Tag: Motley Fool

At lunch on Tuesday the S&P/ASX 200 Index (ASX: XJO) has followed the lead of international markets and is sinking lower. The benchmark index is currently down 1.2% to 6,081.5 points.

Here’s what is happening on the market today:

Blackmores jumps on AGM update.

The Blackmores Limited (ASX: BKL) share price is jumping higher today after the release of the health supplements company’s annual general meeting update. That update reveals that management continues to expect profit growth in FY 2021. Though, this will come predominantly from the second half of the financial year. Management also advised that its restructuring is set to deliver $15 million of gross annualised savings from the second half.

Bendigo and Adelaide Bank impresses.

The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is pushing higher today following the release of a trading update. For the first quarter, the regional bank achieved total lending growth of 11% and residential lending growth of 16.1%. Management notes that these are both well above system growth. The bank also recorded a small increase in its net interest margin.

Gold miner updates galore.

Gold miners Evolution Mining Ltd (ASX: EVN), Northern Star Resources Ltd (ASX: NST), and Ramelius Resources Limited (ASX: RMS) shares are all trading lower following the release of their respective quarterly updates. Not even Ramelius revealing that it smashed its production and costs guidance was able to prevent its shares from dropping lower. The S&P/ASX All Ordinaries Gold index is down 1% at lunch.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Tuesday has been the Blackmores share price with a 4% gain. This follows the release of its annual general meeting update. Going the other way, the worst performer has been the Zip Co Ltd (ASX: Z1P) share price with a decline of over 5%. This appears to have been driven by a selloff of tech stocks today following a weak night of trade on the Nasdaq index.

More reading

• Boral (ASX:BLD) share price surges after announcing a US$1bn transaction
• Northern Star (ASX:NST) share price edges lower despite positive update
• Ramelius (ASX:RMS) share price lower despite smashing Q1 guidance
• ASX 200 slumps as second COVID-19 wave takes over US and Europe
• Why the Evolution Mining (ASX:EVN) share price is dropping lower

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Blackmores 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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The Boral Limited (ASX: BLD) share price is one of the best performing stocks on this dismal trading day thanks to a billion-dollar transaction.

Shares in the building materials supplier surged 4% to $4.92 in morning trade, making it the second best performer on the S&P/ASX 200 Index (Index:^AXJO).

In case you are wondering, the Blackmores Limited (ASX: BKL) share price is in pole position with a 6.8% rally.

But Boral shareholders won’t be complaining. The top 200 stock index tumbled 1.4% due to an aggressive resurgence of global COVID‐19 cases.

The billion-dollar Boral share price catalyst

Management excited the market after it announced a deal to sell 50% of USG Boral to Gebr Knauf KG for US$1.015 billion (~A$1.43 billion).

What may be more pleasing to investors is news that Boral has received multiple offers for its troubled US assets, reported the Australian Financial Review.

US asset sales in the pipeline?

Boral’s expansion into the US is a key reason why the stock has been underperforming and led to the ouster of the former chief executive Mike King.

But new boss Zlatko Todorcevski promised there will be no “fire sale” of its US assets even after the group took a $1.2 billion write-down of its Meridian Brick business.

Boral’s major shareholder Seven Group Holdings Ltd (ASX: SVW) would be pleased as it’s been agitating for the sale of the underperforming businesses.

Boral share price a target for takeover

It’s probably a little self-serving though as it’s an open secret that Seven Group would like to acquire Boral’s Australian assets. Any takeover would be easier without the deadweight from Boral’s US divisions.

However, any divestments in that market will have to wait till 2021. Management isn’t willing to enter into any serious negotiations while Todorcevski is still reviewing his restructuring plan for the group.

Expanding margins

Boral also provided a pleasing September quarter trading update. While group revenue fell 9% over the same period last year, earnings before interest and tax margins expanded to 9.5% from around 9%.

This meant group EBIT declined a more modest 5% over the first quarter of FY19.

This trend was consistent through all Boral’s divisions. Boral Australia reported 1QFY20 EBIT that was steady despite a drop in concrete, quarry and asphalt volumes.

Boral North America and USG Boral recorded slight increases in EBIT margins too.

Shareholders will be hoping this marks a turning point for the underperformer. Even with today’s jump, the stock is trading flat over the past year when the James Hardie Industries plc (ASX: JHX) share price and CSR Limited (ASX: CSR) share price are up 40% and 16%, respectively.

More reading

• ASX 200 down 1.2%: Blackmores jumps, Bendigo and Adelaide Bank’s update, Zip sinks
• ASX 200 slumps as second COVID-19 wave takes over US and Europe
• 5 things to watch on the ASX 200 on Tuesday
• 3 ASX stocks are outperforming today after brokers upgraded them to “buy”
• ASX 200 was mixed today, ends down 0.2%

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc and Seven Group Holdings Limited. Connect with me on Twitter @brenlau.

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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

In a recent interview on Motley Fool Live, Motley Fool co-founder and CEO Tom Gardner recalled meeting Kendal Musk – the brother of Tesla (NASDAQ: TSLA) CEO Elon Musk. As Tom recalls, “He looked at me and he said, ‘I don’t know, I just learned. Don’t bet against my brother.’”

Tesla short-sellers are learning that the hard way (again) after Tesla shattered analysts’ expectations for the company’s third quarter results, which were released on Oct. 21 after market close. Here’s what investors need to know. 

By the numbers

Metric	Q3 2020	Q2 2020	Q3 2019	YOY % Change
Revenue	$8.8 billion	$6.0 billion	$6.3 billion	39%
Net Income	$331 million	$104 million	$143 million	131%
Adjusted EPS*	$0.76	$0.44	$0.37	105%
Operating Cash Flow	$2.4 billion	$964 million	$756 million	217%
Free Cash Flow	$1.4 billion	$418 million	$371 million	276%

*Adjusted Earnings Per Share, diluted (a non-GAAP measure). Data source: Tesla. Chart by author.

Those are impressive numbers, made even more impressive by the fact that they’re being posted in the midst of a US recession during which there are fewer drivers on the roads. When 39% revenue growth is the lowest percentage gain in your marquee figures, you know it’s at least a good report. For Tesla, the third quarter wasn’t just good: it was record-setting. 

Quarterly revenue set a new record high for the company, at $8.8 billion, which was expected due to the company’s strong delivery numbers. Another record is the $331 million in quarterly net income, which surpassed Tesla’s previous milestone of $311 million, set in third quarter 2018. For me, the most jaw-dropping figure is Tesla’s $2.4 billion in operating cash flow for the quarter, which is nearly double its previous quarterly record, set in fourth quarter 2017. 

Despite the company’s outperformance – EPS topped analysts’ consensus estimates by $0.20/share – shares closed up less than 1% from the previous day’s close. This could indicate that the expectation of big growth is already priced into the lofty valuation of Tesla’s stock. 

What Musk had to say

CEO Elon Musk, never one to understate his successes, started the earnings call by telling it the way he saw it: “All right. So, Q3 was our best quarter in history.”

He highlighted the company’s other initiatives, including the incremental advances in battery technology that Tesla showcased at its Battery Day, the beta release of Full Self-Driving mode, the continued buildout of the company’s manufacturing capabilities, and a projected increase in sales of Solar Roof, which he referred to as a “killer product”.

He also doubled down on the company’s stated goal of continuing to cut prices:

If the car is too expensive… and people don’t have enough money in their bank account, they simply can’t buy it no matter what the value proposition is. So it is important to lower the prices… I do not think we lack for desire for our product, but we do lack for affordability. 

The catch-22

Some analysts are concerned that, as the company grows sales of its lower-priced cars and pursues price cuts, it won’t be able to maintain its double-digit margin target. CFO Zachary Kirkhorn agreed with Musk on the need for affordability, but didn’t think it was mutually exclusive with margin growth:

If you just look at the journey of the company over the last 1.5 years, we have grown volumes and grown gross margins despite a number of price reductions over that period of time, and we have kept OpEx fairly stable during that period of time as well. 

We have to also continue to make progress improving the cost structure … and improve the value of the vehicles at the same time. So in addition to reducing the cost of the car, we’re making the cars better. And that’s the formula to sell the volume. That’s what we’re focused on.

One way to do this, according to Musk, is to bring as much manufacturing in-house as possible. “There’s in excess of a dozen start-ups effectively in Tesla,” Musk said, citing microchips, battery cells, superchargers, and autonomous driving as areas that other car companies outsource but Tesla doesn’t. “Tesla is absolutely vertically integrated compared to other auto companies or basically most any company,” said Musk. “We literally make the machine.

“Quite frankly, we would like to outsource less,” concluded Musk. “That would be great.”

What Q3 tells investors

The third quarter’s strong performance indicates that Tesla has finally turned the corner when it comes to profitability and cash flow generation from its passenger cars.

Interestingly, Musk and his management team didn’t even mention the Semi or Cybertruck until they were specifically asked about them by the analysts on the call. They only briefly mentioned the company’s often-overlooked energy storage products, Powerwall and Megacell. The primary focus of the earnings call – and the company – is clearly on its passenger cars. 

That’s probably good news for investors, since Tesla’s cars are in demand and selling well. Focusing on maximising their profitability and improving their affordability is probably going to give Tesla the biggest bang for its buck in terms of improving the (already-much-improved) bottom line. 

Tesla’s sky-high valuation should give new investors pause, but operationally, it seems to be on solid footing, and its impressive growth streak seems likely to continue. I wouldn’t place any bets against the company right now.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Could Tesla deliveries surge 70% next year?
• Tesla Q3 trounces analyst estimates
• Tesla (NASDAQ:TSLA) earnings: What to watch
• 2 big challenges as Tesla (NASDAQ:TSLA) aims for a $25,000 car
• Is Tesla Inc (NASDAQ:TSLA) stock a buy ahead of earnings?

John Bromels owns shares of Tesla.  The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) has followed the lead of global markets and is sinking lower. At the time of writing the benchmark index is down a disappointing 1.1% to 6,088.2 points.

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

Afterpay Ltd (ASX: APT)

The Afterpay share price is down over 3.5% to $97.09. A number of tech shares are dropping notably lower today amid heavy selling on the Nasdaq index overnight. The tech-focused index dropped 1.6% on Monday night due to concerns over rising COVID-19 cases across the world. The S&P/ASX All Technology Index (ASX: XTX) is down 2.3% at the time of writing.

LiveTiles Ltd (ASX: LVT)

The LiveTiles share price has fallen almost 4% to 25 cents. This follows the release of the intranet and workplace technology software provider’s first quarter update this morning. At the end of the quarter, LiveTiles’ reported annualised recurring revenue (ARR) hit $57.1 million. While this was up 33% year on year, it was up just 6.1% on the prior quarter’s ARR.

PointsBet Holdings Ltd (ASX: PBH)

The PointsBet share price has dropped 3.5% to $10.59. Weakness in the tech sector appears to have offset the release of a very strong first quarter update. For the three months ended 30 September, the sports betting company reported turnover of $691.9 million, up 193% from the prior corresponding period. This was driven largely by its Australian business, which reported a 221% increase in turnover to $527.7 million.

Santos Ltd (ASX: STO)

The Santos share price is down almost 3% to $5.15. Investors have been selling Santos and other energy producer shares on Tuesday following a sharp pullback in oil prices overnight. Oil prices dropped notably lower amid concerns that rising COVID-19 cases could have a negative impact on demand for oil.

More reading

• PointsBet (ASX:PBH) share price on watch after explosive Q1 growth
• The Santos (ASX:STO) share price is up 3% on positive sentiment
• How did ASX buy now, pay later shares perform in the latest quarter? 
• Pointsbet (ASX:PBH) share price continues to excite investors
• ASX 200 Weekly Wrap: ASX snaps winning streak… just

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 LIVETILES FPO and Pointsbet Holdings Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended LIVETILES FPO and Pointsbet Holdings 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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The financial breakdown in 2008 left an indelible mark on the banking system and left global investment banks with tighter regulatory requirements.

The shortcomings exposed during the GFC included inadequacies in corporate governance and risk management practices for investment banking activities. Multinational banking group Macquarie Group Ltd (ASX: MQG) survived the financial crisis, but it was forced to look at its business model in view of stricter regulations globally in the years after the GFC. 

A shift to annuity style business

With a market capitalisation of around $49 billion, Macquarie Group is Australia’s fifth largest bank. It has a minuscule market share in the retail bank sector compared to the big four banks – Australia and New Zealand Banking GrpLtd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB), and Westpac Banking Corp (ASX: WBC).

The bulk of Macquarie’s earnings traditionally came from its trading desks and advisory fees – in FY14, they made up 68% of the group’s revenue – but from 2015, Macquarie began scaling up its annuity style businesses amid changing market conditions. Annuity style businesses refer to businesses that generate steady income with low risk. In Macquarie’s case, these are its asset management, asset finance and retail banking services, which produce recurring revenue year in, year out.

These annuity style businesses contributed less than 30% to the group earnings 10 years ago, but made up 63% of its net profit in FY20. The transformation to a more predictable earnings stream is one of the main reasons why Macquarie’s share price is much higher today (+300%) compared to October 2010.

As the group successfully navigated COVID-19 relatively unscathed, the Macquarie share price has returned to its pre-COVID levels of around $135. The banking group has proven its ability to grow its asset management business, which makes up 40% of its net profit according to Macquarie’s annual general meeting result in 2020.

The rise of renewable energy and infrastructure

Macquarie has focused on its less volatile asset management business to free up capital, protect its balance sheet and to comply with stricter regulatory requirements. This has changed the group’s business model from investment banking to a more balanced one.

In the asset management space, infrastructure and renewable energy are Macquarie’s 2 main growth drivers. In the near term, the annuity style businesses are expected to be hit by the timing in asset realisation due to the pandemic. This will impose some impediments on the asset sale process.

However, as a leading asset manager, the banking group’s asset management business has proven more defensive. Low interest rates support real asset values such as infrastructure, property, asset finance and commodities. The Reserve Bank of Australia (RBA) has kept the official interest rate at a record low of 0.25% since March. It continues to keep the discount rate low, resulting in an increase in the asset prices of Macquarie’s holdings.

What’s next

While investors may stay positive on the banking group’s medium-term prospects, Macquarie will not emerge completely scar free from COVID-19.

However, I think the banking group has made the right decision to focus on annuity style businesses and invest in the infrastructure and renewable energy sectors. As different countries recover from the pandemic-induced shutdown, Macquarie is well positioned to benefit from a more stable income stream while maintaining a healthy balance sheet.

More reading

• The Magellan (ASX:MFG) share price fell 4% last week. Here’s why.
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• Coca-Cola Amatil (ASX:CCL) share price jumps on M&A speculation
• CSL (ASX:CSL) share price and 2 other ASX stocks among latest broker “buy” ideas
• ASX 200 Weekly Wrap: Promises of easy money push ASX 200 to post-crash high

Motley Fool contributor Miles Wu has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group 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 prominent investment manager has called for the government to scrap plans to permanently allow ASX-listed companies to conduct virtual annual general meetings (AGMs).

To allow companies to conduct business under the threat of the COVID-19 pandemic, this year the federal government temporarily allowed AGMs to be conducted online.

This experiment had shown retail investors were “unfairly impacted”, according to Wilson Asset Management Chair, Geoff Wilson.

“Conducted in person, AGMs provide retail investors with the ability to directly and publicly ask questions of a company’s board of directors,” he said.

“The virtual alternative, as we have experienced this year, allows boards to omit, rephrase and reinterpret shareholders’ questions.”

Wilson said retail shareholders were very limited in ways they could get the attention of the board, and the AGM is the only practical way of communicating their concerns.

Wilson Asset Management operates a number of popular listed investment companies (LICs), such as WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).

The Federal Treasury has currently opened public feedback on the proposal to permanently allow virtual AGMs. Comments must be submitted by Friday.

The timing of this submission period has also been criticised by investor groups, because it’s happening right in the middle of AGM season.

Wilson urged his clients to submit feedback opposing virtual AGMs.

“We encourage you to join us in arguing for AGM transparency and accountability to be upheld.”

Some institutional investors agreed with Wilson’s sentiments.

“Virtual AGMs are a necessity during the pandemic but they can diminish shareholders’ ability to ask questions and hold companies to account,” said Australian Council of Superannuation Investors Chief, Louise Davidson.

“In the AGMs we have already seen this year, it is apparent that – like a Zoom birthday party — something is definitely lost in the new format.”

Davidson, who represents 37 institutional investors that own an average of 10% of each ASX 200 company, criticised the timing.

“We are in the midst of the busiest period for company meetings and there are still hundreds of companies that are yet to test new technology and meeting procedure,” she said.

“We need time to ensure the lessons from the temporary provisions are appropriately incorporated into the permanent rules.”

More reading

• Attention: This ASX dividend share offers a fully franked 10% yield
• New WAM Alternative Assets LIC appoints portfolio manager
• 3 ASX shares I want to buy in October
• 5 ASX shares held by leading fund managers
• 3 ASX 200 passive investing shares to buy today

Motley Fool contributor Tony Yoo owns shares of WAM Capital Limited and WAM Research 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 Northern Star Resources Ltd (ASX: NST) share price initially went against the broader ASX market sell-off this morning to move marginally higher. At the time of writing, however, the Northern Star share price has succumbed to wider market doldrums and edged 0.19% lower to $15.56.

This follows the release of the company’s first quarter update for FY21. Let’s take a look at how Northern Star performed over the last three months.

Strong quarter performance

For the period ending 30 September, Northern Star reported a robust result underpinned by its operations at Yandal and Pogo.

Gold sales increased to 227,532 ounces, which was in the upper end of the quarterly production guidance.

All-in costs came to $1,752 per ounce, with the average released selling price comfortably ahead at $2,493 per ounce. The wide margin resulted in free underlying cash flow of $132 million after the miner invested $42 million in growth and exploration activities.

Net profit after tax was estimated to be around $100 million, with a net mine cash flow of $170 million.

Annual production is forecast to increase by 40% to 1.25 million ounces over the next three years. In addition, capital costs are expected to fall by 10%, further generating free cash flow.

Corporate debt stood at $500 million, compared to the $700 million recorded at the end of prior quarter. The $200 million was repaid to reduce bank debt with a further $200 million spent on fully-franked shareholder dividends.

Northern Star closed the quarter with $470 million in cash, bullion and investments.

Management commentary

Northern Star Executive Chair, Mr Bill Beament commented on the outstanding performance at Yandal and Pogo as well as the Saracen Mineral Holdings Limited (ASX: SAR) joint venture. He said:

We are also delighted with the results at Pogo, which continued to improve on every metric as the benefits of the new bulk mining method and other changes we have introduced flow through. Costs for the quarter are 14.5 per cent lower than in FY20 and the project is generating strong free cashflow.

Our changes with Joint Venture partner Saracen at KCGM are also paying dividends, with costs beating guidance.

Mr Beament said the results at the Kalgoorlie operations reflected mine sequencing which resulted in lower grades and reduced overall tonnages. Gold sales were also reduced due to a planned roaster shutdown. However, this increased the inventory of concentrate, which will be poured in the current quarter.

Mr Beament continued:

Overall, we expect to increase production at the Kalgoorlie Operations each quarter this year and ultimately meet our full- year guidance there.

We have one of the strongest growth profiles in the global gold industry and we will achieve this with one of lowest capital intensities in the global gold industry. This combination enables us to deliver strong growth in production and free cashflow while maintaining our superior financial returns.

Mr Beament said Northern Star’s strong quarterly performance, combined with the excellent September quarterly results released by Saracen last week, provided further insight into the significant strengths of the proposed merged group. He lastly added:

Both companies have again demonstrated the tier-1 quality of our assets. Our combined production is growing to 2Moz a year by FY27 while most of our peers have a falling production profile. Our costs will continue to reduce and our combined scope for further organic growth in tier-1 locations is exceptional.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• Why Saracen (ASX:SAR) is on track to achieve FY21 guidance
• ASX 200 shares hit by multiple takeovers

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Ramelius Resources Limited (ASX: RMS) share price is dropping lower on Tuesday despite delivering a strong first quarter production update.

At the time of writing, the gold miner’s shares are down 1.5% to $1.94.

What happened in the first quarter?

Ramelius performed ahead of expectations during the first quarter and delivered group gold production of 71,344 ounces. This compares to its guidance of 65,000 ounces to 70,000 ounces.

Also coming in ahead of guidance was its costs. Ramelius reported an all-in sustaining cost (AISC) of A$1,241 per ounce for the quarter. This compares to its guidance of A$1,250 per ounce to A$1,350 per ounce.

The key driver of this strong quarter was its Mt Magnet operation. It recorded production of 41,064 ounces at an AISC of A$1,138 per ounce. This was supported by its Edna May operation, which achieved production of 30,280 ounces at an AISC of A$1,387 per ounce.

Quarterly gold sales came in at 70,299 ounces, generating total revenue of A$163.3 million. This represents an average gold price of A$2,323 per ounce. As a comparison, the spot gold price is currently A$2,672.06 an ounce.

At the end of the period the company’s cash and gold balance stood at an all-time high of A$221.9 million, up from A$185.5 million three months earlier. This is after spending A$21.3 million on capital expenditure and exploration.

Net cash stood at A$205.7 million, with debt further reduced by A$8.1 million to just A$16.3 million.

Second quarter guidance.

More of the same is expected in the current quarter, with management guiding to group gold production of 67,000 ounces to 72,000 ounces. This comprises Mt Magnet production of 39,000 ounces and Edna May production of 30,500 ounces.

Costs are expected to be similar during the second quarter. Management expects to achieve its production with an AISC of A$1,200 per ounce to A$1,300 per ounce.

Capital expenditure will be higher. Management advised that capital and project development expenditure is projected to be approximately A$41.4 million.

This comprises A$15.4 million for the Eridanus cut back at Mt Magnet, $1.6 million for open pit development, A$17.6 million for Tampia (including modifications to Edna May plant), and $6.8 million for exploration.

Looking further ahead, management has retained its guidance for FY 2021. It continues to expect production of 260,000 ounces to 280,000 ounces at an AISC of A$1,230 per ounce to A$1,330 per ounce.

More reading

• Why a2 Milk, Blackmores, Ramelius, & Synlait Milk shares are tumbling lower
• ASX 200 Weekly Wrap: Bank shares push ASX 200 higher

Motley Fool contributor James Mickleboro 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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In what is set to be the ASX market’s biggest initial public offering (IPO) this year, property developer Home Consortium Limited (ASX: HMC) has secured at least AU$300 million for its spinoff real estate investment trust (REIT) fund.

The new fund, called HomeCo Daily Needs REIT (proposed ticker ASX: HDN), will list on the ASX on 23 November. It is expected to offer 484 million units at $1.33 per unit, which brings its market cap at IPO of $644 million.

What assets are included in the HomeCo REIT fund?

As part of its effort to bring the fund to IPO, HomeCo has been actively acquiring retail shopping mall properties in NSW, Victoria, and Queensland.

Since July, it has purchased three shopping centres from Woolworths Group Ltd (ASX: WOW), along with assets in Western Sydney worth $220 million.  Overall, it has seeded the fund with 17 malls worth $844 million.

It’s worth noting that the fund has specifically chosen to anchor these properties with major supermarket tenants – hence the name ‘Daily Needs’. It specifically named supermarkets Woolworths and Coles Group Ltd (ASX: COL) as these anchor tenants.

The prospectus goes on to say that the portfolio has a 98 per cent occupancy rate, and 8.4  years average lease expiry. It was pitched to investors with 5.5% yield based on FY21 projections, with a total return story of 10% that includes capital gains. 

Is REIT a good investment?

REITs in general are a good diversifier for your overall portfolio. In addition to having a low price correlation with other shares in your portfolio, it can also give exposure to commercial properties in various geographical locations that you otherwise would not get from buying a single private dwelling. 

REITs usually offer relatively high dividends and potential long-term capital gains. Due to the nature of its underlying assets, REIT share prices are usually less volatile than other shares because properties tend to follow a more stable price movement and trajectory pattern.

So should I buy the HomeCo REIT shares?

In this ultralow interest rates environment, any investment that can provide a yield pick-up should definitely be considered. The HomeCo REIT’s expected dividend yield of 5.5% could boost your portfolio return, and provide a steady income above term deposit rates for many years to come.  

In Australia, there is no one single property market. Instead, the market is fragmented by states. The fact that the HomeCo REIT’s assets are spread over different states clearly offers good diversification. 

As the retail mall concept around the world is gradually pushed to the brink in the face of e-commerce competition, properties that are exposed to the non-discretionary retail sector will stand the most chance of surviving.

Non-discretionary assets refer to those investments which are not exposed to discretionary spending. Supermarkets like Coles and Woolworths are examples of the non-discretionary retail sector as they provide consumer staples. 

Although COVID-19 has generally put a lot of strain on the property sector, I think HomeCo has timed its purchases well and managed to pick up properties at good prices. Along with household names like Woolworths and Coles as anchor tenants, this REIT may just provide a good stable addition to your portfolio.

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Motley Fool contributor dsunarto 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 Pioneer Credit Ltd (ASX: PNC) share price has rocketed up another 11.5% up in opening trade today, following a major jump yesterday after the company released its Q1 update.

The news yesterday sent the financial service provider’s shares soaring to 60.5 cents, up 28.7% at market close. Let’s see what has sent the Pioneer share price flying.

Refinance process complete

Pioneer reported it completed the refinancing of its senior debt facility with The Carlye Group. The agreement will see Pioneer enter a new senior finance syndicate facility arranged by Nomura Australia Limited.

The funding solution will provide the company with the ability to further grow, purchasing new debt portfolios. The fully drawn facility is worth $169 million with an additional $20 million of undrawn funds available.

The company said it was currently exploring opportunities to reduce its cost of funding.

Trading update

For the period ending 30 September, Pioneer received $25.6 million in cash flow from customers. Cash outflows from operating activities stood at $16.9 million, which were in line with company expectations. A significant portion of these costs, $6.3 million, was paid to process the refinance of the senior debt facility.

Cash outflow from investing activities totalled $9.7 million, mostly comprising of purchased debt portfolios (PDP). PDP investment in the period was $10.6 million, with $1.1 million payable at the end of Q1.

Pioneer closed the quarter with a cash balance of $8.7 million.

COVID-19 response

As COVID-19 has caused challenging conditions, Pioneer advised it has provided a range of options to support its customers. Measures include payment holidays, interest rate deferrals, payment reductions and in some cases debt waivers.

Furthermore, Pioneer noted it has not credit-listed or defaulted any customer’s credit file during the pandemic.

The company was recently rated as +13 on a rolling 6-month net promoter score (NPS). NPS is a way to indicate customer support and resolve of financial outcomes.

Liquidations

Pioneer’s PDP liquidations were $25.3 million, making it a record amount over any previous first quarters.

The rate of liquidations corresponds to the solid growth in the payment arrangement portfolio, reaching $367 million for Q1. The company saw growth offset a reduction in the average payment instalments and lump sum settlements.

Customer portal

To increase consumer engagement, Pioneer is developing a digital platform that provides ease of the services offered. The portal accounts for 9% of customer payments across the business and is contributing to a reduction of operating costs.

The self-service platform continues to be refined, allowing greater management of a customer’s account and payment options.

Outlook

Pioneer revealed it has a broad range of PDP purchasing opportunities, which it will apply an appropriate risk approach. Lower priced debt portfolio sales are anticipated to continue in the future, reflecting a change in customer circumstances.

Pioneer did not provide a guidance for the remainder of FY21.

More reading

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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