Tag: Motley Fool

The Vanguard Australian Shares Index ETF (ASX: VAS) doesn’t hold the mantle of the most popular exchange-traded fund (ETF) on the ASX for nothing.

There’s little doubt that this ETF’s unique structure in being the only fund to track the S&P/ASX 300 Index (ASX: XKO) rather than the more popular S&P/ASX 200 Index (ASX: XJO), plays a role here. As does the brand reputation of (the famously not-for-profit) Vanguard.

But dividend distributions surely play a role here too.

After all, the ASX share market has a well-earned reputation as a bountiful source of dividend income. Thus, an index fund that tracks ASX shares will, by definition, reflect this. Just consider the VAS ETF’s top holdings.

Big four banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) dominate VAS’ weighting, as does the dividend machine that is BHP Group Ltd (ASX: BHP).

But let’s take a deeper dive and look at the numbers.

Five years of VAS dividend distributions

So VAS pays out dividend distributions every quarter. Here’s a summary of those payments over the past five years:

Date (quarter ending)	VAS Distribution (cents per unit)
30 June 2022	215.95
31 March 2022	199.59
31 December 2021	69.65
30 September 2021	140.73
30 June 2021	55.64
31 March 2021	77
31 December 2020	43.42
30 September 2020	56.84
30 June 2020	20.6
31 March 2020	67.27
31 December 2019	72.14
30 September 2019	107.1
30 June 2019	82.14
31 March 2019	91.59
31 December 2018	71.06
30 September 2018	112.74
30 June 2018	101.73
31 March 2018	66.53
31 December 2017	68.1
30 September 2017	100.88

If any reader would like a more concise version of this data, here it is:

• For the 12 months ending 30 June 2022, VAS paid out $6.26 in distributions per unit.
• For the 12 months to 30 June 2021, it was $2.33 per unit.
• The 12 months to June 30 2020 saw a total of $2.67 per unit.
• For the 12 months to 30 June 2019, it was a sum of $3.58 per unit.
• The 12 months to 30 June 2018 had VAS pay out $3.37 in distributions per unit.

Why so bumpy?

So what is immediately obvious is the massive dividend distribution haul investors have enjoyed over the past 12 months compared to prior years. This probably comes down to a couple of factors.

Firstly, the past 12 months have seen many ASX shares, especially the big four banks, raise their dividends to well above what was being paid out during the worst months and years of the pandemic.

Secondly, since ending its London dual-listing earlier this year and rehoming to the ASX in full, BHP now enjoys a far greater weighting in the ASX 300 Index than it used to.

As such, index ETFs like VAS now hold far more BHP shares, which is currently one of the most generous dividend-paying shares on the market, as a proportion of its overall portfolio today.

So that’s a summary of VAS’s dividend distribution history over the past five years. The most recent four distributions give this ETF a trailing yield of 7.07%.

The post Here’s how much the Vanguard Australian Shares Index ETF (VAS) has paid in dividends over the past 5 years appeared first on The Motley Fool Australia.

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More reading

• Why did the Novonix share price nosedive 6% today?
• Here are the top 10 ASX 200 shares today
• Looking to buy IAG shares but worried about where the growth will come from? Read this
• Here’s why the Nickel Industries share price is climbing on Wednesday
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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 Corporate Travel Management Ltd (ASX: CTD) share price dropped 2.5% after the ASX travel share reported its FY22 result today.

As one of the world’s largest corporate travel businesses, it is highly aligned to the recovery of business travel.

But, despite positive commentary, investors weren’t impressed by what the business told the market overall.

What did the company report?

It revealed that total transaction value (TTV) increased 215% to $5.07 billion in FY22, with the fourth quarter showing $1.8 billion of TTV.

FY22 revenue rose 94% year over year. It generated $17.5 million of underlying net profit after tax (NPAT), which was a major improvement from the $32.3 million loss in FY21. According to reporting by The Australian, this is better than what the market and the broker RBC was expecting.

The broker thought the commentary about the fourth quarter of FY22 was “strong” and that demand looks “strong” too.

In a sign of future profit generation, it generated $20.5 million of underlying NPAT in the fourth quarter of FY22.

It even declared a dividend of 5 cents per share. The ASX travel share didn’t pay anything in FY21.

Investors like to look ahead

The Corporate Travel share price is usually forward-looking. In other words, the FY22 result is interesting, but what FY23 looks like (and beyond) is usually more important for investors.

In terms of what could have caused the decline of the business today, management noted that the travel industry has resourcing challenges.

It is facing “unprecedented resourcing shortfalls with corresponding challenges to service levels, airport and airline capacity”.

The company added 950 new employees during FY22 as part of its commitment to maintaining service levels to support customer travel needs.

It has engaged in several initiatives to manage this shortfall, including “innovative employee recruitment, training, onboarding and retention initiatives to attract and retain the business talent in the industry.”

The business is also focusing on delivering improved internal efficiency, by implementing advanced automation and new technologies across its operations, giving employees more time to deliver personalised customer service. Growing scale and technology investments are helping with productivity gains and the revenue per full time equivalent employee, which was 14% higher in the fourth quarter of FY22 compared to the FY19 average.

Trading update and demand

Corporate Travel said that revenue in June 2022 equated to 74% of the monthly average pro-forma revenue for FY19. It said that forward bookings for September are “strong”.

In a global customer survey, conducted in May 2022, around 80% of respondents said that they expect to travel “as much or more” in the coming 12 months as they did before the pandemic.

Corporate Travel is assuming a full recovery in FY24, based on projections for travel activity. This would be revenue of $810 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of $265 million based on synergies and productivity improvements.

The recovery is not expected to be a straight line due to capacity constraints and Greater China’s current travel restrictions. But things are expected to progressively improve during FY23.

The post Corporate Travel share price slides despite earnings beat appeared first on The Motley Fool Australia.

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More reading

• Corporate Travel Management share price in focus as dividends return
• Here are the top 10 ASX 200 shares today
• Brokers just rated these 2 ASX shares as buys for August
• Top brokers name 3 ASX shares to buy today
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Corporate Travel Management Limited. 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 Magellan Financial Group Ltd (ASX: MFG) share price is hurting today. It’s down 5.87% after the business reported its FY22 result to investors. But, it’s still up 22% over the past month.

Magellan is one of Australia’s largest fund managers. But, it’s now quite a lot smaller after the business suffered a major loss of funds under management (FUM) during the financial year.

Investors turned negative on the business as its investment funds underperformed compared to the global share market index. People and institutions pulled out billions of dollars of FUM during the year.

Adjusted net profit before tax dropped 12% to $515.2 million. The total dividend of $1.79 per share was a reduction of 15%.

Over the financial year, FUM plunged from $113.9 billion to $61.3 billion. Negative investment performance was the cause of $2.3 billion of negative movement. The $49.5 billion of negative net flows was the key reason for the decline.

Should investors get out?

According to The Australian reporting, one “veteran trader” says the business is “a basket case” and thinks “investors should get out while they can”. However, any interests in Magellan shares were not disclosed within the article.

The latest monthly update for FUM, being July, showed a drop in FUM to $60.2 billion, down from $61.3 billion at the end of June.

Committed to rebuild

The Australian reported that Magellan is “committed to rebuilding trust among clients and shareholders.” It quoted Magellan chair Hamish McLennan who said:

Our number one priority is to deliver on our clients’ objectives, which in turn will provide the foundation for revenue growth and returns for shareholders over the long-term.

We recognise that the global equities strategy has underperformed relative to the market over the past 18 months and that we must do better.

The new CEO and managing director, David George, said he will share his thoughts with shareholders in October.

But, George did indicate that the current investment landscape is a volatile and difficult one, which should “reward outstanding fundamental company research and active management of portfolios”. He went on to say:

Magellan remains an asset manager of scale, with considerable underlying financial strength and great potential. The strength of Magellan’s balance sheet provides us with significant headroom to invest in our business to deliver our clients and position ourselves for future growth.

During the year, Magellan’s total of cash, financial assets and investments in associates increased 7% to $963.3 million. It has no debt either.

Magellan said its focus is on its core funds management business, strengthening processes and driving consistent and improved investment performance. It’s “determined to rebuild value for clients and shareholders”.

The fund manager revealed that based on the FUM of $60.2 billion at 29 July 2022, retail fees make up 68% of the base fees, even though retail money only represents 38% of the FUM. If retail FUM proves to be more ‘sticky’ than institutional money, then this could be a positive mix.

Foolish takeaway

I did recently sell my own Magellan shares.

After the loss of FUM, FY23 profit is likely to fall again because of the loss of revenue. I recently wrote the following in my previous Magellan article:

The key thing for Magellan is to start generating some good performance in its key investment funds over longer time periods again. With relatively high fees, what will attract/retain funds if the investment fund is underperforming against its benchmark consistently?

Will the dividend and FUM keep falling? It’s really hard to say. But going for a declining business is not the type of investment I normally like to make.

The post Should Magellan shareholders ‘get out while they can’? appeared first on The Motley Fool Australia.

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More reading

• Why CSL, Downer, Magellan, and PointsBet shares are falling today
• Magellan share price in freefall despite 44% rise in profits
• Is the Magellan share price caught in a death spiral?
• What’s $1 billion between friends? Magellan share price shrugs off latest FUM figures
• Is the Magellan share price a buy for its big dividend yield?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Lifestyle Communities Limited (ASX: LIC) share price finished 0.23% higher today after the property developer and manager released its FY22 full-year results.

Lifestyle Communities develops and manages independent living residential land lease communities for senior citizens across Victoria. Lifestyle’s properties target retirees, semi-retirees, and working downsizers with plenty of recreational facilities and entertainment on site.

The Lifestyle Communities share price opened at $17.50 today, up 0.8% on yesterday’s close of $17.36. It then fell to an intraday low of $16.91 before rebounding again to close at $17.40.

Let’s take a look at the results.

Lifestyle Communities share price fluctuates after results released

The highlights of the results are as follows:

• Net profit after tax (NPAT) of $88.9 million, down 2.4% on the prior corresponding period (pcp)
• Underlying profit after tax of $61.4 million, up 69% pcp
• Total assets worth $1,006.2 million, up from $781.3 million pcp
• Net debt of $243.1 million, up from $187.7 million pcp
• Annuity income of $40.6 million, up 25% pcp
• 401 new home settlements, up 57% pcp
• 3,193 homes currently under management
• Final dividend of 6 cents per share payable on 6 October.

What else happened in FY22?

Lifestyle Communities said its annuity income increased due to a higher number of settlements and homes under management.

The annuity income included gross rental income of $29.7 million and deferred management income (DMF) of $10.9 million on resales.

The company also said increased property valuations lifted its statutory profit after tax to $89.9 million.

Over the 12 months, Lifestyle Communities acquired four sites, including the Phillip Island site in August 2021 and the Merrifield site in Mickleham in November 2021.

These acquisitions have put more than 2,150 new homes into the development pipeline. Managing director James Kelly says this will “underpin our continued growth for the next three to five years”.

Lifestyle now has more than 4,500 homeowners living in 19 operating communities across Melbourne and regional areas of Victoria.

Lifestyle Communities increased its dividend payment in FY22 by more than 30%, paying a total of 10.5 cents per share. The company paid 8 cents per share in FY21.

What did management say?

Kelly said FY22 had been challenging, mainly due to COVID-19 lockdowns:

To say this year was an unusual one for the business is an understatement.

Lockdowns for the first four months of the year were followed by a large upswing in demand through the Christmas/New Year periods as pent-up demand and a ‘life is short’ sentiment coming out of lockdown saw strong sales and increasing desire to free up equity through downsizing.

We continue to see new land acquisition opportunities come to market and are well funded to continue to purchase high quality sites that meet our investment criteria.

What’s next?

Lifestyle Communities plans to launch seven new sites for development and sale in FY23. This will take the total number of sites at various stages of development to 11 by FY25.

The company plans to deliver between 1,400 and 1,700 new home settlements between FY23 and FY25.

Lifestyle Bellarine will be the next site that Lifestyle takes to market in September 2022.

Share price summary

In FY22, the Lifestyle Communities share price hit a 52-week high of $23.85 in October 2021.

It then fell in line with the broader S&P/ASX All Ordinaries Index (ASX: XAO) until reaching a 52-week low of $11.34. The shares have since rebounded along with the rest of the market.

Overall, the Lifestyle Communities share price is down 16.2% over the year to date. This compares to a 5% fall in the All Ords.

Lifestyle Communities has a market capitalisation of approximately $1.81 billion.

The post Lifestyle Communities share price seesaws on FY22 results after ‘unusual’ year appeared first on The Motley Fool Australia.

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More reading

• Top analysts say investors should buy these quality ASX shares
• Goldman Sachs names 2 ASX shares as conviction buys

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Mineral Resources Limited (ASX: MIN) share price has leapt 40% in the past month.

After reaching a low of $43.37 on 15 July, the miner’s shares sharply continued to rebound in the following weeks.

At market close today, Mineral Resources shares finished trading up 0.08% at $60.52.

For context, the S&P/ASX 200 Index (ASX: XJO) is up 7.90% over the same time frame.

Let’s take a closer look and see what’s been boosting Minerals Resources shares lately.

What’s been lifting the Mineral Resources share price?

It appears that investors are buying up the Mineral Resources share price as confidence in the market is regaining momentum.

After Goldman Sachs released a report forecasting a severe drop in lithium prices in the near term, the sector tumbled.

This led to a number of popular lithium shares erasing their meteoric gains achieved in 2022.

However, since then, lithium prices have maintained posture with investors shrugging off the bearish sentiment.

Also, providing a major boost is the recent quarterly report from Mineral Resources which highlighted record production volumes for FY22.

The news sent the company’s shares flying 9.04% on the day to finish at $53.21.

And if that wasn’t enough, two prominent brokers revised their outlook on the miner’s shares.

Analysts at Bell Potter raised its price target by 8.2% to $75.75 per share for Mineral Resources. Based on the current price, this implies an upside of around 24%.

On the other hand, Macquarie also took the liberty of adjusting its price target by 4% to a bullish $85 per share. This represents an upside of almost 40% from where it trades today.

How have Mineral Resources shares performed in 2022?

After a choppy 8 months, the Mineral Resources share price has returned an 8% gain to investors.

In comparison, the S&P/ASX 200 Resources Index (ASX: XJR) is down 4% over the same period.

On valuation grounds, Mineral Resources presides a market capitalisation of roughly $11.46 billion.

The post Why has the Mineral Resources share price surged 40% in a month? appeared first on The Motley Fool Australia.

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More reading

• Do any ASX lithium shares pay dividends?
• Analysts name 2 ASX dividend shares to buy next week
• Buy this ASX share for its ‘undervalued’ lithium business: expert
• Top brokers name 3 ASX shares to buy next week
• Brokers name 3 ASX shares to buy today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Novonix Ltd (ASX: NVX) share price closed lower on Wednesday despite no news coming from the company in the last month.

Shares of the battery materials tech company finished at $2.74 each, 6.49% lower than yesterday’s closing price of $2.93.

By comparison, the S&P/ASX 200 Information Technology Index (ASX: XIJ) closed 0.27% higher while the S&P/ASX 200 Industrials Index (ASX: XNJ) finished 1% ahead.

Meanwhile, the S&P/ASX 200 Index (ASX: XJO) gained 0.31% today.

Let’s look at the performance of Novonix against some of its peers today.

Why did the Novonix share price plummet today?

The Novonix share price was sold off considerably this afternoon.

It wasn’t alone though. Lake Resources NL (ASX: LKE), Vulcan Energy Resources Limited (ASX: VUL), and Core Lithium Limited (ASX: CXO) also closed well in the red today. The companies lost 5.6%, 4.93%, and 4.03%, respectively.

It was a tough day generally for ASX lithium shares today despite lithium carbonate prices holding steady, according to Trading Economics.

Today’s fall sees the Novonix share price down 74% year to date and 51% over the last six months.

Its long-term trend is more positive, though, with the company’s shares yielding a gain of more than 225% in the last five years.

The benchmark index is currently down 6% year to date and up 24% over the last five years.

The post Why did the Novonix share price nosedive 6% today? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Looking to buy IAG shares but worried about where the growth will come from? Read this
• Here’s why the Nickel Industries share price is climbing on Wednesday
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• How much have Medibank shares paid in dividends over the past 5 years?

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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S&P/ASX 200 Index (ASX: XJO) shares posted another strong performance on Wednesday despite a wobbly morning’s trade. The index ended the day 0.31% higher at 7,127.70 points, marking its highest close since early June.

Consumer shares were the real winners in today’s session with the S&P/ASX 200 Consumer Staples Index (ASX: XSJ) and the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) gaining 1.7% and 1.4%, respectively. Their gains followed a strong session for retailers on Wall Street and earnings from Super Retail Group Ltd (ASX: SUL).

Meanwhile, the S&P/ASX 200 Energy Index (ASX: XEJ) weighed on the market, slumping 0.6% amid falling oil prices and earnings from energy giant Santos Ltd (ASX: STO).

Crude oils hit six-month lows overnight, with the Brent crude price falling 2.9% to US$92.34 a barrel ­– its lowest point since February – while the US Nymex crude price lost 3.2% to hit US$86.53 a barrel – its lowest since January.

At the end of the day, seven of the ASX 200’s 11 sectors closed in the green. But which share outperformed all others to be crowned today’s top performer? Let’s take a look.

Top 10 ASX 200 shares countdown

The top performing ASX 200 share on Wednesday was annuities provider Challenger Ltd (ASX: CGF).

It posed a recovery after tumbling on the back of its earnings, released to the market yesterday, helped along by broker upgrades.

Learn more about the company and what it’s been up to lately here.

Today’s biggest gains were made by these ASX shares:

ASX-listed company	Share price	Price change
Challenger Ltd (ASX: CGF)	$6.76	5.63%
Brambles Limited (ASX: BXB)	$12.40	5.08%
City Chic Collective Ltd (ASX: CCX)	$2.44	4.72%
Super Retail Group Ltd (ASX: SUL)	$10.70	4.7%
New Hope Corporation Limited (ASX: NHC)	$4.57	4.34%
Reece Ltd (ASX: REH)	$16.35	3.55%
Reliance Worldwide Corporation Ltd (ASX: RWC)	$4.65	3.33%
Pendal Group Ltd (ASX: PDL)	$5.02	3.08%
Metcash Limited (ASX: MTS)	$4.24	2.91%
Zip Co Ltd (ASX: ZIP)	$1.075	2.87%

Our top 10 ASX 200 shares countdown is a recurring end-of-day summary to let you know which companies were making big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

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More reading

• Why did the Novonix share price nosedive 6% today?
• Looking to buy IAG shares but worried about where the growth will come from? Read this
• Here’s why the Nickel Industries share price is climbing on Wednesday
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why Brambles, Challenger, Nearmap, and Super Retail shares are rising today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Reliance Worldwide Corporation Limited, Super Retail Group Limited, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Super Retail Group Limited. The Motley Fool Australia has recommended Challenger Limited and Reliance Worldwide Corporation Limited. 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 Adore Beauty Group Ltd (ASX: ABY) share price is not looking all too glamorous on Wednesday.

At the close, shares in the online cosmetics and skincare retailer were 12% worse compared to yesterday. As a result, the company is now sporting a share price of $1.94, giving Adore a market capitalisation of $182.6 million.

So, what’s driving this less-than-glowing performance today?

Clearing the air on the Adore Beauty share price

What a world of difference 24 hours can make. Yesterday, shares in Adore Beauty were on fire, skyrocketing more than 30%. This was in addition to several extremely strong trading sessions leading up to Tuesday.

As a result, the Australian Securities Exchange issued the company with a speeding ticket — prompting an explanation for the swift upwards move. Fast forward to today and we have our supposed answer to the sudden euphoria.

According to the release, Adore said it was aware of Temple & Webster Group Ltd (ASX: TPW) experiencing a 29.7% glow-up amid the release of its FY22 annual results.

Furthermore, the company referenced our coverage yesterday of Adore. The article referenced was titled Why is the Adore Beauty share price rocketing 19% on Tuesday?. Adore Beauty points out this article discussed the outsized performance of both Temple & Webster and the Adore Beauty share price on Tuesday.

However, Adore highlighted that it was not aware of whether or not Temple & Webster’s results had any influence on its own share price. The company also noted it was unaware of future buying or selling intentions of a recent substantial shareholder, Woodson Funds.

Looking back

The recent rebound in value has acted as a reprieve to an otherwise painful year. Since the start of 2022, the seller of makeup and skincare products has endured a steady dismantling of value.

While the S&P/ASX 200 Index (ASX: XJO) is 6% in the red year-to-date, Adore is 52% underwater. This is even after a near 90% bounce back in the Adore Beauty share price.

The post Adore Beauty share price slips 12% following ASX speeding ticket appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia has recommended Adore Beauty Group Limited and Temple & Webster Group Ltd. 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 Insurance Australia Group Ltd (ASX: IAG) share price closed in the green today, recovering from a dip after the company released its FY22 results last week.

The insurance giant’s shares gained 1.53% during Wednesday trade to $4.65 apiece. That takes the company’s share price to around the same level it was when it delivered its results last Friday.

Financial year 2022 was a mixed bag for IAG with uncertainty clouding its future growth. However, the insurance company’s management seems confident about its outlook.

But could it be looking through rose-tinted glasses? Let’s find out.

A quick recap of FY22 results

Whilst net profit improved dramatically from a $427 million loss in FY21 to $347 million in FY22, the same cannot be said for cash earnings.

IAG’s cash earnings took a tumble from $747 million to $213 million.

The company had to slash its dividend from 20 cents per share in FY21 to 11 cents per share in FY22.

As reported in the Australian Financial Review, IAG CEO Nick Hawkins said, “We had a tough … 24 months really but we can see genuine momentum within the organisation.”

CEO lays the bull case

In response to concerns over a growing price war that could potentially compress margins for insurers, the company maintains a medium-term margins target of between 15% to 17%.

Hawkins told the AFR Weekend, “That drives everything we do. We’re not going to make a decision against that in pursuit of something.”

This is after recording underlying insurance margins of 14.7% in FY21 and 14.6% in FY22.

Hawkins also advised growth would be driven by IAG’s “wonderful brands that we probably haven’t done as much with as we should have”.

Some of IAG’s brands include NRMA, SGIO, RACV in Victoria, and CGU Insurance.

And Hawkins was also upbeat on customer retention, saying it was “as strong as I can remember”.

The bear case

As reported in the AFR, a Jarden analyst advised clients that “accelerated premium rate momentum is required in our view to meet … margin targets”.

IAG management expects premium increases will likely absorb inflationary impacts.

I tend to err on the side of caution when management may appear overly confident in their guidance. In this case, I’m trying to understand how reasonable Hawkis’ predictions are relative to IAG’s past performance.

If you review the top line and bottom line for the last decade, IAG has produced quite volatile financial results.

It’s because the very nature of the products it sells is subject to forces outside its control.

Who would have predicted a war in Ukraine and the record-breaking floods this year?

So, how is Hawkins in a position to be so confident about IAG’s future if there are so many variables outside of his control?

I’m not asserting that his statements will prove to be false. Rather, I’m trying to frame his point of view in the context of the cold hard numbers.

Whilst management is confident in addressing inflation through higher premiums, Content Editor of Livewire Markets Glenn Freeman makes a great point about IAG.

He noted that IAG offers insurance products that are for shorter durations, like house and car insurance. If inflation keeps rising, this could spell significant price hikes for cars, automotive parts, wages, and building material supply.

All these factors will affect IAG, putting it in a vulnerable position.

IAG share price snapshot

In the last 12 months, the IAG share price has fallen 13% but is making ground with a 5% jump in the last month.

The S&P/ASX 200 Index (ASX: XJO) fared better in the last year, falling by 5% and gaining 7% in the last month.

IAG’s market capitalisation is around $11.4 billion. It’s currently trading at a price-to-earnings multiple of 34.69 times.

The post Looking to buy IAG shares but worried about where the growth will come from? Read this appeared first on The Motley Fool Australia.

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Motley Fool contributor Raymond Jang has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Insurance Australia Group Limited. 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 Carnarvon Energy Ltd (ASX: CVN) share price is tumbling today.

Carnarvon shares closed yesterday trading for 20 cents and are currently trading for 17 cents, down 17.5%.

The ASX energy share certainly hasn’t been helped by sliding oil prices, now at six-month lows.

But the real pressure on the Carnarvon share price today looks to be an update on its Dorado development, located offshore in Western Australia.

What’s happening at the Dorado project?

Investors are driving down the Carnarvon share price today after the company reported it will not make a financial investment decision (FID) for the project this year.

While the Dorado Front End Engineering and Design (FEED) works are “substantially” complete, the company said current instability in the cost environment and uncertainty around supply chain capacity will delay its FID.

Commenting on the progress and delays at Dorado, Carnarvon CEO Adrian Cook said:

Carnarvon is keen to see the timely sanctioning of the Dorado development and commencement of the construction phase, and we continue to work collaboratively with the operator to achieve this.

That said, given the current regional inflationary pressures and supply chain challenges, the risk of cost escalation is unacceptably high and requires fiscal discipline until this environment shows signs of stabilising.

As for funding, Carnarvon said a formal and ongoing process is underway to fund its share of the Dorado development. Carnarvon said it may divest some of its share in the project and associated exploration acreage prior to taking FID.

On the regulatory front, the Carnarvon share price could also be facing some headwinds. The explorer’s offshore project proposal remains under assessment by the National Offshore Petroleum Safety and Environmental Management Authority.

Cook remained upbeat on the project’s future, adding:

The analysis of the Pavo discovery to date shows that this is a tremendous resource with the potential to generate a significant amount of value for Carnarvon shareholders by utilising the proposed Dorado facilities. Accordingly, the Joint Venture is undertaking detailed studies to optimise an integrated Dorado development concept.

Carnarvon share price snapshot

The Carnarvon share price has struggled this year, down 53% since the opening bell on 4 January.

By comparison, the All Ordinaries Index (ASX: XAO) is down 7% in 2022.

The post Why is the Carnarvon share price cratering 18% on Wednesday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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