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The Santos Ltd (ASX: STO) share price is on the move on Tuesday morning.

In morning trade, the energy producer’s shares are up 1% to $7.28.

Why is the Santos share price on the move?

Investors have been buying Santos shares after it announced a final investment decision (FID) on the Barossa joint venture, located offshore the Northern Territory.

According to the release, Santos has made its FID and will proceed with the US$3.6 billion gas and condensate project.

In addition to this, the Barossa FID kick-starts the US$600 million investment in the Darwin LNG life extension and pipeline tie-in projects. These will extend the facility’s life for around 20 years. The Santos-operated Darwin LNG plant has the capacity to produce approximately 3.7 million tonnes of LNG per annum.

What is Barossa?

The company notes that Barossa is one of the lowest cost, new LNG supply projects in the world. It expects the project to give Santos and Darwin LNG a competitive advantage in a tightening global LNG market.

The project also represents the biggest investment in Australia’s oil and gas sector in almost a decade.

Santos’ Managing Director and Chief Executive Officer, Kevin Gallagher, believes the FID is consistent with Santos’ strategy for disciplined growth utilising existing infrastructure around its core assets.

He commented: “Our strategy to grow around our five core asset hubs has not changed since 2016. As we enter this next growth phase, we will remain disciplined in managing our major project costs, consistent with our low-cost operating model.”

“As the economy re-emerges from the COVID-19 lockdowns, these job-creating and sustaining projects are critical for Australia, also unlocking new business opportunities and export income for the nation. The Barossa and Darwin life extension projects are good for the economy and good for local jobs and business opportunities in the Northern Territory,” he added.

The Barossa and Darwin LNG life extension projects are expected to create 600 jobs throughout the construction phase. After which, they are expected to secure 350 jobs for the next 20 years of production at the Darwin LNG facility.

Carbon neutral plans

Santos has also revealed that it has signed a memorandum of understanding with joint venture partner SK E&S and Mitsubishi to investigate opportunities for carbon-neutral LNG from Barossa.

This includes a collaboration relating to Santos’ Moomba CCS project, bilateral agreements for carbon credits, and potential future development of zero-emissions hydrogen.

“We will continue to explore the potential for carbon-neutral LNG from Barossa as part of our commitment to lower global emissions and as a company, reach our net-zero emissions target by 2040,” Mr Gallagher said.

What now?

The Barossa FID is the final condition required for completion of the 25% equity sell-downs in Darwin LNG and Bayu-Undan to SK E&S.

Completion of the SK transaction is expected to occur at the end of April and result in net funds to Santos of approximately US$200 million. This represents the sale price of US$390 million less the forecast cashflows from the 25% interests from the effective date of 1 October 2019 to completion.

In addition, Santos and JERA continue to progress their binding sale and purchase agreement for JERA to acquire a 12.5% interest in Barossa.

Should everything go to plan, Santos will see its interests in Bayu-Undan and Darwin LNG change to 43.4%, and in the Barossa project to 50%.

More reading

• Why AVZ, Betmakers, Santos, & South32 shares are storming higher
• Santos (ASX:STO) share price rises on production update
• 5 things to watch on the ASX 200 on Friday
• The ASX sector set to outperform this morning thanks to Suez
• How are ASX 200 shares faring in the carbon revolution?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In morning trade the AGL Energy Limited (ASX: AGL) share price is pushing higher.

At the time of writing, the energy retailer’s shares are up 3% to $10.50.

Why is the AGL share price pushing higher?

Investors have been buying AGL’s shares after they responded positively to a major announcement this morning.

According to the release, the company plans to create two leading energy businesses focused on executing distinct strategies, via a structural separation.

The company intends to split the business as follows:

• New AGL – Australia’s largest multi-product energy retailer, leading the transition to a low carbon future.
• PrimeCo – Australia’s largest electricity generator, supporting the economy as the energy market evolves.

Why is AGL doing this?

AGL’s Managing Director and CEO, Brett Redman, believes the proposed separation will give each business the opportunity to execute their own respective strategies and growth agendas.

He commented: “The accelerating market forces of customer, community and technology are driving the imperative to create this new path and separate AGL into two distinct organisations.”

“The proposed structural separation would give each business the freedom, focus and clarity to execute their own respective strategies and growth agendas, while playing an equally important, but different, role in Australia’s energy transition.”

New AGL

Commenting on New AGL, Mr Redman said: “New AGL would have a strong, stable and growing customer base, delivering electricity, gas, internet and mobile services to more than 30 percent of Australian households.”

“This strong customer base would be backed by a leading energy trading capability and a 2.1 GW portfolio of flexible generation and storage assets to manage peak demand events. And, importantly, New AGL would be carbon neutral for scope one and two emissions on day one, with a clear pathway to full carbon neutrality,” he added.

PrimeCo

PrimeCo will generate approximately 20% of the total electricity demand across the National Electricity Market (NEM), making it Australia’s largest electricity generator supplying major wholesale, industrial, and retail electricity users.

Mr Redman commented: “PrimeCo’s first focus would be the safe and reliable running of its generation portfolio. As the low-cost backbone of the NEM it would be well positioned from day one to support the Australian economy as the energy market continues to evolve.”

“PrimeCo’s strong base generation position brings with it a capacity to invest in development options including the transformation of existing generation sites into the energy hubs of the future, as well as development of its 1,600 MW wind development pipeline.”

What’s next?

AGL will now commence a process of engaging with shareholders, regulators, government, and workforce stakeholders. After which, it is aiming to confirm the timing and nature of the proposed structural separation by end of FY 2021.

The proposed separation remains subject to this consultation process and to ongoing internal AGL analysis.

Shareholders will no doubt be hoping that this plan unlocks value just like Telstra Corporation Ltd (ASX: TLS) is expected to do with its own separation plans.

More reading

• What’s happening with the Damstra (ASX:DTC) share price?
• What’s with the AGL Energy (ASX:AGL) share price today?
• How are ASX 200 shares faring in the carbon revolution?
• Genex (ASX:GNX) share price frozen on hydro project fund raising
• Leading brokers name 3 ASX shares to sell today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra 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 famous adage from Peter Lynch, “Invest in what you know” is an investing tip I couldn’t agree with more. Fundamentally, the premise is there’s an edge in knowing a company’s products and understanding its business model. However, applying this approach to retail shares can sometimes prove to be difficult.

Whether you’re a programmer that’s familiar with tech disruption, a doctor knowledgeable in medical developments, or in this case, a keen shopper — by being aware of the product/service and its competitors you can certainly improve your chances of investing successfully.

With that being said, retail shares can be a little tricky sometimes. The reason being the store name doesn’t always align with the publicly-traded company name. This is because retail shares often own several brands all under one roof.

So, for those of you that popped into their local Westfield on the weekend like I did – here’s a summary of the retailers you might have shopped at, with perhaps unfamiliar ASX and US-listed owners.  

Sneakerheads, this one’s for you

Sneakers have been a huge craze over recent years. For many, footwear is somewhat of a staple for self-expression. Whether it’s the old school Vans, rugged Timberlands, or some fresh Air Force 1’s, there’s a good chance they came from Accent Group Ltd (ASX: AX1).

At the end of FY20, Accent had 519 stores across Australia. Scratching your head thinking “I’ve never bought sneakers from a store called Accent.” Well, that’s because Accent actually operates through 12 various brands. You might have heard of The Athlete’s Foot, Platypus, Hype, Vans, Merrel, etc.

Accent has benefitted from a substantial lift in online orders stemming from COVID-19 lockdowns. First half FY21 digital sales increased by 110% compared to the FY20’s first half. Furthermore, the company recently announced its plan to open an additional 90 stores by the end of this financial year.

ASX retail share for the more outdoorsy

More of an explorer, or a sportsperson? Was it a wander in the woods for the weekend, or an intense match on the fields? Two stores that are right up that neck of the woods are Macpac and Rebel. But you might not have known, they are owned by ASX-listed Super Retail Group Ltd (ASX: SUL).

The Super Retail Group also owns Supercheap Auto and BCF. Considering how much people have been cooped up, it’s not surprising that Rebel experienced a 17.1% increase in like-for-like sales during the last half. Super Retail Group managed to grow earnings before, interest, tax, depreciation, and amortisation (EBITDA) by 95% in the period. Increasing EBITDA to $311.4 million for the half.

Further abroad retail brands

Not all brands happen to be Australian retail shares. Some of the most iconic and recognisable brands in Australian stores are owned by US-listed companies.

For example, maybe this weekend was a bit of an everything-shop. Grab the jocks from Bonds, throw in some new towels and bed sheets from Sheridan, maybe some undergarments for the women out there from Bras N Things. Would you believe that all of these brands belong to one company? That company is known as Hanesbrands Inc (NYSE: HBI).

Although not particularly well known in Australia, Hanesbrands did over $6.664 billion in revenue last year. Hence, the company is quite sizeable with a market capitalisation of US$7.17 billion.

Retail shares for the person who shops everywhere

Too many favourite stores to buy shares in all of them? Maybe there’s a different approach to ‘investing in what you know’ when it comes to retail shares.

There’s always the option of investing in the shopping centre that holds all of those companies. Not every shopping centre will be owned by a listed company, but with a bit of digging you should be able to find out whether it is or not. If you’re like me and live near a Westfield shopping centre, it will be owned by Scentre Group Ltd (ASX: SCG). Other popular centre owners include Vicinity Centres (ASX: VCX), Stockland Corporation Ltd (ASX: SGP), and Aventus Group (ASX: AVN).

So when you next go shopping, I challenge you to explore what companies own your favourite brands. Are they listed or private? are they Australian or from overseas? At a minimum, you’ll be more informed about the companies you purchase from, and at best there could be an investment opportunity in it. 

More reading

• 2 high yield ASX dividend shares for income investors to buy
• 2 quality ASX dividend shares you can buy today
• Brokers name 3 ASX shares to buy right now
• 2 highly rated ASX dividend shares to buy today
• Why the Accent (ASX:AX1) share price is pushing higher today

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The WISR Ltd (ASX: WZR) share price is on watch this morning after an investment update from the Aussie fintech.

Why is the Wisr share price on watch?

Wisr this morning said it has executed a term sheet to invest in European financial wellness fintech platform, Arbor. A convertible loan structure will give Wisr a minority shareholding in the European financial wellness platform.

Wisr said there is a pathway to potentially increase its shareholding to 45% over the next 36 months. Forecast acquisition finalisation is April 2021 following finalisation of due diligence and legal documentation.

The Wisr share price will be in focus this morning after this latest acquisition update from the company. Shares in the Aussie fintech have rocketed 127.8% higher in the last 12 months to 21 cents per share.

Wisr’s upfront consideration is approximately $400,000 cash with follow-on investment subject to various milestones. Arbor was founded in 2017 and has accumulated almost 100,000 customers in the European market, according to the release.

The European fintech uses a digital wallet to offer savings, investment and lending fatures to its customer base. According to today’s release, Arbor is growing its user base by circa 20% month on month.

Wisr CEO Anthony Nantes said, “This is a small but highly strategic first step in taking Wisr’s business model global.” The acquisition will see Wisr and Arbor share intellectual property to grow the business further.

Prior to the market open, Wizr had a market capitalisation of $224.8 million. The Wisr share price will be worth watching as investors react to this global expansion move.

What does Wisr do?

Wisr is an Australian non-bank lender or ‘neo-lender’ that focuses on consumer lending services. The company has operated under various names since being founded in 1966, including DirectMoney.

The Wisr share price has climbed 7.9% higher so far this year on the back of strong trading performances from the Aussie fintech.

More reading

• Wisr (ASX:WZR) share price jumps on strong trading update
• Why the WISR Ltd (ASX:WZR) share price is racing higher today

Motley Fool contributor Ken Hall 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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ASX energy and oil companies appeared to spring a financial leak late yesterday. At close of trade yesterday, the Woodside Petroleum Limited (ASX: WPL), Oil Search Ltd (ASX: OSH), and Beach Energy Ltd (ASX: BPT) share prices were down 0.45%, 0.71% and 0.85%, respectively.

All three companies were trading higher than the previous day’s close, until it was announced the container ship blocking the Suez Canal was successfully re-floated.

The Woodside share price finished the day at $24.43, Oil Search at $4.19, and Beach was $1.76. By comparison, the S&P/ASX 200 Index (ASX: XJO) ended the day 0.36% lower.

Background and how it affected ASX energy companies

Six days ago, an Evergreen Marine Corporation cargo ship became horizontally lodged within Egypt’s Suez Canal, blocking the shipping route. The ship is 400m long and was blown off course during a sandstorm. Its hull became trapped on the embankment and it could not be moved. The ship, being so long, blocked the entire canal in both directions.

The waterway, which connects the Red Sea to The Mediterranean, dramatically cuts the shipping time to freight goods. In fact, 12% of all global trade and 9% of all petroleum trade goes through the Suez Canal.

As so much of the global energy supply goes through the canal, the supply of oil was deeply disrupted. A decrease in supply led to an increased price of crude oil. As the price of oil increased, the share price of ASX energy producers increased likewise.

Due to the blockage, some ships were travelling around the African continent to reach their destinations.

Suez relief

At 4:30 am Egyptian time, the Evergreen ship was re-floated. The ship was able to continue its journey to Rotterdam, The Netherlands. Normal shipping operations resumed soon after in the canal.

The MV Ever Given was successfully re-floated at 04:30 lt 29/03/2021. She is being secured at the moment. More information about next steps will follow once they are known. #suezcanel #maritime pic.twitter.com/f3iuYYiRRi

— Inchcape Shipping (@Inchcape_SS) March 29, 2021

https://platform.twitter.com/widgets.js

As the Suez Canal returned to business as usual, the disruption on global energy supply was over. Accordingly, the market reacted, and the price of oil fell. As of writing Texas crude oil fell by 2.31% on the commodities market to be at US $59.56.

Just as the market giveth, the market taketh away. With the dramatic fall in the price of oil, investors offloaded their ASX energy stocks. The sweet taste of Texas tea can leave a bitter aftertaste if you let it boil over.

ASX energy companies share price snapshots

ASX energy companies’ share price movements are highly correlated with the price of oil. When OPEC cut production at the beginning of March, both the price of oil and ASX energy company share prices boomed.

All three aforementioned companies have staged healthy recoveries since the COVID-19 panic selloff last year. The Woodside share price is up 45.1%, Oil Search is up 83%, and Beach Energy is up 68.4%.

The market capitalisations of these companies are $23.5 billion, $8.7 billion, and $4.0 billion, respectively.  

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 Weekly Wrap: ASX 200 gets its mojo back
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• Some of the ASX 200 companies that drove Australian exports to record levels

Motley Fool contributor Marc Sidarous 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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Big brokers have run the ruler over the ASX 200 shares they believe have the tailwinds and fundamentals to outperform the market. These 4 ASX shares were rated as a buy or buy-equivalent on Monday 29 March. 

Amcor CDI (ASX: AMC) 

Amcor is one of the world’s largest flexibles packaging and rigid plastics suppliers. UBS highlights that COVID-19 has led to greater at-home consumption which is seen as a positive for consumer packaging companies such as Amcor. 

The broker believes this trend will continue into the third quarter of FY21. It points to above-average volume trends supporting the company’s organic growth outlook while offsetting short-term raw material headwinds. 

UBS rates Amcor shares as a buy with a $16.60 target price. This represents an upside of 9.2% from Amcor’s closing price of $15.20 on Monday. 

Inghams Group Ltd (ASX: ING) 

The Inghams share price took to a 5% dive on Monday following Jim Leighton stepping down from his role as CEO and managing director, and current non-executive director Andrew Reeves stepping up.

Citi acknowledges that a CEO departure should be treated with caution, but asserts that the calibre of Andrew Reeves as a replacement reduces the risk. The broker believes the main issue is whether or not Inghams can maintain stability in its senior management team.

Citi puts the spotlight on Ingham’s Woolworth Group Ltd (ASX: WOW) contract which is currently being negotiated and notes it as a concern. 

Nevertheless, the broker reiterated a buy rating but acknowledges that clarity about the company’s direction under the new CEO will be needed before the stock can re-rate. A $4.40 price target was given. If Inghams meets the target price, it will return 28% based on Monday’s closing price of $3.43. 

Polynovo Ltd (ASX: PNV) 

The Polynovo share price has started to recover from a brutal selloff in January after the company missed revenue expectations. 

Ord Minnett comments on the company’s purchasing agreement with Premier Inc, a major US group purchasing organisation (GPO) for the supply of NovoSorb BTM. This agreement will allow Polynovo’s product to be available to over 41,000 health facilities in the United States. 

The broker views this as a solid mid-to-long-term opportunity that could see additional large-scale agreements take place in the near term. It notes that the top five GPOs, of which Premier is one, provide access to around 90% of the US market. 

The broker note maintained an accumulate rating and a target price upgrade from $2.55 to $3.10. This represents an upside of 11% based on Monday’s closing price of $2.79. 

Sonic Healthcare Limited (ASX: SHL) 

Credit Suisse believes there is increasing evidence of pent-up demand for healthcare services as people delayed seeking healthcare at the beginning of the pandemic.

The broker highlights that trends across all diagnostic services improved in February relative to a weak January. Credit Suisse analysts expect above historical growth rates in 2021 as the vaccine roll-out continues, economies open-up, confidence increases and physician visits return. The continued volume of COVID-19 testing will also be a factor that underpins Sonic Healthcare’s earnings. 

An outperform rating was retained with a $40.00 target price. This represents an upside of 13% after its shares closed at $35.30 on Monday. 

More reading

• Why Immutep, Inghams, REA Group, & Synlait shares are sinking
• These are the 10 most shorted shares on the ASX
• Here’s why the Inghams (ASX:ING) share price is in focus
• Top brokers name 3 ASX shares to buy next week
• 2 growing ASX dividend shares to buy

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 POLYNOVO FPO. The Motley Fool Australia owns shares of and has recommended Amcor Limited. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Sonic Healthcare 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 Commonwealth Bank of Australia (ASX: CBA) share price has made a resurgence back to pre-COVID levels. As the vaccine roll-out continues, economic activity picks up and confidence increases, what’s the outlook for the CBA share price?  

Solid half-year results point to a cautious recovery 

CBA’s half-year results came in ahead of market expectations for the six months ended 31 December 2020. The company delivered a 0.5% decline in operating income of $11,961 million, driven by COVID-19 impacts and a 10 basis point reduction in net interest margins to 2.01%. 

Earnings were slightly lower on the prior corresponding period with cash net profit after tax from continuing operations down 10.8% to $3,886 million. The bank noted that if COVID-19 impacts and remediation costs were excluded, cash profit would have been broadly flat. 

A key highlight from CBA’s half-year results was the significant decline in loan impairments and bad debts. The bank recorded a loan impairment expense of $822 million, higher than the prior corresponding period but down by more than 50% from 2H20. 

The number of home loans in deferral has also experienced a significant decline from 145,000 loans with a balance of $51 billion at the end of FY20 to approximately 25,000 home loans with a balance of $9 billion at the end of January. 

What are big brokers thinking about the CBA share price? 

Citi is neutral rated on the CBA share price. The broker highlights the bank’s recent buy now, pay later (BNPL) product launch as a move to defend its share of the millennial market and challenge BNPL leader, Afterpay Ltd (ASX: APT). Citi describes this move as a conundrum for the Reserve Bank of Australia, which has so far left the BNPL industry largely unregulated. 

Overall, the broker didn’t provide any updated commentary with regards to CBA earnings or the broader banking industry. It retained a target price of $82.50, or a downside of 3.59% compared to CBA’s closing price on Monday. 

Morgan Stanley retained an underweight rating for the CBA share price. An underweight rating can be defined as a recommendation for investors to weigh a stock less heavily in their portfolios with the belief that it will underperform the market. 

Despite an underweight rating, Morgan Stanley’s commentary was largely neutral. The broker noted that major banks have maintained strong capital levels and forecast buybacks to commence at CBA in FY22. 

Morgan Stanley retained a $79 target price or a downside of 7.68% given CBA’s closing price of $85.57 on Monday. 

More reading

• Where to reinvest your Commonwealth Bank (ASX:CBA) dividends
• 5 things to watch on the ASX 200 on Tuesday
• ASX stock of the day: Integrated Research (ASX:IRI) shares up 7%
• Afterpay (ASX:APT) share price sinks despite new product launch
• ASX 200 Weekly Wrap: ASX 200 gets its mojo back

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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ASX tech shares are really good businesses to consider for long-term investments in April 2021.

Technology businesses usually have a lot of growth potential and they can also have higher profit margins than some other industries as well.

Not every business may be trading at very attractive value, but it could be the right time to think about these two:

Redbubble Ltd (ASX: RBL)

The Redbubble share price has fallen 12% since 16 March 2021 and it’s down 24% since 15 February 2021.

That decline has happened despite Redbubble reporting a high level of growth in its FY21 half-year result where marketplace revenue grew 105% in constant currency terms, gross profit went up 127% in constant currency terms and earnings before interest and tax (EBIT) rose by $44 million to $42 million. It also generated $80 million of operating cashflow.

Redbubble describes itself as a leading print-on-demand marketplace for independent artists – the number of artists on Redbubble marketplaces increased 76% year on year to 572,000 and customers grew 69% year on year to 6.2 million, spending $442 million of gross transaction value – up 90% year on year.

The broker Morgans currently rates the Redbubble share price as a buy and has a price target of $6.64 on the ASX tech share.

One area of growth that Redbubble is seeing is that sales through apps are growing rapidly (up 163% year on year) and attracting loyal users. App sales represented 14% of total marketplace revenue in HY21.

Redbubble believes that 2021 is a year of opportunity, it said:

Redbubble is positioned to build on a decade of momentum and aggressively pursue the global opportunity presented by the shift to online activity and increasing adoption of e-commerce platforms.

Kogan.com Ltd (ASX: KGN)

Kogan.com is another e-commerce business that is seeing high levels of growth, yet the Kogan.com share price has fallen 11% since 19 March 2021 and it’s down 42% since January 2021.

The ASX tech share’s growth is slowing compared to the even higher levels of improvement that the company was seeing during 2020 through COVID-19, but it is still seeing elevated double digit growth.

In January 2021, Kogan.com saw gross sales increase by 45% year on year with 111.6% growth of Kogan.com marketplace. There were some declines in verticals like travel and insurance (including travel insurance and certain other insurances which remain suspended).

Even so, gross profit was up 102% year on year and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was up 90% year on year in January 2021.

The above growth rates are not as fast as the first half of FY21 which showed gross sales growth of 97.4% and net profit after tax (NPAT) growth of 164.2%.

Kogan.com is displaying good network effects and scalability.

The Kogan First membership represents a large and growing community of loyal customers. The ASX tech share explains that these members purchase on average much more than non-members.

In the HY21 result, Kogan.com saw the gross margin improve from 22.7% to 27.3%, whilst the EBITDA margin increased from 7.6% to 9.4%, despite a large increase in marketing costs.

According to Commsec, the Kogan.com share price is valued at 18x FY23’s estimated earnings.

More reading

• 2 highly-rated ASX growth shares to buy
• 2 ASX dividend shares to buy in April
• $10,000 invested in the Kogan (ASX:KGN) IPO is worth how much today?
• Got money to invest? Here are 2 ASX shares to buy
• Is Temple & Webster (ASX:TPW) the best e-commerce ASX share to buy right now?

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia 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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Technology growth shares have done it tough over the past few weeks, with the market turning on them in favour of other more ‘value’ sectors.

However, Capital H Management portfolio manager Harley Crosser reckons he’s found a gem that’s undervalued, profitable and with plenty of room to grow.

It’s digital services provider Webcentral Group Ltd (ASX: WCG). The Webcentral share price was trading at 53 cents at market close on Monday.

“With a clean balance sheet, sticky/recurring revenues, strong cash flows, growing top line and an appetite for acquisitions I’d argue WCG deserves 20x [price to] EBITDA,” Crosser posted on Livewire.

“That would put the stock above $1.”

That’s double the current price.

Capital H Management holds the shares so it’s in Crosser’s interests to see the stock do well. But here are the reasons he outlines:

A huge tailwind coming in July

Australian Domain Administration (auDA) is the authority that administers internet names under the .au domain.

July this year will see history created as auDA will allow registrations of first-level domain names directly under .au. For example, instead of fool.com.au, this publication could grab the name fool.au.

This has never been allowed before and is expected to see a surge in business for domain name registrars like Webcentral.

Australians that already have web addresses will have a 6-month grace period to buy the equivalent new .au name. This is to stop opportunistic ‘squatters’ from nabbing existing business names.

“If you think from the perspective of a business owner, the logical decision is to just buy the domain in order to protect your brand,” said Crosser.

“The risk is that someone else buys it and either you have confused customers sent to the wrong website, or a fight on your hands. It’s a small outlay each year for this security and peace of mind.”

He added that when a similar move occurred in the UK, the industry saw a 20% to 30% increase in revenues.

“Webcentral has given early guidance around why they expect domain registrations to rise by a similar amount on the release of .au domains,” Crosser said.

“.uk domains have since become the dominant extension and I would think that in a few years the same will happen here.”

Pre-sales of .au names open from 12 April.

While it’s a one-off event, the new incoming clientele has very sticky potential.

“It’ll be recurring every year as domains need to be renewed. It also kicks in at the very start of FY22, which is nice from a timing perspective for the financial markets,” said Crosser.

“Domains are typically the pull through for other Webcentral services too. You buy a domain, then hosting, emails, security, online marketing, etc. so the other parts of the business should benefit.”

New management after a bidding war

Webcentral was the company originally named Melbourne IT, which was Australia’s first internet domain name registrar.

So for three decades, Australian businesses and residents have engaged with it to register their .com.au and other .au internet addresses. But in recent times the business has been in huge trouble.

“Late last year, the company was still saddled with debt and the ‘for sale’ sign was put up by the previous board,” said Crosser.

A bidding war then ensued between US giant web.com and 5G Networks Ltd (ASX: 5GN).

According to Crosser, both parties “significantly” undervalued the business with their initial bids. But just as the purchase price went up, web.com dropped out of the race.

5G Networks’ final offer was rejected by Capital H Management and another large shareholder. But 5G ended up with a part shareholding and took board and executive control of Webcentral.

“The stock started to rally almost as soon as the offer period closed, reflecting the fact that: 1, new management could fix the company, with some very low hanging fruit in front of them; and 2, the debt issue, which was the main reason the stock was so depressed, had effectively been removed.”

Crosser believes the new management’s interests are synchronised with minority shareholders.

“The MD, Joe Demase, owns 15% of 5GN and 10% of Webcentral personally. He’s taking no cash salary,” he said.

“His Webcentral options vest on hitting $10m of annualised EBITDA in that company. He bought another $100k of stock on-market earlier this month.”

Erasing the debt

According to Crosser, new management has taken control of the debt.

“As part of the all-scrip bid, 5GN paid back the $46m of debt to Webcentral’s bankers and assumed it themselves. That has since been reduced down to $40m of net debt, or 3 to 4x free cash flow.”

The company has committed to the market that the remainder of the debt will be paid off. Management has a few different options to reduce it even further, according to Crosser:

• Capital raise or external bank funding
• A merger with 5G Networks
• Eventually pay it off with cash (it has $10 to $12 million of yearly free cash flow)
• Debt to equity conversion
• A combination

More reading

• Why the 5G Networks (ASX:5GN) share price is storming 5% higher

Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends 5G NETWORK 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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If you find yourself worrying about the fact the CSL Limited (ASX: CSL) share price has fallen 15% in the last 12 months, here’s a great way to shift your focus.

Think about how the company might look a decade from now. Yes, ten whole years.

After all, the real magic of investing is finding companies that can relentlessly grow and compound earnings over long periods of time. Thinking about a company’s long-term plans can help to put short-term share price movements in perspective.

And CSL actually has a strong vision for how it wants to grow over the next decade. Here are three things we can expect to see from the company over the next ten years:

1. A new manufacturing facility in Australia

In November last year, CSL announced that the company’s wholly-owned subsidiary Seqirus will invest more than $800 million in a new manufacturing facility in Melbourne. The facility will produce seasonal and pandemic flu vaccines as well as antivenoms for Australian snakes, spiders and marine creatures.

The new facility is supported by a 10-year supply agreement with the Australian Government and is expected to be operational by mid-2026.

2. Significant investment in R&D

In addition to the new manufacturing facility, CSL has announced some significant plans to continue investing in research and development (R&D). This includes building a brand-new global headquarters in the Parkville Biomedical Precinct in Melbourne. The huge 16-storey building is expected to open in 2024 and will accommodate 800 employees and “expand our R&D footprint” according to CSL.

The company is also undertaking the construction of a special R&D campus in Marburg, Germany which is scheduled for completion in 2022 and will have enough space for around 600 employees.

Innovation is a core principle of CSL’s business so investing in R&D is an important driver of future growth. In FY20, CSL invested an incredible US$922 million in R&D across its businesses and expects to invest up to 11% of revenue on R&D in FY21.

3. More digitalisation across the business

One of the core pillars of CSL’s strategy over the coming decade is a focus on a digital transformation. Digital investments are often hard to see from the outside of a company. However, digital tools will help with essential areas like improving quality control, supply chain efficiency and regulatory compliance.

For example, the introduction of automated inspection technology can increase the number of vials inspected every minute which means manufacturing operations can accommodate greater demand.

More reading

• Where to reinvest your Commonwealth Bank (ASX:CBA) dividends
• 2 of the best ASX 50 shares to buy in April
• ASX 200 Weekly Wrap: ASX 200 gets its mojo back
• 3 high quality ASX shares to buy next month
• AstraZeneca COVID-19 vaccine trial data results in revised efficacy rate

Regan Pearson has no position in any of the stocks mentioned. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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.

The post 3 things to expect from CSL (ASX:CSL) over the next decade appeared first on The Motley Fool Australia.

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