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There are some small cap ASX shares that are growing really quickly and could be worth looking into.

Businesses with a small market capitalisation have the advantage of being much earlier on in their growth journeys and could generate more capital growth, unlike large blue chips which have already become major players in their industry.

With that in mind, here are two small cap ASX shares that could be worth looking into:

Sezzle Inc (ASX: SZL)

Sezzle is a buy now, pay later (BNPL) business on the ASX.

Many businesses in the BNPL industry are growing quickly. Sezzle just announced its growth for the fourth quarter of 2020.

The small cap ASX share said that the fourth quarter underlying merchant sales (UMS) went up by 205.4% year on year to US$320.8 million, this was growth of 40.6% quarter on quarter. December’s UMS beat November’s UMS by 0.4%. The annualised run rate reached US$1.36 billion.

Average monthly UMS reached US$106.9 million in the fourth quarter of 2020, compared to US$76.1 million in the third quarter of 2020 and US$35 million in the fourth quarter of 2019.

Merchant fees as a percentage of UMS were 5.4% in the fourth quarter of FY20, compared to 5.5% in the fourth quarter of 2019. This reflected Sezzle’s expansion into large enterprise.

Active consumers for the 2020 fourth quarter went up 143.9% year on year to 2.2 million. This was an increase of 24.5% quarter on quarter.

Active merchants went up 166.6% year on year in the fourth quarter to 26,690, which represented growth of 27.8% quarter on quarter.

The small cap ASX share said that its consumer profile continued to improve as active consumer repeat usage grew to 89.8%, which represented two years of consecutive monthly improvement. Management said this is a key driver for lower loss rates.

In terms of merchant fees for Sezzle, it grew by 195.6% year on year to US$17.2 million.

Sezzle also said that it is now experiencing omnichannel traction with large enterprise. In the fourth quarter of 2020, it became available at Fortune 500 company GameStop, which is the world’s largest retailer of video games and Sezzle is now available at GameStop’s more than 3,300 retail stores, as well as online and in its mobile app. Sezzle is also available at Pure Hockey, the US’ largest hockey retailer.

Australian Ethical Investment Limited (ASX: AEF)

Australian Ethical is a fund manager that focuses on ethical investments on behalf of investors. It offers both superannuation and managed funds.

Funds under management (FUM) growth is an important contributor to the growth of profit for fund managers.

About a month ago the small cap ASX share gave an update about its profit expectations and FUM movements.

At 30 November 2020, Australian Ethical’s FUM had risen by 14% to $4.92 billion, up from $4.32 billion. This was 21.6% higher since 30 June 2020. This increase was driven by “exceptional investment performance of $0.43 billion and strong net flows of $0.18 billion in October and November.”

Australian Ethical is expecting underlying net profit after tax for the six months ending 31 December 2020 to be between $4.6 million and $5.1 million. The mid-point of that range represents an increase of 11% on the six months ending 31 December 2019.

Strong growth in FUM was partially offset by the impact of superannuation fee reductions including those implemented in the second half of FY20 and fee and threshold reductions across some managed funds in October. The idea is that lower fees may attract more FUM over time.

Australian Ethical said it continues to invest in its growth strategy and anticipates that revenue will exceed $50 million this financial year, with associated tax rate adjustments.

More reading

• Here’s why the Sezzle (ASX:SZL) share price is up over 5% today
• Why did the Australian Ethical (ASX:AEF) share price storm 9% higher today?
• How to invest in ASX shares in a post-COVID world 
• 3 exciting ASX payment shares to buy in January
• ASX sector of the year: BNPL goes from strength to strength

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 Australian Ethical Investment Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. and Sezzle Inc. 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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Rio Tinto Limited (ASX: RIO)’s most important growth project is under threat, with the government of Mongolia this week threatening to pull the deal.

For years Rio Tinto, through its subsidiary Turquoise Hill Resources Ltd (NYSE: TRQ), has been trying to expand the Oyu Tolgoi copper and gold mine.

But on Tuesday Australian time Turquoise Hill announced to the market that the Mongolian government was “dissatisfied” about the estimated economic benefits of the $8.7 billion expansion.

The numbers were released mid-December but this was the first the market heard about the Mongolian government’s response.

“The government of Mongolia has indicated that if the Oyu Tolgoi project is not economically beneficial to the country, it would be necessary to review and evaluate whether it can proceed,” Turquoise Hill stated on the NYSE and TSE.

The situation is serious enough that Ulaanbaatar has expressed intent to tear up the Oyu Tolgoi Underground Mine Development and Financing Plan (UDP) that it signed with Rio in 2015.

“The government of Mongolia has stressed the importance of achieving a comprehensive solution that addresses both financial issues between the shareholders of Oyu Tolgoi as well as economic and social issues of importance to Mongolia, such as water usage, tax payments, and social issues related to employees, in order to implement the Oyu Tolgoi project successfully.”

The Oyu Tolgoi project is rather important to Rio Tinto

Turquoise Hill announced it would be “engaging immediately” with the Mongolian government to sell the economic benefits and save the UDP.

This is the latest crisis in a long-troubled project.

The Oyu Tolgoi expansion was first budgeted to cost $6.8 billion but Rio Tinto was forced to update that number to $8.7 billion in October.

Notwithstanding the headaches, the mining giant is keen to keep the project going as it wants to grow and diversify from its main iron ore business.

The Mongolian government’s adverse reaction to the economics estimate is the first big challenge for Rio Tinto’s new chief executive Jakob Stausholm.

He was appointed to the job after the company’s last crisis — last year’s blowing up of the historically significant Juukan Gorge in Western Australia.

Rio Tinto, in testimony to parliamentary committees and in an internal investigation, defended the destruction, citing that it fully complied with the law. 

The company initially penalised 3 executives a total of $7.2 million of bonuses without apportioning blame on any individual. 

But after a campaign from its biggest shareholders, the 3 executives exited Rio Tinto. Although the ‘punishment’ possibly ended up better than an exoneration, with the trio walking away with massive golden handshakes.

After that messy saga, Stausholm promised to rebuild trust with indigenous owners of lands the company mines. Now he unexpectedly faces a test of that promise in north Asia.

More reading

• Here’s why the Fortescue (ASX:FMG) share price is up 12% in a month
• The Pilbara Minerals (ASX:PLS) share price is already up 25% in 2021
• 5 top ASX mining shares for dividends and growth in 2021
• ASX company stops Kakadu uranium production
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Tony Yoo 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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There is a sector in Australia that’s about to grow its revenue by 478% in the current financial year, according to one analyst.

Consumer research firm IBISWorld revealed Tuesday that the medical cannabis manufacturing industry is currently experiencing a boom despite the still-remaining legal hurdles.

“The strict regulatory framework regarding the manufacture of medical cannabis products has limited the sector’s growth over the past five years,” said IBISWorld senior industry analyst Will Chapman.

“However, the recent determination by the Therapeutic Goods Administration to allow over-the-counter [cannabidiol] products to be sold without a prescription is expected to drive significant revenue growth in the years ahead.”

The industry produces medicines and consumables based on one of two ingredients extracted from the cannabis plant: cannabidiol (CBD) and tetrahydrocannabinol (THC).

CBD is a non-psychoactive ingredient used as a pain killer and an anti-convulsant. THC is the stuff that gives you “a high” but can be used to treat pain and nausea, low appetite and insomnia.

Recreational use for cannabis has been legalised in Canada and some US states. There is no sign of such a development yet in Australia, but IBISWorld reckons this won’t stop local cannabis businesses from growth.

“It will take time for new medical cannabis products to be approved, but medicines derived from cannabis will eventually appear on pharmacy shelves,” said Chapman.

Banks are offering massive finance to cannabis companies

The sector in Australia is still very much in the startup phase – so it’s coming off a low base. 

Nevertheless, after seeing total revenue of just $5.4 million in the 2020 financial year, IBISWorld has forecast the current year will end with $31.2 million.

But there’s still plenty of growth to come, it reported.

“Overall, medical cannabis manufacturing revenue is projected to rise at an annualised 79.1% over the five years through 2025-26, to $575.2 million,” said Chapman.

“IBISWorld anticipates employment in this industry to reach 1,500 by 2025-26.”

There are a few cannabis businesses listed on the ASX.

The Motley Fool reported last month Zelira Therapeutics Ltd (ASX: ZLD) had a stunning 2020, with the share price spiking up 67%. Althea Group Holdings Ltd (ASX: AGH) returned a nice 14% to its investors over the calendar year.

IBISWorld singled out Cann Group Ltd (ASX: CAN) as a “major player” in the Australian industry, with a 24% market share in the 2020 financial year.

Privately owned Little Green Pharma was also named by the analysis firm as a player to watch.

Banks have already recognised the huge potential, according to Chapman, lending out large sums to cannabis startups.

“The growth opportunities in the budding cannabis industry have not gone unnoticed by Australian financiers. In March 2020, start-up CannaPacific secured a $3.5 million debt facility from Westpac Banking Corp (ASX: WBC). Cann Group secured a $50 million credit facility from National Australia Bank Ltd (ASX: NAB) in November 2020,” he said.

The ultimate milestone

Recreational legalisation may remain politically unpalatable in the near future in Australia. But the local industry’s current focus is to get a cannabis-based medicine on the Australian register of Therapeutic Goods for domestic supply.

There is currently none on that hallowed list.

“For many start-up cannabis businesses, the ultimate goal is to have the medical benefits of cannabis recognised and their products accepted among medical professionals,” Chapman said.

“Achieving the listing of cannabis products on the Pharmaceutical Benefits Scheme would be a major win for cannabis products.”

More reading

• Why ASX cannabis shares are cheering the US elections
• Why the Althea (ASX:AGH) share price is flying high this morning
• Why the Cann Group (ASX:CAN) share price is moving today
• Are these 4 ASX medical shares set for a healthy 2021?
• Why the Cann (ASX:CAN) share price has backflipped today

Motley Fool contributor Tony Yoo 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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There are a few different reasons why the Pushpay share price could be attractive to investors at the moment.

What is Pushpay?

Pushpay describes itself as a donor management system, including donor tools, finance tools, a customer community app and a church management system to the faith sector, non-profit organisations and education providers located predominately in the US.

It also acquired and owns Church Community Builder, which is a software as a service (SaaS) church management platform system that churches use to connect and communicate with their community members, record member service history, track online giving and perform a range of administrative functions.

Pushpay also offers a combined system called ChurchStaq where churches can used both systems in a joint offering.

The company just announced that its chief customer officer, Molly Matthews, will become the new CEO from 1 March 2021. She joined the Pushpay business over four years ago. Pushpay said that Ms Matthews has excellent leadership, strategic thinking, problem solving, cultural development and advocated for Pushpay’s customers in decision making. The company’s leadership said she has a deep understanding of Pushpay’s customers.

Why the Pushpay share price could be interesting

Fund manager Ben Griffiths from Eley Griffiths said: “Over the last 12 months it has become clear Pushpay is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, Pushpay has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress Ltd (ASX: IRE)). We believe the next few years for Pushpay will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash.”

Here are three reasons to consider Pushpay:

Continued profit growth

Pushpay just announced that it was increasing its profit guidance again. The key donation month of December 2020 was better than expected, which meant that the company decided to raise its expectations.

When Pushpay released its FY21 result in May 2020, it was guiding that earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDA) could be in a range of US$48 million to US$52 million.

At its AGM in June 2020 it increased that EBITDAF guidance to a range of US$50 million to US$54 million.

When it released its FY21 half-year result it increased the EBITDAF expectations again to a range of US$54 million to US$58 million.

This week the company increased the guidance yet again to a range of US$56 million to US$60 million.

Operating leverage

Operating leverage is when a company is able to grow its profit even faster than revenue because of economies of scale.

In the recent FY21 half-year result, Pushpay reported that its operating revenue increased by 53% to US$85.6 million. However, in that same result the total operating expenses only grew by 16%. EBITDAF surged by 177% to US$26.7 million. Net profit grew 107% and operating cashflow went up 203%.

The gross profit margin improved by another three percentage points from 65% to 68% and the EBITDAF margin jumped from 17% to 31%.

If profit margins increase, it means that profit will increase at a faster pace than the revenue growth.

Pushpay said it expects significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low.

Valuation

Looking out to FY23, the Pushpay share price is not priced as highly as other ASX growth shares.

According to Commsec, the Pushpay share price is valued at 23x FY23’s estimated earnings. Looking at other valuations, the Pro Medicus Ltd (ASX: PME) share price is valued at 73x FY23’s estimated earnings, the REA Group Limited (ASX: REA) share price is valued at 40x FY23’s estimated earnings, the ResMed Inc (ASX: RMD) share price is valued at 31x FY23’s estimated earnings and the SEEK Limited (ASX: SEK) share price is valued at 43x FY23’s estimated earnings.

More reading

• 2 fantastic ASX healthcare shares to buy
• ASX 200 drops lower
• 3 highly rated ASX growth shares to buy now
• 3 ASX shares to buy that fund managers love
• Why ARB, Mesoblast, Pushpay, & Super Retail shares are racing 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 and recommends Pro Medicus Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended IRESS Limited, Pro Medicus Ltd., PUSHPAY FPO NZX, REA Group Limited, ResMed Inc., and SEEK 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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Last year the cash rate was taken down to a record low of just 0.1%. Unfortunately for income investors, the market is currently pricing in a 75% probability of a cut to zero next month.

If this happens, it is going to make it even harder for income investors to generate a sufficient income from term deposits and savings accounts.

Fortunately, in this low interest rate environment, the Australian share market is home to dividend shares that offer investors generous yields.

Two ASX shares dividend shares with generous forecast yields are listed below. Here’s what you need to know about them:

Aventus Group (ASX: AVN)

Aventus is the owner and operator of 20 large format retail parks across Australia. It counts major retailers such as ALDI, Bunnings, Officeworks, and The Good Guys as tenants.

Not only has this led to high occupancy levels, these tenancies give the company’s centres a high weighting towards everyday needs. This has been a real strength during the pandemic and allowed Aventus to collect the majority of its rent as normal in FY 2020.

According to a note out of Macquarie, its analysts are positive on the company and expect it to pay a 16.7 cents per share dividend in FY 2021. Based on the latest Aventus share price, this represents a forward 6.2% dividend yield.

Westpac Banking Corp (ASX: WBC)

Another dividend share to look at is Westpac. Although the banking giant has recovered strongly from its COVID lows, its shares are still expected to provide a very attractive dividend yield in FY 2021.

According to a note out of Citi, now APRA has removed its dividend restrictions on the sector, it is forecasting a $1.30 per share fully franked dividend this year. Based on the latest Westpac share price, this represents a 6.3% yield.

The broker believes that the worst is over for the banks and feels net interest margins have now bottomed. Westpac remains its number one pick in the sector and it has put a buy rating and $26.00 price target on its shares.

More reading

• Bank of Queensland (ASX:BOQ) share price touches 52-week high today
• ASX 200 down 0.4%: Afterpay tumbles, bank shares lower, gold miners crash
• 2 quality ASX dividend shares with 6%+ yields
• Interest rates could be at ultra low levels for years, so buy this ASX dividend share
• ASX 200 up 0.4%: Afterpay & Zip charge higher, NAB rises, Harvey Norman hits new high

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia has recommended AVENTUS RE UNIT. 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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On Tuesday the S&P/ASX 200 Index (ASX: XJO) gave back its morning gains to end the day lower. The benchmark index fell 0.3% to 6,679.1 points.

Will the market be able to bounce back from this on Wednesday? Here are five things to watch:

ASX 200 expected to fall.

The Australian share market looks set to continue its poor run on Wednesday. According to the latest SPI futures, the ASX 200 is expected to fall 21 points or 0.3% lower this morning. This is despite it being a reasonably positive night of trade on Wall Street. In late trade the Dow Jones is up 0.2%, the S&P 500 has risen slightly, and the Nasdaq has climbed 0.2%.

Confession season continues.

The Altium Limited (ASX: ALU) share price came under pressure on Tuesday after it became the first company to provide a profit warning ahead of February’s reporting season. It is likely that more companies will now start to provide investors with guidance ahead of their results releases next month.

Oil prices higher.

It could be a good day for energy producers such as Beach Energy Limited (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices pushed higher. According to Bloomberg, the WTI crude oil price rose 1.8% to US$53.20 a barrel and the Brent crude oil price has risen 1.6% to US$56.57 a barrel. Saudi Arabia’s production cuts have supported prices.

Gold price flat.

Gold miners including Newcrest Mining Limited (ASX: NCM) and St Barbara Ltd (ASX: SBM) will be on watch after the gold price traded largely flat. According to CNBC, the spot gold price is up slightly to US$1,852.00 an ounce. Gold was held back by improving US treasury yields during overnight trade.

Iron ore rises.

The shares of BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) could be on the rise today after the iron ore price strengthened further. According to Metal Bulletin, the spot iron ore price has risen 0.3% to US$172.67 a tonne. Robust demand in China for the steel making ingredient is supporting prices.

More reading

• With energy prices roaring back will these ASX energy shares keep booming?
• ASX 200 drops lower
• Objective (ASX:OCL) share price continues its rise in 2021 after doubling last year
• Are the recent US elections turbocharging the ASX 200?
• Here’s why the Fortescue (ASX:FMG) share price is up 12% in a month

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 and recommends Altium. 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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Some investors may not have heard of ASX small cap shares Eureka Group Holdings Ltd (ASX: EGH) or Healthia Ltd (ASX: HLA), but both companies’ share prices are currently trading at or near their 52-week highs.

The Eureka share price is currently trading higher by 3% to at 48 cents — its 52-week high.

The Healthia share price, meanwhile, touched its all-time high of $1.64 earlier today. It has since retreated to the current price of $1.55, up by 1.3%.

Let’s take a quick look at what’s been driving the share prices.

Eureka Group

Eureka Group is a provider of quality and affordable rental accommodation for independent seniors within a community environment. It owns 30 villages and manages a further nine villages with a total of more than 2,000 residences across Queensland, Tasmania, South Australia, Victoria, and New South Wales.

In FY20, Eureka delivered across all key financial metrics over the previous year.

Healthia is a small cap ASX share that is an integrated group of health businesses which includes My FootDr (a podiatry business), Allsports Physiotherapy, Extend Rehabilitation, iOrthotics (a 3D printing orthotic devices business), and DBS Medical Supplies (a podiatry equipment business).

In its full FY20 results, the company reported a 40% increase in underlying revenue, while its underlying EBITDA grew 47.6%.The company also reported a 22% bottom line increase in underlying net profit.

Healthia has identified acquisitions to be the main focus for its growth, given the fragmented market in the health industry. In its most recent round of acquisitions, Healthia purchased The Optical Company for $43 million, and the North Queensland Physiotherapy Centre for $1.34 million.

It commands a market cap of $135 million.

More reading

• 3 ASX shares rated as buys by fundie

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has recommended HEALTHIA 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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After ringing in the new year, many ASX investors are looking to add new shares to their portfolios. And perhaps sell some they believe will underperform in 2021.

We’ll let the potential underperformers rest for today. Instead we turn to a share that Centennial Asset Management’s Matthew Kidman believes could lead the ASX charge higher in the year ahead.

Namely, Downer EDI Limited (ASX: DOW).

Why Downer is tipped to outperform in 2021

If you’re unfamiliar with Downer EDI, the company designs, builds and sustains assets, infrastructure and facilities in Australia and New Zealand. It operates across a range of industries including transport, utilities, mining, engineering and construction. Downer is part of the S&P/ASX 200 Index (ASX: XJO).

In an interview with Livewire Markets last week, Matthew Kidman explained why he likes the outlook for Downer shares in 2021. Kidman said that Downer was in the middle of restructuring its business:

It’s selling its lumpy, heavy capital intensive components, and going into a much more capital-light service-based business with a lot of long-term government contracts.

It’s really unloved by the market and it’s trying to fix itself up. It’s fixed its balance sheet, it’s fixing its business mix up. I think it sits alone as a service-based business for that mid to large-cap market.

As they see it unwind some of these businesses and focusing on the better-returning businesses, it will get a re-rate. So today, around $5.30, I think it can trade on a slightly higher multiple. With that multiple expansion, the earnings will go up. I think over the course of the next few months they may be able to get around $7 out of it, as long as the story unfolds the way we think it will.

Downer share price snapshot

Downer shareholders were absolutely hammered during the wider COVID-19 market selloff last year. From 21 February through to 24 March, the Downer share price crashed 69%.

Since that low, shares have rebounded an impressive 103%. But that still leaves the share price down 37% since 21 January last year.

Downer trades at a trailing price to earnings (P/E) ratio of 12.4 times. The company pays a dividend yield of 2.4%, unfranked.

The Downer share price gained 0.9% today, closing at $5.53 per share.

More reading

• 7 ASX shares to buy for 2021
• Can the ugliest ASX 200 dogs of 2020 turnaround in the New Year?
• Downer (ASX:DOW) share price edges higher on divestment news

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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Australian retail turnover rose 7.1% in November 2020, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures.   

The rise was led by Victoria, which saw its retail sales surge by 22.4% as Melbourne retail stores were able to trade for a full month in November. Excluding Victoria, turnover increased 2.6%. 

ASX retail shares have largely reported upbeat earnings, especially in the months of November and December. Here are the industries and ASX retail shares that have benefitted from improved retail conditions. 

Industry level breakdown 

At the industry level, clothing, footwear and personal accessory retailing jumped by 26.7%. 

Coinciding with the strong performance for this segment, Accent Group (ASX: AX1) released a trading update on 7 January 2021 citing stronger than expected sales in November and December. The company is now expecting group earnings before interest, tax, depreciation and amortisation (EBITDA) for the half year ended 27 December 2020 to be in the range of $95 million to $98 million, which represents a growth of between 40–45% on the prior corresponding period. 

Department stores also experienced a significant uplift in turnover with a 21.1% increase. This has helped the likes of Kmart and Target owner Wesfarmers Ltd (ASX: WES) hit all-time record highs on the back of strong earnings across the group’s retail businesses.

Household goods retailing also improved 12.7%. Nick Scali Limited (ASX: NCK) recently updated its profit guidance following better than anticipated container availability during the months of November and December, which lead to increased delivery volumes. The company now expects unaudited net profit after tax for the six months to 31 December 2020 to be $40.5 million, up approximately 100% on the prior corresponding period.

Other household retailers such as Temple & Webster Group Ltd (ASX: TPW) and Adairs Ltd (ASX: ADH) have also experienced a recent resurgence in share price.

Elsewhere, cafes, restaurants and takeaway food services increased 6.7% while food retailing fell 0.3%. Total retail turnover rose 13.3% when compared to November 2019. 

E-commerce trend continues 

The growing dominance of e-commerce is also clear in these latest numbers. Online sales made up 11% of total retail turnover in November 2020, compared to 10.4% in October 2020, while in November 2019, online retail contributed 7.2% to total retail turnover. 

More reading

• 2 star ASX shares to buy for a retirement portfolio
• Capital returns galore from cashed-up ASX retail stocks
• The biggest ASX bulls are about to get their faith tested
• Got money to invest? Here are 3 ASX shares to buy
• 3 ASX dividend shares with yields above 4%

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Accent Group, ADAIRS FPO, 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.

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If you’re in the process of building a retirement portfolio, then you might want to take a look at the ASX shares named below.

They could be great options for investors looking for a combination of growth and income over the next decade. Here’s what you need to know:

Collins Foods Ltd (ASX: CKF)

The first share to look at is Collins Foods. It is a growing quick service restaurant operator with a massive 244 KFC stores in Australia and 41 KFC stores in Europe. Collins Foods also operates 13 Taco Bells across Queensland and Victoria.

Its defensive qualities were on display for all to see in 2020 when Collins Foods delivered strong sales, profit, and dividend growth despite the pandemic. During the first half of FY 2021, the company reported an 11.3% increase in revenue and a 15.1% lift in underlying net profit after tax.

The good news is that management still sees plenty of room for growth for its KFC network in Australia and particularly in the underpenetrated Europe market. This should be supported by the further rollout of Taco Bell stores.

One broker that is positive on Collins Foods is Morgans. It has an add rating and $11.39 price target on its shares. The broker is forecasting a fully franked dividend of 23 cents per share. This represents an attractive 2.5% dividend yield.

Wesfarmers Ltd (ASX: WES)

Another ASX share that could be a good option for a retirement portfolio is Wesfarmers. This conglomerate is arguably one of the highest quality companies on the Australian share market and has been tipped to deliver solid earnings and dividend growth over the next decade.

This is thanks largely to its portfolio of leading retail brands such as Bunnings, Catch, and Kmart. In addition, the company has a number of industrial businesses with decent outlooks and exposure to the lithium boom through its Kidman Resources business.

Another positive is that the company has a very strong balance sheet and plenty of firepower to make earnings accretive acquisitions in the future.

Analysts at Credit Suisse are positive on the company and have an outperform rating and $55.83 price target on its shares. They are also forecasting a $1.90 per share fully franked dividend in FY 2021. This equates to a 3.7% dividend yield.

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Motley Fool contributor James Mickleboro owns shares of Collins Foods Limited. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Collins Foods 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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