Tag: Motley Fool

In recent weeks, the financial news chatter has turned to resurgent inflation and the spectre of higher interest rates. And when interest rates go up, it can put pressure on shares, particularly growth shares.

When United States Government 10-year bond yields hit 1.6% earlier in the week, global share markets sold off. In Australia, the S&P/ASX 200 Index (ASX: XJO) was no exception.

But according to the world’s leading central bankers (past and present), investors’ inflation concerns are ill-founded.

On Monday, former Federal Reserve chair and current US Treasury Secretary Janet Yellen dismissed the notion that President Joe Biden’s US$1.9 trillion (AU$2.5 trillion) COVID recovery package would stoke inflation. (More details here.)

Rates to remain at rock bottom levels

Yesterday, speaking at The Australian Financial Review‘s Business Summit, Reserve Bank of Australia governor Philip Lowe joined his international counterparts, stressing that the current record low cash rate wasn’t going to rise anytime soon.

Here are a few key takeaways for investors concerned rising interest rates could impact their holding of ASX 200 shares:

The Reserve Bank is committed to continuing to provide the necessary assistance and will maintain stimulatory monetary conditions for as long as is necessary. We want to see a return to full employment in Australia and inflation sustainably within the 2 to 3 per cent target range…

An important element of our policy package is the cash rate target being set at what is the effective lower bound of 0.1 per cent. The board will maintain this setting of the cash rate target until inflation is sustainably within the 2–3 per cent range.

It is not enough for inflation to be forecast to be in this range. Before we adjust the cash rate, we want to see actual inflation outcomes in the target range and be confident that they will stay there.

Lowe added that the RBA is not only waiting for inflation to sustainably track above its target range, but also waiting for the Aussie jobs market to come roaring back.

He went on to say:

A question that investors have been grappling with recently is when will this condition for a higher cash rate be met? … For inflation to be sustainably within the 2 to 3 per cent range, it is likely that wages growth will need to be sustainably above 3 per cent…

Currently, wages growth is running at just 1.4 per cent, the lowest rate on record…

Predicting how long it will take is inherently difficult, so there is room for different views. But our judgement is that we are unlikely to see wages growth consistent with the inflation target before 2024.

This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024.

There you have it.

If you’ve anxiously been watching your ASX 200 shares rise and fall on the back of shifting speculation surrounding rising interest rates, you may want to give it a rest, “until at least 2024”.

ASX 200 snapshot

At the time of writing, the ASX 200 is down 0.12% for the day and is now up 1.8% in 2021.

Over the past 12 months the ASX 200 as gained 17.3%.

More reading

• Will the Afterpay (ASX:APT) share price bounce back?
• ASX stock of the day: Event (ASX:EVT) shares are shooting higher
• The Zip (ASX:Z1P) share price just keeps on falling
• Should the JobKeeper payment be replaced with discounted airfares?
• Why Afterpay, Nearmap, Temple & Webster, & Z Energy are tumbling lower

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.

The post Worried about rising interest rates impacting ASX 200 shares? Read this… appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/38tZrbQ

The Event Hospitality and Entertainment Ltd (ASX: EVT) share price is having a wild day. Event shares closed at $11.06 yesterday but opened at $11.77 this morning.  The share price has been bouncing around this level ever since, despite a quick but sharp drop to $11.31 soon after market open.

Event shares are trading at $11.74 at the time of writing, a 6.15% rise for the day. Today’s move caps off what has been a great, if volatile, year for the company. Event was hard-hit in the coronavirus-induced market crash last year. The company bottomed out at a share price of $5.44 back on 23 March 2020. But it has been onwards and upwards for Event from there. Since 23 March, Event shares are up a healthy 115% going off of today’s pricing.

So who is Event? And why are the company’s shares doing so well today?

Cinemas and resorts hard hit

Event Hospitality is, as its name implies, a company that runs hotels and movie cinemas. You have probably seen one of its cinemas in at least one of the country’s major towns and cities, given there are 142 spread across Australia, as well as New Zealand. The company also operates the Rydges, QT and Atura hotel and resort chains and the Thredbo Alpine Resort near the Thredbo ski fields.

Event can also boast the State Theatre in Sydney in its portfolio, which was originally opened in 1929 and is now one of Australia’s oldest and most famous theatres.

As you might imagine, Event was not a company that escaped the pandemic and its associated lockdowns and social gathering restrictions lightly. Just last month, Event reported that revenues were down 58% over the six months to 31 December 2020 compared with the prior period in 2019. However, the company did manage to cut costs drastically, going from burning $20 million a month over March-June to $5 million a month over the six months to December.

Why is the Event share price rising then?

Given these not-too-encouraging statistics from the company’s earnings report, why is the Event share price on the move today? It’s not just today either, actually. Event shares are up 18.2% over the past month and 22% over 2021 so far.

Well, the company has not made any major market announcements since its earnings on 18 February. Thus, we can probably put investors growing enthusiasm down to coronavirus optimism—specifically, the snowballing rollout of coronavirus vaccines around the country and the world.

Since the Christmas time Northern Beaches outbreak in New South Wales, Australia has not had a major virus outbreak. That might explain the positive year-to-date share price performance for Event. Today, we have just had an announcement of a tourism stimulus package from the federal government. This includes cut-cost airline tickets, as well as other stimulatory measures for the tourism sector. This could also be feeding into market optimism for Event as well.

Whatever the reasons, I’m sure Event shareholders are pleased with what 2021 has brought so far, especially with today’s Event share price moves. At the current price, the company has a market capitalisation of ~$1.88 billion.

More reading

• Why did the Event (ASX:EVT) share price finish higher 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.

The post ASX stock of the day: Event (ASX:EVT) shares are shooting higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3t6hZH0

Zip Co Ltd (ASX: Z1P) shares might have shocked investors this morning after falling by as much as ~7% to a one-month low of $7.79. The Zip share price has since staged a significant intraday recovery to be down just 1.78% at the time of writing. 

ASX 200 tech shares under pressure 

The S&P/ASX Information Technology (ASX: XIJ) index continues to face relentless selling pressure and is currently down nearly 2% today.

The index’s five-day performance sits at -3.20% while its one-month performance is a shocking -18.2%. This compares to the S&P/ASX 200 Index (ASX: XJO) which is down just 2.2% in the last month. 

The tech index has been dragged down by heavyweights Afterpay Ltd (ASX: APT), Xero Limited (ASX: XRO) and WiseTech Global Ltd (ASX: WTC) which all experienced a similar topping out pattern in mid-Feb. The three heavyweights have lost at least 20% in value since mid-Feb. 

No big issues overnight 

The Nasdaq Composite (NASDAQ: .IXIC) finished 0.04% lower overnight while the Dow Jones Industrial Average (DJX: .DJI) surged 1.46% higher into record all-time highs. US benchmark bond yields also eased to 1.52% after closing at a one-year high of 1.60% on Tuesday. 

Perhaps more importantly for the Zip share price, US buy now, pay later giant (BNPL), Affirm Holdings Inc (NASDAQ: AFRM) closed 1.38% higher. 

Why is the Zip share price so weak? 

On Thursday, there has been weakness across the board for ASX tech shares and more specifically, BNPL shares. The Afterpay share price is 4.36% lower to $110.24 at the time of writing, bringing its year-to-date returns to around -7%.

Elsewhere today, the Sezzle Inc (ASX: SZL) share price is down 3.37%, the Laybuy Holdings Ltd (ASX: LBY) share price is down 2.94%, Openpay Group Ltd (ASX: OPY) shares have fallen by 0.4% and the Splitit Ltd (ASX: SPT) share price has tumbled 1.97%. The only BNPL stock that is green today is the beaten up Humm Group Ltd (ASX: HUM). 

The Zip share price was downgraded by analysts at UBS yesterday from a neutral to sell rating. The broker was concerned about potential execution risks and additional capital requirements to grow the business. As a result, UBS slapped a $6.40 share price target on Zip. 

There could also be lingering fears after PayPal announced its plans to launch its BNPL product in Australia yesterday. 

More reading

• Is it ok to buy ASX 200 shares at a 52-week high?
• ASX 200 down 0.9%: Flight Centre & Webjet jump, Afterpay sinks
• Is Afterpay (ASX:APT)’s BNPL competition heating up?
• ASX 200 drops, Zip down, Afterpay soars
• Why Accent, Fortescue, Western Areas, & Zip shares are tumbling lower

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 ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Humm Group Limited and Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post The Zip (ASX:Z1P) share price just keeps on falling appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/38vXr2V

As the JobKeeper payment wraps up, the Flight Centre Travel Group Ltd (ASX: FLT), Webjet Limited (ASX: WEB) and Qantas Airways Limited (ASX: QAN) share price are all having a party this afternoon. Especially the Flight Centre share price, which is presently up 10%.

The JobKeeper payment is coming to a close and the new package to replace it is a hot topic today. Particularly because it includes 800,000 half-priced airfares within the $1.2 billion stimulus package.

So why exactly are travel and tourism stocks rallying while the government prepares to reel in the JobKeeper payment? And what does the package look like next to US President Joe Biden’s latest stimulus?

How will half-price airfares help the economy?

Commenting on the subsidised ticket scheme, Prime Minister Scott Morrison said that the new program “…means more jobs and investment for the tourism and aviation sectors as Australia heads towards winning our fight against Covid-19 and the restrictions that have hurt so many businesses.”

Investors were happy to hear about the upcoming cash injection to the tourism industry. The Qantas share price is up 2.13% to hit $5.28 a share and the Webjet share price has flown by 4.44% to touch $6.12 at the time of writing.

In addition to the market support we’re seeing, the government is betting that the discounted ride will also get consumers out to spend money.

Prime Minister Morrison concluded: “Our tourism businesses don’t want to rely on government support ­forever… they want their tourists back.” 

Do airline tickets or cash lead to quicker spending?

Meanwhile, the US is rolling out a $1.9 trillion relief bill, which essentially puts US$1,400 in the pocket of many Americans. 

A lesson already learned in Australia is that COVID-19 stimulus checks led to a gambling surge, a similar pattern we witnessed during the 2009 stimulus package.

The National Library of Medicine performed research around that stimulus and revealed that the issued cash allowances resulted in a 26% increase in electronic gaming machine (EGM) revenues. Over $60 million in additional tax revenue for state governments was also accrued. 

It seems likely that the federal government kept this in mind when considering how to package up this round of benefits. The question is, will people take advantage of the offering? Or is it just business that is catching a break?

Foolish takeaway

While some investors are likely enjoying the rally we’re seeing with tourism stocks today, such as the Flight Centre share price gaining more than $1 a share, we’re looking at a much bigger picture.

The JobKeeper payment was an economic staple for a decent amount of time and the new stimulus package has big shoes to fill. We’ll have to wait and see if half-price airfares will be up for the challenge. 

More reading

• ASX 200 down 0.9%: Flight Centre & Webjet jump, Afterpay sinks
• Here’s why the Webjet (ASX:WEB) share price is flying
• Why Flight Centre, Qantas, ResApp, & Volpara are racing higher
• Qantas (ASX:QAN) share price rises despite fears tourism will struggle after JobKeeper
• Why the Qantas (ASX:QAN) share price is soaring today

Motley Fool contributor Gretchen Kennedy owns shares of Flight Centre Travel Group Limited and Qantas Airways Limited. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Should the JobKeeper payment be replaced with discounted airfares? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/30DjMHb

The S&P/ASX 200 Index (ASX: XJO) is having a volatile day and experiencing a number of ups and downs. But in afternoon trade, the benchmark index is down 0.2% to 6,698.9 points.

Four ASX shares that are dropping more than most today are listed below. Here’s why they are tumbling lower:

Afterpay Ltd (ASX: APT)

The Afterpay share price is down 4% to $110.80. This appears to have been driven by further weakness in the tech sector amid concerns over rising bond yields. The Afterpay share price is now down 31% from the record high it reached just last month.

Nearmap Ltd (ASX: NEA)

The Nearmap share price is down 2.5% to $2.07. The catalyst for this may have been a broker note out of Citi this morning. Although the broker has retained its buy rating and $3.10 price target on its shares, it has slight concerns over rising competition in the ANZ market from Aerometrex Ltd (ASX: AMX). It suspects this was why its growth in the ANZ business was subdued during the first half.

Temple & Webster Group Ltd (ASX: TPW)

The Temple & Webster share price has fallen 4.5% to $8.59 despite there being no news out of the online homewares and furniture retailer. However, this morning the Federal Government launched a major stimulus program to support the Australian tourism sector. Investors may be concerned that consumer spending could soon shift away from home improvements and back onto travel.

Z Energy Ltd (ASX: ZEL)

The Z Energy share price is down 5% to $2.48 following the release of an update to its guidance for FY 2021. According to the release, the New Zealand based fuel retailer has downgraded its operating earnings range to between NZ$235 million to NZ$245 million. Previously it was guiding to operating earnings of NZ$235 million to NZ$265 million. This has been driven by COVID-19 impacts on tourism and mobility.

More reading

• Could Australia be the next tech hub? Afterpay (ASX:APT) CEO thinks it should be
• Is it ok to buy ASX 200 shares at a 52-week high?
• ASX 200 down 0.9%: Flight Centre & Webjet jump, Afterpay sinks
• 2 great ASX tech shares to buy today
• Is Afterpay (ASX:APT)’s BNPL competition heating up?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nearmap Ltd. and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why Afterpay, Nearmap, Temple & Webster, & Z Energy are tumbling lower appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/30wKstf

The Incannex Healthcare Ltd (ASX: IHL) share price, which has shot up 310% in the past 12 months, has remained relatively flat in today’s trade.

We take a look at the ASX healthcare share’s latest announcement on its accelerated drug study, along with its share price performance over the past year.

What did Incannex Healthcare report?

Incannex Healthcare shares are flat today after the company reported it has partnered with Monash Trauma Group to study the effectiveness of its proprietary drug on treating concussions.

The in vivo study, to be conducted on rats, will assess the “neuroprotective capability of IHL-216A”. IHL-216A combines cannabidiol (CBD) and isoflurane (or any other volatile anaesthetic agent).

Incannex designed its proprietary drug, intended to be given shortly after head injuries, to reduce secondary brain injuries.

Few athletes are as at risk of head injuries as grid iron players. And it’s the United States National Foot Ball League (NFL) that worked together with Incannex to create the model for traumatic brain injuries that will be used in the new study.

Commenting on the partnership study, Incannex Healthcare CEO Joel Latham said:

Undertaking this extensive and well-recognised animal model study, instead of the in-human proof of concept study, has the effect of reducing the overall development time and expense associated with our drug registration plan. Furthermore, the company will collect additional data from an animal study that it would not be able to compile in human studies. This additional data will inform the design and end points of our pivotal clinical trials.

The company previously reported positive results from its initial in vivo study on 15 December 2020. At that time the ASX healthcare company reported its IHL-216A drug combination was 35% more effective than CBD alone and 123% more effective than isoflurane administered alone in reducing the “Iba1 neuroinflammation marker”. 

Between 15 December and 16 February, the Incannex share price soared 53% to a 1 year high. 

Incannex Healthcare share price snapshot

Incannex Healthcare shares delivered very strong gains over the past 12 months, up 310% at the time of writing. The share price hit a 1 year high on 16 February of 26 cents per share and has since retraced to the current level of 21 cents per share.

Year-to-date the Incannex Healthcare share price is up 36%. By comparison, the All Ordinaries Index (ASX: XAO) is flat so far in 2021.

More reading

• Why the Incannex Healthcare (ASX:IHL) share price is up 15% today

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.

The post Up 300% in 1 year, what’s driving the Incannex Healthcare (ASX:IHL) share price? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3l6CQaA

The Nanoveu Ltd (ASX: NVU) share price is roaring higher in afternoon trade. This comes after the company announced that it has signed two international distribution agreements.

At one point, the nanotechnology company’s shares reached an intraday high of 7.2 cents. However, some profit-taking has led its shares to retrace back to 5.7 cents, up 14%.

Established in 2018, Nanoveu is focused on developing a range of products for the mobile phone and digital displays market. The company’s flagship product, Nanoshield, is an antiviral protection technology that can be applied to a number of surfaces. This includes mobile phone covers, mobile phone cases, tablets, and more.

What’s pushing the Nanoveu share price higher?

The Nanoveu share price is on the move after providing an update that could potentially boost its sales.

According to its release, Nanoveu advised that it has entered into an exclusive distribution agreement with Vital Medikal for its Nanoshield products to be delivered to the Republic of Turkey.

Nanoveu stated that while there were no product sale guarantees, a US$575,000 annual purchase target has been set for Vital Medikal to hold exclusivity rights. The agreement, effective immediately, will run for a 12-month period with an option to extend further pending a sales performance review.

With over 25 years of experience in the medical field, Vital Medikal is an established medical equipment distributor in Turkey. The company supplies crucial devices such as respirators, cathodes and pre-filled syringes to Turkish hospitals, clinics, and medical facilities.

It is believed that the Nanoshield products will complement Vital Medikal’s existing business-to-business customer base.

In addition to the first agreement, Nanoveu also signed a non-exclusive distribution deal with Asia Pro Lab for Hong Kong. The initial arrangement does not stipulate the minimum sales that are to be achieved. The non-material purchase agreement of Nanoshield will be valid for a term of 12 months and automatically renew thereafter.

Formed in 2009, Asia Pro Lab specialises in detailing and customisation of interior and exterior alterations on vehicles. The company primarily uses vinyl wrapping to suit customer needs. Adopting Nanoshield products with Asia Pro Lab enables antiviral and antibacterial protection properties within the customised works.

What did the head of Nanoveu say?

Nanoveu executive chair and CEO Alfred Chong commented:

We are continuing to see an expansion of our distribution network across the globe, which is reflective of the momentum Nanoveu has built. It is clear that there is immense desire for greater protection against bacteria and viruses and this demand is not just from first-world countries – it is from a global phenomenon.

The company will continue to target further distribution agreements in major markets, which permit greater avenues to generate sales revenue from Nanoshield products.

The Nanoveu share price has gained 42% from this time last year, but is down 18% for 2021.

More reading

• Will Aussie agricultural commodity prices see another record-breaking year?
• Is it time to buy at this A2 Milk (ASX:A2M) share price?
• Cimic (ASX:CIM) share price slides after credit rating downgrade
• Peter Costello thinks this will spark the next ASX market crash
• Could Australia be the next tech hub? Afterpay (ASX:APT) CEO thinks it should be

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.

The post Why the Nanoveu (ASX:NVU) share price is roaring 14% higher appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/30w8Mvh

According to Rabobank’s monthly agribusiness report, Australian commodity prices are looking to gain this year despite a record-breaking 2020.  

Australian agricultural commodities saw their highest prices on record last year, as prices soared approximately 18% between September 2019 and March 2020.  

The report found that, thanks to La Niña and demand from China, the majority of commodities produced in Australia are in for another good year.

The report follows ABARES’ prediction that  2020–21 will be the second most profitable season ever for Australian farmers.

Which commodity prices are expected to gain?

Canola

The price of canola is currently close to record-breaking ­– Western Australian genetically modified (GM) Kwinana Canola is trading 6% higher than last year, while non-GM canola is up 15%. These gains are due to strong Chinese demand and poor European and Canadian production.

Barley

A structural deficit in corn amidst a surge in Chinese demand is expected to indirectly raise prices for Australian barley.

Sugar

Australian sugar might be having a golden moment. With a late harvest season in Brazil likely and a lack of shipping containers muting Indian sugar exports – a nod to the intricacies of our globalised world – 2021’s sugar prices may be volatile.

Lamb

Lamb prices are at an all-time high for the second year in a row, but is not all good news, slaughter is at yet another low point. January lamb exports were also down, they have dropped 42% over the last 12 months.  

Which commodity prices are expected to fall?

Cattle

Cattle prices are caught in a stalemate. While producer demands are declining, a limited supply of cattle may have a stabilising effect on prices. Australian beef export volumes have fallen year to date, they’re currently down 37% overall, with the US and Chinese market down 55% and 56% respectively.

Wheat

If not comparing to 2020, Australia is in for a bumper year of wheat production. This comes as fears of frost damage to crops in the US loom. Rabobank predicts the market will be sensitive to downgrades of wheat crops globally.

Which ASX shares could be impacted by rising or falling commodity prices?

Here’s a quick look at 3 ASX shares dealing in the commodities discussed above:

• GrainCorp Ltd (ASX: GNC) stores and markets Australian barley, canola and wheat. It is also the largest producer of solvent and expeller canola oil in Australia. GrainCrop has a history of stable performance on the ASX, but it’s been slowly rising over the last 12 months, with a 24% return on investment. The GrainCrop share price is currently $4.34.
• Wingara AG Ltd (ASX: WNR) primarily markets fodder and hay for livestock consumption. It identifies exporting canola, barley, wheat and legumes as growth opportunities within the company. The Wingara share price is currently 14 cents, down 44% over the last 12 months and 31% year to date. Hopefully, the rise in demand and price of its commodities will help boost the company into the green. 
• Australian Agricultural Company (ASX: AAC) manages a herd of around 400,000 head of cattle in Queensland and the Northern Territory. The company owns 6.4 million hectares of land – roughly 1% of Australia’s land mass. The company’s share price is currently $1.16 with steady returns of 4% over the last 12 months and 5% year to date.

La Niña is providing a boost for Australian farmers

The rainfall outlook for the next few months is very promising. Most of Australia’s east coast is expecting 60% to 70% more than the median rainfall between March and May. The rest of the country is expecting around 50% more than the median.

More good news for farmers; soil moisture across most of Australia is above average. WA’s wheat belt and the interior of NSW are leaving the rest of the country in its dust. South-East Queensland and parts of Central WA are still suffering from severe rainfall deficits.

While La Niña has brought much-needed rainfall to Australia, it has been detrimental to food production in the Northern Hemisphere. The weather cycle has caused seasons to be unusually dry for most of the world, keeping prices firm over the coming months.

More reading

• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• These were the best performing ASX 200 shares last week

Motley Fool contributor Brooke Cooper has no position in any of the shares 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.

The post Will Aussie agricultural commodity prices see another record-breaking year? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3eudm5E

The A2 Milk Company Ltd (ASX: A2M) share price is coming under further pressure. It has fallen another 1% today.

What’s happening to the A2 Milk share price?

Since 2 March 2021, A2 Milk shares have steadily fallen from $9.54 to today’s $8.90 (at the time of writing.

Of course, the share price was at $10.45 just before the release of its FY21 half-year report.

The last month has seen negative news in relation to demand signs for A2 Milk.

For example, a week ago Synlait Milk Ltd (ASX: SM1) gave an update regarding its FY21 guidance. Synlait is a major supplier for A2 Milk. Plus, A2 Milk owns a large amount of Synlait shares.

In the update, Synlait said that there is ongoing uncertainty of A2 Milk’s expected demand for the rest of FY21 and FY22. Synlait also said that there continues to be global shipping delays which is expected for some time and could further impact FY21.

A2 Milk itself has said that it’s experiencing a lot of disruption.

The company said that FY21 half-year revenue was down 16% to $677.4 million but earnings before interest, tax, depreciation and amortisation (EBITDA) was down 32.2% to $178.5 million.

A2 Milk is suffering from challenges resulting from COVID-19 disruption experienced in the daigou and reseller channel with a flow on impact to the cross-border e-commerce (CBEC) channel.

There are some parts of the A2 Milk business that are still growing, such as its liquid milk business in North America and Australia, as well as local Chinese growth.

However, infant nutrition revenue in Australia and New Zealand fell 40.5% to $209.5 million for the half. This segment is suffering from pantry destocking after the strong sales in the third quarter of FY20, combined with reduced tourism from China and international student numbers as a consequence of COVID-19 travel restrictions.

But it’s the daigou channel sales that are particularly suffering, with the resellers being slower to re-enter the market. Whilst there was improvement in the channel, the recovery wasn’t as strong as the company had expected.

The A2 Milk share price has dropped 55% since the middle of July 2020.

How is A2 Milk going to turn things around?

One of the areas that A2 Milk continues to focus on is the China label channels, which is seeing high levels of growth. In the six months to 31 December 2020 it experienced 45.2% revenue growth to $213.1 million. The company said that its 12-month rolling market value share in Chinese mother and baby stores (MBS) increased to 2.4%, up by 0.7 percentage points from the prior corresponding period. The distribution also increased to 22,000 stores.

A2 Milk commented on this:

This performance is pleasing given the strategic importance and size of the channel and the increasing competitive intensity. There will continue to be an opportunity to gain market share given the strong resonance the brand has with consumers.

Is it time to buy at this A2 Milk share price?

There’s an investment saying that profit downgrades comes in threes, so only time will tell whether A2 Milk downgrades its expectations further from here. At the moment the company is expecting FY21 revenue in the order of $1.4 billion and a group EBITDA margin for FY21 to be between 24% to 26%, excluding acquisition costs.

Some brokers are quite bearish on A2 Milk shares, such as Ord Minnett and Citi, which have share price targets of below $8. Indeed, Citi’s target is $7.15 with lower margins expected over time.

However, Morgans thinks the company can recover as these conditions improve. It has a price target of $10.40 for A2 Milk shares.

More reading

• Where next for the A2 Milk (ASX:A2M) share price?
• Here’s why you should think twice about chasing the next hot ASX trend
• International Women’s Day: Which ASX companies are fighting gender inequality?
• Top brokers name 3 ASX shares to buy next week
• Synlait (ASX:SM1) share price crashes 7% on cancelled guidance

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is it time to buy at this A2 Milk (ASX:A2M) share price? appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3teplIJ

Cimic Group Ltd (ASX: CIM) shares are sliding lower today after the company revealed a downgrade to its credit rating. At the time of writing, the Cimic share price has edged 0.33% lower to $18.88. However, for context, the S&P/ASX 200 Index is also having a pretty flat day and is currently down by 0.02%.

Let’s take a look at what the construction giant reported.

Cimic’s credit rating worsens

In a statement to the ASX this morning, Cimic revealed that ratings agency Standard & Poors (S&P) has revised down the company’s credit rating. Previously, its rating was BBB/A-2 and it is now BBB/A-3. The agency did, however, revise its outlook on Cimic from ‘CreditWatch negative’ to ‘stable outlook’.

In its assessment, S&P viewed Cimic’s $2.2 billion sale of mining services provider Thiess negatively. The agency stated the move reduced “the business scale and diversity of Cimic…” and thus exposed it to more risk.

The credit analysts also highlighted that Cimic performed below expectations during FY20, even after incorporating the effects of COVID-19. Factoring in the Thiess sale, and a higher debt-to-earnings ratio that’s expected to remain for at least the next two years, ultimately led S&P to downgrade Cimic’s creditworthiness.

In some positive news for investors, S&P highlighted Cimic’s strength in the construction industry and the fact this should ultimately keep it in good stead.

From the report:

Cimic’s favorable end-market exposure and work in hand should help mitigate the group’s exposure to the operating risks, uneven project tenders, and inherent cyclicality of the construction industry.

The group’s proven ability to deliver large-scale and technically complex projects–including tunnels and bridges–supports its ability to win new contracts. Cimic’s work in hand as of Dec. 31, 2020, was about A$30.1 billion (adjusted for Thiess at 50%) and provides revenue visibility for approximately the next two years. Having said that, the lower level of work awarded in the past 12 months will likely weigh on revenues in fiscal 2021.

Cimic is also is in a good cash position, according to S&P’s report. Over the next two years, S&P believes the group will earn 1.5x more revenue than expenses “even if EBITDA declines by 30%.”

It also noted Cimic has “large cash reserves and [S&P] expect positive operating cash flow…”

Cimic share price snapshot

The Cimic share price has been tumbling over the past week as the fallout from the Greensill liquidation continues.

Shares in the company were trading at $26.00 as recently as 30 days ago. Since then, the Cimic share price has collapsed by 27.4%.

More reading

• Telstra (ASX:TLS) share price and others caught in Greensill insolvency
• The worst performing ASX 200 shares last week
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• These were the worst performing ASX 200 shares last week
• Why the Cimic (ASX:CIM) share price is edging higher today

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.

The post Cimic (ASX:CIM) share price slides after credit rating downgrade appeared first on The Motley Fool Australia.

from The Motley Fool Australia https://ift.tt/3et51yQ