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The BHP Group Ltd (ASX: BHP) share price has continued to decline over the past month followed by weak investor sentiment.

At the time of writing, the mining giant’s shares are further slipping 2.07% to $35.67. This means that the company’s shares have fallen more than 5% in the past week alone.

What happened to BHP shares in October?

Investors pushed the BHP share price lower last month following the company’s first-quarter trading update on 19 October.

BHP revealed a fall in production across most of its operations due to a variety of issues affecting each of its commodities. Its shares sunk 2.04% following the release after reaching a one-month high of $39.28 in the prior day.

On a positive note, the company stated that the proposed merger of its petroleum business with Woodside Petroleum Limited (ASX: WPL) is on track. However, this did little to appease investors who were largely concentrated on the results.

Despite the current slump, BHP stated that all production and unit cost guidance remains unchanged for the 2022 financial year.

The company is scheduled to hold its annual general meeting (AGM) on 11 November.

What do the brokers think?

A number of brokers weighed in on BHP’s shares after the release of its latest performance report.

Analysts at Macquarie cut its price target by 3.6% to $54.00 for the BHP share price. Credit Suisse had a more bearish tone, reducing its outlook by a sizeable 15% to $39.00. It’s worth noting that this is almost in line with the current share price.

Leading Australian investment firm Morgans had a different view, raising its rating by 1.9% to $46.05. It appears the broker is focused on BHP’s statement that FY22 guidance is stable for now.

BHP share price summary

Since the beginning of the year, it has been another disappointing result for BHP shares, falling by more than 15%. This is in stark contrast to when its shares were tracking more than 25% higher for the year-to-date period during August.

Based on today’s price, BHP presides a market capitalisation of roughly $105.7 billion with approximately 2.96 billion shares outstanding.

The post Why did the BHP (ASX:BHP) share price go backwards in October? appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• Here’s why the BHP (ASX:BHP) share price is down 13% so far in 2021
• BHP (ASX:BHP) share price lifts as Morgans tips 20% upside
• These are the 10 most shorted ASX shares
• 2 blue chip ASX dividend shares rated as buys

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 Bruce Jackson.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is looking worse for wear, trading 0.57% lower to 7,328.70 points. Currently, more than 65% of companies included in the benchmark index are in the red.

However, real estate shares are well ahead of the rest of the market today. This gain makes the sector the best performing in the last month.

Here’s a closer look at what is going on among real estate shares on the ASX today.

ASX 200 real estate shares in the green today

Goodman Group (ASX: GMG)

Today, Goodman Group is both the largest and the highest returning real estate share in the ASX 200. The global property company is experiencing a strong 6.9% uptick in its share price on Tuesday. This momentous move follows the release of its first-quarter update.

The update reflected a strong start to the new financial year for the commercial and industrial property group. Additionally, Goodman reported an occupancy rate of 98.4% across its now $62 billion worth of assets under management.

Citing continued strength in its business, Goodman has upgraded its operating earnings per share (EPS) growth guidance to over 15%. For context, the property group had previously forecast growth in the range of 10%.

Charter Hall Group (ASX: CHC)

Goodman is not alone in the continued revitalisation of ASX 200 real estate shares. Another property player enjoying a trot on the green today is Charter Hall Group. It is possible the smaller integrated property group has fallen into a slipstream behind Goodman Group, benefitting from the heightened positive for the sector as a whole.

Although, Charter Hall posted its own earnings guidance upgrade yesterday. Specifically, the property group increased its guidance to no less than 83 cents per share for FY22, representing a minimum increase of 36% year on year.

Lendlease Group (ASX: LLC)

Lastly, Lendlease Group rounds out some of the best performing ASX 200 real estate shares on the market today. Similar to Charter Hall, Lendlease has not made an announcement of its own today. However, yesterday it informed the market of the services sale completion. In turn, the $7.2 billion property and infrastructure group collected the full $310 million sale price.

The Lendlease share price is up 2.25% to $10.69 in afternoon trade.

The post Real estate shares are leading the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

More reading

• Why Goodman, Praemium, Step One, and Telix shares are charging higher
• ASX 200 (ASX:XJO) midday update: Netwealth’s merger proposal, IAG sinks
• It’s been a great 2021 so far for the CBA (ASX:CBA) share price
• Why is the Brickworks (ASX:BKW) share price falling today?
• Goodman (ASX:GMG) share price storms 5% higher on earnings guidance upgrade

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 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 Bruce Jackson.

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Yesterday I looked at three ASX shares brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below. Here’s why these brokers are bearish on these ASX shares:

Coles Group Ltd (ASX: COL)

According to a note out of UBS, its analysts have retained their sell rating and $16.50 price target on this supermarket giant’s shares. Although Coles delivered a better than expected first quarter sales update, the broker believes the outlook for food sales in Australia is weakening. In light of this, UBS now has a negative view on the sector as a whole and not just Coles. The Coles share price is fetching $17.17 on Tuesday.

Commonwealth Bank of Australia (ASX: CBA)

A note out of Goldman Sachs reveals that its analysts have retained their sell rating and $84.40 price target on this banking giant’s shares. Goldman has been looking through recent data provided by APRA. And while CBA leads the major banks in both housing lending and retail deposits growth, it isn’t enough for a more positive rating. The broker has previously stated that it believes the CBA share price is severely overvalued at 21x estimated FY 2022 earnings. The CBA share price is trading at $105.26 today.

IGO Ltd (ASX: IGO)

Analysts at Morgan Stanley have retained their underweight rating and $8.25 price target on this battery materials mining company’s shares. This follows the release of its latest quarterly update. While that update revealed that the miner’s production is on target in FY 2022, its costs were higher than the broker was expecting. In light of this, Morgan Stanley isn’t in a hurry to change its rating and continues to believe IGO’s shares are overvalued at the current level. The IGO share price is fetching $9.19 this afternoon.

The post Leading brokers name 3 ASX shares to sell today appeared first on The Motley Fool Australia.

More reading

• Which ASX bank shares were the best performers during October?
• It’s been a great 2021 so far for the CBA (ASX:CBA) share price
• IGO (ASX:IGO) share price storms higher on Q1 update
• Top brokers name 3 ASX shares to sell next week
• Brokers rate these 2 ASX dividend shares as top buys today

Motley Fool contributor James Mickleboro 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 owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to give back all of yesterday’s gain. At the time of writing, the benchmark index is down 0.75% to 7,314.6 points.

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

Ingenia Communities Group (ASX: INA)

The Ingenia share price is down 3.5% to $6.29. This follows the completion of the institutional component of this retirement community development company’s equity raising. Ingenia has raised $370 million from institutional investors at $6.12 per new share. The company will now seek to raise a further $105 million from retail shareholders. The proceeds will be used to partly fund $552 million of strategic acquisitions.

Insurance Australia Group Ltd (ASX: IAG)

The IAG share price has sunk 7.5% to $4.48. Investors have been selling this insurance giant’s shares following an update on its net natural perils claim costs for FY 2022. This follows severe storm and hail activity experienced over the course of October. IAG has increased its expectation for FY 2022 net natural perils claim costs from $765 million to $1,045 million. As a result, the company has downgraded its FY 2022 insurance margin guidance range from 13.5% – 15.5% to 10% – 12%.

Vulcan Energy Resources Ltd (ASX: VUL)

The Vulcan share price has continued its slump and is down a further 7% to $11.14. Investors have been selling this lithium developer’s shares in recent sessions after it was the target of a short seller attack. While the company has refuted the claims, it hasn’t been enough to keep some investors on board.

Westpac Banking Corp (ASX: WBC)

The Westpac share price is down a further 3% to $23.06. Investors have been selling this banking giant’s shares after brokers responded poorly to Monday’s full year results release. One of those brokers was Goldman Sachs, which downgraded the bank’s shares to a neutral rating with a $25.60 price target. It made the move largely on Westpac’s weaker net interest margin trajectory.

The post Why Ingenia, IAG, Vulcan, and Westpac shares are dropping appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Netwealth’s merger proposal, IAG sinks
• IAG (ASX:IAG) share price sinks 6% on guidance downgrade
• Why this top broker downgraded Westpac (ASX:WBC) shares
• 5 things to watch on the ASX 200 on Tuesday
• Why Advanced Human Imaging, ResMed, Western Areas, and Westpac are falling

Motley Fool contributor James Mickleboro owns shares of Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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 Bruce Jackson.

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Might the Xero Limited (ASX: XRO) share price be quality idea to think about at the current level?

Xero is a leading business in the cloud accounting tech space. It started in New Zealand, but the business has now built large subscriber bases in places like Australia (where it has more than 1.1 million subscribers) and the UK (with over 700,000 subscribers).

Xero share price rises as ecosystem grows

The cloud accounting business has been busy making acquisitions in recent times, including Planday for €183.5 million, Tickstar for SEK150 million and Waddle for A$80 million.

Waddle is an invoice lending platform that uses customers’ accounting data. Planday is a workforce management platform for employers and employees. Tickstar technology provides connections to the Peppol global e-invoicing network.

The strategy of Xero is to grow its small business platform and drive cloud accounting, which will help build for global scale and innovation.

Xero can become even more attractive to subscribers, accountants and financial advisers if its ecosystem is able to offer more services that the business needs.

Planday in-particular was the biggest acquisition. It offers a number of useful benefits for businesses including employee scheduling, time tracking and attendance, payroll compliance and reporting. At the latest update, it was operating in Denmark, Norway, Sweden, the UK, Germany, France and the US.

Strong unit economics

Xero continues to see growth in some of the most important metrics of the business, which might be useful for the Xero share price over time.

For example, the gross profit margin was 83.6% in FY19, grew to 85.2% in FY20 and rose again to 86% in FY21. Management explained that the gross margin improvement was driven by continuing efficiencies in cost to serve, including customer support and cloud hosting services.

The company’s customer acquisition cost (CAC) as a percentage of revenue continues to improve. In FY19 the CAC as a percentage of revenue was 44.9%, falling to 43.6% in FY20 and improving again to 36.3% in FY21. The less it costs to win customers, the higher the profit margins can go.

In FY21, Xero’s operating revenue increased 18%, thanks to subscriber growth of 20%. Free cashflow surged 110% to NZ$56.9 million.

Outlook

The Xero share price can be affected by what management say about the outlook.

The company is going to keep focusing on growing its global small business platform and maintain a preference for re-investing the cash generated, subject to investment criteria and market conditions, to drive long-term shareholder value.

Total operating expenses, excluding acquisition integration costs, as a percentage of operating revenue for FY22 are expected to be in a range of 80% to 85%, which is consistent with levels seen in the second half of FY21 and the pre-pandemic period.

The acquisition of Planday is expected to contribute approximately three percentage points to operating revenue growth in FY22.

Is the Xero share price a buy?

One opinion about Xero comes from the brokers at Macquarie Group Ltd (ASX: MQG). It rates Xero as a sell/underperform with a price target of $130. That suggests that the Xero share price could fall by more than 10% over the next year if the broker is right.

A couple of months ago, Xero rival Intuit announced that it was going to buy Mailchimp for $12 billion. Mailchimp is a global customer engagement and marketing platform for small and medium businesses. In that announcement, Intuit said that its mission is to become a global, AI-driven expert platform. It aims to create a platform for small and medium businesses to do a range of activities like:

Get their business online, market their business, manage customer relationships, benefit from insights and analytics, get paid, access capital, pay employees, optimise cash flow, be organized and stay compliant, with experts at their fingertips.

It is the Mailchimp acquisition that makes Macquarie think that Xero’s global growth could be hampered if Intuit grows its global market share in more than just its home market of America.

The post Could the Xero (ASX:XRO) share price be a quality buy? appeared first on The Motley Fool Australia.

More reading

• Which ASX bank shares were the best performers during October?
• Leading brokers name 3 ASX shares to buy today
• ASX 200 (ASX:XJO) midday update: Westpac sinks, Macquarie raises $1.5bn
• Can the Macquarie (ASX:MQG) share price break new highs over $200?
• Macquarie (ASX:MQG) share price falls after completing $1.5bn capital raising

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It’s that time again when we take a look back and review the best performing ASX-listed bank shares during the last month. While the S&P/ASX 200 Index (ASX: XJO) posted a gain of 1.9% in October, there were some banks that did better and some that performed worse.

Interestingly, the biggest gains weren’t secluded to the big four banks. Here is a look at the top performers and what they got up to during the month.

Macquarie Group Ltd (ASX: MQG)

Starting with the best performing ASX bank share, the Macquarie Group share price was the pick of the bunch for October, gaining a phenomenal 12% during the month. Investors appear to have been front-running the investment bank’s first-half results for FY22. Perhaps, in anticipation of a solid result. Well, the true numbers were released on the last trading day of October, revealing an incredible 107% lift in first-half profits to $2,043 million. Simultaneously, assets under management increased 31% to $737 billion.

National Australia Bank Ltd. (ASX: NAB)

The next best performing ASX-listed bank share during the month was the National Australia Bank, adding 5.28%. It was a relatively quiet period for the NAB share price. Likely the only notable announcements involved the stumbling appointment of a new non-executive director. While Australian entrepreneur, James Spenceley, had intended to be appointed to the board, the decision was then reversed by Spenceley due to feedback from proxy advisors.

Commonwealth Bank of Australia (ASX: CBA)

Lastly, the third best performing ASX bank share in October was none other than Australia’s biggest bank, Commonwealth Bank of Australia. The CBA share price rallied 4.6% during the 30-day period with a raft of developments concerning the bank. Although, one particularly interesting move from CBA during the month was its further push into smart payment solutions. The device is similar to Square Inc (NYSE: SQ) tile-style chip reader.

The post Which ASX bank shares were the best performers during October? appeared first on The Motley Fool Australia.

More reading

• It’s been a great 2021 so far for the CBA (ASX:CBA) share price
• Leading brokers name 3 ASX shares to buy today
• How did the NAB (ASX:NAB) share price perform in October?
• ASX 200 (ASX:XJO) midday update: Westpac sinks, Macquarie raises $1.5bn
• Can the Macquarie (ASX:MQG) share price break new highs over $200?

Motley Fool contributor Mitchell Lawler owns shares of Commonwealth Bank of Australia and Macquarie Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Square. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Step One Clothing Ord Shs (ASX: STP) share price is charging higher again on Tuesday.

At the time of writing, the online underwear retailer’s shares are up 3.5% to $2.85.

This means the Step One share price is now up 86% since listing on the ASX on Monday.

Step One share price surges higher following IPO

On Monday, Step One’s shares hit the ASX boards following the completion of an IPO that raised $81.3 million at a price of $1.53 per new share.

This gave the company a market capitalisation of $284 million upon listing. However, with the Step One share price surging higher following its IPO, its market capitalisation has now ballooned to $530 million.

It also means that the company’s shares are now trading on a reasonably lofty EV/forecast FY 2022 EBITDA multiple of 30x.

What will the proceeds from the IPO be used for?

Step One raised $81.3 million via its IPO, with $41.3 million of the proceeds going to existing shareholders to allow them to realise part of their investment in the company.

The remaining proceeds will be used to support the company’s growth strategies. This includes growing Step One’s existing customer base in Australia and the UK and investing in establishing a presence in the enormous US market.

Step One’s Founder and CEO, Greg Taylor, believes the IPO will help the company with the next stage of its growth and its vision of becoming an innovative and ethical global brand.

He commented: “I am very excited that today Step One has listed on the ASX. I created Step One to solve the problems of chafing, ride up and managing sweat. In addition to creating an innovative product, it’s also made from organic and sustainable materials. I’m looking forward to continuing to build the Step One brand as we expand offshore.”

Mr Taylor added: “I am pleased with our year to date sales performance in the lead up to the November Black Friday Cyber Monday sales event. I’m also pleased to confirm our US launch commenced as planned during October. Sales are being fulfilled from a third-party logistics (3PL) provider in the USA and initial results are consistent with our expectations.”

The post Step One (ASX:STP) share price surges 86% in 2 days following IPO appeared first on The Motley Fool Australia.

More reading

• Why Goodman, Praemium, Step One, and Telix shares are charging higher

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

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The Electro Optic Systems Hldgs Ltd (ASX: EOS) share price is rebounding today in what’s sure to come as welcome news to shareholders.

The Electro Optic share price is up 2.94% in early afternoon trading, but it still leaves its shares down 8.4% over the past 5 trading days.

Below, we take a look at what’s been pressuring the company which produces electro-optic technologies for the defence and aerospace markets.

Earnings, earnings, earnings…

The biggest driver that looks to have pulled down the Electro Optic share over the last week was a significant downgrade in its earnings guidance.

The company’s previous guidance for 2021 was for revenue in the range of $230-240 million. The revised guidance dropped this to a range of $215-220 million.

Underlying earnings before interest and tax (EBIT) were revised downwards from $18-21 million to $4-8 million.

The Electro Optic share price likely also suffered from the company’s upward revision of its SpaceLink costs, from $17 million up to $19 million. Its underling EBIT after SpaceLink is included (excluding any potential foreign exchange moves) fell from a positive of $1-4 million to a loss of $11-15 million.

The earnings downgrades overshadowed other positive news released by the company during the week.

As my Foolish colleague James Mickleboro reported:

EOS has received $65 million of cash receipts relating to a major export contract. This has boosted its total cash at bank to in excess of $100 million, including a $35 million working capital facility.

This cash receipt relates to a $440 million contract to supply significant quantities of its remote weapons systems to the UAE…

Electro Optic share price snapshot

The Electro Optic share price has struggled in 2021, down 47%. That compares to a year-to-date gain of 11% posted by the All Ordinaries Index (ASX: XAO).

Over the past month, Electro Optic shares are down 8.43%.

The post Why has the Electro Optic (ASX:EOS) share price sunk 8% in the last week? appeared first on The Motley Fool Australia.

More reading

• These are the 10 most shorted ASX shares
• Why A2 Milk, Codan, EOS, and Woolworths shares are sinking
• Electro Optic Systems (ASX:EOS) share price tumbles on guidance downgrade
• These are the 10 most shorted ASX shares
• Here’s why Electro Optic Systems (ASX:EOS) shares are frozen today

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool Australia owns shares of and has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Immutep Ltd (ASX: IMM) share price is climbing today after the biotechnology company announced it has secured a new patent.

At the time of writing, Immutep shares are edging 1.7% higher to 59.5 cents. In the last month, its shares have risen around 7%.

Immutep furthers patent protection

Investors are pushing the Immutep share price higher after digesting the company’s positive update.

Immutep has been granted another patent for its lead product candidate eftilagimod alpha to add to its growing portfolio, the company advised. Approved by the Chinese Patent Office, the latest addition will seek to further protect Immutep’s intellectual property.

It comes after the company previously secured corresponding European, Australian, Japanese, and United States patents.

The new patent is titled, ‘Use of recombinant LAG-3 or the derivatives thereof for eliciting a monocyte immune response’.

Efti is Immutep’s lead immunotherapy candidate which is a soluble LAG-3 protein and a pd-1 pathway inhibitor. LAG-3 is an inhibitory co-receptor that plays a vital role in the treatment of cancer and autoimmune diseases.

The new patent is solely owned by Immutep and licensed exclusively to Chinese biopharmaceutical company, EOC Pharma. The patent is set to expire on 3 October 2028.

Based in Shanghai, China, EOC Pharma focuses on manufacturing and commercialising oncology products in China.

Management commentary

Speaking on the news possibly pushing the Immutep share price higher, CEO Marc Voigt said:

We are making good progress building our global patent estate around our LAG-3 development pipeline, including lead candidate efti which has delivered promising clinical data in various settings.

We will continue to make these important investments and are especially pleased to be working so closely with our Chinese partner, EOC Pharma, as they expand their clinical development of efti for the Chinese market.

EOC Pharma CEO Xiaoming Zou added:

We are investing in the development of efti for the local market in China and are very pleased with the steps being taken by our partner, Immutep, to build a broad portfolio of patent families around this unique candidate. These are important and ongoing steps in the complex process of bringing innovative medicines to the market for patients.

Immutep share price summary

The Immutep share price has jumped by more than 120% over the past 12 months. Year-to-date has also been sound, with shareholders recording gains of above 40%.

Based on today’s price, Immutep has a market capitalisation of roughly $500 million.

The post Here’s why the Immutep (ASX:IMM) share price is rising on Tuesday appeared first on The Motley Fool Australia.

More reading

• Immutep (ASX:IMM) share price hikes amid clinical trial momentum in FY21

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 Bruce Jackson.

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Shares in investment and financial services company Praemium Ltd (ASX: PPS) are soaring today and are now at $1.43 apiece, up 15% on yesterday’s closing price.

Praemium shares are gaining ground after the company advised it had received a takeover proposal from Netwealth Limited (ASX: NWL).

Here are the details.

Netwealth puts in bid for Praemium

Praemium advised that it had received an unsolicited, non-binding, indicative proposal from Netwealth to acquire all of its outstanding shares “in exchange for fully paid ordinary shares in Netwealth plus [a] contingent cash consideration”.

The scrip deal would see Praemium shareholders receive one new Netwealth share for every 11.96 Praemium shares owned.

This implies a value of $1.50 per Praemium share – a roughly 20% premium to its closing price on Monday – and an Enterprise Value/EBITDA multiple of 55x. This suggests Netwealth values Praemium, the company, at $785 million.

For reference, Praemium’s current market capitalisation is $721 million, whereas its enterprise value is $711 million at the time of writing.

However, its fully-diluted market capitalisation is $627 million and its fully-diluted enterprise value is calculated at $616 million.

Another feature embedded into the deal would see a ‘contingent value right’ tied to the sale of Praemium’s international operations.

Under this arrangement, Praemium shareholders would retain any excess “realised from the sale of [its] international operations and $50 million less costs”.

However, the company stated it is not possible to assign any value to this particular embedded option.

In response to the offer, Praemium’s board explicitly agreed the proposal “undervalues Praemium’s business and is not in the best interests of [its] shareholders”.

As such, the board’s view is that the proposal does not factor in the company’s current performance or its future earnings trajectory.

Nor does it appropriately value Praemium’s “market leadership position and superior technology”, according to the board.

The board believes the offer misses the mark on other fronts as well, by failing to reflect the “significant valuation upside available to shareholders, given Praemium is valued at a discount to industry peers Hub24 and Netwealth” on certain valuation multiples.

Netwealth shares fell sharply this morning on news of its rejected offer for Praemium, whereas it sent the latter’s share price soaring in response.

What’s next?

Praemium has recommended its shareholders take no action in response to the offer and that they don’t have to do anything at this stage.

Netwealth has yet to formally respond, although as The Motley Fool reported earlier today, Netwealth sees many reasons for the merger to go ahead. It stands to reason that the acquisition story may not be finished here just yet.

Netwealth notes that the merger would create the largest independent wealth advisor in Australia, with $72 billion in funds under administration on the table if the deal goes ahead.

Praemium share price snapshot

It’s been a year in the green for Praemium shareholders anyway, with the company posting a return of 117% since January 1.

This extends its run into the green to 125%, eons away from the benchmark S&P/ASX 200 Index (ASX: XJO)’s gain of around 25% in the same time.

The post Why is the Praemium (ASX:PPS) share price 15% higher on Tuesday? appeared first on The Motley Fool Australia.

More reading

• Why Goodman, Praemium, Step One, and Telix shares are charging higher
• ASX 200 (ASX:XJO) midday update: Netwealth’s merger proposal, IAG sinks
• Netwealth (ASX:NWL) share price drops on Praemium merger proposal
• These were the worst performing ASX 200 shares in October
• These were the best performing ASX 200 shares in October

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Netwealth and Praemium Limited. The Motley Fool Australia owns shares of and has recommended Netwealth. The Motley Fool Australia has recommended Praemium Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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