Tag: Motley Fool

The Xero Limited (ASX: XRO) share price is pushing higher on Monday.

At the time of writing, the cloud-based accounting and business platform provider’s shares are up 2% to $132.80.

This latest gain means the Xero share price is now up over 52% since this time last year.

Why is the Xero share price rising today?

Today’s gain in the Xero share price appears to have been driven by a broker note out of Morgan Stanley this morning.

According to the note, the broker has retained overweight rating and lifted its price target by 1.5% to $137.00.

What did Morgan Stanley say?

The note reveals that Morgan Stanley has been looking at the results of its arch rival Intuit.

It believes Intuit’s third quarter update points to a quicker than anticipated recovery in the global market for accounting software. It feels this bodes well for Xero.

This is particularly case given that Intuit’s update showed that there was strong growth in the take-up of additional products and services such as payroll and payments. It appears optimistic Xero is benefiting in this way also.

Morgan Stanley notes that Xero has been busy adding to its offering over the last 12 months with the bolt-on acquisitions of Planday, Tickstar, and Waddle. These have expanded its capabilities into accounting-adjacent services.

What else has been happening?

Morgan Stanley isn’t the only broker that has been looking at Intuit’s result and the implications it could have for Xero.

According to a note out of Citi on Friday, based on management commentary, its analysts suspect that Xero could be outperforming Intuit’s Quickbooks offering in the UK market.

However, it isn’t enough for the broker to change its rating. It continues to believe the Xero share price is fairly priced and has held firm with its neutral rating and $136.00 price target.

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The Inghams Group Ltd (ASX: ING) share price has been a positive performer again on Monday.

In afternoon trade, the poultry producer’s shares are up 3.5% to $3.53.

This means the Inghams share price is now up 12% over the last two trading sessions.

Why is the Inghams share price charging higher?

Investors have been bidding the Inghams share price higher since the release of its FY 2021 guidance on Friday.

For the 12 months ending 25 June, Inghams is forecasting statutory earnings before interest, tax, depreciation and amortisation (EBITDA) of $438 million to $448 million and statutory net profit after tax of $80 million to $87 million. This has been driven by the benefits derived from operational efficiencies implemented throughout the year and improved trading conditions.

Management also noted that the guidance was well-ahead of the analyst consensus estimates.

Can its shares keep on climbing?

One leading broker believes the Inghams share price still has a long way to run from here.

According to a note out of Goldman Sachs, its analysts have retained their buy rating and lifted their price target on the company’s shares to $4.50.

Based on its current share price, this implies potential upside of 27% over the next 12 months excluding dividends. And if you include dividends, this potential return stretches to ~34%.

What did Goldman say?

Goldman commented: “The ANZ Poultry market is improving and ING has issued a positive trading update as we head to a close in FY21. We have upgraded our FY21-FY23 EBITDA by +2-5% and EPS by +2-11%. While today’s announcement is specific to FY21 profitability, we expect some flow through to future years from the high earnings base. Our 12-month TP has increased +5% to A$4.50, implying 39% [prior to today] total return potential. We retain our Buy rating.”

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Bitcoin (CRYTP: BTC) miners and cannabis growers may not appear to share much in common at first glance.

But there’s a surprising connection between the 2 emerging assets.

An electric connection, to be precise. As British police discovered last week.

How much electricity do we need?

Indoor cannabis cultivation requires quite a bit of electricity, mainly to power the high wattage lights which are intended to mimic the sun.

In the world’s fast-growing legal cannabis markets, cultivators tend to toe the line when it comes to tapping into the grid. Meaning they do so legally. And they pay their utility bills just like any other business.

Illicit cannabis growers, on the other hand, sometimes do an end run around the utilities by illegally tapping into power sources they’re not monitored for.

Now, with the electric usage of Bitcoin mining skyrocketing, it would seem that some Bitcoin miners are following that same illegal path.

As Bloomberg reports, police using drones in West Midlands, England discovered a warehouse throwing off an unusual amount of heat. “When British police raided a warehouse, they were expecting to find a cannabis farm. Instead they found banks of computers illegally siphoning the electricity needed to mine for Bitcoin.”

All up there were about 100 computers illegally tapped into the grid.

Police Sergeant Jennifer Griffin admitted, “It’s certainly not what we were expecting. It had all the hallmarks of a cannabis cultivation set-up.”

While Bitcoin mining is perfectly legal in the UK, stealing electricity isn’t, and charges may be pending.

So, just how much electricity does Bitcoin mining require?

According to Citigroup Inc (NYSE: C), the world’s largest cryptocurrency by market value uses 66 times more electricity today than it did back in 2015. And, as Bloomberg noted, the University of Cambridge “estimates it uses more electricity globally in a year than the Netherlands”.

Bitcoin price snapshot

The Bitcoin price is up 1% over the past 24 hours. One Bitcoin is currently trading for US$34,940 (AU$45,377).

Although the token is now well off its all-time high of US$64,829, set in mid-April, it’s still up 19% year-to-date. And lest we forget, only 12 months ago crypto investors could have picked up a Bitcoin for US$9,423.

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The IGO Ltd (ASX: IGO) share price is trading slightly higher today following the release of an announcement.

At the time of writing, the nickel and lithium-focused mining company’s shares are up to $7.63.

What did IGO announce?

This afternoon IGO announced the successful completion of the divestment of its 30% interest in the Tropicana Gold Mine to Northern Star Resources Ltd (ASX: NST).

According to the release, the net proceeds from the divestment totalled $889 million, which comprises $903 million of sale consideration less $14 million of completion adjustments.

In addition, the Tropicana related hedge book has an approximate out of the money mark to market position of $20 million. IGO revealed that it intends to settle these positions progressively during June 2021.

What now?

Management notes that the completion of the divestment has maximised the value of Tropicana for IGO’s shareholders and will allow the company to pursue its strategic focus on commodities critical to enabling clean energy.

It will also allow IGO to complete the transaction with Tianqi Lithium without the need to draw on debt facilities, while retaining a strong balance sheet with pro forma net cash of $300 million.

The Tianqi Lithium transaction will see the company acquire a 49% non-controlling interest in a new joint venture with Tianqi Lithium. This will provide it with a 24.99% indirect interest in the world-class Greenbushes Lithium Mining and Processing Operation and a 49% indirect interest in the Kwinana Lithium Hydroxide Plant. Both are located in Western Australia.

IGO’s Managing Director and CEO, Peter Bradford, commented: “We are delighted to have successfully divested, and now settled, the transaction with Regis to divest our stake in the Tropicana Gold Mine. Tropicana has been a wonderful asset for IGO however, our strategic focus on clean energy metals and pending lithium transaction with Tianqi meant a divestment at this juncture was the best outcome for our shareholders.”

The Northern Star share price is up 3% to $11.78 today.

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• Leading brokers name 3 ASX shares to buy today

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It might be ancient history now, but there was a time when Transurban Group (ASX: TCL) was regarded as one of the most reliable ASX dividend shares on the S&P/ASX 200 Index (ASX: XJO). This company had managed to increase its dividend distributions every year between 2009 and 2020 And by a wide margin too. In 2009, Transurban paid out 22 cents per share in distributions. By 2019, that had grown to 59 cents per share, an annual compounded growth rate of 10.37%.

This yield seemed very secure too. Transurban operates toll roads, a highly stable and predictable earnings base. Well, that’s what we all thought until COVID-19 came along. It turns out that a global pandemic was one of the few events that could spark a situation where everyone effectively stopped driving. Well, not everyone. But in April last year, Transurban reported that traffic volumes had dropped by close to 50% on some of its roads.

Traffic volumes slowly recovered over 2020, but that wasn’t enough to prevent some serious damage to Transurban’s dividend distribution abilities. In 2020, the company managed to pay out just 47 cents in distribution, breaking its 10-year streak of annual increases. Things have still not recovered today either. Last August, Transurban paid out a distribution of 16 cents per share. Back in February this year, Transurban’s distribution came in at 15 cents a share.

Have we found the bottom for Transurban’s dividend?

In its half-year earnings report that Transurban delivered in February, the company did not expand too much on its future distribution plans. It only told us that the 15 cents per share distribution was “114% covered by 1H21 free cash [flow]”. It went on to say that “FY21 distribution [is] expected to be in line with Free Cash, excluding Capital Releases”.

So how do these dividend distributions translate into yield for Transurban shares? Well, on the current (at the time of writing) Transurban share price of $13.88, Transurban’s last two distribution payments of 16 cents and 15 cents per unit equate to a trailing yield of 2.23% for Transurban shares. 

What does the future hold?

A trailing yield of 2.23% is not what investors were used to before COVID. But this is a Brave New World Transurban is operating in today. Remember, the company told us in February that its traffic volumes between 1 July and 31 December 2020 were down 17.8% against the same period in 2019. Transurban funds its dividends through free cash flow. As such, we would probably need to see these declines reversing and traffic volumes to get close to, or back to, where they were pre-COVID before the company can increase its dividends back to its old levels. 

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Motley Fool Australia Chief Investment Officer Scott Phillips joined Weekend Sunrise on Sunday to discuss the sting in the tail for some workers as Super increases (and preemptively channels Bob Hawke), and celebrates roaring sales for Aussie icon, Akubra.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) has given back its morning gains and is edging lower. At the time of writing, the benchmark index is down 0.1% to 7,173.4 points.

Four ASX shares that have not let that hold them back today are listed below. Here’s why they are pushing higher:

Bravura Solutions Ltd (ASX: BVS)

The Bravura share price is up 7% to $3.52. This is despite there being no news out of the financial technology company today. However, as I noted at the weekend, Bravura has been tipped as a share to buy recently by analysts at Goldman Sachs. They see a lot of value in its shares at the current level.

Costa Group Holdings Ltd (ASX: CGC)

The Costa share price is rebounding from last week’s selloff and is up 3.5% to $3.43. Bargain hunters may be swooping in today on the belief that the horticulture company’s shares were oversold last week. Investors were heading to the exits in their droves following the release of an update at Costa’s annual general meeting.

Inghams Group Ltd (ASX: ING)

The Inghams share price is up 2.5% to $3.50. This morning analysts at Goldman Sachs released a bullish broker note relating to the poultry producer. According to the note, the broker has retained its buy rating and lifted its price target to $4.50. Goldman made the move in response to the company’s solid trading update released at the end of last week.

Propel Funeral Partners Ltd (ASX: PFP)

The Propel share price has risen 6% to $3.62. The catalyst for this was news that the funeral company has entered into an implementation agreement with its manager, Propel Investments. The agreement is intended to internalise key senior management functions. The independent directors stated that they believe the internalisation proposal is in the best interests of Propel Funeral and its shareholders.

More reading

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The market is pushing further into record territory this morning and those bitten by the FOMO buy will be pleased to know that there are at least two ASX shares that brokers just added to their “buy” list.

The S&P/ASX 200 Index (Index:^AXJO) hit a high of 7,203 this morning before easing slightly into the red during lunch time.

Investors are waiting for more positive cues before pushing the index higher. This pause could be a good time to look at ASX newbie – the Peter Warren Automotive Holdings Ltd (ASX: PWR) share price.

The ASX share that’s the newest buy idea

The auto dealer only debuted on the bourse last month, and what a great time to enter the market!

You only need to look at its peers to see why. The Eagers Automotive Ltd (ASX: APE) share price and Autosports Group Ltd (ASX: ASG) share price have revved up recently. Lack of supply and strong demand for vehicles have created near-perfect conditions for the sector.

Morgan Stanley initiated coverage on the Peter Warren share price with an “overweight” recommendation.

While the sun won’t always be shining this brightly on the industry, the broker reckons the shares are cheap even on more normal profit margins.

Tailing a bigger rival to growth

What’s more, Morgan Stanley thinks Peter Warren will follow in the footsteps of the Eagers Automotive share price.

“We think the M&A opportunity resembles that of APE – which scaled from A$40m PBT in 2010, to A$120m+ five years later, through organic, inorganic and synergy execution,” said the broker.

“We can envision a similar bull case for PWR.”

Morgan Stanley’s 12-month price target on the Peter Warren share price is $4.40 a share.

Temp headwinds prompts buy upgrade for this ASX share

Meanwhile, the Costa Group Holdings Ltd (ASX: CGC) share price is the newest buy idea from Credit Suisse.

The broker upgraded the fruit and vegetable grower to “outperform” from “neutral” after management’s sour outlook.

But the factors that have contributed to Costa Group missing market expectations are seasonal and not structural, in Credit Suisse’s view.

It’s all in the margins

“Here in, lies the crux of valuing CGC. It is difficult to ascertain what might be a normal margin for CGC’s domestic product. A normal year is likely to have some agricultural impacts,” said the broker.

“In a 12-month period, CGC hit peak margins of about 14%-15%. In a bad year, CGC had margins as low as 5%-6%.

“When agriculture conditions are favourable we are swayed to think normal margins are 11%-12%. When conditions become challenging we are inclined to use more conservative margins of 10%-11%.”

These assumptions prompted the broker to upgrade the stock. Credit Suisse’s 12-month price target on the Costa Group share price is $4.15 a share.

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The Pure Hydrogen Corporation CDI (ASX: PH2) share price is sliding during early-afternoon trade. This comes despite the company announcing an update on the Serowe Project in Botswana.

At the time of writing, the oil and gas exploration company’s shares are fetching for 24 cents, down 5.88%.

What did Pure Hydrogen announce?

Investors are dragging Pure Hydrogen shares down today regardless of the company’s latest progress report.

According to its release, Pure Hydrogen advised that its joint venture partner, BotsGas will commence spudding this week. The drilling campaign in Project Serowe aims to confirm geological modelling of the area to extract coal bed methane (CBM).

The campaign consists of two separate stages of three appraisal wells each (6 wells in total).

Serowe 2, the first stage 1 well is on track to be spudded in the coming days, followed by Serowe 3 & 4 wells. Pure Hydrogen noted the campaign will exceed the minimum acreage commitments which should ensure permit renewals in the future.

Two of the wells will be converted to production wells, with the remaining third well used to identify high-grade CBM.

The second stage 3 wells are expected to be drilled sometime later this year. However, this is dependent on the results and knowledge gained on the drilling program that is scheduled to commence.

Pure Hydrogen managing director, Scott Brown commented:

Serowe is an exciting asset with good upside and the gas price in Botswana is very high at the moment. BotsGas’ team is well-placed to execute this program. They have the experience and the technical skills to unlock the value from these highly prospective leases.

Pure Hydrogen share price summary

It has been an eventful 2021 for Pure Hydrogen shares, with investors recording gains of around 200%. The company’s share price reached a multi-year high of 44 cents in March, before treading lower since.

Pure Hydrogen commands a market capitalisation of roughly $81 million, with approximately 313 million shares outstanding.

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The bullish Wisr Ltd (ASX: WZR) share price, which has surged ~30% in the last two weeks, isn’t trading on Monday after the company announced a trading halt.

The Wisr share price was trading at

Wisr operates in the lending industry, facilitating a unique financial wellness ecosystem underpinned by competitive consumer finance products. The company’s Wisr app automatically rounds up transactions to the nearest dollar, using the spare change to pay off debt faster.

Why the Wisr share price won’t be trading

A trading halt was requested by Wisr in relation to a capital raising. The only detail provided in the announcement was that the capital raising will be comprised of an institutional placement and a share purchase plan. Its shares will remain in a trading halt until Wednesday, 2 June or after the completion of the placement.

What investors might want to note is that Wisr already retains a strong cash position, with $33 million in cash and cash equivalents as at 31 March 2021.

Why the Wisr share price has surged in recent weeks

It certainly took a while for the Wisr share price to get going. Its shares have been consolidating around the low 20 cent level since June last year and only managed to push above the mid 20 cent level in the last few weeks.

Despite its share price chopping back and forth, the company has been busy kicking goals, delivering a number of financial and operational milestones.

The company’s March quarter results witnessed an accelerated level of new loan originations, revenue growth and loan book quality metrics. Wisr’s operating revenue surged to a record $7.5 million for the quarter, a 275% increase in 3Q20 and 27% increase on 2Q21.

This growth was underpinned by a strong interest in its financial wellness platform, with more than 56,000 new customer profiles created in the March quarter, compared to 47,900 in 2Q21. This brings the company’s total profiles to 401,488 as at 31 March, and the company is confident in its path to 1 million customers at a proven low acquisition cost.

More recently, the company hit another milestone with the pricing of its $225 million asset-backed securities (ABS). Its inaugural ABS transaction received a top tranche AAA rating from international ratings agency, Moody’s, demonstrating the company’s low credit risk and ability to repay short-term debt.

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