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The Fortescue Metals Group Limited (ASX: FMG) share price is making a comeback this week, bouncing 13% off Monday’s low of $14.15.

At the time of writing, the Fortescue share price is up 4.1% to $16.00.

Iron ore back above US$100

Chinese markets were closed on Monday and Tuesday as the nation celebrated its Mid-Autumn Festival.

According to Fastmarkets, iron ore prices rose sharply on Wednesday amid a strong post-holiday push on front-month swaps and futures.

Benchmark iron ore prices rallied 16% to US$108.70 a tonne.

Fortescue share price bouncing off 14-month lows

Fortescue shares were in a dire place on Monday, opening at a 14-month low of $14.15.

Iron ore has plunged more than 60% from record highs of US$230 a tonne to US$92.98 a tonne on Monday.

The price is under pressure due to China capping its steel output and rolling out energy-consumption curbs.

The market has also been very concerned about the debt-laden Chinese property giant, Evergrande, so there’s been no shortage of bearish headlines for iron ore.

The S&P/ASX 200 Index (ASX: XJO) has rallied strongly since Wednesday afternoon when Evergrande announced it had reached an agreement to meet its bond coupon payment.

The Fortescue share price rallied strongly off the news, pushing 4.2% higher yesterday to close at $15.37.

Iron ore outlook remains weak

Analysts warn that China’s iron ore demand will remain weak as the country focuses on lowering energy consumption and its property market slows.

Despite the small win this week, the Fortescue share price may continue to suffer as a result of weak iron ore prices.

UBS strategist Wayne Gordon said iron ore will come under more pressure and fall to US$80 to US$90 a tonne heading into next year, according to Mining.com.

Australia & New Zealand Banking Group Ltd (ASX: ANZ) analyst Daniel Hynes was also pessimistic about the recent rally above US$100 a tonne.

Hynes said:

This is probably the last hurrah in terms of that fundamental growth in steel demand. There is no relief on production cut pressure, as the government is asking more provinces around Beijing to cut their steel production to improve air quality ahead of the Winter Olympics next year.

The post Fortescue (ASX:FMG) share price jumps 4%, iron ore back above US$100 a tonne appeared first on The Motley Fool Australia.

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• Evergrande on investors’ minds and miners in focus. Scott Phillips on Nine’s Late News
• Why Champion Iron, Fortescue, Lake Resources, & Zip are racing higher
• Why the Fortescue (ASX:FMG) share price is up 5% today

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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The Brickworks Limited (ASX: BKW) share price is rising this Thursday after the company released its full-year results for the 12 months to 31 July 2021.

At the time of writing, shares in the construction materials manufacturer are trading for $24.96 – up 2%. The S&P/ASX 200 Index (ASX: XJO) is 0.95% higher.

Let’s take a closer look at today’s results.

Brickworks share price leaps as full-year dividend increases

• Underlying net profit after tax (NPAT) of $285 million – up 95% on the prior corresponding period (pcp);
• Total revenue fell 6% on the pcp to $890 million;
• Underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose 61% to $453 million;
• Underlying earnings per share (EPS) of $1.89 – up 93%; and
• A full-year dividend of 61 cents per share, fully franked – including a 40 cent per share final dividend. This is a rise of 3% on the pcp and represents a yield of about 2.5% on the previous day’s close.

What happened in FY21 for Brickworks?

According to the release, property contributed to a “record” full-year result, generating EBIT of $253 million. This was due primarily to a 50/50 joint venture property trust with Goodman Group (ASX: GMG).

Building products EBITDA rose 7% in the year to $97 million. The company described this performance as “relatively steady”. In North America, building products EBITDA rose 10% to $20 million. Brickworks says, however, that COVID-19 had material and significant impacts on the working conditions of its plants in the regions.

Finally, Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – the largest shareholder in Brickworks – interest in the company has increased to $3.4 billion.

These factors may be contributing to the rising Brickworks share price.

What did management say?

Brickworks chair Robert Millner commented:

Brickworks’ business model is focussed on building a diversified portfolio of assets with increasing value. Therefore, in addition to delivering record underlying earnings, I am particularly pleased to report an exceptional year of asset growth for our company.

The value of our 39.4% stake in WHSP increased by $1.2 billion over the period. Including further gains since the end of the year, the market value of this investment now stands at around $3.4 billion. Adding the net asset value of our property and building products assets, and taking into account net debt, the total asset backing is $4.8 billion.

On a per share basis, our asset value has increased by 149% over the past 10 years, and now stands at almost $32. This level of asset backing provides considerable support for our current share price.

Brickworks managing director Lindsay Partridge added:

Early in the financial year, sales were subdued, due primarily to disruptions and uncertainty at the start of the pandemic. However, as the year progressed, demand improved in response to the government stimulus measures put in place to boost housing activity across the country.

Whilst underlying demand was strong and broad-based across all states, sales momentum was stifled by intermittent lock-downs in our two largest markets, Sydney and Melbourne.

What’s next for Brickworks?

Looking forward, Brickworks says it is in a “strong” position going into the new year.

The company says the underlying demand for building products is strong with a “large backlog” of detached housing to fulfill. While the Sydney Delta outbreak has caused some disruption to the business, operations are back to 90% of their previous levels.

The company expects higher sales volumes out of North America, as well as higher earnings.

Brickworks share price snapshot

Over the past 12 months, the Brickworks share price has increased 32.6%. This is 8 percentage points greater than the ASX 200. Since the start of 2021, Brickworks has outpaced the ASX 200 by 18 percentage points.

Brickworks has a market capitalisation of about $3.8 billion.

The post Brickworks (ASX:BKW) share price jumps as net profit soars by 95% appeared first on The Motley Fool Australia.

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• Here’s why the Brickworks (ASX:BKW) share price is lifting on Monday
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Motley Fool contributor Marc Sidarous 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 Brickworks. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company 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 Washington H Soul Pattinson & Co Ltd (ASX: SOL) share price is in the green today after the conglomerate released its FY21 earnings.

Let’s take a closer look.

Soul Pattinson share price gains after robust earnings in FY21

• Group Regular net profit after tax (NPAT) up 93% year on year to $328.1 million
• Group profit after tax atttributable to members down 71% year on year to $273 million
• Net asset value (pre-tax) at $5.8 billion, up 12% on the year
• Net cash flows from investments reduced to $180.3 million, a 29% year on year drop
• Total FY21 dividend of 62 cents per share, an increase of 3% from FY20.

What happened in FY21 for Soul Pattinson?

The Soul Pattinson share price is now changing hands at $37.24 apiece, a 4.5% jump from the open.

At first glance, it’s obvious there is a disconnect in group regular profit and group profit after tax attributable to members.

Soul Pattinson explains this is due to a one off “accounting gain” of $1.5 billion that was recognised in FY20, which made its profit figures appear abnormally larger last year.

The adjustment was due to Soul “derecognising” telco company TPG Telecom Ltd as an associate “after its merger with Vodafone”. Net cash flows from investments will also take a hit due to this same offloading, due to the lost dividends from TPG.

It adds that group regular profit is a “better reflection of the underlying performance of major investments” as it excludes one off items like the one described above.

As such, the group’s 93% gain NPAT was driven by growth in key investments in Soul’s portfolio.

Brickworks capitalised on the local building market’s strengths and contributed $82 million, a 95% year on year gain.

New Hope also contributed $61 million, a climb of 45% propelled by strengths in the coal markets.

Round Oak Minerals also benefitted from strengths in the broader commodity markets and generated $103 million in revenue for the company.

“Other investing activities” was a major performer also, increasing their contribution by 87% to $129 million, as “markets recovered from Covid-19 disruptions”.

Finally, Soul increased its dividend to 62 cents for FY21, a 3% gain over the year prior. This was completed with a final dividend of 36 cents per share.

Overall, it appeared to be a significant growth period for the group, with its major portfolio segments each growing substantially over the year. This could weigh in on the Soul Pattinson share price moving forward.

What did management say?

Regarding the group’s dividend increase, Soul Pattinson chair, Robert Millner proudly said:

One of the strengths of WHSP’s portfolio over the years is the way that the cash generation from assets has supported increasing dividends through any market conditions.

Extending praise on the dividend, Millner added:

While the cash generation was less than the prior year due to a large special dividend paid by TPG in FY20, the cash from the portfolio remains strong and has again supported increased dividends to shareholders. Total dividends paid by WHSP in FY21 represents 82% of Net cash flows from investments.

What’s next for Soul Pattinson?

Soul Pattinson’s managing director, Todd Barlow, acknowledged that “markets remain volatile”, and that there is a need to “constantly adjust portfolio allocations” with active management.

The company is also “very excited” about its upcoming merger with Milton. It says the blending of the two entities will “deliver a significant increase” to Soul Pattinson’s scale, and provide “additional liquidity to fund strong deal flow”.

It is also a diversification play for Soul, given its “higher cash generation” and “additional liquidity” to fund future investments.

Soul sees an additional $2 billion in liquidity from the deal to provide future investment financing.

The integration will also add “up to 30,000 new shareholders” and will result in a “significant increase in (Soul’s) market capitalisation”.

The Soul Pattinson share price has climbed 18% this year to date and has gained just over 50% over the past 12 months.

The post Soul Pattinson (ASX:SOL) share price jumps after 93% profit growth in FY21 results appeared first on The Motley Fool Australia.

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The author Zach Bristow has no positions 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 Washington H. Soul Pattinson and Company 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 Premier Investments Limited (ASX: PMV) share price is heading north today. This comes after the retail conglomerate released its full-year results for the 2021 financial year.

After the time of writing, Premier shares are swapping hands for $27.74 apiece, up 3.47%.

Premier Investments share price jumps on record result

The Premier Investments share price is erasing some of this week’s losses following the company’s robust result for the 12 months ending 30 June 2021. Here are some of today’s key highlights measured against FY20’s scorecard:

• Statutory net profit after tax of $271.8 million, up 97.3%;
• Retail sales of $1,443.2 million, up 18.7%;
• Record retail gross profit of $927.9 million;
• Record retail gross margin up 331 basis points to 64.3%;
• Underlying retail earnings before Interest and tax (EBIT) of $351.9 million, up 88%; and
• Final fully franked dividend of 46 cents per share, up 27.8%.

What happened in FY21 for Premier?

Underpinning the robust performance, Premier’s Peter Alexander business delivered $100 million in sales growth in FY21. The record $388.2 million came from online, full-price and outlet stores across Australia and New Zealand.

Peter Alexander continuously invested in inventory, stocking its products at the key gift-giving periods across important holidays. This steered customers to freely shop without product shortages in the fast-moving retail environment.

In addition, the group’s Apparel brands also achieved record sales of $841.6 million, up 25.3% on FY20. A strong stock position led to improved sales and gross margin growth across all brands.

The group however faced temporary government-mandated store closures across its global store network for 52 of the 53 trading weeks. Premier stated this added immense operational complexity across every aspect of the entire business.

The impact of COVID-19 was particularly severe on the Smiggle business as schools were closed for long periods. A fundamental aspect to Smiggle thriving is children attending school.

The company noted that in countries and markets where schools have re-opened under easing restrictions, Smiggle is faring well.

Cash on hand stood at $523.3 million for the end of FY21.

What did management say?

Chair Solomon Lew touched on the results possibly driving the Premier Investments share price:

…Premier faced temporary store closures across our global store network due to government-mandated closures. On average, 176 stores were forced into temporary closures in any given week during the year. This resulted in 50,581 lost retail store trading days during FY21.

Yet today Premier is very pleased to announce record results for the year. Today’s announcement is a testament to the skills and dedication of our entire global team. To have delivered these record results in a very difficult and volatile environment is a truly outstanding achievement.

What’s next for Premier?

For the first 7 weeks of FY22, the group’s retail store network has continued to be impacted by store closures. In total, 661 stores were temporarily closed across Australia and New Zealand throughout August and into early September. This represents 56% of the global retail store network.

Premier advised it has since progressively been able to re-open more than 170 of these stores in the past two weeks. Global sales are down around 9.5% compared to this time last year.

Mr Lew also talked about FY22, adding:

Premier remains optimistic about the all-important second quarter of FY22 as the vaccine rollout progresses and the economy re-opens. Premier Retail has again made the strategic decision to invest in inventory and we have the appropriate supply chains to support this decision and ensure we are in stock of wanted product.

No guidance was given by management for the FY22 period.

Premier Investments share price snapshot

The Premier Investments share price has struggled over the past week but has been performing strongly this year so far.

It is up by more than 16% since January 1. It has also gained more than 47% in the past 12 months.

The post Premier Investments (ASX:PMV) share price surges on FY21 results, NPAT up 97% appeared first on The Motley Fool Australia.

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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 recommended Premier Investments 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 Fonterra Shareholders’ Fund (ASX: FSF) share price is in the green this morning following the release of the company’s results for financial year 2021 (FY21).

Within its results, Fonterra announced it’s considering divesting its international operations, with Fonterra Australia potentially undergoing an Initial Public Offering (IPO).

At the time of writing, the Fonterra share price is $3.77, 3.29% higher than its previous close.

A quick note: Fonterra reports in New Zealand Dollars. All dollar amounts have been converted to Australian Dollars at the current exchange rate of AUD$1 to NZD$1.03.

Fonterra share price higher despite lower earnings

Here’re the key performance metrics for Fonterra’s FY21:

• $578.96 million of reported profits after tax, down $57.99 million on that of FY20.
• Around $20.4 billion of revenue, up 1% on the previous financial year’s.
• Normalised earnings per share of 33 cents.
• 14 cent final dividend, bringing total dividends for FY21 to 19 cents.
• $11.21 billion of total payout to New Zealand farmers.

Over FY21, the average farmgate price of milk solids paid by Fonterra was $7.29 per kilogram.

Over FY21, the company reduced its net debt by $842.82 million. As of 30 June, it has around $3.67 billion of debt.  

Fonterra’s divestment intentions

It might not be its earnings that have got the Fonterra share price in the spotlight today.

All eyes are on Fonterra following news it intends to divest its Australian and Chilean operations to focus on building its New Zealand business.

The company believes demand for New Zealand milk will increase from now until 2030 due to its quality and sustainability. However, it also expects the country’s milk production to drop or remain flat.

Therefore, it plans to divest its Chilean dairy brand, Soprole, and its subsidiary, Prolesur. Fonterra will start the process to divest its integrated investment in Chile.

Meanwhile, the company is in discussions about the future of Fonterra Australia.

Fonterra stated Australia continues to be an important export market for its products and is considering what the best ownership structure will be for the business.

One option is to list Fonterra Australia, with Fonterra retaining a significant stake.

On the divestment intention, Fonterra’s CEO, Miles Hurrell commented:

We see both these moves as critical to enabling greater focus on our New Zealand milk and, importantly, allowing us to free up capital, much of which is intended to be returned to shareholders.

Through its planned divestments and improved earnings, Fonterra intends to return around $966.5 million to shareholders by FY24. It also plans to have around $1.93 billion of additional capital available for investment in growth and further returns to shareholders.

Possible changes to shareholding structure

The company also released a proposed change to its shareholding structure today.

A new maximum shareholding requirement would be set at 4-times milk supply, compared to the current 2-times milk supply. This is intended to strike a balance between supporting liquidity in the farmer-only market while avoiding a significant concentration of ownership.

The company’s also considering allowing more types of farmers to buy shares, extending exit provisions, and easing entry provisions.

The Fonterra Shareholders’ Fund would also be capped and the Fonterra Shareholders’ Market would continue to operate as a farmer-only market, but market participants won’t be able to exchange shares into units in the fund.

The new structure is subject to shareholder approval.

What did management say?

Hurrell commented on the news driving the Fonterra share price today, saying:

Although the higher milk price and tightening margins put pressure on earnings in the final quarter, this is a strong overall business performance…

The work we’ve done as part of the 2019 strategic reset means we’re well placed to take advantage of favourable industry dynamics. Growing global demand for dairy coupled with constrained supply has resulted in high prices for our milk. Our resilient supply chain has allowed us to get products to market and the healthy demand for our farmers’ New Zealand milk has seen a record shipping year for the Co-op.

We’ve continued to reshape our business and the sales of our joint venture farms and wholly-owned farming hubs in China. Our continued focus is to get our New Zealand milk to the world.

What’s next for Fonterra?

The Fonterra share price might be being boosted by its positive outlook for FY22.

Over FY22, Fonterra will be focusing on reducing its carbon footprint and returning value to its shareholders.

The company’s earnings guidance for FY22 is between 24 and 38 cents per share – pretty much in line with its FY21 earnings.

It also reaffirmed its forecast farmgate milk price range is between $7.01 and $8.46 per kilogram of milk solids, with a midpoint of $7.73 per kilogram of milk solids.

Fonterra notes that New Zealand’s dairy industry is the lowest carbon producing industry of its kind.

However, it will be working to reduce the methane output of dairy production through research and development initiatives.  

By FY30, the company wants to achieve average farmgate milk prices of between $6.28 and $7.25 per kilogram of milk solids for the decade ending FY30.

It also wants to increase its operating profits by 40% to 50% on that of FY21.

Fonterra share price snapshot

2021 hasn’t been a good year for the Fonterra share price on the ASX.

It has fallen 10% year to date. However, it is 3% higher than it was 12-months ago.

The post Fonterra (ASX:FSF) share price gains amid profit slide and flagged Australian arm IPO appeared first on The Motley Fool Australia.

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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 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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Centuria Industrial REIT (ASX: CIP) has just revealed a number of property acquisitions.

This real estate investment trust (REIT) is all about investing in industrial property for its investors.

Centuria Industrial REIT’s acquisition spending spree

The industrial property business has entered into agreements to acquire four urban infill industrial freehold assets and completed the acquisition of four other freehold assets for a total cost of $351.3 million.

These acquisitions come with an average initial yield of 4.1% and a weighted average capitalisation rate of 4.23%.

Looking at the properties it’s buying, there are two in NSW, three in Victoria, two in Queensland and one in Western Australia. Five of the properties are distribution centres, two are for transport logistics and one is a cold storage property.

The main property that is being acquired is 58-88 Lisbon Street, Fairfield in NSW for a purchase price of $200.2 million.

There’s an occupancy rate of 100% with this portfolio, with a weighted average lease expiry (WALE) of 3.8 years.

The fund manager of Centuria Industrial REIT, Mr Jesse Curtis, believes there is rental growth potential with these properties:

We consider the acquisitions to be under rented as market rents have continued to grow at a rapid rate on the back of accelerating tenant demand, driven by e-commerce and last-mile users. The WALE of 3.8 years provides the opportunity to leverage CIP’s strong leasing capability to achieve positive rental reversion capturing outsized rental growth being experienced within infill industrial markets. In addition, a number of the sites have value add potential through leasing, developing or reportioning, adding to CIP’s value-add pipeline.

Further opportunities

Centuria Industrial REIT said that it’s also looking at a number of other off-market opportunities and is doing due diligence on over $100 million of further potential acquisitions.

Capital raising

The REIT announced that to partially fund the acquisitions, and provide capacity to debt fund its pipeline of acquisitions in due diligence, it’s going to do a fully underwritten institutional placement to raise approximately $300 million.

The issue price will be determined through a book build process today, with an underwritten floor price of $3.80 per unit.

That floor price represents a 5.2% discount to the last closing price and a 4.6% forecast FY22 distribution yield.

Eligible unitholders will be able to buy up to $30,000 in additional units, at the same issue price under the placement, adjusted for the 30 September 2021 distribution of 4.325 cents per unit. This part of the raising is subject to a cap of $25 million (though this may be increased).

Financial impacts

When taking into account the acquisitions and capital raising, Centuria Industrial REIT reaffirmed its FY22 guidance provided in August 2021 of funds from operations (FFU) of no less than 18.1 cents per unit and a distribution of 17.3 cents per unit.

Pro forma gearing is forecast to be 30.3% after the acquisitions and institutional placement. This is at the bottom end of its target range, giving it more capacity to fund its identified pipeline.

Based on the current Centuria Industrial REIT share price, the current FY22 distribution yield forecast is 4.3%.

The post Centuria Industrial REIT (ASX:CIP) reveals acquisitions worth $351 million 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 Openpay Group Ltd (ASX: OPY) share price is charging higher on Thursday morning.

At the time of writing, the buy now pay later (BNPL) provider’s shares are up over 5% to $1.34.

However, despite this gain, the Openpay share price is still down a disappointing 43% in 2021.

Why is the Openpay share price charging higher?

Investors have been bidding the Openpay share price higher today after it announced two new customer agreements.

According to the release, the company is leveraging its existing relationship with Kogan.com Ltd (ASX: KGN) in the business to customer (B2C) space to secure a new OpyPro business to business (B2B) enterprise contract win.

The release notes that OpyPro will integrate with Kogan’s ecommerce systems to deliver an enhanced and simplified buying and transaction experience for business customers.

In addition, it notes that OpyPro’s funding partner Lumi will provide credit to Kogan’s business customers.

Openpay’s CEO and Managing Director, Michael Eidel, commented: “We are thrilled to have added Kogan.com to our growing list of B2B customers. This deal demonstrates strong demand from businesses for an easier and more efficient payment experience. Credit term funding for business buyers in Australia will be provided by OpyPro’s funding partner, Lumi, enabling OpyPro to operate as a capital-light, SaaS-based product.”

What else was announced?

Also giving the Openpay share price a lift was news that the company has signed an agreement with Nissan Australia.

The release explains that Nissan Australia will work with its dealership network to increase the availability and use of Openpay’s consumer payment offerings among its 188 network dealerships.

The agreement includes marketing campaigns to drive new customer growth and targeted communication to Nissan Australia’s existing customer base.

Openpay’s ANZ CEO, Dion Appel, said: “We are excited to have signed with Nissan as a new customer in the Automotive vertical, further enhancing our leadership position. Through this partnership, we can help give Nissan’s customers greater payment flexibility and options for the automotive servicing needs.”

This deal follows recently announced agreements with Ford Australia, Pentana Solutions, Dunlop Super Dealers, DC Motor Group, Norris Motor Group, Thomson Motor Group, Janrule Group and Goodyear Autocare.

Management notes that the agreement delivers on its strategy of becoming a leader in its chosen verticals, primed for longer, larger and customised payment plans with healthy revenue yield.

The post Openpay (ASX:OPY) share price up 5% on Kogan and Nissan deals 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. owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

It’s common knowledge among the investing community that cryptocurrency prices are extremely volatile, and major price fluctuations on a day-to-day basis are normal. So, if you want safer portfolio exposure to this burgeoning asset class, what are you supposed to do? 

One popular course of action is to invest in shares of public companies that offer products and services that serve the cryptocurrency market. Buying a stock like Coinbase (NASDAQ: COIN) might make a lot of sense at first, but it too has a serious flaw that you should keep in mind. 

Let’s break down what investors need to know. 

Following Bitcoin up and down 

Since Coinbase had its initial public offering (IPO) on April 14 of this year, the stock has fallen 28% from the closing price on its first day of trading. The business seems to be thriving as revenue and net income in the second quarter grew astronomically higher than they were in the prior-year period. And the number of monthly transacting users now stands at 8.8 million, up from just 1.5 million in the second quarter of 2020. 

Coinbase, which generates the majority of its revenue from trading fees, does well when cryptocurrency volatility is high. This has certainly been the case in 2021 as Bitcoin, the largest cryptocurrency by market capitalization, has been on a roller-coaster ride this year. But what stands out the most is just how closely Coinbase’s stock price follows that of Bitcoin. In the time since Coinbase’s IPO roughly five months ago, Bitcoin’s price has declined about 25%, not much different than Coinbase’s performance. A look at the chart below makes it quite apparent how these two assets track each other.

Data by YCharts.

In an interview from April, Coinbase co-founder and CEO Brian Armstrong mentioned how owning shares of the company could be viewed as an “indexed bet on the crypto space more broadly.” He also explained that his company isn’t “tied to one crypto asset.” Although Bitcoin accounted for just 24% of total trading volume for the business in the most recent quarter (down from 57% in the prior-year period), Armstrong’s statement hasn’t proven true so far during Coinbase’s short public history. 

The company currently offers 83 digital assets for trading and 142 for custody. Furthermore, an emphasis on boosting subscription and services revenue in the years ahead could disconnect Coinbase from the price of Bitcoin. This has not, however, been the case recently. And investors looking to put money to work in cryptocurrencies via the stock market should think twice before buying Coinbase shares. 

The investor takeaway 

Becoming a successful investor in general is challenging, and investing in a new and unfamiliar asset class is even harder. While it may seem like owning shares in Coinbase is a relatively safe bet to gain exposure to the cryptocurrency market, the stock has clearly been quite volatile in its own right. The business is growing its non-Bitcoin revenue, but based on their similar trajectories, the market still views the two assets in the same light.

It’s important to not only understand the fundamentals of any particular company that you’re interested in but also how the market perceives that business and stock. Coinbase is still heavily influenced by the rise and fall of Bitcoin. Keep this critical point in mind if you’re considering Coinbase as an investment.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post This top cryptocurrency stock has a major drawback — Here’s what investors need to know appeared first on The Motley Fool Australia.

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Neil Patel owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin. 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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The AGL Energy Limited (ASX: AGL) share price is flying higher this morning. It is currently up 4.93% to $5.96.

This comes after the company’s executives copped a grilling from shareholders at its annual general meeting (AGM) on Wednesday.

In a heated exchange, shareholders voiced their concerns on a number of issues with the company’s response to climate risk.

Let’s take a closer look.

What went down at AGL’s AGM yesterday?

The major takeout was that 55% of shareholders voted in favour of the energy giant setting short and long-term emissions targets in accordance with the Paris Agreement.

This is despite AGL’s board recommending shareholders vote against the proposition.

However, of the 6 resolutions put forward at the AGM, item 6 was was a two-part segment. The “Paris Goals and Targets” item was called resolution 6B. The former, 6A, was an “amendment to the (company’s) constitution”.

Voting to amend AGL’s constitution did not receive broad voting support.

This is important – because in a bit of a loophole, according to AGL’s chair, Peter Botten, the Paris Goals resolution was “contingent” on the constitution being amended.

So even though the majority 55% of shareholders voted in favour of AGL to adopt decarbonisation targets, the resolution was not passed.

Not only did the majority of shareholders vote in favour, but it was also the largest ever contested vote in Australian corporate history – without board support. As such, yesterday’s vote was considered an “advisory vote” only.

Botten also said AGL’s board “does not believe it is in the best interests” of the company to make the transitional “commitment unilaterally” into renewables.

“The task is to create a glide path rather than a crash landing,” Botten explained. He noted that policy and investment reasoning are also key factors in making any change as smooth as possible.

Nonetheless, even though AGL acknowledged “more is required” and that work is underway to “define the decarbonisation roadmaps” for the upcoming demerger, AGL remains without short and long-term decarbonisation goals, for now.

AGL share price snapshot

The AGL share price has struggled this year to date, falling 52% since January 1.

The shares have also fallen by about 60% over the past 12 months. That’s well behind the S&P/ASX 200 index (ASX: XJO)’s return of around 25% over the last year.

The post AGL (ASX:AGL) share price climbs as shareholders vote for greater carbon cuts appeared first on The Motley Fool Australia.

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The author Zach Bristow has no positions 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 Transurban Group (ASX: TCL) share price has returned from its trading halt and is falling.

At the time of writing, the toll road operator’s shares are down 2.5% to $13.84.

What’s happening with the Transurban share price?

The Transurban share price was placed into a trading halt earlier this week so that it could undertake an equity raising.

The company is aiming to raise ~$4.2 billion from investors to support its acquisition of the remaining 49% stake in the WestConnex toll road network from the NSW Government for $11.1 billion. This comprises a $3.97 billion entitlement offer and a $250 million placement to AustralianSuper.

Once the acquisition completes, Transurban and its Sydney Transport Partners (STP) consortium will own 100% of WestConnex.

What’s the latest?

This morning the company revealed that it has successfully completed the institutional component of its fully underwritten entitlement offer.

The institutional entitlement offer raised gross proceeds of approximately $2.9 billion at an 8.3% discount of $13.00 per new share. This will result in the issue of approximately 223 million new Transurban shares.

Management advised that the offer attracted strong demand from institutional shareholders, with approximately 93% of eligible entitlements taken up.

In addition, the institutional shortfall bookbuild was well supported by eligible institutional shareholders and new investors. So much so, the entitlements not taken up were sold and cleared in the institutional shortfall bookbuild at $13.90 per new share. This is 90 cents higher than the offer price.

Transurban’s Chief Executive Officer, Scott Charlton, was pleased with the equity raising.

He commented: “The acquisition of the remaining 49% equity stake in WestConnex is a privilege for Transurban and its consortium partners, and we thank our investors for supporting this transaction.”

The company will now push ahead with its retail entitlement offer, which aims to raise the balance on the same terms.

Why acquire WestConnex?

The company believes WesConnex is a key asset to own and expects it to generate significant free cash in the future, supporting its distributions.

Mr Charlton said: “WestConnex is one of the largest road infrastructure projects in the world with an enterprise value of $33 billion based on this transaction. WestConnex is a key component of the NSW Government’s integrated transport plan to ease congestion and connect communities in Sydney.”

“We feel privileged to take Sydney Transport Partners’ holding in this critical asset to 100%. This transaction is expected to support Free Cash growth and distributions for Transurban security holders for the life of the concession,” he added.

The Transurban share price is now up just 1% in 2021.

The post Why the Transurban (ASX:TCL) share price is falling today 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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