Tag: Motley Fool

Wesfarmers Ltd (ASX: WES) shares are having a pretty slow day, along with the rest of the S&P/ASX 200 Index (ASX: XJO). The Wesfarmers share price is, at the time of writing, down 1.45% to $46.23.

Even so, Wesfarmers has been a great ASX share to own in 2020. Despite the coronavirus pandemic, and the massive share market crash we saw in March and April, the Wesfarmers share price is up more than 11% year to date, and up 48.5% since 23 March.

But at the current share price, is Wesfarmers still a buy, either for growth or dividend income (or perhaps both)? Let’s take a look.

What does Wesfarmers do?

Wesfarmers is one of the largest retailers in the country and one of the largest companies on the ASX. It’s a massively diversified conglomerate. Most of its earnings come from the company’s retail chains like Bunnings Warehouse, Kmart, Officeworks and Target. But Wesfarmers also owns an almost dizzying array of other ventures, including mines, industrial and chemical manufacturing plants and a clothing line.

In recent years, Wesfarmers is probably most well-known for its 2018 blockbuster spin-off of Coles Group Ltd (ASX: COL), which it used to own in its own right. Today, Coles is independently listed on the ASX, but Wesfarmers still owns a 4.9% stake.

Growth or dividends?

Wesfarmers does have a reputation as a solid, ASX 200 blue-chip dividend payer. But on current prices, it offers a decent, if uninspiring, 3.3% dividend. This also comes fully franked (giving Wesfarmers a grossed-up yield of 4.71%).

That’s based on Wesfarmers’ last two dividends (interim and final), which came in at 75 and 77 cents per share (cps) respectively. Those dividends were down from the 100 cps and 78 cps interim and final dividends in 2019. However, Wesfarmers also paid out an 18 cps special dividend alongside its final dividend in August 2020. If we factor this in, Wesfarmers’ trailing dividend yield instead becomes 3.69% (or 5.27% grossed-up).

This, to me, says that Wesfarmers is a decent, if not exactly market-leading, income share to own.

But what of growth?

Wesfarmers has always been a company that is looking for the ‘next big thing’. And it’s been up to some interesting stuff in recent years. In 2019, Wesfarmers completed the acquisition of Catch Group – an online e-commerce company that has seen significant growth. Also in 2019, the company acquired lithium producer, Kidman Resources.

I like that Wesfarmers is pursuing these ventures and isn’t just sitting on its laurels. Although ventures like these would have to substantially grow to make a meaningful impact on Wesfarmers’ $52 billion market capitalisation, it’s still a good thing to see in an established ASX blue chip in my view.

Foolish takeaway

I believe Wesfarmers is one of the highest calibre ASX blue chip shares, which I think any investor could own in their portfolio. I think the company offers a healthy mix of future growth opportunities together with reasonable dividend income. A top all-rounder share, Wesfarmers is a solid company in which to place your capital today in my opinion.

More reading

• Are Coles (ASX:COL) or Woolworths (ASX:WOW) shares a better ASX dividend buy today?
• Buy these ASX dividend shares in November
• What zero COVID-19 cases in Victoria means for ASX 200 shares
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• Why it makes sense to invest in ASX shares

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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.

The post Is the Wesfarmers (ASX:WES) share price a buy for growth or dividends? appeared first on Motley Fool Australia.

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The Probiotec Limited (ASX: PBP) share price is shooting higher as the company presented its annual general meeting. The Probiotec share price is rising despite today’s 1.9% decline in the All Ordinaries Index (ASX: XAO). Shares are currently trading 3.17% higher as the company reaches a price of $1.79.

What Probiotec does

Probiotec is a manufacturer, marketer and distributor of a range of prescription and over-the-counter (OTC) pharmaceuticals, complementary medicines and consumer health products.

It owns 4 manufacturing facilities in Australia and counts a number of major international pharmaceutical companies as customers. As such, it distributes products both domestically and internationally.

How are the financials?

The company highlighted its strong year of growth, telling the AGM:

2020 was a highly successful year for Probiotec in which we successfully met our objectives and achieved strong financial results for shareholders.

The company reported revenue growth of 46% from the year before, bringing in $107.2 million. It was the first time Probiotec has reached more than $100 million in revenue. Furthermore, the company reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $16.9 million, up 79% on FY19. This was towards the upper end of its guidance ($16 to $17 million).

Probiotec’s strong financial performance was driven by impressive organic growth and solid acquisitions. This was performed in the face of the coronavirus pandemic that has driven the S&P/ASX 200 Index (ASX: XJO) down 10.5% from this time a year ago.

What’s next for the Probiotec share price?

The company did not provide guidance due to the ongoing uncertainty surrounding COVID-19. However, Probiotec reported that its Q1 FY21 trading performance was ahead of budget. The company announced that sales were up 6.5% with each of its operations performing above expectations.

The Probiotec share price is currently trading 3.75% higher as it looks to bounce of its 52-week low of $1.55.

More reading

• Will COVID-19’s second wave crash share markets a second time?
• ASX 200 down 1.2%: Blackmores jumps, Bendigo and Adelaide Bank’s update, Zip sinks
• Boral (ASX:BLD) share price surges after announcing a US$1bn transaction
• ASX 200 slumps as second COVID-19 wave takes over US and Europe
• 5 things to watch on the ASX 200 on Tuesday

Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Probiotec Limited. 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 COVID-19 pandemic has upended the airline industry, halting international and domestic travel. Despite this, one aviation services stock has increased in value by more than 200% since March.

Alliance Aviation Services Ltd (ASX: AQZ) generates income by providing contract, charter and allied aviation services to the mining, energy, tourism and government sectors, both locally and internationally. It is one of the few aviation companies that delivered a profit before tax of $47.7 million in FY20 (+24.1% compared to the previous year).

In recent weeks, the airline industry has been in survival mode. Listed companies such as Air New Zealand Limited (ASX: AIZ) and Cathay Pacific Airways Ltd are being placed under scrutiny. However, while the aviation industry faces unprecedented challenges, long-term investors have enjoyed a 5-year investment return of more than 470% in the Alliance Aviation share price.

Let’s take a closer look at Alliance Aviation.

Strong return on capital employed

Return on capital employed (ROCE) is one of the most popular metrics used to assess how well a capital intensive company is generating profit from its capital. The formula for ROCE is:

Earnings before interest and tax (EBIT) divided by capital employed = ROCE.

(Capital employed is the difference between total assets and current liabilities)

Using this formula, Alliance’s ROCE is $43.4 million/($435.9 million − $70.8 million) = 11.9 cents (based on its FY20 results presentation). This means for every $1 of worth of capital deployed by Alliance Aviation, the company was able to earn 11.9 cents in profit as of June 2020.

On the other hand, Cathay Pacific has a ROCE of −HKD10,913 million (equivalent to −A$1,978 million) /HKD143,455 million (equivalent to A$26,001 million) = −7.6 cents (data sourced from the Hong Kong Stock Exchange as of 22 Oct 2020)

Air New Zealand’s ROCE is −$87 million/($391 million − $44 million) = −25.1 cents (data sourced from FY20 annual financial results).

So, Alliance Aviation’s ROCE is 11.9 cents per capital dollar, versus −7.6 cents per capital dollar for Cathay Pacific, and −25.1 cents per capital dollar for Air New Zealand.  

The calculations above show that Cathay Pacific and Air New Zealand are larger businesses than Alliance Aviation in terms of EBIT. However, when using the ROCE metric, investors can see that Alliance Aviation is generating profit more efficiently from its capital than the other two. 

Reliance on the commodities industry

In addition to the ROCE, Alliance Aviation’s total FY20 revenue grew to $298.2 million, (+7.8% compared to FY19). It also recorded a strong cash flow of $98.8 million (+929.2% compared to FY19). The growth is due to an increase in additional flights from its clients and the equity raising for fleet expansion.

Unlike other aviation and airport businesses, Alliance Aviation has provided aviation services to mainly iron ore, gold, copper and uranium sectors, with the commodities industry representing 53% of its total contract value in FY20. 

I think the earnings outlook of Alliance Aviation remains positive in the near term. Based on data released by the Department of Industry, Science, Energy and Resources (DISER) in March, Australia has a resources and energy export market of $299 billion in 2020, which I think Alliance Aviation looks to be well positioned to benefit from. 

Foolish takeaway

From a financial perspective, Alliance Aviation has a relatively strong industry ROCE. It means that the company has been utilising its capital well amid the pandemic.

Even though the aviation industry is currently facing acute danger, I’d argue that Alliance’s most valuable assets are its strong business fundamentals, which have contributed to the Alliance Aviation’s impressive share price return over the past 5 years.

More reading

• 3 ASX trends to watch in budget week

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This morning Australia’s leading investment platform provider CommSec released data on the most traded ASX shares on its platform from last week.

Looking at the data, I think it is fair to say that speculative stocks were in demand with investors (or more likely, traders) last week.

Here’s the data:

Douugh Ltd (ASX: DOU)

For a second week in a row, this neobank was the most traded share on the CommSec platform. Douugh’s shares accounted for 3.5% of trades during the five days, with buyers behind 58% of them. Unfortunately, for those buyers, the Douugh share price was out of form and tumbled 16% lower over the week. Though, it is worth noting that it was a very strong performer a week earlier.

Zip Co Ltd (ASX: Z1P)

Zip shares were popular with investors again last week. They contributed a total of 3.1% of trades on the CommSec platform, with approximately 72% of trades coming from buyers. The announcement of the launch of the Tap & Zip product appears to have caught the eye of investors. Unfortunately, this was offset by news that Westpac Banking Corp (ASX: WBC) would be selling off its stake in Zip. The Zip share price lost 4% of its value last week.

Ioupay Ltd (ASX: IOU)

Speculators were fighting to get hold of this fintech company’s shares last week. This led to them accounting for 2.7% of trades on the CommSec platform. Over the five days, the Ioupay share price rocketed 70% higher on no news. Approximately 59% of trades were from buyers.

BrainChip Holdings Ltd (ASX: BRN)

This artificial intelligence services company was back in the top five last week, accounting for a total of 1.8% of trades on the platform. Although almost two-thirds of these trades were from the buy-side, it couldn’t stop its shares falling 1.3% over the five days. Last week BrainChip released a reasonably underwhelming quarterly update.

Emerge Gaming Ltd (ASX: EM1)

This eSports company’s shares were popular with investors last week after the release of an update on pre-registrations for its MIGGSTER mobile platform. That update revealed that total pre-registrations have now reached 3 million. This news sent the Emerge Gaming share price hurtling 150% higher for the week. Buyers accounted for 61% of trades.

More reading

• ASX 200 down 1.2%: Blackmores jumps, Bendigo and Adelaide Bank’s update, Zip sinks
• ASX 200 was mixed today, ends down 0.2%
• How did ASX buy now, pay later shares perform in the latest quarter? 
• ASX 200 up 0.3%: Coca-Cola Amatil rockets on takeover approach, Westpac’s $1.2bn earnings hit
• Emerge Gaming (ASX:EM1) share price sees explosive growth

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. 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 Next Science Ltd (ASX: NXS) share price has fallen today as the company released its quarterly report. On a day where the All Ordinaries Index (ASX: XAO) has dropped 1.9%, the Next Science share price has also fallen in afternoon trading, down 0.85% at $1.16 at the time of writing.

What Next Science does

Next Science is a medical technology company headquartered in Sydney, Australia. The company, established in 2012, is focused on the development and continued commercialisation of its Xbio platform. The technology aims to reduce the impact of biofilm-based infections in human health.

The 100% patented product attacks biofilm structures by breaking metallic bonds that hold the extracellular polymeric substance together.

Quarterly report

Unfortunately for the Next Science share price, the resumption of clinic based treatments has been slower than the resumption of surgical activity. Consequentially, this has impacted BlastX sales.

As a result, cash receipts from customers in Q3 2020 were US$134,000, declining from the prior quarter. Furthermore, operating expenses rose to US$3.9 million, the increase mainly relating to increased R&D expenditure on XPerience surgical rinse.

Next Science also announced the launch of a capital raising during the quarter. The company successfully raised $15 million and holds cash of US$13.6 million as of 30 September as a result.

In some good news for the company, it announced that Bactisure sales had started in Australia and were expected to commence in Europe by the end of 2020.

What now for the Next Science share price

Despite the drop in the Next Science share price, good news may be on the horizon. This comes in the form of an increase of elective surgeries. Surgery levels in the US have continued to improve in Q3 compared to Q2 levels.

Furthermore, Brian Hanson, CEO of Zimmer Biomet, Next Science’s distribution partner for Bactisure, addressed the Wells Fargo Healthcare Congress on 3 September. He advised that “Zimmer expects Q4 2020 to be equivalent in surgical volume to Q4 2019.”

Looking forward the main focus for the business in Q4 is continuing to drive market adoption of SurgX (Next Science’s sterile wound gel to reduce surgical site infection). The company also aims to build market awareness of its XbioTM technology in preparation for its launch in the first half of next year.

The Next Science share price has fallen 0.85% lower at the time of writing.

More reading

• Should you follow Buffett into buying gold shares?
• Are Coles (ASX:COL) or Woolworths (ASX:WOW) shares a better ASX dividend buy today?
• Leading brokers name 3 ASX shares to sell today
• Why these 7 ASX 200 shares received broker upgrades this week
• Why is the Bravura (ASX:BVS) share price dropping today?

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.

The post Why the Next Science (ASX:NXS) share price is falling today appeared first on Motley Fool Australia.

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Warren Buffett’s aversion to gold has been well documented. Over the last few decades, he has steered Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B) away from any direct or indirect investments in gold. In 2011, he explained to CNBC’s Squawk Box talk program that “gold is a way of going long on fear”.

This is what The Oracle of Omaha actually said during the talk show program:

Basically gold is a way of going long on fear, and it’s been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in the year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money. But the gold itself doesn’t produce anything.

Buffett then made a shocking move

In August 2020, Buffett shocked the investing world when he revealed that his mothership company, Berkshire Hathaway, purchased US$563.6 million or a 1.2% stake in a major United States gold miner Barrick Gold Corp (NYSE: GOLD). The move was even more surprising because by the time he made this purchase, the gold price had already increased by 15% since March.

His investment clearly gave a strong signal to the market that he expected gold prices to remain high over the long term, as he is not known to make flippant investments for short-term profits. Indeed, the gold price did rally after the announcement, moving as high as US$2,035/oz in late August before retreating to the current level of US$1,903/oz.

How should we interpret Buffett’s gold investment?

There are two ways we can read into Buffet’s Barrick investment. One way to look at it is that Buffett is expecting the pandemic and consequent market uncertainties to be prolonged indefinitely. This is consistent with his view that “gold is a way of going long on fear”. In this instance, his Barrick investment can then be regarded as a substitute for pure, precious metal play. 

Another way to interpret his investment is that Buffett is not actually buying exposure directly into gold metals, but rather seeing fundamental value and growth prospects in Barrick as a business. This line of thought has been previously dissected by one of my Fool colleagues here. 

However you look at it, one thing is for sure: precious metal is one of the winners in this pandemic. Gold has jumped by nearly 30% since the beginning of the year, while silver metal is faring even better, up 35% since January. This affirms the fact that rare metals, particularly gold, provide safe haven during market volatility, the likes of which we are currently experiencing.

Getting exposure to gold

So how do you get exposure to gold in Australia? It turns out you have various options, but in my opinion, exchange-traded funds (ETFs) provide the best way to get diversified exposure to the gold market.

ETFs provide both liquidity and diversification, and here I consider three gold ETFs, each with a different twist:

The ETFs Metal Securities Australia Ltd (ASX: GOLD) is the largest gold ETF on the ASX with approximately $2 billion under management. This ETF provides exposure to physical ownership of gold bullions in a vault. The fund has a 1-year total return of 19% and a 5-year total return of 10% p.a.

The Perth Mint Gold ETF (ASX: PMGOLD) is a smaller ETF fund with lower management fees. With PMGOLD, the gold is unallocated which means you do not own the physical gold in your name. It is almost like a derivative security where investors get exposure to the price movements while not having ownership of the underlying asset. PMGOLD’s 1-year total return is 27.4%, while its 5-year total return is a respectable 11.15% p.a.

Finally, investors looking for exposure to gold could invest in the VanEck Vectors Gold Miners ETF (ASX: GDX). This ETF is slightly different to the previous two in that it invests in a variety of gold mining companies. According to its website, this ETF’s top three holdings currently are: Newmont Corporation (NYSE: NEM), Barrick Gold and Franco-Nevada Corp (TSE: FNV). Its 1-year total return is a healthy 38.5%, while its 5-year total return is an enviable 24% p.a.

(Note that the total returns of these ETFs assume the reinvestment of all dividends and distributions, not just the return on the share price over time).

More reading

• 3 ways to protect your ASX share portfolio in a market crash

dsunarto 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 Berkshire Hathaway (B shares) and recommends the following options: short January 2021 $200 puts on Berkshire Hathaway (B shares), long January 2021 $200 calls on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). 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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Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) are two ASX companies with very similar characteristics. Together, both essentially hold an duopoly over the Australian supermarket/grocery market, albeit against small market shares held by both the German-owned Aldi, and the Metcash Limited (ASX: MTS)-owned IGA.

In addition, both companies have tie-ups with petrol retailers, and both have a presence in the liquor/bottleshop market with names like Dan Murphy’s (Woolworths) and Liquorland (Coles). However, Woolworths also owns the Big W store chain, as well as the ALH Group — which in turn owns a network of pubs and hotels.

Due to its larger share in the Aussie grocery market, as well as its additional assets like Big W, Woolworths is by far the larger company today. Woolies, on current prices, has a market capitalisation of $48.34 billion, whereas Coles has a market cap of $22.8 billion.

Both Coles and Woolies are large, established and mature businesses that have been around longer than most people alive today. As such, most investors don’t really buy these companies for their growth prospects, but rather for their dividend income potential.

But since Coles and Woolworths have such similar business characteristics — offering defensive, largely recession-proof earnings bases — I think we should compare the dividend prospects for both companies today.

So let’s dig in.

Coles vs Woolworths: Which is a better dividend buy?

On current pricing, Coles is offering a trailing dividend yield of 3.37%. That number is based on Coles’ two most recent dividends – a February interim payout of 30 cents per share (cps), and an August final payout of 27.5 cps.

In contrast, Woolworths shares are currently offering a trailing yield of 2.45%. That number is based on Woolworths’ two most recent dividends – a March interim payout of 46 cps, and a September final payout of 48 cps.

Both dividends come fully franked, so Coles’ dividend grosses-up to 4.81% with full franking credits, while Woolies grosses-up to 3.5%.

On these raw numbers, Coles appears to be the winner.

But let’s look at both companies’ recent dividend history as well. Coles’ August final dividend was a 14.5% increase on its 2019 final dividend of 24 cps, whilst its interim dividend in 2020 was the first the company paid since its spin-off from old parent, Wesfarmers Ltd (ASX: WES).

In contrast, Woolworths’ final dividend of 48cps was a 15.8% cut from the 57 cps dividend the company paid in 2019. Its March interim payout was a 2.22% increase from 2019’s interim payout of 45 cps.

Foolish takeaway

Since Coles both offers a higher starting dividend yield on current prices today, as well as offering dividend growth in 2020 (as opposed to Woolworths’ cuts), I have to conclude that Coles offers a better deal for dividend investors right now. The difference between a grossed-up yield of 4.81% and 3.5% is not insignificant, so if you’re looking to add one of these companies to an ASX dividend share portfolio, I would go with Coles today.

More reading

• Could this HomeCo (ASX:HMC) REIT IPO be the biggest in 2020?
• Buy these ASX dividend shares in November
• What to expect from the Coles Q1 update this week
• What zero COVID-19 cases in Victoria means for ASX 200 shares
• These are the 10 most shorted shares on the ASX

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths 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.

The post Are Coles (ASX:COL) or Woolworths (ASX:WOW) shares a better ASX dividend buy today? appeared first on Motley Fool Australia.

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On Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on these ASX shares:

Mineral Resources Limited (ASX: MIN)

According to a note out of Morgan Stanley, its analysts have retained their underweight rating but lifted their price target on this mining and mining services company’s shares slightly to $23.50. This follows the release of a quarterly update that fell short of the broker’s expectations. In light of this and its valuation, which it has previously noted looks stretched, it holds firm with its bearish rating. The Mineral Resources share price is trading at $25.46 this afternoon.

National Australia Bank Ltd (ASX: NAB)

A note out of the Macquarie equities desk reveals that its analysts have retained their underperform rating and $17.50 price target on this banking giant’s shares. This follows the release of an update on a number of notable items that will impact its full year results. Outside this, it notes that it has exposure to the small to medium sized business market, which it feels is a risky area in the current environment. In light of this, it suspects its shares could underperform over the next 12 months. The NAB share price is fetching $19.02 on Tuesday.

Premier Investments Limited (ASX: PMV)

Analysts at Goldman Sachs have downgraded this retailer’s shares to a sell rating but lifted their price target on them to $19.20. According to the note, the broker points out that Premier Investments is trading on significantly higher multiples than any time over the last decade. It is also at the high end in comparison to global apparel peers. It also has concerns over the sustainability of the current low expense profile and the economic recovery impact on the apparel category. The Premier Investments share price is changing hands for $21.76 today.

More reading

• Why these 7 ASX 200 shares received broker upgrades this week
• 5 things to watch on the ASX 200 on Tuesday
• 3 ASX stocks are outperforming today after brokers upgraded them to “buy”
• Leading brokers name 3 ASX shares to buy today
• AMP (ASX:AMP) asset sales part of wealth sector transformation

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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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A number of S&P/ASX 200 Index (ASX: XJO) shares in the travel, materials, construction and healthcare sectors have received broker upgrades this week. This follows strong quarterly results and a general anticipated recovery within their respective sectors.

Austal Limited (ASX: ASB) 

Goldman Sachs retained its buy rating on Austal with a price target of $4.35 in anticipation that its annual general meeting commentary will reflect a strong earnings outlook. 

Beach Energy Ltd (ASX: BPT) 

Citi raised its Beach Energy share price target from $1.91 to $1.98 and retains a buy rating. The company’s quarterly production update was solid but slightly missed expectations. It anticipates upside from Beach Energy’s upcoming drilling results. 

Bluescope Steel Limited (ASX: BSL) 

A series of upgrades came in for the Bluescope Steel share price including: 

• Citi raises price target from $14.00 to $16.00 
• Credit Suisse raises price target from $15.55 to $16.95 
• Macquarie raises price target from $16.20 to $19.05 
• Morgan Stanley raises price target from $11.00 to $16.00 
• UBS raises price target from $13.10 to $15.70 

This was on the back of the company’s strong first half results and anticipated benefit from fiscal stimulus measures in Australia and the US. 

CSR Limited (ASX: CSR)

Sticking to the theme of materials and construction, Credit Suisse upgraded the CSR share price target from $4.10 to $5.30. It expects fiscal stimulus measures to underpin earnings in the short-medium term. 

National Australia Bank Ltd (ASX: NAB)

The NAB share price received mixed broker opinions. Credit Suisse retained an outperform rating with a $21.30 price target and UBS retained a buy rating with a $20.50 price target. The brokers believe that the company is on top of the current situation and should continue to navigate sensibly through the crisis. 

Conversely, Macquarie retained an underperform rating with a $17.50 price target. While it considers the valuation attractive, it has concerns about earnings risks in the short-medium term. 

Qantas Airways Limited (ASX: QAN)

Morgan Stanley reiterated its overweight rating and retains its Qantas share price target of $4.90. It predicts that domestic capacity will improve to approximately 50% by Christmas but is highly dependent on state border re-openings. 

Resmed CDI (ASX: RMD) 

Morgan Stanley raised its Resmed share price target from $25.40 to $25.90. It believes that the company will continue to deliver strong growth despite the pandemic. 

More reading

• Leading brokers name 3 ASX shares to sell today
• Boral (ASX:BLD) share price surges after announcing a US$1bn transaction
• 5 things to watch on the ASX 200 on Tuesday
• 3 ASX stocks are outperforming today after brokers upgraded them to “buy”
• Leading brokers name 3 ASX shares to buy today

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 Austal Limited. The Motley Fool Australia has recommended ResMed Inc. 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 Bravura Solutions Ltd (ASX: BVS) share price has dropped today following the announcement of a new contract win.

During market open, the news sent the software solutions company shares to an intra-day high of $3.31. However, negative market sentiment has caused a retreat in the Bravura share price, which has now fallen 4.24% to $3.16 at the time of writing.

Contract win

According to the release, Bravura signed a long-term contract with Aware Super for a suite of software products. The agreement will allow Aware Super to use Bravura’s ecosystem to support the administration of retirement savings.

Aware Super is the second largest superannuation funds in Australia, managing close to $130 billion in retirement savings. The company has over 1 million members and supports them with superannuation, retirement, investments and advice.

What’s in the deal

Bravura will provide its Sonata Alta operating model that encompasses AdviceOS, Babel SuperStream messaging and member, and adviser digital products. The deal will assist in Aware Super’s running of superannuation, income stream, unit trust and advice offerings.

Sonata Alta is a new, digital platform that automates administration tasks through its cloud business-process-automation-as-a-service (BPaaS). The product gives complete visibility of super fund performance and insights to create a personalised experience for customers.

A dedicated support team will also be on standby for any service-related enquiries.

Both parties have signed the contract for an initial term of 7 years.

What did both companies say?

Bravura CEO, Mr Tony Klim commented on the new deal:

We are delighted to provide Bravura’s world-class technology to Aware Super. Sonata Alta and Bravura’s ecosystem of products are ideally suited to providing Aware Super unprecedented control, flexibility and a highly personalised member experience at scale to support their members for and in retirement.

Ms Deanne Stewart, Aware CEO, added:

After a rigorous selection process, Aware Super selected Bravura as its technology partner for this key initiative. We look forward to working closely with Bravura to deliver exceptional outcomes for our members.

Outlook

Bravura advised that due to the impact of COVID-19 on businesses, there has been greater uncertainty in the timing of deal closures.

Despite the new contract win with Aware Super, Bravura noted that its FY21 outlook remains unchanged. Because of the second wave lockdowns in the UK and stalling Brexit negotiations, its pipeline opportunities are being slowed.

The company expects its net profit after tax for FY21 to be significantly weighted to the second-half of the financial year.

About the Bravura share price

The Bravura share price has been trending lower since May, falling over 30% and its shares are currently trading back near their March lows.

The company has a market capitalisation of $781 million and a P/E ratio of 19.46.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. 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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