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ASX investors have been happily watching the S&P/ASX 200 Index (ASX: XJO) make a series of new all-time highs over the past few weeks. Ditto with the the US S&P 500 Index (INDEXSP: .INX). Although most investors like to buy shares when they are cheap, I’d wager there are few investors out there that don’t enjoy watching the share market climb to new highs on some level. However, one sector that is certainly not joining the party right now are China shares.

Now, most China shares are not listed on the ASX, instead finding homes on the US, Hong Kong or Shanghai stock exchanges.

But let’s take an ASX China barometer in the BetaShares Asia Technology Tigers ETF (ASX: ASIA). This exchange-traded fund (ETF) is one of the top ETFs on the ASX. It holds within it most of the famous Chinese e-commerce companies in Tencent Holdings Ltd (HKG: 0700) and Alibaba Group Holdings Ltd (NYSE: BABA). As well as JD.com Inc (NASDAQ: JD) and Baidu Inc (NASDAQ: BIDU).

Since topping out at $14.36 a unit back in February, this ETF is now down to $9.76 on current pricing. That’s a pretty steep fall of more than 30%.

Looking at some of the individual shares listed above and things look even worse. The Tencent share price is down more than 42% from its 52-week high. JD and Alibaba aren’t too far behind, while Baudi is out in front, down more than 53% from its February peaks.

So what’s going on here?

China shares face CCP wrath

Well, according to a report in the Australia Financial Review (AFR) today, it’s the Chinese government that is largely to blame. The Chinese Communist Party (CCP) has reportedly been executing a crackdown on several industries in China. Most prominantly education and tech companies.

The CCP is forcing certain educational businesses to reorganise as not-for-profit groups. It has also banned them from raising capital on the private markets. Further, the government is also bringing in more regulation, including new rules for delivery drivers.

This follows an incident last year, which saw Alibaba ditch a float of its financial division Ant Group. This also saw Alibaba founder Jack Ma retreat from public life after making comments that some interpreted as critical of the central government.

The report also states that the CCP wasn’t too happy with the IPO of Chinese ridesharing company DiDi Global Inc (NYSE: DIDI) last month. This reportedly went ahead, even though “Chinese regulators recommended a delay”.

Here’s what the report stated happened next:

This insubordination was quickly punished. Days after it went public, China’s internet regulator ordered Didi to undergo a cybersecurity review, and banned the road-hailing group from accepting new users.

DiDi shares are now trading for less than half of what they were on the company’s first day of trading.

Overall, it seems that the CCP is putting its own control of China’s largest companies ahead of what might be good for the short-term (and perhaps medium or long term) share market performance of its largest companies.

This is probably something that every ASX investor with an interest in China shares should pay attention to.

 

The post What’s gone wrong with China shares like Tencent lately? 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 Alibaba Group Holding Ltd., Baidu, and JD.com. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended JD.com. 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 Predictive Discovery Ltd (ASX: PDI) share price is zooming higher again on Wednesday.

In afternoon trade, the gold explorer’s shares are up a further 11% to 15.5 cents.

This means the Predictive Discovery share price is now up 70% in the space of a month.

Why is the Predictive Discovery share price rocketing higher this month?

The catalyst for the rise in the Predictive Discovery share price this month has been the release of several very promising drilling updates from its West African-based Bankan Project.

At the beginning of the month, the company revealed its highest impact gold intercept at the project.

Predictive Discovery’s Managing Director, Paul Roberts, commented: “The intersection of 44m at 8.0g/t Au from around 240m vertical depth is an absolute standout, better than any intercept we have obtained so far in the deposit.”

Less than three weeks later, the company revealed further stellar drilling results, driving the Predictive Discovery share price higher again.

Management advised that it followed up its prior drilling with a significantly broader and higher-grade gold intercept 100m to the north of the previous intercept. Something which management described as “simply remarkable.”

Mr Roberts added: “On the new drill section reported here, we can see a clear progression of both increasing grade and grade consistency as we drill deeper. Furthermore, with these new results, we now have a high-grade gold zone which is 100-200m long, extends down-dip for over 250m and, very promisingly, is open at depth.”

What now?

These drilling results have changed the way management is thinking about the project.

Paul Roberts explained: “Until now, NE Bankan has been shaping up as a large gold deposit with excellent geometry for a large-scale open pit mine. These new results have added a whole new dimension to the project as it now appears that the core of the deposit contains consistently higher grades in a zone which is expanding at depth. This offers clear justification for drilling deeper on this deposit.”

The company will now continue to define the new high-grade zone by infill and extension drilling. It has a multipurpose drill rig currently on site that will be focused on further defining and extending this zone over the next few months.

This could make it worth keeping a close eye on the Predictive Discovery share price over the remainder of 2021.

The post Why the Predictive Discovery (ASX:PDI) share price is up 70% in a month appeared first on The Motley Fool Australia.

More reading

• Here’s why the Predictive Discovery (ASX:PDI) share price is rocketing 52% higher
• Why the Predictive Discovery (ASX:PDI) share price is rocketing 20% 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 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 Wide Open Agriculture Ltd (ASX: WOA) share price is strongly in the green today.

Shares in the food and agriculture company are trading higher following the release of its quarterly results earlier today.

Let’s take a look at how Wide Open Agriculture performed for the quarter.   

Wide Open Agriculture reports strong growth

Earlier today, Wide Open Agriculture released its results for the fourth quarter of FY21.

The company’s report was highlighted by its eighth consecutive quarter of revenue growth.

Wide Open Agriculture reported a 28% quarter-on-quarter revenue growth of $1.459 million. The company noted that actual cash payments received for the period totalled $1.585 million.

Revenue for the quarter also represents a 155% increase in sales over the corresponding period the previous year.

Wide Open Agriculture’s management attributed the growth to its commercial strategy to scale and expects its growth trajectory to continue.

The company also noted its strong balance sheet. As at 30 June 2021, Wide Open Agriculture reported a cash position of approximately $13 million.  

Wide Open Agriculture highlights achievements

In addition to its financial performance, Wide Open Agriculture also highlighted its achievements for the quarter.

In particular, the company cited encouraging nutritional analysis of its Lupin Protein Project.

Wide Open Agriculture noted its lupin protein concentrate, with 76% protein content, was being used in several early-stage food and drink prototypes.

The company was also able to expand its distribution and product range during the quarter.

Wide Open Agriculture said it will continue to direct its efforts towards the multi-billion dollar plant-based foods sector.

More on Wide Open Agriculture

Wide Open Agriculture Limited is a vertically integrated food and agriculture company.

The company has three main areas of operation. These include its regenerative food brand ‘Dirty Clean Food’, oat products and plant-based proteins.

Wide Open Agriculture markets and distributes food products with a focus on conscious consumers in Australia and South-East Asia

Despite today’s boost, the Wide Open Agriculture share price has struggled in 2021. Shares in the company are still around 11.5% from where they started the year.

At the time of writing, the Wide Open Agriculture share price is up more than 3.29% for the day, trading at its intra-day high of 78.5 cents.

The post Wide Open Agriculture (ASX:WOA) share price lifts on results appeared first on The Motley Fool Australia.

More reading

• When Ellume is making news, these ASX shares are in focus
• Down 7% this week, why the Zip (ASX:Z1P) share price keeps falling
• Here’s why the Lake Resources (ASX:LKE) share price is charging 5% higher
• It hasn’t been a great month for the AGL (ASX:AGL) share price
• ASX 200 real estate shares are lifting today – here’s why

Motley Fool contributor Nikhil Gangaram 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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Unlisted company Ellume is making headlines again with reports claiming Australian governments are being lobbied to approve the use of at-home rapid COVID-19 tests.

While it would be the dream of many investors to see Ellume debut on the ASX, we have these shares to keep an eye on until then.

Quick refresher on Ellume

Ellume is a Brisbane-based developer of digitally enabled diagnostic products. Nowadays, however, it’s most well known for its at-home rapid COVID-19 tests.

Ellume’s rapid COVID-19 test was the first to receive emergency approval from the United States Food and Drug Administration (FDA).

As The Motley Fool has previously reported, the test developed by Ellume costs around US$30 and takes around 20 minutes to show a result.

It has a 94% success rate when detecting COVID-19. It also has a 96% success rate in detecting the virus is not present.

Why Ellume is boosting ASX shares

Right now, reports are swirling that both state and federal governments are facing pressure to approve the use of at-home COVID-19 tests like Ellume’s.

However, as we reported here, there’s a lot of pushback from government and experts.

But not all hope is lost. News of the unlisted company tends to boost a number of ASX listed shares.

AnteoTech Ltd (ASX: ADO)

Potentially the closest share to Ellume on the ASX is AnteoTech. Right now, shares in AnteoTech are trading for 8.89% more than their previous close. The AnteoTech share price is 25 cents.

One of AnteoTech’s major customers is Ellume. Ellume uses AnteoTech’s AnteoBind technology in their rapid COVID-19 tests.

AnteoTech generally moves when we hear about Ellume.

Atomo Diagnostics Ltd (ASX: AT1)

Another share that’s been boosted by today’s news is Atomo Diagnostics.

Atomo also creates at-home COVID-19 rapid tests. The company partners with Access Bio to bring its integrated device together with Access Bio’s rapid COVID-19 antibody test strips. The resulting at-home rapid test is named CareStart COVID-19 IgM/IgG.

The CareStart COVID-19 lgM/lgG received FDA emergency use approval last month.

The Atomo share price is currently 10% higher, with shares in the company trading for 22 cents apiece.

Memphasys Ltd (ASX: MEM)

Memphasys is another biotech share that the market tends to get excited about when word of Ellume hits the streets. The Memphasys share price is 4.62% higher today, trading at 6.8 cents.

The post When Ellume is making news, these ASX shares are in focus appeared first on The Motley Fool Australia.

More reading

• Here’s why the Atomo (ASX:AT1) share price is soaring 10%
• AnteoTech (ASX:ADO) share price lifts as Ellume US sales ramp-up
• The 5 best ASX shares of FY21 revealed
• The 5 best performing ASX healthcare shares of FY21, did yours make the cut?

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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Investors might have been hoping for a bounce in the Zip Co Ltd (ASX: Z1P) share price following the sharp 8.04% selloff last Thursday after the company announced its fourth quarter update.

Unfortunately, the Zip shares have been tipping lower in every single trading session so far this week.

At the time of writing, the Zip share price is down another 1.78% trading at $6.62.

Why is the Zip share price falling today?

The weakness in the Zip share price on Wednesday is broadly in line with the S&P/ASX 200 Index (ASX: XJO) and S&P/ASX Information Technology Index (ASX: XIJ) index, which are down 0.82% and 1.61% respectively.

Another factor possibly weighing on both Zip and ASX tech shares is the tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC), which fell 1.21% overnight.

BNPL sector falling flat

It’s a tough time to be bullish on the BNPL sector.

Take Openpay Group Ltd (ASX: OPY) for example. The emerging BNPL announced its June quarter results on Wednesday.

The company revealed classic high double digit and in some cases, triple digit growth across key operating metrics.

In addition, it cited the signing of strategic partnerships to drive merchant growth, an acquisition in the UK to expand into the automotive vertical and perhaps most importantly, plans to launch in the United States in early October 2021.

Despite its achievements and growth initiatives, the Openpay share price is down 2.5% at the time of writing and down almost 50% year-to-date.

While the example doesn’t directly relate to the Zip share price, it might flag the increasingly high expectations that investors might have for BNPL shares.

A similar case for the Zip share price?

The Zip share price met the same fate as Openpay when it released its fourth quarter results last week.

The company revealed triple digit growth for metrics including total transaction volume and revenue. As well as launching its BNPL products in Canada and Mexico.

The market met Zip’s achievements with a harsh 8% selloff. And this selling pressure carried over to this week, where the company’s shares are down another 7.11% to a near 6-month low of $6.59.

The post Down 7% this week, why the Zip (ASX:Z1P) share price keeps falling appeared first on The Motley Fool Australia.

More reading

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• CBA and Zip were among the most traded ASX shares last week
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• Is the Zip (ASX:Z1P) share price a buy or a sell?
• Leading brokers name 3 ASX shares to sell 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. owns shares of and has recommended ZIPCOLTD FPO. 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 Lake Resources N.L. (ASX: LKE) share price is pushing higher on Wednesday.

In afternoon trade, the lithium developer’s shares are up 5% to 42 cents.

This means the Lake Resources share price is now up over 420% since the start of the year.

Why is the Lake Resources share price pushing higher today?

Investors have been bidding the Lake Resources share price today following a positive announcement.

In fact, that announcement might make Lake Resources shareholders feel like it’s Christmas in July.

According to the release, in recognition of the support received from its shareholders, Lake Resources revealed that it intends to undertake a bonus issue of options to all shareholders with an address in Australia or New Zealand.

These options will be granted to eligible shareholders that are holding Lake Resources shares at 5pm on the record date of 10 August.

What are the options?

The release explains that all eligible shareholders will be granted one free bonus option for every 10 Lake Resources shares they own on the record date.

These options will be exercisable at 35 cents before their expiration date of 15 October, resulting in 1 new share per option. This represents a 16.5% discount to the current Lake Resources share price.

But it doesn’t stop there! For every option that is exercised, Lake Resources will issue a second option to the shareholder. On this occasion, those options will be exercisable at 75 cents each, with an expiration date of 15 June 2022.

Once again, if exercised, this will result in the shareholder being allotted one new Lake Resources share for every option.

Given that the second option represents a 79% premium to the current Lake Resources share price, management appears confident in the company’s prospects over the next 12 months.

Lake Resources’ Managing Director, Steve Promnitz, commented: “The intent of the offer is to thank supportive shareholders as Lake enters a major development phase through financing, construction and into production. Shareholders appreciated the benefits from a similar bonus option offer in 2019 and the company seeks to repeat that success.”

The post Here’s why the Lake Resources (ASX:LKE) share price is charging 5% higher appeared first on The Motley Fool Australia.

More reading

• Why the Lake Resources (ASX:LKE) share price is storming 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 AGL Energy Ltd (ASX: AGL) share price continues to set record lows as we head into the remainder of 2021.

AGL shares are now exchanging hands at $7.52, a 2.4% dip into the red from the market open.

Today’s dip extends the previous 1 month’s loss of ~16% and the previous 12 months’ loss of 55%.

Let’s take a look at some of the headwinds AGL shares have faced lately.

Planned demerger

AGL started the month on the back foot after provided an update on its planned demerger back on 30 June.

AGL explained that it will create two separate listings from the demerger: AGL will become Accel Energy. It will then form a new company, AGL Australia.

The plan will complete the work to spin off its coal-fired power plants to Accel, which will retain these under the new structure.

AGL Australia will then focus its priorities as the largest power retailer in Australia.

Considering AGL is labelled as Australia’s top emitter of “scope 1 greenhouse gases”, it is pursuing a strategy to compete with the emergence of renewables.

AGL chair Peter Botten was quoted saying in the announcement:

The impact of recent challenging market conditions on our financial performance emphasises that AGL Energy is not at an inflection point as the transition of the energy sector accelerates.

Shareholders will go to vote on the proposal later this year, with the company aiming to complete the demerger by Q4 if successful.

Guidance downgrade

AGL also withdrew its FY22 guidance amid the ongoing uncertainties with the planned demerger.

Regarding the coming financial year, it estimates a “material step-down” in earnings on a backdrop of “lower wholesale electricity prices”.

It states these prices have been low for the last 2 years and are only now to be realised by the company.

Suspension of dividend

Regarding its dividend, AGL will be terminating its special dividend program to “preserve ~$400 to $500 million in cash within AGL prior to execution of the demerger”.

Analysts are not viewing AGL’s dividend prospects highly, with an overall negative sentiment.

The company has paid dividends per share of 92 cents over the last 12 months, implying a current yield of 12.2%.

This has crept up from 11.7% on 26 July when AGL shares had set a new record low at $7.87.

However, there is an inverse relationship between share price and dividend yield. If price goes down, yield goes up, and vice-versa.

The Motley Fool encourages investors to consider the concept of a “value trap”. This is where a high and increasing dividend yield is masking a depreciating share price.

Investors who are chasing yield buy on the increasing dividend yield for a particular company, believing they have nabbed a bargain.

However, the prospect of total return is then hindered by poor performance from the underlying share price.

Such is the case with AGL shares given the rapid decline in share price over the previous 12 months, which has propped up the dividend yield.

Since it announced it would slash its dividend, AGL shares have sunk firmly into the red by 17%.

Foolish takeaway

The AGL share price has underperformed the S&P/ASX 200 Index (ASX: XJO) by a considerable amount this month. The broad index has posted a return of 1.16% over the last month versus AGL’s loss of ~17%.

It stands to reason the demerger proposal has been a major catalyst for AGL’s share price depreciation over the past month.

This, coupled with the dividend, has seen AGL shareholders continue to realise record low share prices, which offset the attractiveness of the dividend yield.

The demerger narrative certainly isn’t over for AGL, with shareholders yet to fully vote on a resolution on the matter.

The post It hasn’t been a great month for the AGL (ASX:AGL) share price appeared first on The Motley Fool Australia.

More reading

• Should you buy AGL (ASX:AGL) shares in July 2021 for the dividend yield?
• AGL Energy (ASX:AGL) share price one to watch during transition – expert
• AGL (ASX:AGL) share price checks in at new 52-week low
• The AGL share price is now trading on a 10% dividend yield
• Top brokers name 3 ASX shares to sell today

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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Can you hear that?

That’s the sigh of relief being issued by millions of Victorians and a lesser number of South Australians exiting lockdowns.

Also receiving some relief are shareholders in S&P/ASX 200 Index (ASX: XJO) real estate shares.

On the down side, ASX 200 real estate shares will continue to be hampered as lockdowns were extended by 4 weeks in the Greater Sydney area as well as some outlying regions in New South Wales. This after the state recorded 177 new locally acquired COVID-19 cases.

However, South Australia recorded no new COVID-19 cases after its snap 7-day lockdown, while the 8 cases reported in Victoria were all said to be in self isolation already.

Both states maintain some restrictions, but retail outlets have been given the green light to open their doors.

This looks to be lifting investor sentiment in ASX 200 real estate shares including Vicinity Centres (ASX: VCX) and Scentre Group (ASX: SCG).

How have these ASX 200 real estate shares been performing?

Vicinity Centres is primarily focused on owning and managing Australian shopping centres.

As you’d expect then, the ASX 200 real estate share was smashed during the February and March 2020 pandemic-fuelled market selloff, with shares crashing 59%. While shares have rebounded strongly since then, Vicinity Centres is still trading 38% below its pre-COVID levels.

At time of writing the share price is up 2.16% in intraday trading, while the ASX 200 is down 0.70%. Vicinity has a market cap of $6.8 billion and pays a dividend yield of 6.60%, unfranked.

Also gaining today is ASX 200 real estate heavyweight Scentre Group. Scentre owns and operates Westfield properties across Australia and New Zealand.

Scentre also saw its share price crushed during the 2020 COVID market panic, falling 60% from 21 February through to 27 March 2020. Over the past 12 months the share price has gained 21%.

Scentre’s share price is also bucking the falling ASX 200 today, up 1.40%. Scentre has a market cap of $13 billion. It pays a dividend yield of 2.73%, unfranked.

The post ASX 200 real estate shares are lifting today – here’s why appeared first on The Motley Fool Australia.

More reading

• These 3 ASX 200 shares were the most heavily traded today
• ASX 200 real estate shares sink 8% in a month as lockdown woes persist
• Now’s the time to buy up mega-cap tech shares
• 3 ASX shares to win when lockdown ends
• 2 buy-rated ASX dividend shares with generous yields

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 past month has actually been a pretty decent one for ASX shares. The S&P/ASX 200 Index (ASX: XJO) has spent the last 30 days or so hitting a series of all-time highs, and the ASX 200 remains up around 1% from where it was a month ago. But the Afterpay Ltd (ASX: APT) share price hasn’t been so lucky.

Yes, Afterpay has had a month to forget. Even just today, the buy now, pay later (BNPL) pioneer is down a nasty 3.39% to under $99.31 a share at the time of writing. That’s the first time Afterpay has gone under $100 a share since early June. Over the past month, Afterpay shares have now lost a whopping 16.6% on current pricing.

So what’s gone so wrong for BNPL?

Well, the primary catalyst for this downward slide was a double whammy that came earlier this month. On 14 July Afterpay shares fell almost 10% in one day, followed by its BNPL competitors in Zip Co Ltd (ASX: Z1P), Sezzle Inc (ASX: SZL) and Laybuy Holdings Ltd (ASX: LBY).

Why this panicked sell-off? Well, that was the day ASX investors got the news that none other than Apple Inc (NASDAQ: AAPL) would possibly be expanding into the BNPL space with ‘Apple Pay Later’. 

Additionally, on the same day, we heard the news that fellow US tech company PayPal Holdings Inc (NASDAQ: PYPL) would be removing late fees from its own ‘Pay in 4’ BNPL product.

PayPal and Apple are obviously global behemoths in their respective spaces, and hardly the ideal choice to have as a competitor. As such, investors punished Afterpay and the ASX BNPL shares on this news, and they have been under pressure ever since. It’s not the first sign of intense competitive pressure in this space.

We have seen companies like Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB), Mastercard Inc (NYSE: MA) and American Express Company (NYSE: AXP) all launch BNPL or ‘interest-free credit’ products over the past few years. But perhaps PayPal and Apple were two straws too many on the camel’s back.

Where to now for the Afterpay share price?

As we covered yesterday, there are still some investors who think Afterpay shares are a buy. Morgan Stanley is one. This broker currently has Afterpay shares rated as a buy, with a 12-month share price target of $145 a share.

At the current Afterpay share price, the company has a market capitalisation of $28.76 billion.

The post The Afterpay (ASX:APT) share price is down 16% in a month. Here’s why appeared first on The Motley Fool Australia.

More reading

• World’s largest fund manager says ASX volatility a great buying opportunity
• Could it be time to consider buying Afterpay (ASX:APT) shares?
• ASX 200 Weekly Wrap: Just like that… ASX back to record highs
• These ASX 200 CEOs have the most wealth tied up in their companies
• The Afterpay (ASX:APT) share price is gaining 3% today

American Express is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Sebastian Bowen owns shares of American Express and Mastercard. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Apple, Mastercard, PayPal Holdings, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $75 calls on PayPal Holdings, long March 2023 $120 calls on Apple, and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Apple, Mastercard, and PayPal Holdings. 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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Small-cap ASX shares have treated investors very well in the past year.

Yes, the big boys of the S&P/ASX 200 Index (ASX: XJO) gained more than 23% over the last 12 months. But the little guys have actually outperformed them, with the S&P/ASX Small Ordinaries (ASX: XSO) returning almost 26%.

Eley Griffiths Group managing director Ben Griffiths reckons small-cap ASX shares are in “the midst of a bull-drive”.

“Reassuring to see 66% of small cap names are trading above their 100-day moving average,” he posted on Livewire.

“Witness the solid outperformance small caps have had over large caps this past 12 months.”

Griffiths’ team is “confidently” betting that the Small Ordinaries will hit 4,177, which is a 23% premium to now.

And he picked out 5 small-cap ASX shares that might lead the charge.

Real estate and finance

Griffiths’ team likes Pepper Money Ltd (ASX: PPM) because they see it as “more entrepreneurial and opportunistic than other operators” in the lending sector.

“For example, in the mortgage broking channel, where customer service and approval times are critical, Pepper’s investment in technology, particularly in its distribution capability, has positioned it well for further market share gains.”

The company listed on the ASX in late May after an initial public offer priced at $2.89 per share. The stock closed Tuesday at $2.40.

“The company was priced on a [price-to-earnings ratio] P/E of 10.5x,” said Griffiths.

“Whilst its debut has been soft, we are optimistic about the company’s future, particularly as credit growth in Australia continues to recover post The Royal Commission.”

Related to this is another recent ASX debutant, PEXA Group Ltd (ASX: PXA).

The real estate transaction settlements system holds a practical monopoly in Australia currently.

“As various state governments have embraced [or] mandated digitisation over the last few years, electronic settlement now makes up over 70% of all transactions, of which Pexa has a circa 95% share.”

While wary of IPOs, Griffiths’ team managed to follow Pexa’s fortunes since 2018 via 42%-owner Link Administration Holdings Ltd (ASX: LNK).

“The business has excelled over that time frame, growing from ~$40 million revenue then to in excess of $200 million today.”

Gamblers going from TAB to this ASX share

Bluebet Holdings Ltd (ASX: BBT) is taking advantage of the recent trend away from traditional provider TAB to online bookmakers.

“Bluebet has been well-positioned to pick up market share, particularly from regional customers looking for alternative wagering product[s] with a quality mobile and in-app experience,” said Griffiths.

“Mobile-first with innovative wagering products, Bluebet has grown to over 90,000 registered customers, with significant growth in betting turnover (>$340mil).”

And of course, like every other online Australian bookmaker, it’s having a go at the recently deregulated US market.

‘Significant scale’ for this small cap

Chemicals company DGL Group Ltd (ASX: DGL) also listed on the ASX in late May after raising $100 million through the IPO.

It’s no startup though — it floated with a 20-year history behind it.

“Specialist licenses and significant scale positions DGL as the leader in chemical manufacturing and logistics across the Tasman, with the top 20 customers having on average over 9 years of tenure,” said Griffiths.

“With sound financials, management alignment and large end markets, DGL is a quality industrial addition to the portfolio.”

DGL shares are up almost 39% since its listing.

This small-cap ASX share is ‘over-trading’

Agricultural services provider Elders Ltd (ASX: ELD) was sold off after a “strong interim result” in May, according to Griffiths.

“We believe Elders is presently ‘over-trading’, notwithstanding a continuing flow of self-help initiatives via acquisition integrations and 8-point plan wins,” he said. 

“The group is well leveraged to livestock prices and is presently booking outsized earnings largely from record cattle prices (via voracious re-stocker demand).”

Despite the sell-off the last few weeks, Elders shares are still up more than 15% for the year.

The post 5 small-cap ASX shares on their way up 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 recommended Elders 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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