Tag: Motley Fool Australia

In late morning trade the S&P/ASX 200 Index (ASX: XJO) has fought back from an early decline and is pushing higher. At the time of writing the benchmark index is up 0.45% to 6,101.8 points.

Four shares that have climbed more than most today are listed below. Here’s why they are pushing higher:

The Coca-Cola Amatil Ltd (ASX: CCL) share price has jumped 5% to $8.93 after the release of a trading update. That update revealed that the beverage giant’s performance during the month of June improved greatly as COVID-19 restrictions eased. Trading volumes across the group in June were down approximately 9% compared to June 2019. This resulted in a second quarter 2020 volume decline of approximately 23% compared to the prior corresponding period.

The Newcrest Mining Limited (ASX: NCM) share price is up 2% to $34.85. This follows the release of the gold mining giant’s fourth quarter update. Newcrest delivered group gold production of 573,000 ounces during the fourth quarter, up 7% on the prior quarter. This was better than the consensus estimate of 542,000 ounces. Newcrest achieved this with a quarterly all-in sustaining cost (AISC) of US$878 per ounce. This was also better than expected.

The QBE Insurance Group Ltd (ASX: QBE) share price is up 4.5% to $10.28. This morning analysts at UBS retained their buy rating on this insurance giant’s shares and lifted the price target on them to $11.50. This follows an update on its first half expectations on Wednesday. UBS was pleased with its first half operating trends and notes that its gross written premiums grew by more than 10%.

The Tabcorp Holdings Limited (ASX: TAH) share price is up 5% to $3.63. This morning the gambling company announced its new chairman and the retirement of its chief executive officer. In respect to the former, Steven Gregg will succeed Paula Dwyer at the end of the year. As for the latter, the company’s current CEO, David Attenborough, intends to retire during the first half of calendar year 2021.

More reading

• Coca-Cola Amatil share price pushes higher on trading update
• Newcrest Mining share price on watch after strong Q4 update
• 5 things to watch on the ASX 200 on Thursday
• QBE share price rises despite expected half year loss
• Why Baby Bunting, Beach Energy, QBE, & Resolute shares are pushing 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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If you have some spare cash to invest in ASX shares, I believe that both Vocus Group Ltd (ASX: VOC) and SEEK Limited (ASX: SEK) could be good options.

Here’s why both ASX shares are in my buy zone right now:

Vocus

Vocus may not be as well known as other Australian telcos such as Telstra Corporation Ltd (ASX: TLS), Optus and TPG Telecom Ltd (ASX: TPG). However, Vocus has proven to be one of Australia’s most successful and profitable telcos for over two decades now.

Over the years, Vocus has evolved to become a specialist fibre and network solutions provider. Vocus’ offerings include broadband, fibre, data centre services and Unified Communications. Previously only servicing the enterprise and corporate markets, Vocus now also services the retail sector as a result of mergers and acquisitions.

The company’s retail division has struggled in recent years, and this has led to some recent lackluster performance in the Vocus share price. Its share price has been trending sideways for over 3 years now. However, I believe its 3-year turn-around strategy is getting Vocus back on the right track. I feel Vocus is now well positioned for above average growth over the next few years. 

Seek

The financial performance, and in turn, the share price, of Australia’s leading online employment portal, Seek, tends to be highly correlated with overall conditions in the local employment market. When employment indicators take a turn for worse, the Seek share price is often impacted. This was clearly seen in the first phase of the coronavirus pandemic, with the Seek share price falling by around around 50% to $11.95 between mid-February and late March. Since then, the Seek share price has managed to regain most of those losses. However, with the local employment market still looking very rocky right now, I still see potential for Seek’s share price to climb higher in the next 6 to 12 months.

Equally as important over the longer term, I believe Seek remains a very solid company with strong growth prospects. While growth in Australia and New Zealand has slowed down, Seek holds a very dominant position in these markets and can take advantage of a growing population over the next decade, especially in Australia. On top of this, Seek will benefit from expansion of its smaller, but faster growing, overseas operations in Asia during the coming years.

Foolish takeaway

Both Vocus and Seek are two high quality ASX shares trading at prices that place them in my buy zone right now.

I believe both offer strong growth potential over the next decade.

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

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The Megaport Ltd (ASX: MP1) share price is down by 3.04% so far today, despite providing a strong quarterly update to the market. At the time of writing, the Megaport share price is trading at $13.71 per share.

What does Megaport do?

Megaport offers a ‘network as a service’ to enterprises, enabling customers to increase or decrease their fixed broadband bandwidth. This enables them to ramp up their bandwidth requirements during busy times and reduce their usage when demand is lower.

This service is enabled via an ecosystem network of cloud providers, data centre operators, and network service providers. Megaport partners with cloud operators including Amazon Web Services, Google Cloud and Microsoft Azure. The company has a customer base across the Asia Pacific, Europe and North America.

Strong revenue growth continues

For the quarter ended June 2020, Megaport reported solid revenue growth of 12%, quarter on quarter, to total $17 million. Megaport’s year-on-year quarterly growth grew even more strongly, up by 66%.

Megaport’s recurring revenue base also continues to grow. The company’s monthly recurring revenue (MRR) totalled $5.7 million for the month of June. This was a year-on-year quarterly increase of 57%, and an increase of 4% on the previous quarter.

Megaport has a subscription-based billing model, which provides it with a sticky recurring revenue stream. It receives revenue from its network access points, as well as from the services that customers consume within its ecosystem.

Megaport also reported a strong quarter in terms of receipts from customers, which were up 44% on the prior quarter to $20 million. On a year-on-year basis, Megaport’s total customer base has now grown by 24% to reach 1,842.

Megaport also announced a strong cash position of $166.9 million at the end of June.

Megaport’s cloud ecosystem continues to grow

Megaport continues to grow the number of total installed data centres within its cloud ecosystem. Total installed data centres for Megaport has now have reached 366, which is 11% higher than last quarter, and 22% higher than the same quarter last year. The number of enabled data centres within its ecosystem also is growing strongly, up 11% on the prior quarter.

About the Megaport share price

Despite falling by 3.04% so far today, the Megaport share price has performed strongly over the past 12 months. During that time, the Megaport share price has risen by 85%, driven by strong revenue and customer growth. 

More reading

• Why I would buy Appen and these ASX tech shares right now
• 2 top ASX tech shares to buy right now
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• 5 of the worst performing ASX shares from last week
• ASX 200 Weekly Wrap: Blue chip shares pull ASX 200 back over 6,000 points

Phil Harpur owns shares of MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT 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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ASX retail share, Briscoe Group Limited (ASX: BGP), yesterday released a market update regarding the company’s half-year sales and profit. The Briscoe share price rose 5.2% to $3.25 on the news. 

What does Brisco Group do?

Briscoe operates over 85 stores throughout New Zealand within two retail sectors, homewares and sporting goods. It operates under three brand names Briscoes Homeware, Living & Giving and Rebel Sport (New Zealand). The company generated sales revenue in the Group’s latest financial year in excess of $650 million. Briscoe also owns the fourth largest stake in Kathmandu Holdings Ltd (ASX: KMD). 

The market update

The directors of Briscoe advised the ASX that they had witnessed unexpected sales increases. Furthermore, the cost saving measures that were implemented by the company as a result of COVID-19 have positively impacted the business. The Briscoe share price has jumped following the conclusion of lockdowns in New Zealand. 

While it remains unlikely that the Group will achieve last year’s half-year sales and profit, Briscoe now expects the first half results to be closer to last year’s. This is closer than indicated in their previous announcement, when the company reported a 35.6% hit to revenue.

Managing Director, Rod Duke, noted in yesterday’s update that the company’s “primary focus has not altered from the outset of these challenging times – the health and wellbeing of our team and customers and the protection of existing jobs and incomes have been upper most priorities for the Board and leadership team”.

What now for the Briscoe share price?

The Briscoe share price has suffered at the hand of the pandemic, falling 14.5% so far this year. However COVID-19 continues to recede in New Zealand with the country recording no new cases yesterday. Briscoe shareholders will be hoping the company can continue its upturn in sales, as it looks to benefit from more generous market conditions. Briscoe will provide its 2Q update at the end of July.

More reading

• These 2 ASX retail shares have surged higher in 2020
• Why the Kathmandu share price is up 11% today

Motley Fool contributor Daniel Ewing owns shares of Kathmandu Holdings 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 Santos Ltd (ASX: STO) share price is pushing higher on Thursday after the release of its quarterly update.

At the time of writing the energy producer’s shares are up 1.5% to $5.55.

How did Santos perform in the second quarter?

According to the release, Santos delivered second quarter production of 20.6 mmboe. This was 15% higher than the prior quarter and a company record.

Management advised that the strong production result was driven by higher domestic gas production in Western Australia, continued strong onshore production, and a higher equity interest in Bayu-Undan following completion of the ConocoPhillips acquisition.

Quarterly sales revenue came in at US$785 million, which was 11% lower than the prior quarter. This was primarily due to lower prices, which was partially offset by higher domestic gas and LNG sales revenues.

First half update.

For the first half of FY 2020, production was up 4% to a record 38.5 mmboe. Management notes that its disciplined operating model continues to drive strong onshore performance, with first half Cooper Basin and Queensland equity gas production up 18% and 5%, respectively.

This ultimately led to half year sales revenue of US$1.7 billion, down 16% on the prior corresponding period.

Pleasingly, despite the sharp decline in prices, Santos is still generating strong free cash flows. It reported US$431 million of free cash flow in the first half.

This left Santos with liquidity of over US$3 billion at the end of the quarter. This comprises US$1.3 billion in cash and US$1.9 billion in committed undrawn debt facilities.

Santos Managing Director and Chief Executive Officer Kevin Gallagher, commented: “Our disciplined, low-cost operating model continues to drive strong performance across our diversified asset portfolio and completion of the ConocoPhillips acquisition in late-May further boosted our production and cash flows.”

Outlook.

Santos has updated its production guidance to 83 mmboe to 88 mmboe and its sales volume guidance to 101 mmboe to 107 mmboe.  

This compares to previous guidance of 81 mmboe to 89 mmboe and 101 mmboe to 109 mmboe, respectively.

Santos’ guidance includes the ConocoPhillips acquisition from the completion date of 28 May 2020, when its interest in Bayu-Undan and Darwin LNG increased from 11.5% to 68.4%.

Management advised that the company is targeting a FY 2020 free cash flow breakeven oil price of US$25 per barrel. It notes that approximately 60% of production volumes for the remainder of 2020 are either fixed-price domestic gas contracts or oil hedged at an average floor price of US$38 per barrel.

Mr Gallagher spoke positively about the future. He said: “By maintaining our sustaining activities, production levels from our core assets are expected to remain relatively steady for the next five or six years, allowing us to continue to progress our major capital projects while maintaining capital discipline and flexibility in commitment timing.”

As COVID-19 and the lower oil price continue to challenge us, we have remained resilient and kept production going, meaning our revenues have continued to flow. Our balance sheet is strong and we remain well positioned to leverage our growth opportunities when business conditions improve,” Mr Gallagher concluded.

More reading

• Why the Santos share price is back on my radar
• 5 things to watch on the ASX 200 on Thursday
• Top brokers name 3 ASX 200 shares to buy today
• Santos share price lifts despite non-cash impairment of up to US$800 million
• The worst performing ASX 200 oil stock is finally catching a break today

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 Mount Gibson Iron Limited (ASX: MGX) share price has is up 0.70% this morning, after the iron ore minor reported improved performance in the quarter ended June 2020. Iron ore sales for the quarter totalled 1.2 million wet metric tonnes, giving group cash flow of $24 million for the quarter. 

What does Mount Gibson Iron do? 

Mount Gibson Iron is an Australian producer of iron ore products. It operates the Koolan mine located in the Kimberley and the Extension Hill mine site in the mid-west region of Western Australia. Koolan Island is Mount Gibson’s flagship operation. A former BHP Group Ltd (ASX: BHP) mine, Koolan Island boasts Australia’s highest grade hematite ore reserves. 

What did Mount Gibson Iron report? 

Mount Gibson delivered its report for the quarter ending 30 June 2020 this morning. The miner made total sales of 1.2 million wet metric tonnes (Mwmt) over the quarter. This included 0.52 Mwmt from Koolan Island and 0.64 Mwmt from Extension Hill.

Group cash flow for the quarter was $24 million with $9 million incurred in constructing an airstrip at Koolan. Over the financial year, group cash flow was $72 million before Koolan airstrip construction costs of $14 million. 

Commenting on the update, CEO Peter Kerr said, “Mount Gibson achieved an improved performance in the June quarter despite substantial operating challenges related to COVID-19 restrictions, and the business ended the first full year since Koolan Island’s restart in solid shape.

Mount Gibson reported cash and liquid investments of $423 million at 30 June 2020, and no borrowings. This compares to $402 million cash and liquid investments at the end of March 2020 and $385 million at the end of June 2019. 

What is the outlook for Mount Gibson Iron? 

The iron ore price soared this month due to supply concerns and rising demand from China. Iron ore reached US$110 a tonne in July, a level not since August 2019. This has lifted the Mount Gibson share price, which is up 16% since the end of June. The miner successfully added to its cash and investment reserves over the year, leaving it well positioned as it enters FY21. 

In the year ahead, Mount Gibson is focused on increasing mining movements at Koolan Island to substantially complete open pit waste stripping. Ore shipment volumes for Koolan Island are expected to dip slightly in FY21 but then increase significantly from FY22 onwards. Mount Gibson confirmed that production and costs guidance for FY21 will be delivered with the release of annual results. 

At the time of writing, the Mount Gibson share price is up 0.70% in early trade to 72 cents per share.

More reading

• 4 trends to invest in before August earnings season
• How you can take advantage of the surging Australian dollar
• Is the BHP share price in the buy zone?
• BHP’s share price tumbles with this other ASX miner after being hit by broker downgrades
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Motley Fool contributor Kate O’Brien owns shares of BHP Billiton Limited and Mount Gibson Iron 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 Inghams Group Ltd (ASX: ING) share price fell 5.1% yesterday with the chicken producer announcing the closure of a processing plant following positive COVID-19 tests. The Thomastown Further Processing Plant in Victoria has been temporarily closed after five employees at the plant tested positive for coronavirus. 

Ingham’s advised that it has had contingency plans in place for plant closures for some months. Other sites across Australia remain in operation. The temporary closure is not expected to materially impact the businesses results in FY21. Although the company is yet to announce FY20 results, in May it reported it was on track for 2H FY20 underlying EBITDA to exceed 1H FY20. Nonetheless, Ingham’s warned at the time that it would be premature to draw conclusions as to the trading results for the final weeks of FY20 given changes in volume and channel mix across the business. 

Impact of coronavirus 

COVID-19 restrictions created a temporary surge in retail sales in March and early April but as consumer behaviour normalised, store traffic subsided. Ingham’s has advised that out of home consumption of poultry products has been negatively impacted by the pandemic. Major customers have been resilient but their operations have been restricted to drive through and home delivery. Customers supplying hospitality and tourism industries have reduced purchases leading to weaker conditions in the food service and wholesale markets. 

Ingham’s CEO and Managing Director, Jim Leighton, said in early May, “COVID-19 has presented unprecedented challenges and we have executed a swift realignment of our supply chain and operations in order to manage any substantial operational issues created by required social distancing protocols in our facilities. This has created additional complexity, inefficiency, and cost and the temporary suspension of the production of some value enhanced products.”

Inghams share price outlook 

The Ingham’s share price remained fairly resilient in the March downturn, falling 18% from its February high of $3.76 to its March low of $3.06. It has now partially recovered to trade at $3.34. Ingham’s says it has a strong balance sheet with good access to liquidity and funding. There is significant headroom in debt covenants and the company says it is well supported by its lenders. Measures have been implemented to manage costs including reducing discretionary spend and capital expenditure. As a food business, demand for Ingham’s products is less variable than for more discretionary purchases. Demand from the hospitality industry is currently subdued, but this should lift with the easing of restrictions. 

More reading

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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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The Catapult Group International Ltd (ASX: CAT) share price has surged 33% in the last 3 days. The positive price action follows a FY20 results preview that the company released to the market earlier this week.

So, can the Catapult share price go higher, and is now the time to invest?

Positive results preview

Earlier this week, Catapult released a preview of its unaudited earnings. The results were highlighted by the company generating net free cash of $9.0 million in FY20 and achieving cash flow positivity a year earlier than forecast.   

Despite professional sports being postponed due to the coronavirus pandemic, Catapult was able to grow group revenue and earnings before interest, tax, depreciation and amortisation (EBITDA), which was fuelled by the company’s scalable, subscription-based business model. Catapult expects total revenue for FY20 to be between $100 million to $101 million and EBITDA between $11.5 million and $12.5 million. Catapult also acknowledged the company’s strong financial position, boasting $27.5 million cash on hand.

How has Catapult performed during the pandemic?

As indicated by the company’s provisional results, Catapult has managed the pandemic relatively well. The company attributed this resilience to its subscription-based business model, which contributes approximately 75% to its revenue, along with the early implementation of cost control measures.

Although professional sporting leagues were postponed during the pandemic, Catapult managed to retain existing customers whilst also winning new clients. In an earlier update, the company noted that customers continued to purchase Catapult solutions during the height of the lockdown in order to prepare athletes for when competitions recommence.

Should you buy?

Catapult are world leaders in sports analytics and solutions, providing sports teams and athletes with technology that tracks and measures performance and recovery. The company’s solutions cover 3 divisions: elite video, wearables, and prosumer products, which provide elite performers and teams with metrics and information they can use to tailor strategy, training and recovery regimes.

Catapult has more than 3,000 elite clients, including soccer giants Chelsea Football Club and Real Madrid FC. In Australia, the company also has long-term contracts with the National Rugby League (NRL), Australian Football League (AFL) and the National Basketball League (NBL). With the majority of these sports having resumed the season, the short -term outlook for Catapult looks appealing.

In the long-term, a higher percentage of Catapult’s revenue is generated through subscription and recurring sales, which is also appealing. In addition, the company is in a global leader in athlete tracking solutions, giving Catapult great potential for growth in a relatively unpenetrated market.

More reading

• Market close: ASX 200 falls 0.5%
• Why Catapult, Eclipx, FlexiGroup, & Whispir shares are charging higher
• Catapult share price on watch after FY20 Results Preview
• Catapult share price edges higher on former Amazon executive appointment
• Catapult share price on watch after COVID-19 update

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Catapult Group International Ltd. The Motley Fool Australia has recommended Catapult Group International Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Coca-Cola Amatil Ltd (ASX: CCL) share price is pushing higher on Thursday after the release of an update.

In morning trade the beverage giant’s shares are up 2.5% to $8.72.

What did Coca-Cola Amatil announce?

Coca-Cola Amatil has been finalising its first half financial results and is currently assessing the carrying value of each of its businesses.

In light of the adverse impact of COVID-19 on its trading performance and the prescribed approach to assessing carrying values, management advised that it expects to incur non-cash impairments in the range of $160 million to $190 million post tax in its half year accounts.

Management revealed that these impairments relate predominantly to its Indonesian business and will not impact its debt facilities. This is because these facilities do not have any financial covenants.

The final outcome of the impairment review is subject to external audit review and final board approval.

The company’s Group Managing Director, Alison Watkins, commented: “These expected impairments are non-cash accounting adjustments and we remain very confident about the long-term prospects for our Indonesian business”.

Trading update.

Coca-Cola Amatil revealed that it has experienced an improvement in trading conditions in its major markets during June. This reflects the gradual easing of COVID-19 related restrictions.

Trading volumes across the group in June 2020 were down approximately 9% compared to June 2019. This resulted in a second quarter 2020 volume decline of approximately 23% compared to the prior corresponding period.

How are its businesses performing?

Management advised that the rate of improvement has varied across different markets.

In New Zealand June volumes increased approximately 4% on June 2019 and in Australia monthly volumes declined approximately 3% year on year.

Over in Indonesia things haven’t been as positive. This market, where COVID-19 infection rates remain high, monthly volumes declined approximately 23% on June 2019.

Ms Watkins said, “It is encouraging to see the improvement in our Volumes as the pandemic restrictions were lifted across a number of our markets. It has also been pleasing to see that the strength of our brands and strong sales capabilities continue to drive market share gains in Australia and New Zealand. We nevertheless remain cautious, given the reinstatement of lockdown measures from July in Melbourne and the rising COVID19 infection rate in Indonesia.”

“The impacts of the pandemic are continuing to evolve with the situation fluid across all of our markets. I am proud of the way the Amatil team has responded to the unprecedented challenges we have faced and am confident that we have a clear path forward, which coupled with our ample liquidity, strong balance sheet and solid credit ratings, positions us well, to emerge from the pandemic as a stronger, better business,” she concluded.

More reading

• Top ASX dividend shares to buy in July 2020
• 3 defensive ASX shares to add to your portfolio
• The Afterpay share price among ASX stocks hit by a broker downgrade today

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 August earnings season will be unlike anything we have ever seen in our investing careers. It will be a moment of truth when we’re able to find out what’s been going on behind closed doors over the past four months. We all have an idea of where the problems are, but there are always surprises. I think the following trends will be very important for investors to think about while positioning their portfolios.

Mass gatherings are still out

Clearly travel and tourism will be among the hardest hit sectors this earnings season. We have all seen the announcements about Qantas Airways Limited (ASX: QAN) reducing staffing levels and retiring aircraft. In addition, we all know other companies that have been smashed by the coronavirus pandemic include Webjet Limited (ASX: WEB) and Flight Centre Travel Group Ltd (ASX: FLT). However, during earnings season, these companies may still surprise on the downside. I think travel is likely to be a barren sector for at least the next two years. 

One company I think is unlikely to see its share price fall, however, is Alliance Aviation Services Ltd (ASX: AQZ). This company recently forecast a year-end profit before tax of $40 million. If anything, I think Alliance has a chance of surprising the market on the upside. 

Some other companies likely to report bad results during earnings season may include those exposed to retail real estate. In particular, Australian real estate investment trusts, or A-REITs, such as Vicinity Centres (ASX: VCX), Scentre Group (ASX: SCG) or GPT Group (ASX: GPT). For instance, GPT Group disclosed a re-valuation of 8 of the company’s retail centres, slashing 8.8%, or $476.7 million, from its portfolio valuation due to the impacts of coronavirus. These companies, in particular, could surprise on the downside. 

However, there are some real estate companies that may give the market cause to celebrate. I believe these are most likely to be companies focused on commercial real estate and self-storage. These include Centuria Office REIT (ASX: COF) and Abacus Property Group (ASX: ABP).

We may be seeing a shift from office to home-based work. Nevertheless, client leases in these two companies average 5.1 years and 4.4 years respectively. So even if their clients have downsized their office-based staff, they still have leases in place for now. In addition, both of these ASX shares have been sold down considerably. So much so, that I think there’s a good chance the market will be surprised come August.

Online trading is now, not tomorrow

The transition towards online shopping during the lockdown is now a recognised phenomenon. Digital-native companies such as Kogan.com Ltd (ASX: KGN) and Temple & Webster Group Ltd (ASX: TPW) have given every indication of strong results. They may surprise on the upside, however I think their success has already been priced into their share prices.

Potential earnings season surprises may also come from discretionary retail shares. Specifically, Accent Group Ltd (ASX: AX1) has recently reported that earnings before interest, taxes, depreciation and amortisation would be around 10% higher than FY19. This is largely due to digital sales and a 7% increase in like-for-like sales.

Other retail companies I will be watching include Lovisa Holdings Ltd (ASX: LOV), City Chic Collective Ltd (ASX: CCX) and Michael Hill International Ltd (ASX: MHJ). Of these three, I expect City Chic to perform well. The company already had two thirds of its global sales via digital channels. I believe Lovisa and Michael Hill are likely to disappoint in terms of overall sales volume. 

Earnings season for miners

Fortescue Metals Group Limited (ASX: FMG) is a pure play iron ore company that has benefitted greatly during lockdowns. Not only has the price of iron ore stayed strong, it has actually lifted. I expect this company to report solid results. This will be similar for all the larger gold mining companies. Of these, I think Regis Resources Limited (ASX: RRL) is likely to surprise on the upside, and is possibly the best choice of the established gold miners.

However, I’m not so sure about BHP Group Ltd (ASX: BHP). While iron ore has been very strong, other products like coal, copper and petroleum have seen production challenges and historically low prices. I think BHP will surprise on the downside, just as Rio Tinto Limited (ASX: RIO) may do for similar reasons.

However, even worse affected are likely to be the nation’s LNG and oil producers. Despite horrible oil prices, and disclosures of companies changing impairments, investors are still buying these shares. Personally, I think the pandemic has hastened a structural shift in the market. Maybe that will become evident during earnings season.

The move to work from home is over

Several companies did very well from the transition to working from home. Companies like JB Hi-Fi Limited (ASX: JBH) in particular reported strong results in June. However, I’m not sure this can continue into FY21. Personally, I needed one desk, one monitor and one chair. I am unlikely to need more than that for a year or so.

The same could be said for the retail arms of Wesfarmers Ltd (ASX: WES) including companies like Officeworks and Bunnings. I think most of the revenue uplift for these companies has already been priced in to their shares. They may well post strong results this earnings season, but I don’t think it is sustainable.

More reading

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• Is the BHP share price in the buy zone?

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 Kogan.com ltd, Temple & Webster Group Ltd, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Accent Group, Flight Centre Travel Group Limited, Kogan.com ltd, Scentre Group, Sezzle Inc, and Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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