Tag: Motley Fool

It hasn’t been a great day for companies in the buy now, pay later (BNPL) sector. The Afterpay Ltd (ASX: APT) share price fell into the red, as did shares in fellow payment providers Zip Co Ltd (ASX: Z1P) and EML Payments Ltd (ASX: EML).

Comparatively, the S&P/ASX 200 Index (ASX: XJO) closed 0.6% up. So why did the share prices of these 3 BNPL companies drop today?

ASIC continues BNPL probe

The BNPL industry is on the Australian Securities and Investments Commission’s (ASIC) radar.

According to the Australian Financial Review, ASIC is concerned that consumers are not clear on how the BNPL businesses operate. 

ASIC believes that while the payment services that companies like Afterpay, EML Payments and Zip offer are convenient, some consumers are not aware of how the transactions are actually structured. 

Specifically, ASIC is now probing into whether the BNPL companies meet the regulator’s new design and distribution obligations (DDO). The DDO has to do with how a business defines its consumers, how it determines the services required and how the product is delivered.

Afterpay share price sinks 4.5% as BNPLs slide

The Afterpay share price closed down 4.5% today, trading at $108.28 a share. The Zip share price lost 1.1%, and the EML Payments share price dropped 0.97%.

ASIC has voiced its concern that the BNPL industry has grown far too quickly without being regulated. Its new regulations are scheduled to be enforced come October.

The general idea of enforcing the new BNPL rules is consumer protection. The DDO will also apply to other sectors and industries. However, BNPL is the first target set to try the new regulation out on.

Foolish takeaway

All businesses have an obligation to be transparent and not pull the wool over the eyes of consumers. 

The BNPL companies were bound to hit a regulation hurdle sooner or later, and being selected to test drive the DDO framework can potentially send a strong regulatory message from a fairly new space.

Investors will undoubtedly be interested in discovering what the DDO rules will mean for ASX BNPL companies and others once enforced.

More reading

• ASX 200 recovers, Evolution Mining acquisition, Afterpay sinks
• Why Afterpay, Fortescue, GWA, & Jupiter Mines are dropping today
• ASX 200 down 0.1%: Afterpay sinks, Evolution announces acquisition
• Can ASX BNPL companies like Afterpay (ASX:APT) compete with Paypal?
• ASX 200 Weekly Wrap: Calm restored to the ASX 200

Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended EML Payments. 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 S&P/ASX 200 Index (ASX: XJO) ended flat, after being down earlier in the day, ending at 6,773 points.

One of the worst performers in the ASX 200 was the Afterpay Ltd (ASX: APT) share price which fell 4.5%.

Here are some of the highlights from the ASX:

Evolution Mining Ltd (ASX: EVN)

The Evolution Mining share price rose today in reaction to a Canadian acquisition. The gold miner said that it’s buying Battle North Gold Corporation for C$343 million, which equates to a price of C$2.65 per share – it’s listed in Canada.

This purchase price is a 46% premium to the closing share price from last week.

Battle North’s CEO, George Ogilvie, explained the benefits of joining the two businesses together to progress the Bateman Gold Project further:

We believe that there are unique and undeniable merits to combining the Red Lake assets of Battle North and Evolution and this transaction reduces development and execution risk. Evolution is a highly regarded mining company with a demonstrated ability to successfully operate internationally.

Jake Klein, the executive Chair of Evolution, said what this would do for the ASX 200 gold miner:

This acquisition provides Evolution with an opportunity to expand our footprint in the region and create value by leveraging the infrastructure of the two operations. The additional processing capacity from the new Bateman mill will also accelerate our ability to achieve our objective of producing in excess of 300,000 ounces of gold per annum from Red Lake.

People Infrastructure Ltd (ASX: PPE) acquisition

People Infrastructure announced that it’s acquiring a leading Melbourne nursing agency.

It has entered into a binding agreement to buy the SwingShift Nurses business. This company is focused on the mental health market and it’s a contracted supplier to most public sector hospitals in Victoria.

The acquisition price is $3.1 million payable in cash and it’s expected to add to earnings per share (EPS) accretive. People Infrastructure expects this business to generate $1 million of earnings before interest, tax, depreciation and amortisation (EBITDA) in the 12 months after completion.

People Infrastructure CEO Mr Declan Sherman said:

The acquisition of SwingShift Nurses is highly complementary to our existing Victorian nursing staffing business. The business is well established in the Victorian market and will facilitate further growth into the mental health market. People Infrastructure is especially attracted to the business due to its strong position in the Victorian specialist nursing on-hire contracting market, and its long term relationships with its customers.

The People Infrastructure share price went up more than 2% in reaction.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price also went up around 2% after it announced that Yibin Tianyi Lithium Industry Co Ltd will provide a US$15 million unsecured prepayment to Pilbara, contributing to the funding of the A$22 million improvement works underway on plant 1 at Pilgangoora.

The prepayment will be provided in support of additional uptake of up to 40,000tpa of spodumene concentrate for Yibin Tianyi.

Site works will commence on the stage 1 improvement works this month, with commissioning expected in the quarter ending 30 September 2020.

Pilbara Minerals managing director and CEO Ken Brinsden said:

Our relationship continues to grow with Yibin Tianyi as we work together in support of both our businesses’ growth ambitions. For Yibin Tianyi, to become one of the biggest lithium chemical suppliers in China with the support of our major shareholders, CATL and for us to become one of the largest, lowest cost lithium raw material suppliers in the world.

More reading

• 2 ASX 200 shares to buy for income
• Why the Hub24 (ASX:HUB) share price is firing up 12% today
• Triple whammy hammers the Fortescue (ASX:FMG) share price today
• ASX lithium shares on watch as lithium prices eye 2-year high
• Here’s why the Pilbara Minerals (ASX:PLS) share price is pushing higher

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 People Infrastructure Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended People Infrastructure Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The News Corporation (ASX: NWS) share price snuck up 0.7% today to reach $31.58 by the market’s close.  

This follows news last night reported by The Australian that News Corp and Facebook Inc (NYSE: FB) are on “the cusp of a commercial agreement”.

The agreement relates to Facebook’s compliance with parliament’s news media bargaining code that came into force last month.

Facebook to pay News Corp for use of its journalism

Many assumed there was bad blood a few weeks ago between Facebook and media outlets after Facebook banned Australian users from posting news content. However, according to The Australian, we can expect to hear something over the coming days about an agreement being reached between News Corp and the social media giant. Facebook has already struck deals with some other Australian news media outlets. 

As a product of parliament’s News Media and Digital Platforms Mandatory Bargaining Code, Facebook and Alphabet Inc’s (NASDAQ: GOOGL) ((NASDAQ: GOOG) Google must pay local news publishers to feature their content.

The news media bargaining code only applies when the government deems there is a major imbalance between the news media organisation and the digital platform.

Was anything else impacting the News Corp share price today?

Outside of the news media bargaining code featuring in the news, there hasn’t been much else of note going on for News Corp lately. The last price-sensitive update provided by the media giant was back on 18 February when it advised the market it had reached an agreement with Google regarding the use of its content. 

Reuters reports that the US is presently addressing the same issue that’s currently being worked out between Facebook and News Corp.

On Friday in Washington, the antitrust subcommittee convened to listen to industry insights regarding the problems facing news organisations. Specifically, how to control the hold that Facebook and Google have on how people consume news content.

It’s hard to tell whether the news media bargaining code impacted the News Corp share price today since it was a rather uneventful day for the S&P/ASX 200 Index (ASX: XJO) overall.

More reading

• Could this be the pin to pop the Bitcoin (CRYPTO:BTC) bubble?
• ASX 200 climbs, Westpac in the clear, Nine reveals a WIN-ning deal
• Why the Southern Cross Media (ASX:SXL) share price is tumbling 14%
• Nine (ASX:NEC) share price edges higher on positive update
• 2 not-so-obvious ASX shares to cash in on the property boom

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re looking for buy and hold options, then you might want to take a look at the shares below.

Here’s why they could be top options for investors over the long term:

Adore Beauty Group Limited (ASX: ABY)

The first ASX share to consider as a buy and hold option is Adore Beauty. It is the country’s leading pureplay online beauty retailer which aims to deliver users an empowering and engaging beauty shopping experience.

The beauty of this is that as well as being a place to buy products, the Adore Beauty website is also a destination for education and entertainment. This means that consumers frequent its website even when they are not seeking to purchase items.

Last month the company released its half year results and revealed an 82% increase in active customers to 777,000. From these, Adore Beauty generated an 85% lift in revenue to $96.2 million over the six months. 

Positively, this is still only a small portion of a growing Australian beauty and personal care market currently worth ~$11 billion a year.

Morgan Stanley is a fan of the company. It currently has an overweight rating and $8.75 price target on its shares.

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The second ASX share to consider is actually an exchange traded fund (ETF). The BetaShares Asia Technology Tigers ETF provides investors with exposure to the rapidly growing Asian tech sector.

Given how the the Asian economy is outpacing the growth of the west, it appears to be a great place to invest over the next decade and beyond. Especially with its younger and tech-savvy population, which is leading to Asia surpassing the West in respect to technological adoption.

Among the fund’s holdings you will find the likes of Alibaba, Baidu, JD.com, Meituan Dianping, Samsung, Tencent, and Pinduoduo.

In respect to Pinduoduo, it is an e-commerce platform that offers a wide range of products from daily groceries to home appliances. Its platform connects distributors with consumers directly through an interactive shopping experience, allowing shoppers to team up to buy items at lower prices. At the end of September, it was serving 731 million active buyers.

Another company included in the fund is Alibaba. It is widely regarded to be the Amazon of China. At the end of September the company had 757 million annual active customers across its Alibaba, Taobao, and Tmall brands. From these brands, the company is estimated to control a sizeable 56% of China’s e-commerce market.

More reading

• 10 of the best ASX shares to buy in March
• ASX fashion and beauty shares shine on half-year results
• 2 buy-rated small cap ASX shares growing rapidly
• 2 ASX shares at 52-week lows: Are they bargain buys?
• 2 ETFs to buy in this tech sell off

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. 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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It seemed too good to be true.

Just days after US President Joe Biden edged out former President Donald Trump in the November US elections, the world was greeted by multiple effective COVID-19 vaccine announcements.

Coupled with ongoing turbocharged quantitative easing (QE) programs from the world’s leading central banks, near-zero official interest rates, and trillions of dollars in government stimulus packages, the global economic recovery from the pandemic knockdown began in earnest.

Leading fund managers expect that recovery to continue apace, and they see more opportunities ahead for ASX recovery shares.

Andrew Clifford is the chief investment officer at Platinum Asset Management. According to Clifford (quoted by the Australian Financial Review), “I think that we will have a very strong 2021, and that will probably flow through to 2022. In the stock market, there are opportunities because I think that the natural state of being for the economic system is for it to grow.”

Hugh Giddy, large-cap portfolio manager at Investors Mutual, shares that optimistic outlook, saying, “If we don’t have lockdowns, that in and of itself creates recovery. It’s a lot of moving parts, but overall I think that the economy will improve both here and elsewhere.”

Why this fund manager highlights these 2 ASX recovery shares

Romano Sala Tenna, portfolio manager at Katana Asset Management, says it’s time for investors to look beyond the big four banks, which have all performed well in 2021.

Instead, as the AFR reports, Sala Tenna prefers ASX financial shares like Kina Securities Ltd (ASX: KSL):

There are some smaller financials, like Kina Securities, we’ve got a position in. As you’re moving down the food curve a bit and up the risk curve, we’re seeing some really compelling value. We are re-allocating some capital there.

Sala Tenna is also keen on select ASX energy shares, one of the sectors he says he sees “pronounced value”.

They haven’t rebounded with the oil price. There’s a lot of scepticism around the oil price.

Sala Tenna has been snapping up shares of Woodside Petroleum Ltd (ASX: WPL).

Kina Securities and Woodside Petroleum share price snapshot

Kina Securities is a small-cap company with a market cap of $286 million. It pays an annual dividend yield of 9.2%, unfranked. Kina’s share price is up 18% over the past 12 months and up 10% so far in 2021.

Woodside Petroleum has a market cap of $24 billion and is listed on the S&P/ASX 200 Index (ASX: XJO). Woodside pays an annual dividend yield of 2.1%, fully franked.

The Woodside Petroleum share price is up 41% over the past 12 months, compared to a gain of 35% on the ASX 200. Year-to-date, the Woodside share price is up 10%, and it’s currently trading at $25.34 per share.

More reading

• ASX 200 Weekly Wrap: Calm restored to the ASX 200
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Bernd Struben 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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As I’m a big fan of small cap shares, I feel quite fortunate to have a large number to choose from on the Australian share market.

Three small cap ASX shares that stand out from the rest and could have bright futures are listed below. Here’s what you need to know about them:

Booktopia Group Ltd (ASX: BKG)

Booktopia is an online book retailer which has been growing very strongly. It has been a very positive performer so far in FY 2021. This has been driven by both the shift to online shopping and its investment in a new distribution centre.

The latter allowed the company to take advantage of increased demand by shipping more books than ever during December. This led to Booktopia shipping a total of 4.2 million units for the first half, up 40% on the prior corresponding period.

In respect to its financials, this underpinned a 51.1% increase in revenue to $112.6 million and a 502.3% jump in underlying EBITDA to $8 million.

MNF Group Ltd (ASX: MNF)

Another small cap ASX share to look at is MNF Group. It is a leading provider of Voice over Internet Protocol technology (phone calls over the internet) to businesses and consumers.

It has also been performing strongly in FY 2021. Last month the company released its half year results and delivered a 15% increase in recurring revenue to $55.7 million. This was driven by strong growth in new numbers and a Net Revenue Retention of 115%. The latter means the company’s existing customers are not just sticking around, they are spending more.

Pleasingly, management is positive on the future. This is thanks to the structural tailwinds it is experiencing and its expansion into the Asia market.

Universal Store Holdings Limited (ASX: UNI)

A final small cap to watch is Universal Store. It is a fashion retailer which delivers a carefully curated selection of on-trend products to a target 16-35 year old fashion focused customer.

As with the others, Universal has been a positive performer during the pandemic and reported impressive growth during the first half of FY 2021.

For the six months ended 31 December, Universal Store delivered a 23.3% increase in sales to $118 million and a 63.6% increase in underlying net profit after tax to $21.1 million. This was driven by strong online and like for like store growth.

Positively, the second half has started strongly, putting the company in a position to deliver a bumper profit result in August.

More reading

• 2 ASX tech shares rated as buys by brokers
• 4 exciting small cap ASX shares to watch
• 2 exciting small cap ASX shares to watch
• 2 fast-growing small cap ASX shares to watch
• Why Flight Centre, Life360, Nanosonics, & Universal Store are racing higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended MNF Group 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 Ainsworth Game Technology Limited (ASX: AGI) share price performed exceptionally well today, closing the session up 10.96% to 81 cents. Ainsworth shares had closed at 75 cents each on Friday afternoon, but opened at 80 cents apiece this morning, a level around which they essentially revolved all day.

This latest move in the Ainsworth share price caps off what has been an especially pleasing few months for shareholders. Back in early November 2020, Ainsworth shares were trading for 28 cents each. That means at today’s prices, the shares are up 189% since then. However, they are also still down 25% from the peak of $1.08 per share we saw at the end of last month.

So what is Ainsworth Game Technology? And why were Ainsworth shares shooting higher today?

What does the company do?

Ainsworth Game Technology is a gaming company established in 1995. It was founded by Len Ainsworth. Mr Ainsworth was also the founder of the ASX’s most prominent gaming manufacturer, Aristocrat Leisure Ltd (ASX: ALL).

Like Aristocrat, Ainsworth also manufactures poker machines. It has facilities that enable the design, development and testing of these machines. The company also offers services such as installation, maintenance/servicing and support.

Ainsworth supplies markets as diverse as Europe, North America and Latin America, as well as Australia and Australasia.

Ainsworth has had a rough year due to the coronavirus pandemic effectively shuttering gambling institutions around the world. Last month, the company announced it was expecting to report a net loss before tax of $14 million for the six months ending 31 December 2020.

However, on the same day, the company also announced it had established a new, secured credit facility with the US-based Western Alliance Bancorporation. Investors were evidently pleased with that announcement, given Ainsworth shares rose 15% that day.

What fuelled the Ainsworth Game Technology share price today?

Something very interesting was certainly happening with this company today. On Friday last week, after market close, we had an announcement from S&P Global. S&P Global is the company that administers the S&P/ASX 200 Index (ASX: XJO) and the other major indexes on the ASX. In this announcement, S&P reported that Ainsworth would be removed from the All Ordinaries Index (ASX: XAO).

Normally when a company is removed from an index, it causes a selloff from investors. We covered some of the winners and losers from the ASX 200’s rebalancing this morning in fact. But the opposite has happened today, so this is strange indeed.

Unlike the ASX 200, the All Ordinaries is not an index that is widely covered and tracked by exchange-traded funds (ETFs). So that could be behind this situation.

But we could also just be seeing some price discovery here. Last week, Ainsworth fell by around 10% between Wednesday and Friday to an intra-week low of 74 cents per share. That was before the rebalancing became public knowledge. Perhaps investors have simply decided that price was too low, and have been bidding up the company accordingly.

ASX data does show that trading volumes today were significantly above the company’s 5-day average.

Whatever the reason for today’s Ainsworth share price moves, investors will no doubt be pleased. At the current share price, Ainsworth has a market capitalisation of around $245 million.

More reading

• Why the Ainsworth (ASX:AGI) share price surged 15% today

Motley Fool contributor Sebastian Bowen 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 Blackmores Limited (ASX: BKL) share price was on form again on Monday and continued its ascent.

The health supplements company’s shares climbed 2.5% to $87.32 at one stage to hit a 52-week high.

When the Blackmores share price hit that level, it meant it was up 31% over the last 12 months. However, it is worth noting that it is still down around 60% from its record high.

Why is the Blackmores share price at a 52-week high?

Investors have been buying Blackmores shares thanks to a major improvement in its performance after a couple of forgettable years.

For the six months ended 31 December, the company reported revenue of $302.6 million. This was a 3% increase on the prior corresponding period.

Management advised that this was driven by a 13% increase in International revenue and a 25% lift in China revenue, which managed to offset a 10% decline in ANZ revenue to $148 million.

Positively, thanks to margin expansion, Blackmores’ profit grew at the quicker rate of 8% to $19.4 million.

This improvement in its performance allowed the company to reinstate its dividend. Blackmores declared a fully franked interim dividend of 29 cents per share.

What’s next?

Management was cautious but positive on its outlook. While the company is expecting growth in Asia, it suspects that ANZ revenue could remain soft.

Particularly given during the weakness in the daigou channel because of COVID-19 border closures and lower foot traffic.

Can the Blackmores share price go higher?

According to a recent note out of Morgans, its analysts believe the Blackmores share price is fully valued now.

The broker has put a hold rating and $86.00 price target on the company’s shares, which is a touch lower than where it trades today.

While its analysts expect its efficiency program to deliver strong results for the company, it isn’t enough for a more positive rating. At 35x estimated FY 2022 earnings, it appears to believe the upside is limited in the near term.

More reading

• Top brokers name 3 ASX shares to sell today
• Why Bega, Blackmores, IDP Education, & SeaLink shares are zooming higher
• ASX 200 down 0.45%: Woolworths rises, Blackmores jumps, Appen sinks
• Blackmores (ASX:BKL) share price charges higher after profit growth returns
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores 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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ECS Botanics Holdings Ltd (ASX: ECS) shares have slumped in late-afternoon trade following an announcement regarding a capital raise. At the close of trade, the ECS Botanics share price is down 10% at 5.4 cents.

Let’s take a look at what is driving the agribusiness and hemp food company’s share price down.

Why is the ECS Botanics share price falling?

The ECS share price falls as investors indicate displeasure with the company’s latest update that will perhaps further dilute shareholdings.

In today’s release, ECS advised that it has received strong commitments to complete a $4 million share placement. Offered at 5 cents apiece, sophisticated and professional investors have confirmed to partake in the company’s capital raising efforts.

In addition, a rights issue will be available to existing shareholders at 5 cents per share to raise an extra $2 million. For every 17 ordinary shares held, 1 new share can be issued.

The offer price represents a discount of 19% on the company’s 5-day volume-weighted average price of 6.2 cents. However, after today’s steep fall, the placement only offers a 10% mark-down.

This will be completed under the company’s listing rule 7.1, which allows 15% of its shares to be issued without shareholder approval. The placement of the shares from sophisticated and professional investors is expected to start trading on 24 March 2021. The rights issue timetable will be released later this week.

ECS said as well as providing additional working capital to accelerate growth, it would use the funds for several business affairs. This will include completing its acquisition of Murray Meds and purchasing plant and equipment.

In the next 6 months, the company plans to execute a raft of sales agreements and partnerships. Furthermore, it will seek to expand its Victorian and Tasmanian operations, further boosting manufacturing capacity.

What did the managing director say?

ECS managing director Alex Keach commented:

Having received shareholder approval for our acquisition of Murray Meds, we are excited to complete this transaction which positions ECS as the largest, lowest cost and most geographically diverse cannabis producer in Australia.

Murray Meds has executed several important supply agreements in recent weeks for medical cannabis dried flower, concentrate and final dose oils in Australia as well as Europe with several more expected soon.

The ECS share price has gained more than 160% since this time last year and is up over 40% year-to-date.

More reading

• Why the ECS Botanics (ASX:ECS) share price is moving higher today
• ECS Botanics (ASX:ECS) share price edges lower despite positive update

Motley Fool contributor Aaron Teboneras 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 Magellan Financial Group Ltd (ASX: MFG) share price closed Monday’s session 5.32% higher. By the market’s close, shares in the fund management business were trading at $45.57 after closing Friday’s session at $43.27.

By comparison, the S&P/ASX 200 Index (ASX: XJO) edged just 0.12% higher for the day.

Let’s take a closer look at what’s been happening for Magellan. 

Magellan backed Barrenjoey Capital gets ASX licence

In news that could have helped boost the Magellan share price today, the Sydney Morning Herald (SMH) reported that the ASX has granted Barrenjoey Capital (of which Magellan owns a 40% stake) a licence to be a market participant. This means the investment bank can clear and settle trades in its own name.

Barrenjoey already operates within the corporate finance space and intends to open up its markets arm by the end of FY21, now that it has received the licence.

In addition to the licence granting, SMH also reported that Barrenjoey is lifting top talent from some of its rivals. After picking up Challenger Ltd (ASX: CGF) managing director Brian Bernari as CEO, and UBS executive Guy Fowler as chair, the company is making several more acquisitions.

Three more UBS executives have left the Swiss bank for Barrenjoey. They are banking analyst Jonathan Mott, mining analyst Glyn Lawcock, and gambling and transport analyst Matt Ryan.

As well, BHP Group Ltd (ASX: BHP) chair, Ken Mackenzie, is rumoured to soon be joining Barrenjoey as a senior strategy partner.

What is Barrenjoey Capital?

Launched in 2018, Barrenjoey Capital is the latest investment bank to enter the Australian market. A joint venture between Magellan and Barclays, Barrenjoey provides corporate and strategic advice, equity and debt capital underwritings, cash equities, research, prime brokerage, and fixed income trading.

While Magellan and Barclays are financial backers and own equity in the company, the majority of the company will be owned by its employees.

Magellan’s net profit after tax for the six months ending 31 December 2020 was down 2% to $213.1 million. Part of the reason for this was the $6.1 million net loss Magellan incurred from its Barrenjoey investment.

Magellan share price snapshot

During the COVID-19 market crash of March last year, the Magellan share price reached a 52-week low of $30.10. At today’s price, it has gained more than 50% since that time. However, Magellan shares are down nearly 31% from their 12-month high of $66.00 achieved in August last year.

Magellan Financial has a market capitalisation of around $7.95 billion.

More reading

• 2 ASX 200 shares to buy for income
• Triple whammy hammers the Fortescue (ASX:FMG) share price today
• Do brokers rate the BHP (ASX:BHP) share price as a buy?
• This fundie refuses to invest in gambling and fossil fuels
• Can ASX BNPL companies like Afterpay (ASX:APT) compete with Paypal?

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger 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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