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Investors might be turning their eyes once again to ASX-listed renewable shares on Monday. The ‘green’ grouping of investments is topical after the Australian National party agreed on a pivotal climate deal.

It has been a week in the making of back and forth negotiations, but a deal appears to have been sealed for a net-zero emissions target by 2050.

However, with the Glasgow COP26 climate summit approaching, there are a few extra conditions for Australia’s green ambitions.

Bringing ASX renewable shares into the spotlight

Cutting carbon with conditions

Following a few weeks of strength in renewable and green energy alternative shares on the ASX, yesterday’s historic net-zero agreement by the Australian Government highlights the growing trend towards emission reduction. However, the coalition has a few conditions on its newly set goal.

Deputy Prime Minister Barnaby Joyce relayed that the Nationals have partially come to the party on net-zero targets. This is mostly in an endeavour to stay “inside the tent” as Joyce phrased it, to ensure its voice is heard in future decisions.

Although, there were some conditions imposed by the National party made in the process of compromising. This includes concessions in the form of a regional economic package. While no specific dollar amounts have been divulged, it calls for skills and job creation programs for regional industries including manufacturing, forestry, fishing, and farming.

Additionally, it is believed the party has called for protections for farmers and miners to sustain operations during the shift. As part of this, changes to the Environment Protection and Biodiversity Conservation Act have been called upon.

Concerns were shared by National party members for the implications to farmers over any further amendments to land rights. Speaking on this topic, Minister for Agriculture, drought, and energy management, David Littleproud stated:

If you look back to the last two elections, the Labor Party has campaigned on vegetation management laws that will again take away property rights without looking at these pragmatic ways of how do you manage the landscape, not just in sequestering carbon but actually getting better buyer diversity outcomes, better environmental outcomes that our farmers are doing every day.

The official agreement is set to be voted on in Cabinet today ahead of the Glasgow climate summit.

Nuclear mentioned but not backed

While not technically considered renewable, nuclear has recently been a popular point of discussion for alternative energy.

Reportedly, a handful of National party members had hoped for nuclear power to be included in the net-zero deal. Though, this was scratched — with Littleproud citing it would be ‘politically unrealistic’. This comes at a time when ASX-listed uranium companies have been surging in value.

For example, Paladin Energy Ltd (ASX: PDN), Peninsula Energy Ltd (ASX: PEN), and Deep Yellow Limited (ASX: DYL) have rocketed 150%, 125%, and 63% respectively in the last 6 months.

Littleproud said, “Nuclear is something the National Party obviously stands firmly behind as a party room, but we understand you’ve got to educate before you legislate, and the electorate isn’t necessarily there with us at the moment.”

Finally, it may not be ASX renewable shares in the spotlight today. Investors will be watching closely to see how the market responds to coal producers and other scrutinised energy resources.

The post ASX renewable shares in focus amid Australia’s 2050 net zero pledge appeared first on The Motley Fool Australia.

More reading

• Why is the Pilbara Minerals (ASX:PLS) share price halted?
• Smartgroup (ASX:SIQ) share price crashes 16% amid takeover collapse
• Here are 5 ASX shares trading ex-dividend this week
• 2 high-growth ASX tech shares looking cheap right now
• Origin Energy (ASX:ORG) share price on watch following $2b deal

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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The Pilbara Minerals Ltd (ASX: PLS) share price won’t be going anywhere on Monday.

This follows the lithium miner’s request for a trading halt prior to the market open this morning.

Why is the Pilbara Minerals share price halted?

The Pilbara Minerals share price was placed in a trading halt today pending the release of an announcement.

The release explains that the announcement relates to the company entering into a strategic transaction concerning a downstream joint venture. No further details were provided.

Pilbara Minerals’ shares are expected to remain halted until the commencement of trade on Wednesday.

What is the joint venture?

As I mentioned above, no further details were provided by the company.

However, it is worth noting that just over two years ago, Pilbara Minerals announced binding terms with South Korean conglomerate, POSCO, for the formation of an incorporated joint venture in South Korea to build and operate a 40ktpa LCE primary lithium hydroxide downstream chemical processing facility.

This joint venture was set to be founded on POSCO’s industry leading “PosLX” purification technology. This produces high-grade lithium hydroxide and lithium carbonate chemicals.

It is also worth noting that in its recently released annual report, the company talks about the joint venture as a core part of its FY 2022 plan.

It states: “Negotiate and establish POSCO joint venture for the development and operation of a 40,000 tpa downstream lithium chemical conversion facility in South Korea supported by 315,000 tpa spodumene concentrate offtake.”

All in all, if it is this, it has the potential to be a real milestone for the company. As such, it will make it well worth keeping a close eye on the Pilbara Minerals share price when it returns to trade on Wednesday.

The post Why is the Pilbara Minerals (ASX:PLS) share price halted? appeared first on The Motley Fool Australia.

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• These 3 ASX 200 shares are topping the volume charts this Monday

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 Smartgroup Corporation Ltd (ASX: SIQ) share price is starting the week deep in the red.

At the time of writing, the fleet management and salary packaging company’s shares are down almost 16% to $7.88.

Why is the Smartgroup share price crashing lower?

Investors have been selling down the Smartgroup share price this morning after it released an update on a takeover approach.

Last month the company received a non-binding, indicative and conditional proposal from a consortium comprising TPG Global and Potentia Capital to acquire the company for $10.35 per share. This offer was enough for Smartgroup to grant the consortium a period of due diligence.

Unfortunately, it appears as though the consortium hasn’t seen enough during its due diligence to support a takeover approach.

According to the release, the consortium has informed Smartgroup that it does not intend to proceed with the proposal at $10.35 per share. As a result, discussions with the consortium in relation to the proposal have now ceased and the exclusivity provisions have terminated.

However, that’s not the end of the story.

What’s happening?

The release explains that the consortium has expressed an interest in proceeding with a revised proposal of $9.25 per share in cash. This is 10.6% lower than the previous offer.

Management notes that the new offer would still be a 17.7% premium to the closing Smartgroup share price on 28 September. This compares to the 31.7% premium of the previous offer.

But this hasn’t been enough for the Smartgroup Board. Having received the new offer over the weekend, the Board has unanimously concluded not to proceed with discussions at this price.

Instead, the company intends to continue to focus on the delivery of sustained earnings and dividend growth for shareholders. It also advised that it is currently on track to deliver a calendar year 2021 financial performance in line with consensus expectations.

The post Smartgroup (ASX:SIQ) share price crashes 16% amid takeover collapse appeared first on The Motley Fool Australia.

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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 SMARTGROUP 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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Love ASX dividend shares? Well then, you’ll probably be familiar with the ex-dividend date that comes along with them. When a share goes ex-dividend on the ASX boards, it’s one of the most love-to-hate occasions for investors. While it’s never fun seeing the value of a share fall, most investors find all is forgiven when the cash finally hits their bank account. 

So here are 5 ASX dividend shares that are scheduled to trade ex-dividend this week.

5 ASX dividend shares going ex-dividend this week

Clover Corporation Limited (ASX: CLV)

Nutrition company Clover is going ex-dividend this week. Today, as it turns out. Clover is set to pay out its final half a cent-per-share dividend, fully franked, on 16 November. At the last Clover Corp share price of $1.58, this company has a dividend yield of 0.63%.

New Hope Corporation Limited (ASX: NHC)

Coal miner New Hope is also scheduled to trade ex-div today. New Hope will be sending a final dividend payment of 7 cents per share, also fully franked, on 9 November. At New Hope’s last share price of $2.35, this miner has a dividend yield of 4.68%.

Jupiter Mines Ltd (ASX: JMS)

Iron ore miner Jupiter is next up, also trading ex-dividend this Monday. Jupiter Mines will be lining investors’ pockets with its interim dividend of half a cent per share, unfranked, on 9 November. At this company’s last share price of 24 cents, Jupiter Mines has a meaty dividend yield of 10%.

Bank of Queensland Limited (ASX: BOQ)

This ASX bank is next up on this week’s ex-dividend list. This bank might not be a member of the famous big four, but will still treat investors to a fully-franked final dividend of 22 cents per share on 18 November after it goes ex-div on Thursday. At Bank of Queensland’s latest pricing, the bank has a dividend yield of 4.29%.

Autosports Group Ltd (ASX: ASG)

Our final ASX share on this list going ex-dividend this week is the car dealership company Autosports. Autosports is going ex-dividend on Friday this week. It will be doling out its final dividend on 15 November, which will be worth 7 cents per share, fully franked. At Autosports’ last share price, this company has a dividend yield of 3.8%.

The post Here are 5 ASX shares trading ex-dividend this week appeared first on The Motley Fool Australia.

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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. owns shares of and has recommended Clover Corporation Limited. 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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High-growth ASX shares have felt the pinch in recent months as inflation and interest rate fears grip the market.

In the past month, the S&P/ASX All Technology Index (ASX: XTX) dropped a shocking 8% before recovering the last few days to be 1.3% down.

The theory is that companies in the fast-growth stage — usually in the technology sector — must burn through cash to increase their market share and revenue. So any rise in the future cost of money (i.e. interest rates) automatically downgrades their prospects.

According to Forager Funds Management senior analyst Alex Shevelev, these high-growth companies could be in one of 2 camps: those that will need to raise more capital to survive, or those that can survive without it.

Fellow senior analyst Gaston Amoros added in the Forager video that their Australian shares fund is pretty selective about these types of tech shares.

“We do own just a handful that we really, really like — and where I think we got very interesting entry points.”

He and Shevelev presented two of those growth stocks that Forager currently favours:

ASX share going for half price, even though business is doing fine

There is no denying that shares for cloud communications provider Whispir Ltd (ASX: WSP) have taken a battering this year.

Closing Friday at $2.45, the stock is down 45.7% from its 52-week high of $4.51.

But Amoros insisted the company is doing everything right.

“They raised capital in April at $3.70 per share to fund the expansion into the US, which is a huge opportunity for them,” he said.

“The company has since then met every single quarterly annualised recurring revenue expectation in the market… Yet the share price has neatly halved since April.”

So the only reason these tech shares have been punished is the sentiment against businesses perceived to be sensitive to interest rate rises.

This phenomenon recently presented a great entry point for Forager.

“It’s a very exciting business — they keep growing 25% to 30% per annum. They have a very low churn rate, 2%,” Amoros said.

“Net revenue retention is 117%, which means the business grows nearly 20% every year just with existing customers.”

A very sticky revenue stream

Shevelev admitted sports technology provider Catapult Group International Ltd (ASX: CAT) has “had its ups and downs in the past”.

“A new management team took over 2 years ago and ran smack bang into COVID, which damaged their ability to sell.”

So far this year, Catapult shares are down 7.6%. They closed Friday at $1.82, which is a far cry from the 52-week high of $2.32.

But the addressable market for sports technology is large and is “growing quickly”, according to Shevelev.

“The level of contracted recurring revenue in this business is close to 80% of the total revenue, and growing quite quickly.”

And like Whispir, Catapult’s recurring business is also “a very sticky revenue stream”.

“The churn is only about 5% per year.”

Shevelev liked the recent capital raising round as it funded an acquisition that improved Catapult’s video tech.

“It also put some capital on the balance sheet for them to spend over the next 2 years, when they will be free cash flow negative,” he said.

“We think that at the end of that period the business comes out stronger. And management has some very strong growth targets… and have already shown some progress.”

The post 2 high-growth ASX tech shares looking cheap right now appeared first on The Motley Fool Australia.

More reading

• Catapult (ASX:CAT) share price higher on surging annual contract value
• Whispir (ASX:WSP) share price jumps 8% on solid Q1 growth

Motley Fool contributor Tony Yoo owns shares of Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Catapult Group International Ltd and Whispir Ltd. The Motley Fool Australia owns shares of and has recommended Catapult Group International Ltd. The Motley Fool Australia has recommended Whispir Ltd. 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 Origin Energy Ltd (ASX: ORG) share price could be a mover on Monday after the company agreed to sell a 10% interest in Australia Pacific LNG.

Origin sells LNG interest for $2.12 billion

Origin has executed an agreement with a leading institutional investor in the global energy sector, EIG, to sell a 10% shareholding in Australia Pacific LNG for $2.12 billion.

Upon completion of the transaction, Origin will maintain a 27.5% holding in Australia Pacific LNG. The other major stakeholders are ConocoPhillips (37.5%), Sinopec (25%), and EIG (10%).

Origin said that it will retain its existing seats on the Australia Pacific LNG board. In addition, EIG will gain one board seat with voting rights to reflect its 10% shareholding.

From an operational perspective, Origin said it will continue its role as an upstream operator of the LNG asset. It will retain responsibility for activities such as exploration, development and production.

Origin expects the transaction to be complete by 31 December 2021. The net proceeds will amount to approximately $2 billion after adjustments and transaction costs.

The cash flow guidance for Australia Pacific LNG for FY22 is not expected to change at greater than $1 billion, with the divestment offset by an improvement in commodity prices.

The completion of the sale is subject to pre-emption rights in favour of the other two major shareholders, ConocoPhillips and Sinopec.

Management commentary

Origin CEO Frank Calabria commented on the deal:

Divesting a 10 per cent interest allows Origin to crystalise some of the significant value we have created in Australia Pacific LNG, while retaining upside to further value creation through a continuing substantial shareholding.

A diverse asset portfolio, combined with strategic investments over the past 18 months, have put Origin in a strong position to lead the energy transition. The material cash injection from this divestment provides further flexibility to deliver returns to shareholders and pay down debt, while allowing Origin to accelerate investment in growth opportunities.

Origin Energy share price snapshot

The Origin Energy share price is up 7.25% year to date after a sluggish performance in the first half.

Origin and the broader ASX 200 energy sector has surged in recent weeks. That’s as oil prices rise to 7-year highs of around US$85 a barrel.

The post Origin Energy (ASX:ORG) share price on watch following $2b deal appeared first on The Motley Fool Australia.

More reading

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• Origin Energy (ASX:ORG) share price leaps 6% on investment news

Motley Fool contributor Kerry Sun 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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If you’re looking to add some ASX dividend shares to your portfolio, then the two listed below could be worth considering.

Here’s what you need to know about these top dividend shares:

Australia and New Zealand Banking GrpLtd (ASX: ANZ)

The first ASX dividend share to consider is ANZ. It is of course one of the big four banks, with operations across consumer and business banking.

It could be a top option for income investors due to its attractive valuation and positive dividend outlook. The latter is being underpinned by its improving performance and plans to reduce its costs by $900 million by 2023 through automation and digital banking.

Morgans is positive on the company’s plans and is forecasting generous dividend payments in the coming years. It has pencilled in fully franked dividends per share of $1.45 in FY 2021 and then $1.65 in FY 2022. Based on the current ANZ share price of $28.21, this will mean yields of 5.1% and 5.8%, respectively.

Morgans has an add rating and $34.50 price target on its shares.

Scentre Group (ASX: SCG)

Another ASX dividend share to look at is Scentre. It is the owner and operator of Australia’s leading shopping centre portfolio with $50 billion of retail real estate assets under management. This comprises 42 Westfield shopping centres.

While lockdowns have hit the company hard, it looks well-placed to bounce back as trading conditions improve. In addition, the company has significant exposure to inflation. And it is partly for this reason that Goldman Sachs is bullish on Scentre.

The broker notes that Australian inflation expectations are currently at their highest level since 2015. This is a big positive for Scentre due to it being more positively leveraged to inflation than any other Australian real estate investment trust under the broker’s coverage. Goldman estimates that 70%+ of its base rental income is subject to inflation-linked escalation.

The broker is forecasting dividends of 14 cents per share in FY 2021 and then 17 cents per share in FY 2022. Based on the latest Scentre share price of $3.11, will mean yields of 4.5% and 5.5%, respectively.

Goldman has a buy rating and $3.41 price target on the company’s shares.

The post 2 excellent ASX dividend named as buys appeared first on The Motley Fool Australia.

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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 Telstra Corporation Ltd (ASX: TLS) share price will be one to watch on Monday.

This follows the release of an acquisition announcement this morning.

Why is the Telstra share price on watch?

All eyes will be on the Telstra share price at the open after it revealed that it is partnering with the Australian Government to acquire the South Pacific-based telco, Digicel.

According to the release, the telco giant and Australian Government have agreed to pay US$1.6 billion upfront and up to an additional US$250 million. The latter is subject to business performance over the next three years.

Although the Digicel business will be owned and operated by Telstra, it will only be contributing US$270 million of equity to the US$1.6 billion purchase price. The Australian Government, through Export Finance Australia, is providing the remaining US$1.33 billion through a combination of non-recourse debt facilities and equity like securities. Telstra will own 100% of the ordinary equity.

“An important milestone”

Telstra’s Chief Executive Officer, Andrew Penn, notes that the partnership represents an important milestone in the company’s relationship with the Australian Government. He also highlights that Digicel Pacific is a commercially attractive asset.

Mr Penn commented: “Digicel Pacific is a commercially attractive asset and critical to telecommunications in the region.”

“Digicel enjoys a strong market position in the South Pacific region holding a strong number one position in all markets other than Fiji where it is the number two.”

The release notes that the combined business generated EBITDA of US$233 million for the financial year ended 31 March, with a strong margin. In light of this, the transaction is expected to deliver an attractive IRR and exceeds all Telstra M&A criteria. This includes being earnings per share accretive, ROIC above WACC, and more accretive than a share buyback.

Mr Penn added: “Telstra provided guidance to the market for FY22 at its recent full year results presentation and it also provided aspirations for FY23. These did not include any allowance for the Digicel Pacific acquisition which will further enhance our outlook depending on the timing of completion.”

Telstra’s CEO also stressed that the acquisition will not distract the company from its goals.

He explained: “The transaction does not distract from Telstra’s T22 or T25 strategies and represents a unique commercial opportunity. It is consistent with the Australian Government’s interest in encouraging quality investment in the Pacific, the financial arrangements make it very attractive for Telstra and it strengthens our relationships with the Australian Government and the Pacific region. The Board unanimously believes the transaction is in the best interests of shareholders and it is on this basis that Telstra has agreed to proceed with the acquisition.”

The Telstra share price is up 24% in 2021.

The post Telstra (ASX:TLS) share price on watch after announcing US$1.6bn Digicel acquisition appeared first on The Motley Fool Australia.

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• Which ASX 200 dividend shares have investors been heavily trading this week?
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• What’s been happening with the Telstra (ASX:TLS) share price this week?
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• 2 top ASX shares with generous fully franked dividend yields

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 Telstra Corporation 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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Could the Commonwealth Bank of Australia (ASX: CBA) share price be a good one to consider right now?

At the moment, CBA shares are currently at more than $100. That puts the CBA market capitalisation at around $179 billion according to the ASX.

Whilst it’s one of the largest businesses on the ASX, it is also one that generates one of the biggest profits. In FY21 it made $8.8 billion of statutory profit. The CBA profit is more than the market caps of most businesses on the ASX.

The big bank has been seeing a recovery from the impacts of COVID-19, which were particularly felt during FY20.

FY21’s profit increased by almost 20% to $8.84 billion because of improved economic conditions and outlook resulting in a lower loan impairment expense and a “strong” operational performance.

The loan impairment expense declined by 78% to $554 million. CBA said that it has maintained a “strong” provision coverage ratio of 1.63%, reflecting the economic uncertainty from the continuing impacts of COVID-19.

Whilst the net interest margin (NIM) declined 4 basis points to 2.03% because of higher liquid assets and the ongoing impact of a lower interest rate environment, the balance sheet continued to improve. The common equity tier 1 (CET1) capital ratio, showing a measure of strength of the balance sheet, rose by 150 basis points to 13.1%. The bank pointed out that this is above APRA’s ‘unquestionably strong’ benchmark of 10.5%.

Profitability and the balance sheet can have an impact on the CBA share price.

Large shareholder returns

When CBA unveiled its FY21 result, it decided that it would reward shareholders very handsomely after a difficult FY20.

The board decided to increase the full year dividend by 17% to $3.50 per share. CBA’s leadership decided on that level of a dividend because it was supported by the bank’s strong capital position.

But on top of that, CBA also announced a $6 billion off-market share buy-back.

Regarding the buy-back, the big four bank said that:

The group’s strong capital position and our progress on executing our strategy mean we are well placed to support our customers and manage outgoing uncertainties, while also returning a portion of excess capital to shareholders.

CBA referenced that strategic divestments have generated $6.2 billion in excess capital since 2018. The bank explained that it was the most efficient and appropriate way to commence the return of surplus capital, as shareholders will benefit from a lower share count that will support return on equity and dividends per share.

Is the CBA share price an opportunity?

There are lot of sell, or equivalent, ratings on CBA at the moment.

One of the latest ratings is from Morgan Stanley, which rates CBA as a sell with a price target of $90. That implies the broker thinks that CBA shares are going to fall by more than 10% over the next 12 months.

The broker notes that the tougher lending standards set by APRA could mean less Australian loans compared to if there had been no changes. That could be impactful on CBA in-particular because of how much of its profit comes from the Australian residential market.

Using Morgan Stanley’s FY22 numbers, the CBA share price is valued at 21x FY22’s estimated earnings with a forward grossed-up dividend yield of 5.4%.

The post Is the CBA (ASX:CBA) share price a great deal right now? appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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The last 18 months have been outstanding for Australian shares, with the S&P/ASX 200 Index (ASX: XJO) gaining more than 53% since the March 2020 COVID-19 trough.

But this also means there are a lot of expensive shares out there. It’s not really a buyer’s market, one could say.

But one expert reckons it’s found a reliable large-cap ASX stock that’s going for substantially cheaper than the rest of the market.

“We estimate Seven Group Holdings Ltd (ASX: SVW) is trading on a P/E multiple of sub 14x FY22 earnings, which is about a 25% discount to the S&P/ASX 200, and in our mind an undemanding valuation,” said Airlie Funds analyst Joe Wright in a memo to clients.

Seven Group Holdings is a conglomerate that owns multiple industrial businesses, as well as its better-known namesake, free-to-air television channel Seven West Media Ltd (ASX: SWM).

Shares for Seven Group closed down 1.95% on Friday, selling for $21.12. The stock has lost around 9.5% this year so far.

“In listed equities ‘conglomerate’ is a dirty word,” Wright said.

“It can imply complexity, opacity and bloat, where the corporate structure of the company sits at odds with interest of the shareholders, and many investors choose to avoid conglomerates for these reasons.”

So why is Airlie Funds bullish on Seven Group shares?

Two gems floating in a sea of mediocrity

Two of Seven Group’s arms are mining services brand WesTrac and equipment rental provider Coates.

According to Wright, these types of business are “often unloved” by investors because of their “volatile returns and capital intensity”.

But Airlie Funds sees gems in these two subsidiaries.

“In our mind, WesTrac and Coates are quality businesses sitting within mediocre industries, pushed further out of sight by the conglomerate structure of Seven,” said Wright.

“While investors digest the highly publicised on-market takeover of Boral Limited (ASX: BLD) or lament the decline of the namesake free-to-air TV business, WesTrac and Coates quietly demonstrate their quality and form the majority of our valuation of Seven.”

Seven’s ‘sum of parts’ are bigger than current share price

Wright reckons the strength of WesTrac and Coates makes the total worth of the Seven conglomerate higher than what the current market capitalisation suggests.

This is provided management successfully implements the promised transformation program and “unlocks additional value in the non-core property portfolio”.

“In our ‘sum of the parts’ analysis of the business, we see upside to the current share price when taking a more mid-cycle view of the earnings of WesTrac and Coates, and before including any material valuation upside to the Boral business.”

The other ace up Seven’s sleeve is the concentrated ownership.

“Seven remains 60% owned by the Stokes family, with Kerry Stokes in the chairman role and his son Ryan as CEO,” said Wright.

“In our view this gives shareholders significant alignment with the board and management, and we have found that through time founder-led businesses tend to consistently outperform the broader index.”

The post Why this quality ASX 200 share is seriously cheap: expert appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo 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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