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The PayGroup Ltd (ASX: PYG) share price is rocky today after the payroll and human capital company announced its half-year results for the six months ended 30 September 2020.

In early trade, PayGroup shares rose 3.49% to 60 cents, before pulling back and losing ground to be in the red by lunch. The company’s current market capitalisation is close to $43 million.

About PayGroup

PayGroup is a specialist provider of payroll and human capital management solutions, and is a holding company for brands such as PayAsia, TalentOz, and Astute One.

PayAsia provides software-with-a-service (SwaS) and payroll solutions. It enhances its offer to the market by using a cloud-based human capital management platform called TalentOz. Clients are multinational.

Astute One delivers workforce management solutions for complex businesses, with clients predominantly based in Australia and New Zealand.

PayGroup itself now has staff in 11 countries and services almost 1,000 clients.

Financial reports

In today’s report, PayGroup reported revenue for the first half of FY21 of $6.8 million, up a staggering 100% on the second half of FY20. The company stated that this growth was largely driven by organic growth and acquisitions.

PayGroup also reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.6 million, compared to a loss of $1 million in the prior corresponding period. 

Net profit after tax also represents a healthy turnaround for the company, going from a loss of $1.4 million in the prior corresponding period to a profit of $444,000.

Conditions and growth

Although PayGroup noted strong revenue growth and cost efficiencies as key drivers for the financial outcomes, other factors were also at play. It highlighted that JobKeeper also helped ease the burden in Australia, and other government incentives were noted to help in the Asia market.

The company also noted that during the time of the coronavirus pandemic, it continued to drive strong investment in both technology and staff. 

Following a successful capital raise of $3.5 million in September 2020, PayGroup now has a cash balance of $5.2 million. The goal is to use these funds for further company expansion. 

PayGroup has said that the outlook for the second half of FY21 is strong. It is currently completing another acquisition of Payroll HQ, with plans to capitalise on the strongly re-bounding Asia Pacific economies following COVID-19. 

What did management have to say?

In the announcement, PayGroup’s managing director Mark Samlal commented on the company’s performance:

We have now transitioned our business to become a full-service provider of Human Capital Management and payroll services. This is opening up a significant number of new customer opportunities.

I am very pleased with the financial performance of PayGroup this half as we have reported a profitable period, supported by a strong and growing base of contract revenues. We expect continued growth in contracted sales and earnings as we see the full contribution from our acquisitions and the benefits from our enlarged customer base and addressable markets.

The PayGroup share price

The PayGroup share price recovered well following the March market crash, rebounding from lows of 43 cents to heights of 90 cents in just a few months. However, in the current financial year, the share price has been less than favourable for investors, falling more than 30% in less than 6 months.

Today, PayGroup shares rose immediately on the opening bell, however failed to keep their footing throughout morning trade. The PayGroup share price is currently trading at 58 cents, down 0.86%.

More reading

• Why the PayGroup (ASX:PYG) share price has climbed today

Motley Fool contributor Glenn Leese has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It looks like we’re having another top day on the ASX boards today. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is up 1.15% to 6,636.90 points, a new 8-month high. But not all shares are sharing in the spoils.

Looking at a list of the worst-performing ASX shares today, and a very consistent theme is obvious. The ASX gold mining sector is being smashed today. The worst performing ASX 200 share today (at the time of writing anyway) is Silver Lake Resources Limited (ASX: SLR), whose shares are down 7.69% to $1.72. Next up is De Grey Mining Limited (ASX: DEG), down 8.77% to $1.04. Evolution Mining Ltd (ASX: EVN) is down 6.24% to $5.11, while Saracen Mineral Holdings Limited (ASX: SAR) is down 6.72% to $4.86.

So what’s going on here?

Is gold losing its shine?

You don’t have to look too far to understand why ASX gold miners might be falling today. This morning, we woke up to the price of gold itself a lot lower than it was yesterday. Gold has fallen from roughly US$1,877 an ounce earlier in the week to the price of US$1,834 an ounce, at the time of writing.

Since gold miners can only sell their gold at the market price, this move represents a hit to these companies’ profitability (at least if gold stays at these levels) as their costs largely remain fixed. And gold has been in a tailspin for a while now, ever since making a new all-time high of US$2,061 an ounce back in early August.

But why is gold itself falling?

Well, reporting in the Australian Financial Review (AFR) this month sheds some light on that matter. The AFR asserts that the primary reason that gold is having a case of the wobbles lately is the positive news we’ve seen in recent weeks surrounding the development of coronavirus vaccines.

Remember, gold is viewed as a ‘safe-haven’ asset’, which was obviously a boon in a year of a global pandemic. However, now that a vaccine for said pandemic looks to be firming, the AFR implies that investors’ appetite for safe-haven assets is subsequently dropping.

However, it’s not all bad news for gold bugs. The AFR also quotes Joe Foster, the gold portfolio manager at VanEck. Mr Foster remains bullish on gold, stating:

We’re still going to continue to see the economy struggle (through 2021)… We’ll probably see more stimulus on the fiscal and monetary side and there will be a lot of risks. That should enable gold to stay above the $US2000 level for most of the year…

Countries all over the world have been blowing out their balance sheets by distributing trillions of dollars of QE (quantative easing). We’re seeing liquidity being pumped into the financial system on a scale we’ve never seen before… All this liquidity is creating a very high risk to the financial system.

Mr Foster sees gold rising to US$3,000 an ounce over the next 3-5 years as a consequence of “low real interest rates, blown-out balance sheets and a period of unfettered inflation”.

More reading

• ASX 200 jumps 1.2%: Technology One results, Brickworks update, gold miners sink
• ASX 200 to rise after positive AstraZeneca COVID-19 vaccine news
• 5 things to watch on the ASX 200 on Tuesday
• Is Transurban’s (ASX:TCL) grip on Sydney roads set to tighten?
• ASX 200 rises again on Monday

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Cann Group Ltd (ASX: CAN) shares are flying after the company held its annual general meeting (AGM) this morning. The Cann share price has gained 25.71% so far today, rising to a price of 44 cents.

The news comes a day after the company announced that it had secured a $50 million debt facility with National Australia Bank (ASX: NAB).

What Cann does

Cann is an Australian cannabis producer, manufacturer and distributer located in Melbourne. The company supplies medicinal cannabis throughout Australia and in approved overseas export markets. Through its advanced cultivation facility near Mildura the company is focused on commercialising a range of imported and locally sourced and manufactured medicinal cannabis products.

The company was first listed on the ASX in mid 2017, but despite an initial surge the stock has struggled to perform in recent years. Cann currently trades at 44 cents and boasts a market cap of $118 million.

Whats driving Cann’s share price?

This morning Cann’s chair and CEO, Allan McCallum and Peter Crock, held the company’s AGM. Subsequently the presentation for the meeting was also released.

The pair spoke about the challenges that have faced the company during 2020, and their plans for the future.

It was noted that COVID-19 is causing regulatory delays both locally and overseas. Inevitably, this has impacted sales revenue from the first half of the year. As a result, the projected revenue will be weighted heavily towards the second half of the year.

The company is due to ship 10,000 bottles of its product to Germany and the UK in the coming months. This will be the single largest export of Australian grown and manufactured cannabis to date.

On the back of this information, the company reaffirmed its guidance of approximately $15 million for FY21.

Mildura expansion

In an aim to grow the company, it was also announced that Cann’s Mildura facility will be receiving an upgrade. The Nab facility announced yesterday will be utilised in the upgrade process.

It is expected that remobilisation of the construction team in Mildura will occur on February 2021, with the first crop to be manufactured and released by March 2022.

More reading

• Cann Group (ASX:CAN) share price rockets on NAB (ASX:NAB) update
• Why Ampol, Cann, Fortescue, & Mesoblast shares are surging higher
• Why ASX shares are in awesome shape vs overseas markets
• ASX 200 Weekly Wrap: ASX continues to climb, despite outage
• What would it take for the ASX 200 to hit 7,000 again?

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Money3 Corporation Limited (ASX: MNY) share price is closing in on pre-COVID-19 levels with an 87% increase since March lows. The Money3 share price jumped up 4.44% yesterday and is trading higher again today at $2.87.

Let’s take a closer look at the company and its share price trajectory.

What’s moving the Money3 share price?

Money3 a non-bank lender operating in secured subprime automotive loans. The company yesterday announced positive first quarter results and a new low cost warehouse securitisation facility expected to save it more than $10 million per year.

New funding facility

The lower cost warehouse facility will start with $250 million from international bank Credit Suisse Group AG (NYSE: CS). Money3 intends to use the facility to help achieve its goal of a $1 billion loan book. The company will also use it to increase market share in both automotive sectors.  In addition, Money3 will be able to offer loans in car repair finance.

Money3 CEO Scott Baldwin, said:

The new funding facility positions Money3 in the strongest position in our history to continue the growth of the Australian loan book. We are delighted with the flexibility and incremental funding this provides for our growing Australian operations.

This facility reflects the quality of our existing loan book and operations, providing significant validation from what is a globally recognised A+ rated bank.

First quarter highlights

In first quarter results, Money3 saw its revenues increase by 12.3% against the previous corresponding period (pcp). Consequently, statutory net profits after tax (NPAT) also increased by 33.3% pcp. This is a continuation of the solid results delivered in the company’s FY20 annual report, despite the pandemic. 

In presenting the results yesterday, Mr Baldwin highlighted the cash collections and improving credit quality. This rose by 31.1% pcp and is attributable largely to government stimulus, and the superannuation capital release in Australia.

Following the easing of Victorian COVID-19 lockdown restrictions, new loan originations continue to improve. In fact, October 2020 produced more loan book growth than the first three months of FY21. Moreover, November 2020 has started with good results and the company loan book now exceeds $456m.

Mr Baldwin referenced the demand for second-hand cars, and the rise in second-hand car prices. He acknowledged that car loans in the subprime sector may increase by an average of $1000 per loan in the short term.

More reading

• Why the Electro Optic Systems (ASX:EOS) share price is shooting higher today
• ASX 200 jumps 1.2%: Technology One results, Brickworks update, gold miners sink
• Why Brickworks, Mesoblast, Qantas, & Telix shares are storming higher
• Are ASX lithium shares making a comeback?
• Primero (ASX:PGX) share price surges 10% on takeover news

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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SRG Global Ltd (ASX: SRG) shares shot up more than 10% this morning, after the engineering company announced two new separate contracts worth $100 million. At the time of trading, the SRG Global share price is up 9.23% at 35.5 cents.

SRG Global provides asset services, mining services and construction operating across the entire asset lifecycle. It has a global portfolio of work, including The Emirates Tower in Dubai.

What were the new contract wins

SRG Global has secured contracts in Brisbane and Perth worth $100 million.

The first is with Multiplex to complete specialist facade work at the Oueen’s Wharf residential tower in Brisbane. The scope of works includes the design, supply and installation of engineered curtain wall facades. The work is expected to be completed by March 2023.

The second contract, with D&C Corporation, is to complete structure works at the Elizabeth Quay West development in the Perth CBD. This is SRG Global’s fourth major contract for the Elizabeth Quay waterfront precinct. The project is expected to start immediately and end around June 2022.

Other recent contract wins

Only last week, SRG Global announced it had won three contracts worth $55 million. These projects include work on the NSW Government’s New England Highway upgrade, a 20ML water tank for the Water Corporation in Karratha, and remedial works at Paradise Dam for Sunwater and CPB Contractors.

Overall, the company has secured contracts worth a total of $550 million since the start of the first half of FY21.

SRG Global managing director David Macgeorge is pleased with the progress, saying:

We continue to secure significant contracts, on some of the most important developments across Australia, demonstrating the value of our long-term, trusted relationships with our key clients.

These contract awards are also evidence of our strong technical expertise and 40-year track record of delivering specialist building projects.

With $550 million of new contract wins since July, many of them long-term, SRG Global is in a period of significant momentum that we anticipate extending well into calendar 2021. Importantly, the contract wins are being achieved across a diversity of sectors and geographies, positioning SRG Global well for long-term, sustainable growth.

About the SRG Global share price in 2020

The SRG Global share price started the year at 40 cents. It dropped dramatically to 18 cents in the COVID-19 crash in March before recovering to today’s level of 35.5 cents. The company commands a market cap of $143 million.

More reading

• SRG Global (ASX:SRG) share price up 5% on new contract wins

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Electro Optic Systems Holding Ltd (ASX: EOS) share price is shooting higher today follow the company’s release of its SpaceLink presentation. At the time of writing, the Electro Optic Systems share price is up 2.59% to $6.73. In comparison, the All Ordinaries Index (ASX: XAO) is edging 0.9% higher to 6,829 points.

Let’s take a look at what’s driving the Electro Optic Systems share price today.

What’s moving the EOS share price?

The Electro Optic Systems share price is on the move after the company advised it will build and operate a medium earth orbit (MEO) satellite constellation. It projects to have the system launched and operational in 2024, producing a positive operating cash flow.

The new era of satellite communications will be optimised for defence and government customers. The company said that a vast majority of current commercial systems are unsuitable for the special needs of its target market.

Most satellite constellations are either geosynchronous equatorial orbit (GEO) or low earth orbit (LEO) satellites. Both are considered expensive and limited by the availability of radio frequencies. This hinders continuous connectivity in downloading data in real-time, especially in ocean regions or insecure land networks.

MEO satellites provide high bandwidth and low latency satellite communications. In addition, security levels are much more heightened when compared to the current constellations used.

SpaceLink target market

Electro Optic Systems will seek to target defence and government customers from the Five Eyes alliance for its SpaceLink market. Five Eyes is a signals alliance between the United States, Canada, Australia, the United Kingdom, and New Zealand.

According to estimates, it’s projected that the total Five Eyes defence budget will exceed US$6.3 billion by 2024. This is a lift from US$4.6 billion today, representing an annual compound growth rate of 7.8%.

Most pleasingly for the company, is that it already has long-standing relationships with key Five Eyes customers.

Project cost

Looking at the project from an economics prospective, capital expenditure is forecast to be around US$800 million to US$1 billion. This will equate to roughly four tranches of $200 million to $250 million over a four-year period.

Electro Optic Systems revealed there will be a mix of debt and equity funding. The project will be 70% financed from vendors and export credit agencies. The other 30% will come from external sources into a special purpose vehicle.

The company will look to secure firm customer commitments for US$150 million to underwrite project funding. Based on Electro Optic Systems’ business plan, the internal rate of return is predicted to be above 20%.

More about the Electro Optic Systems share price

The Electro Optic Systems share price went on a mini-rollercoaster ride when COVID-19 hit the global economy. Although defence orders for its products remained, supply chain logistics became disrupted. In turn, this sent its share price south, hitting a low of $2.95 in March.

The Electro Optic Systems share price is still nearly 38% off its all-time high of $10.80 reached in February.

More reading

• Why the Electro Optic Systems (ASX:EOS) share price is up today

Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At lunch on Tuesday the S&P/ASX 200 Index (ASX: XJO) is on course to record another strong gain thanks to positive vaccine news. The benchmark index is currently up 1.2% to 6,638.7 points.

Here’s what has been happening on the market today:

Technology One full year results.

The TechnologyOne Ltd (ASX: TNE) share price is on the rise today after it delivered a solid full year result which beat its guidance. Due to a combination of strong software-as-a-service growth and good cost control, the enterprise software company’s underlying profit before tax came in at $82.5 million. This was up 13% year on year and compares favourably to its guidance range of 8% to 12% growth for FY 2020.

Brickworks trading update.

The Brickworks Limited (ASX: BKW) share price is pushing higher today after the release of a trading update. According to the release, the building products company has started FY 2021 in a positive fashion. Although its North American business is facing disruptions to sales activity and manufacturing operations from COVID-19, the rest of the business appears to be performing well. For example, management advised that the Building Products Australia business delivered first quarter earnings well ahead of the prior corresponding period.

Gold miners sink lower.

The AstraZeneca COVID-19 vaccine news is weighing heavily on safe haven assets today. This has led to the gold price and gold miners such as Northern Star Resources Ltd (ASX: NST) and Silver Lake Resources Limited (ASX: SLR) falling heavily. So much so, the S&P/ASX All Ordinaries Gold index is down 5.1% at lunch.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Tuesday has been the Beach Energy Ltd (ASX: BPT) share price with a 9% gain. A rise in oil prices following the vaccine news appears to be behind this rise. The worst performer has been the Saracen Mineral Holdings Limited (ASX: SAR) share price with a 6.5% decline. This follows the aforementioned pullback in the gold price.

More reading

• Why Brickworks, Mesoblast, Qantas, & Telix shares are storming higher
• TechnologyOne (ASX:TNE) share price higher on strong FY 2020 results
• Brickworks (ASX:BKW) share price on watch after trading update
• ASX 200 to rise after positive AstraZeneca COVID-19 vaccine news
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to record another strong gain. The benchmark index is currently up 1.1% to 6,639.2 points.

Four shares that are climbing more than most today are listed below. Here’s why they are storming higher:

Brickworks Limited (ASX: BKW)

The Brickworks share price is up 2.5% to $19.23 following the release of a trading update ahead of its annual general meeting. While its North American business continues to struggle because of the pandemic, the rest of the business has started FY 2021 strongly. Management revealed that the Building Products Australia business delivered first quarter earnings well ahead of the prior corresponding period.

Mesoblast limited (ASX: MSB)

The Mesoblast share price has continued its incredible run and is up a further 10% to $4.72. This means the biotech company’s shares are now up a massive 39% over the last three trading days. This has been driven by a major announcement on Friday which revealed a potentially lucrative deal with global pharma giant Novartis. The deal could see Mesoblast earn upwards of US$1.25 billion from milestone payments.

Qantas Airways Limited (ASX: QAN)

The Qantas share price is up 3.5% to $5.55. Investors have been buying the airline operator’s shares after AstraZeneca announced that its COVID-19 vaccine had performed very strongly. One dosing regimen of its COVID-19 vaccine candidate, AZD1222, had an average efficacy of 90%. Another positive is that this low cost and not-for-profit vaccine option can be stored, transported, and handled at normal refrigerated conditions for at least six months. This makes it much easier logistically than those developed by Moderna and Pfizer. This has sparked hopes of a quicker than expected recovery in the travel market.

Telix Pharmaceuticals Ltd (ASX: TLX)

The Telix share price has jumped 12% to $3.18. Investors have been buying the company’s shares this morning after it announced that the United States Food and Drug Administration (FDA) has approved its new drug application for a prostate cancer imaging product. Telix’s prostate cancer imaging product is a radiopharmaceutical targeting Prostate-Specific Membrane Antigen. It uses a Positron Emission Tomography to scan for the disease.

More reading

• Why the Telix (ASX:TLX) share price is surging 8%
• Qantas (ASX:QAN) to make COVID vaccine mandatory for passengers
• Brickworks (ASX:BKW) share price on watch after trading update
• Why the Mesoblast (ASX:MSB) share price rocketed 17% higher
• JobKeeper saved 700,000 jobs, reveals RBA

Motley Fool contributor James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia owns shares of and has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX lithium shares have rallied significantly following President-elect Joe Biden’s call for a clean energy revolution in the US. In November, the Pilbara Minerals Ltd (ASX: PLS) share price is up 70% to an 18-month high of 73 cents, the Galaxy Resources Limited (ASX: GXY) share price is up 60% to a 22-month high of $2.21 and the Orocobre Ltd (ASX: ORE) share price is up 50% to a year-to-date high of $3.98. 

Could ASX lithium shares be making a comeback in FY21 or is this just a short-lived period of hype? 

Lithium spot price remains weak

Despite a global commitment to reducing carbon emissions, this has not yet translated to higher lithium prices. Fastmarkets have provided the following updates for November: 

• China’s battery-grade lithium carbonate prices moved up following increasing demand from producers 
• China’s industrial-grade lithium carbonate prices firmed up on tighter supply 
• China’s lithium hydroxide prices drifted lower on limited domestic demand 
• Asia battery-grade lithium prices kept unchanged this week under a flat spot market 

Despite the small improvement, lithium prices remain at multi-year lows. In Orocobre’s September quarterly update, the company revealed that it had been selling lithium carbonate at US$3,102/tonne while the cost of sales were US$3,974/tonne. Current prices are not sustainable for lithium producers. However, there are many redeeming factors that could explain the recent price run. 

Well-capitalised and ready to meet demand 

Despite the lithium market and material prices rolling over in 2018, producers have maintained strong cash positions to survive the market trough.

In many cases, producers have curbed production to adapt to market conditions. Galaxy’s flagship site, Mt Cattlin, has production settings moderated to 50-55% of its nameplate capacity. It noted that Q4 was expected to be the best quarter for 2020 sales due to recovering demand and some supply-side interruptions. Galaxy is examining the potential to ramp up Mt Cattlin to full rate, dependent on product inventory and spot prices. 

Positive medium to long-term outlook 

The global lithium market has suffered a setback due to COVID-19. However the medium to long-term outlook remains positive and continues to be further reinforced with increasing government regulation and funding. ASX lithium shares have lifted as a result of slight improvements in the lithium market and anticipation of the significant changes to come. 

Following the easing of COVID-19 restrictions, Germany and France’s electric vehicle (EV) sales grew 100% and 50% respective year-on-year in May. This demonstrates the immediate impact of new subsidies on consumer EV appetite. 

 After 12 consecutive months of year-on-year (YoY) declines in neighbourhood electric vehicle sales (NEV), China reversed its downward trajectory. It has recorded growth during July, August and September of +23%, +28% and +73% YoY respectively. 

To add to this potential turning point in the lithium market, President-elect Joe Biden also has his own plans for renewable energy in the US. This includes re-joining the Paris Climate Accords, a reduction in fossil-fuel subsidies, eliminating solar tariffs and a historic $400 billion investment into clean energy and innovation over 10 years. 

More reading

• ASX shares that made 52-week highs last week
• Here are the 10 most shorted shares on the ASX
• Why Orocobre, Ramsay, Webjet, & Xero shares are dropping lower
• Lithium miner Orocobre (ASX:ORE) share price down after AGM
• Why the Galaxy (ASX:GXY) share price could push higher

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Primero Group Ltd (ASX: PGX) shares are on the rise after the company announced it has received a conditional off-market takeover offer from NRW Holdings Limited (ASX: NWH). At the time of writing, the Primero share price has surged 10.42% to trade at 53 cents. The Primero board has unanimously recommended Primero shareholders accept the offer, which consists of 27.5 cents cash plus 0.106 NRW shares for each Primero share.

In addition to the surge in the Primero share price, following the announcement, the NRW share price has also risen by more than 4% to $2.70.

Details of the takeover offer

The Primero share price is rocketing higher after the company advised the takeover offer values it at an equivalent of 55 cents per share, or a total equity value of approximately $100 million. This represents a 14.6% premium to the closing share price of Primero on 23 November 2020.

The board says this offer represents value for shareholders. It is worth noting however that Primero’s directors collectively own or control approximately 30% of Primero shares. Each of those directors has confirmed they will accept the offer in respect of all Primero shares they own. Primero also says that its management team will remain with the business under NRW ownership.

NRW has confirmed that it will fund the acquisition through a combination of cash on its balance sheet, and a $50 million bank loan facility. 

Why the takeover?

Both companies believe there are synergies to be achieved through this merger, which will allow the combined entity to expand to other business pipelines and opportunities. 

 NRW Chief Executive, Jules Pemberton, says:

The acquisition of Primero will provide NRW with the opportunity to expand its Minerals, Energy & Technologies specialised capability and to leverage the combined expertise of both companies to pursue new business initiatives across a large pipeline of opportunities.

NRW and Primero have already been working together on a number of projects and we look forward to continuing to work with the Primero team to build out Primero’s design, construction and operations capabilities through NRW’s client network, and expect that the combined operations of NRW and Primero will present clients, employees and shareholders with compelling outcomes

Primero Chief, Cameron Henry, says that the transaction is compelling as it will allow Primero shareholders to avoid dilutive capital raising. He says:

The NRW offer allows Primero to avoid the need for a potential significantly dilutive capital raising to fund working capital required to deliver on our FY21/22 contracted order book.

The combination of NRW’s diversified delivery model coupled with the Primero capabilities will provide our client base with a unique end to end delivery model that will differentiate within the current market and will rapidly accelerate Primero’s growth strategy.

Quick take on Primero and NRW

Primero is a vertically integrated business that provides engineering design, construction and operational services to the minerals, energy and infrastructure sectors. The Primero share price has risen by more than 51% in 2020, and it commands a market capitalisation of around $82 million.

NRW is a much bigger company than Primero, and is a provider of contract services to the resources and infrastructure sectors across most states of Australia. The NRW share price has fallen by 14.8% in 2020, and it commands a market cap of $1.1 billion.

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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