City Chic saw sales growth of 31%. I think FY21 and beyond can see continued strong growth, particularly because the company has a good set up for ecommerce sales.

The balance sheet is in a good position (before completing the capital raising) with net cash of $3.9 million and a debt facility of $40 million which matures in March 2023.

At the current City Chic share price it’s trading at 23x FY22’s estimated earnings. It may also start paying a dividend in FY21 or FY22. But this depends on the business’ capital needs.

Foolish takeaway

I think each of these ASX shares have been very impressive over the past couple of years. At the current prices I think Pushpay could be the best bet for unstoppable growth, but I really like the international growth potential of all three.

More reading

• 3 of the best ASX tech shares to buy and hold until 2030
• Where to invest $500 into ASX shares immediately
• Pushpay and 1 other 5-star ASX share to buy right now
• a2 Milk and 1 other quality ASX 200 share to buy and hold beyond 2026
• Why I would buy and hold NEXTDC and these quality ASX growth shares

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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 coronavirus continues to spread across the world. COVID-19 cases continue to rise in Victoria and NSW. There are some ASX shares that could be a good defence against a coronavirus-induced market selloff.

I’m a bit cautious about some of the shares that saw strong revenue growth in the first few months of COVID-19, particularly ones like retail. People won’t need to buy stuff for another home office. The DIY projects have probably already been done. The economic stimulus payments are scheduled to reduce in the coming months.

Here are three of my ideas with the above in mind:

APA Group (ASX: APA)

APA is the only ASX infrastructure share that I believe can continue to deliver reliable cashflow and distributions for investors during this period.

It owns a large gas pipeline network across the country and it delivers around half of the country’s natural gas supply. It also has investments in renewable energy generation as well as gas energy assets.

Despite COVID-19, the gas infrastructure business only saw a small hit to its earnings in FY20. That’s why it was able to achieve its distribution guidance of 50 cents per unit for FY20.

APA’s growing distribution is funded from the long-term growth of its cashflow. The more projects that come online for APA, the more cashflow that APA can generate and pass through to investors. Even through this coronavirus period.

The ASX share has grown its distribution every year for the past decade and a half. Based on the current APA share price, it offers a current yield of 4.4%. I think its operations will be largely unaffected even if there were to be a large second wave of COVID-19 cases.

Bubs Australia Ltd (ASX: BUB)

Bubs could be one of the better ASX shares to protect against another coronavirus wave. Every household needs access to nutrition and I’m sure families would prefer to go for quality Australian items if their budget allows.

Bubs produces and sells infant formula as well as other similar items like products for adults plus baby food. The company also recently announced the launch of ‘Vita Bubs’ which is a vitamin and mineral supplement range.

I expect that there will continue to be resilient demand for Bubs’ infant formula during FY21 and beyond. In FY20 the company achieved gross revenue growth of 32% to $62 million with infant formula revenue climbing 69% over the year. In FY20, China direct sales increased by 37%. The company continues to see gross margin improvement each year. International growth and rising margins is a strong combination. 

In FY21, excluding any residual COVID-19 adverse impacts, Bubs said it’s expecting to achieve profitability at the ‘normalised earnings before interest, tax, depreciation and amortisation (EBITDA)’ level. It also expects continued strong (revenue) growth in FY21.

The current Bubs share price of around $0.94 looks very attractive to me for the long-term.

Nextdc Ltd (ASX: NXT)

Data centre business Nextdc is one of the limited number of ASX shares that’s seeing faster growth due to the coronavirus.

More businesses are moving to online IT infrastructure with the need for flexible working, and Nextdc is benefiting. It’s responsible for the design, construction and operation of Australia’s only network of tier IV facilities.

It’s winning plaudits for sustainability by using renewable energy sources and good operational efficiency. Its corporate operations have been certified as carbon neutral.

The company regularly reports of new contract wins. It recently announced another 4MW of customer commitments in NSW.

The shift to cloud infrastructure isn’t something that’s going to go back after COVID-19 is over. I think the adoption curve has been brought forward and that is good news for Nextdc. Though it came about from very difficult circumstances.

Nextdc is currently investing heavily in building data centres, so it’s not expecting to make big profits in the short-term. But it’s a long-term investment idea at the current Nextdc share price.

Foolish takeaway

I think all three of these ASX shares can make good returns over the long-term whether there’s more waves of the coronavirus or not. At the current prices I’m most attracted to Bubs. I think it has great international growth potential over the longer-term.

More reading

• Why Bubs, PointsBet, Perpetual, & Waypoint shares are dropping lower
• Got $1,500? Here are 3 ASX shares I’d buy
• Is the Megaport share price a long term buy?
• Why I would buy and hold NEXTDC and these quality ASX growth shares
• 2 top ASX growth shares to buy for long-term growth

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I love an ASX share that offers both growth and income potential. Many ASX shares are pigeon-holed into just one of these two categories. Since many ASX growth shares don’t even pay a dividend, this is understandable.

But don’t make the mistake of thinking that just because a company is paying a substantial dividend, it doesn’t offer concurrent growth prospects as well. So here are two ASX shares that I think offer investors both growth potential and dividend income today.

Rural Funds Group (ASX: RFF)

Rural Funds is an agriculturally-focused real estate investment trust (REIT). This means the company primarily focuses on owning and renting out land and property — in this case, farmland.

Rural Funds owns farms that produce cotton, wine, beef cattle, almonds and macadamias, and leases those farms to many different clients — some of them blue chip ASX companies like Treasury Wine Estates Ltd (ASX: TWE). The average weighted lease of these tenants is more than 11 years, which gives us as investors a lot of certainty.

If this doesn’t sound like a growth company to you, then think again. According to a report in the Australian Financial Review (AFR), prime farmland delivered a total return of 14.9% for the 12 months to March 2020, helped by a falling Aussie dollar and strong commodity prices. That’s a tailwind Rural Funds gives plenty of exposure to.

As an REIT, this company also offers strong income potential as well. On current prices, Rural Funds is offering a trailing distribution yield of 4.18%. Since the company aims to increase this distribution by around 4% per annum, I think this is an investment with lots of future income prospects.

WAM Global Ltd (ASX: WGB)

Listed investment company (LIC), WAM Global, is another top pick for both growth and income in my view. It invests in a diversified portfolio of internationally-based and ‘undervalued’ growth companies, which (as of 30 June) include growth names like Tencent Holdings, Hasbro, Microsoft and EA Games.

WAM Global uses the profits from investing in these growth shares to fund a healthy and growing dividend. Just last week, WAM Global announced a 100% increase to its final dividend, which brought it up to 4 cents per share. On an annualised basis, this gives WAM Global a forward, grossed-up dividend of 5.64% on its current share price.

As such, I think WAM global is another great company for both growth and income exposure today.

More reading

• Why I would buy Coles and these ASX dividend shares today
• Is the Treasury Wine share price a buy?
• Beat low interest rates on savings accounts with these ASX dividend shares
• A top ASX dividend share to buy next week
• Why the Digital Wine Ventures share price is surging today

Motley Fool contributor Sebastian Bowen owns shares of WAMGLOBAL FPO. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED and Treasury Wine Estates 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 TPG Telecom Ltd (ASX: TPG) share price hasn’t been a top performer on the S&P/ASX 200 Index (ASX: XJO) of late. In fact, since its reincarnation as a merged entity with Vodafone last month, the TPG share price has fallen more than 9%, 9.44% to be exact. TPG shares are trading for $8.06, down from the $8.54 level we were seeing just 10 days ago, and well below the ~$8.90 levels we saw at the end of last month. In contrast, TPG’s arch-rival Telstra Corporation Ltd (ASX: TLS) shares are up 7.67% over the same period. So it’s clearly not a ‘telco’ problem going on here. As such, is there a buying opportunity for TPG shares today after this slide?

Why the TPG share price has been dropping out

I think the recent TPG share price performance can be explained by one factor – investors now have nothing to look forward to. For over a year, the battle to merge TPG’s and Vodafone’s operations raged. The two companies initially proposed the merger way back in 2018. But since then, TPG has had to endure the ACCC rejecting its proposed merger on competition grounds. It was only after a successful appeal to the Federal Court last year that this blockage was removed and TPG was allowed to join forces with Vodafone to produce the combined entity we see today. Any TPG shareholder that held their shares prior to 30 June has benefitted in a couple of ways.

Firstly, the marriage of TPG and Vodafone elicited a hefty special and fully franked dividend of 51.6 cents per share.

Secondly, the merger also saw the spinoff of TPG’s Singapore operations into a new company called Tuas Ltd (ASX: TUA). Any shareholders that held TPG shares before 30 June received one Tuas share for every two TPG shares they owned.

Now TPG has completed this reshuffling of capital, I think many ASX investors have cashed out and moved on. This might be why the TPG share price has fallen nearly 10% since 30 June.

Is the TPG share price a buy today?

I’m not very enthused by the current TPG share price, even after the drop over the past month. TPG is a quality company, to be sure. It has built a top-notch business over the past couple of decades on an aggressive pricing model. But I still prefer Telstra to TPG as an ASX telco company today.

Telstra’s shares are looking cheaper from a price-to-earnings perspective and offer a larger forward dividend yield, in my view. Additionally, Telstra is way ahead of TPG in terms of investing in the next-generation 5G mobile technology. TPG has been caught up in the ban of Chinese telco supplier Huawei in a way Telstra hasn’t. That’s left TPG a laggard in the 5G race in my view, leaving me far more excited about Telstra’s future than TPG’s. Thus, if I was looking to add an ASX telco play to my portfolio, I would choose Telstra over TPG today.

More reading

• Pushpay and 1 other 5-star ASX share to buy right now
• Why Telstra is a top ASX dividend share to buy in August
• These shares were the ASX 200’s biggest losers last week
• ASX 200 Weekly Wrap: ASX has week of high volatility
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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 S&P/ASX 200 Index (ASX: XJO) dropped 0.4% to 6,021 points today.

Victoria announced another 384 more COVID-19 cases today and NSW also reported another 14 cases.

Temple & Webster Group Ltd (ASX: TPW) share price rises 5.5%

The online furniture retailer impressed investors today after giving a preview into its upcoming FY20 result.

Temple & Webster reported that its full year revenue increased by 74% to $176.3 million. It achieved 96% revenue growth in the second half of FY20 and 130% growth in the final quarter of FY20. Management boasted that the company achieved its first day of at least $2 million sales in June 2020.

Part of the growth came from the fact that active customers rose by 77% year on year to 480,000.

Temple & Webster also saw the trade and commercial division grow revenue by 68% year on year.

The company achieved earnings before interest, tax, depreciation and amortisation (EBITDA) of $8.5 million, up 483% from $1.5 million over the prior corresponding period (pcp).

Management said that the company was cash flow positive during the year and it finished FY20 with $38.1 million of cash with no debt. This excludes proceeds from the recent $40 million placement.

In FY21 Temple & Webster has continued to see revenue growth rates in line with those experienced in the FY20 fourth quarter.

Temple & Webster CEO Mark Coulter said: “Our strategy of being a category specialist, with a clear customer offering built around the biggest and best range of furniture and homewares in the country, combined with the most inspirational content and services and a great delivery experience and customer service, is working. The advantages of being the online market leader are apparent as we continue to grow our market share.”

Credit Corp Group Limited (ASX: CCP) share price rises 8.8%

Credit Corp released its statutory result today for FY20. The ASX 200 share has been impacted by COVID-19.

Net profit after tax (NPAT) for FY20 was down heavily to $15.5 million due to $64.1 million of impairments and provisioning relating to its purchased debt ledger (PDL) assets and the impact of COVID-19. NPAT before those adjustments was up 13% to $79.6 million.

The debt collector decided not to pay a final dividend for FY20. But it does expect to resume dividends in FY21. Its board will need to be content with the capital position and investment outlook.

In FY21 Credit Corp expects to make PDL acquisitions of between $120 million to $180 million. NPAT in FY21 is expected to be between $60 million to $75 million. The FY21 annual dividend guidance is for between $0.45 to $0.55 per share.

If the ASX 200 share achieves the middle of its guidance range, it expects to produce free cash flow of $175 million in FY21.

Volpara Health Technologies Ltd (ASX: VHT) share price falls 2.5%

Healthcare business Volpara released its update for the first quarter of its 2021 financial year.

Cash receipts from customers for the quarter were NZ$5 million, up 112% compared to the prior corresponding period.

Annual recurring revenue increased by NZ$1.1 million to NZ$19.1 million. The company had NZ$67.5 million of cash at 30 June 2020.

Net operating cash outflow in this quarter was NZ$3.7 million. This was less than projected and the lowest since Volpara’s acquisition of MRS Systems in June 2019.

Volpara continues to cover approximately 27% of US women who undergo screening and have had at least one Volpara product applied to their images and data.

Dr Ralph Highnam, CEO of Volpara, said: “Q1 saw the emergence of COVID-19, but we’re very heartened by the strong cash receipts, negligible churn, and the fact that we got a significant number of new deals over the line. However, we remain fully cognizant of the challenges ahead and are carefully plotting out new strategies so that we can emerge from this crisis strong – COVID-19 will go away, cancer will not.”

More reading

• Will Rio Tinto pay a special dividend tomorrow?
• Top broker warns earnings expectations for the ASX reporting season are too high
• Credit Corp share price jumps 13%, should you invest?
• a2 Milk and 1 other quality ASX 200 share to buy and hold beyond 2026
• UBS picks the best ASX gold miners to buy today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd and VOLPARA FPO NZ. The Motley Fool Australia has recommended Temple & Webster Group Ltd and VOLPARA FPO NZ. 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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Special dividends aren’t something you hear much about these days, but there’s a chance Rio Tinto Limited (ASX: RIO) could pay one tomorrow.

Our largest iron ore miner is scheduled to report its first half earnings after the market closes on Wednesday and expectations are high.

The Rio Tinto share price jumped 1.2% on Tuesday to $104.11 even as the S&P/ASX 200 Index (Index:^AXJO) slipped 0.4% into the red on profit taking.

High earnings expectations

Rio Tinto just about regained all of its losses from the COVID-19 market meltdown and investors will see tomorrow if the rebound is justified.

But it isn’t so much the profit numbers that will be dominating as the market got a good sense of what’s coming after the miner posted its second quarter production report two weeks ago.

However, the analysts at Macquarie Group Ltd (ASX: MQG) still believes Rio Tino can deliver a modest but pleasant earnings surprise.

Chance of a small earnings beat

“Our revenue, EBITDA and earnings forecasts are 1%, 3% and 4% higher than Vuma consensus, respectively,” said the broker.

“Divisionally, our EBITDA forecast is in line for iron ore while beats in Aluminium and at IOC is offset by lower forecasts for Copper and Other.”

Dividends to steal the limelight

Having said that, it’s the interim dividend that will steal the show. Consensus expectations on this front is very wide as it ranges from US$0.94 to US$2.21 a share.

Analysts are clearly dividend on the dividend with Macquarie tipping a regular US$1.70 ($2.38) a share first half dividend. If the broker is right, it will reflect a 60% payout ratio.

“However, given strong iron ore driven cash flows and low levels of gearing of ~3%, we believe there is scope for a special dividend surprise of up to US$1.00,” added Macquarie.

High yield income stock

This will put Rio Tinto’s 2020 yield at 5.5%, or 8% if franking is included. That’s a pretty generous payment given that dividend superstar Commonwealth Bank of Australia (ASX: CBA) may not pay a final dividend this year.

Paying a special dividend provides a benefit beyond its monetary value. If management provides this one-off reward, it will also signal a bullish outlook.

High quality ASX stocks that are concerned about future earnings may still pay its regular dividend, but it certainly won’t cough up a special dividend.

Foolish takeaway

The broker reiterated its “outperform” (or “buy”) recommendation on Rio Tinto ahead of its results and its 12-month price target is $111 a share.

Other major iron ore producers are also well placed to undertake a capital return of sorts. But if I had to guess which, I would pick the Fortescue Metals Group Limited (ASX: FMG) share price over the BHP Group Ltd (ASX: BHP) share price.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Commonwealth Bank of Australia, Macquarie Group Limited, and Rio Tinto Ltd. Connect with him on Twitter @brenlau.

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

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The Virgin Money UK PLC (ASX: VUK) share price will be one to watch on Wednesday following the after-market release of its third quarter update.

How did Virgin Money perform in the third quarter?

For the three months ended June 30, the UK-based bank reported a 4.8% increase in customer deposits to £67.7 billion. This was driven primarily by lower Personal customer spending during lockdown and Business customers maintaining higher levels of liquidity.

Virgin Money reported a 1% reduction in its Mortgage portfolio to £58.9 billion. This reflects the effective closure of the new purchase market under lockdown, partially offset by improved retention rates.

Pleasingly, the bank experienced a 5.7% increase in Business lending growth to £8.8 billion during the quarter. Management advised that this was driven by significant demand for the Government backed lending schemes. A total of £619 million of BBLS and £248 million of CBILS lending were provided at end of June.

Unsurprisingly, Personal lending reduced 2.7% during the quarter to £5.2 billion. This was due to lower credit card balances.

Net interest margin in line with expectations.

During the third quarter the bank’s Net Interest Margin (NIM) declined in line with expectations to 147 basis points. This means Virgin Money’s NIM now stands at 157 basis points for the 9 months.

Management revealed that this reduction was due to the immediate asset repricing following the base rate reduction and cost of holding excess customer deposits.

The good news is that liability repricing actions will drive an improvement in its NIM in the fourth quarter. As a result, management continues to expect a FY 2020 NIM of 155 basis points to 160 basis points.

Asset quality.

Virgin Money advised that it hasn’t seen any significant specific provisions or credit losses in relation to the pandemic given a backdrop of Government support and forbearance measures.

Nevertheless, it has updated its impairment models incorporating more cautious economic scenarios and refined its overlays to reflect payment holiday assumptions. This has resulted in a prudent net increase in its provisions of £42 million, primarily in Mortgages and Personal.

“A severely disrupted environment.”

Virgin Money’s Chief Executive Officer, David Duffy, was pleased with the company’s performance during the pandemic.

He commented: “I am pleased with the way the Group has performed during the pandemic. In a severely disrupted environment we are delivering on what we set out in May; to safeguard the health and wellbeing of our colleagues, customers and communities while protecting the bank.”

“Our Q3 financial results reflect lower demand from consumers due to the pandemic, but strong demand from businesses for Government supported schemes, with the Group further increasing its provisions to reflect the uncertain economic outlook while maintaining a focus on margin, cost and capital management,” he added.

The chief executive also advised that the bank has been supporting its customers during these difficult times.

He explained: “We have now granted c.67k mortgage and c.53k personal payment holidays, and we’ve supported c.25k business customers with lending arrangements. We know that things may yet get more difficult for many of our customers, but we are determined to continue to support their needs where we can and to fulfil our role in the economic recovery.”

Despite the pandemic, the company remains focused on the future and disrupting the status quo.

Mr Duffy concluded: “We have now recommenced our transformation and rebrand activity, taking what we have learned through the pandemic to deliver on our mission to disrupt the status quo as a full-service digital bank.”

More reading

• These ASX 200 shares were the worst performers of FY20
• ASX 200 drops 1.5% on elevated COVID-19 fears

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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