Tag: Motley Fool

The Adairs Ltd (ASX: ADH) share price has made a quick turnaround today, first surging higher 4.4% higher, to now 4.15% lower. This wild price swing follows the release of a trading update and AGM to shareholders.

In late-morning trade, shares in the manchester and homewares retailer are down 3.8% to $3.71. In comparison, the All Ordinaries Index (ASX: XAO) is up 0.3% to 6,391 points.

Let’s see how Adairs performed for the first 17 weeks of FY21 and what was said in its AGM.

Trading update

For the period ending October 25, Adairs reported a robust result despite COVID-19 closing 43 Melbourne stores.

Total sales increased 22% over the prior corresponding period (pcp), underpinned by its online segment which grew 134%. Adairs reported sales stayed up across all channels, and that it was well ahead of the same time last year.

Online sales represented 41% of total sales versus 17% over the pcp.

Management advised that gross margins were above FY20 levels, remaining a key focus with the pricing and outsourcing measures undertaken. Underlying trading gross margin is roughly 600 bps higher than last year’s period, and its Mocka business 150 bps higher.

Gross margins are expected to moderate from current levels as FY21 continues. This is due to consumers having more options for discretionary spend as coronavirus restrictions lift further.

Inventory levels were reduced over the past 6 months to manage cost and liquidity. As Adairs saw stronger than expected sales, inventory levels have increased ahead of the Christmas holiday period.

Overall costs within the business are being kept in line, with most spend occurring in marketing to capture new customers. In addition, government wage subsidies have helped Adairs support team members stood down from government-mandated store closures.

With the ongoing uncertainty around COVID-19, the board did not provide a guidance for FY21.

What did management say at the AGM?

Adairs CEO and managing director Mark Ronan said:

I am pleased that the momentum seen in the second half of FY20 has continued into FY21. These results highlight the strength and continued success of our brands, supported by our omni channel strategy and operational agility. We continue to see our customers invest more in the comfort of their homes, where many are spending more time working and studying.

Mr Ronan said the Adairs team had delivered a great product range under challenging circumstances, with all categories performing well.

This has been supported by all team members across the business working collectively to enable customers to shop via their preferred channel in a safe manner over this period. I have been so proud to see the passion and commitment of our team to work through the challenges and focus on what really matters – inspiring and delighting our customers.

More reading

• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• Why the Laneway Resources (ASX:LNY) share price popped 14% higher today
• Why the Lark (ASX:LRK) share price is flying high today
• Weebit (ASX:WBT) share price surges 17% higher on Q1 update
• Why the Carbon Revolution (ASX:CBR) share price soared 14% higher today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ADAIRS FPO. 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 Adairs (ASX:ADH) share price is swinging lower today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3mmbCvJ

Over the last couple of years, few ASX shares have been in the financial media spotlight more than so-called WAAAX shares: WiseTech Global Ltd (ASX: WTC), Afterpay Ltd (ASX: APT), Appen Ltd (ASX: APX), Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO). These companies’ share prices have all exploded over the last few years, and have been mostly immune to the effects of COVID-19. The Afterpay share price, in particular, has recently soared to unbelievable new highs, surging beyond $100 for the first time in its history just last week.

But there is a new generation of young tech companies that have started making waves on the ASX, due in large part to their abilities to meet the unique demands posed by our new COVID economy. Whether it’s by helping companies automate manual processes or adjust to remote working conditions, these companies are seizing this moment to expand their market share. It’s possible that one day, they may even grow to become the next WAAAX shares.  

Could these ASX tech shares form the next WAAAX?

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan’s flagship sales enablement automation platform is a centralised, integrated software solution that is designed to support businesses throughout their entire sales and marketing lifecycle. This encompasses everything from onboarding and training new staff, to engaging new customers and providing accurate reporting.

Bigtincan delivered strong FY20 results across just about all its key financial metrics. Revenues increased by 56% year on year to $31 million, powered by a 57% jump in subscriptions revenues to $29.5 million. Plus, customer retention levels were a high 89%. With a loyal customer base and high levels of recurring subscription-based revenues, I think Bigtincan is a great company with considerable future growth ahead of it. 

Nitro Software Ltd (ASX: NTO)

Nitro develops a suite of software solutions to allow individuals and businesses to streamline and digitise document workflows. This allows companies to create, edit, sign and store important documents entirely online. Not only does this simplify document management, but it can massively reduce printing costs for large companies, and even make them more environmentally friendly.

With more companies now working remotely, demand for Nitro’s digital document management software has increased dramatically. Revenue for the half year ended 30 June 2020 was up 14% against the June half 2019 to US$19.1 million. This was largely driven by a 60% increase in subscription revenue. The ASX tech share reaffirmed its prospectus guidance for total revenue of at least US$40.5 million for the calendar year.

Megaport Ltd (ASX: MP1)

Megaport leverages cloud-based technology to create customisable networks for corporate clients. It helps clients expand their network connectivity beyond the limits of traditional infrastructure, which is something more and more companies are having to do in this COVID-era of remote working.

Megaport’s bespoke networks also give clients the ability to manage their bandwidth usage. They can scale up their consumption needs during peak times, and then only pay for what they actually use during less busy periods.

Despite a recent pullback in the Megaport share price, I believe this ASX tech share has plenty of growth potential over the longer term. The September quarter saw a record increase in customer numbers, and it is now executing on plans to expand into the United States.

FINEOS Corporation Holdings PLC (ASX: FCL)

FINEOS develops a suite of software for the life, accident and health insurance industries. Its AdminSuite platform is a centralised system that supports billing, claims and payments. Its customer-centric software automates and streamlines processes for insurance providers and can replace legacy insurance administration platforms.

The FINEOS share price has soared over 80% higher already this year after it achieved a number of significant milestones, including signing the biggest insurance company in the US, Prudential Financial Inc (NYSE: PRU), to its platform.  

Whispir Ltd (ASX: WSP)

Whispir develops integrated communications software for corporate clients. It provides a central platform from which its customers can create customisable templates for email, web and social media communications, as well as manage workflows and drive insightful reporting.

The September quarter was the company’s strongest on record in terms of cash receipts, with the ASX tech share bringing in $10.5 million. The company expects full year revenues for FY21 to grow by at least 21% over FY20 to between $47.5 million and $51 million.

More reading

• Is Temple & Webster Group Ltd (ASX:TPW) still a buy?
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• These were the worst performing ASX 200 shares last week
• Brokers name 3 ASX shares to buy right now
• Is the Megaport (ASX:MP1) share price in the buy zone today?

Rhys Brock owns shares of AFTERPAY T FPO, Altium, Appen Ltd, BIGTINCAN FPO, MEGAPORT FPO, Nitro Software Limited, Whispir Ltd, and WiseTech Global. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Altium, BIGTINCAN FPO, MEGAPORT FPO, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and WiseTech Global. The Motley Fool Australia has recommended BIGTINCAN FPO, FINEOS Holdings plc, MEGAPORT FPO, Nitro Software Limited, and Whispir 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.

The post 5 ASX tech shares that could be the next WAAAX stocks appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/34xJSOZ

The Damstra Holdings Ltd (ASX: DTC) share price has started the week in a positive fashion.

In morning trade the integrated workplace management solutions provider’s shares are up 1.5% to $2.15.

Why is the Damstra share price pushing higher?

Investors have been buying Damstra’s shares on Monday following the release of its first quarter update which revealed record revenue, cash receipts, and operating cash flow.

According to the release, for the three months ended 30 September, Damstra reported revenue of $5.2 million, up 34% on the prior corresponding period.

The company’s cash receipts grew even quicker and were up 61% on the prior corresponding period to $7.1 million.

Operating cash flow came in at $2.4 million for the three months. This was up 25% on the prior corresponding period and left the company with a cash balance of $9.6 million. This cash balance includes the costs associated with the Vault Intelligence transaction.

Key metrics improving.

It wasn’t just its financials that improved during the first quarter of FY 2021. Damstra reported improvements in its users, client numbers, and gross margin.

User numbers now stand at 418,000, client numbers have hit 326, and its gross margin has widened to 72%.

What were the drivers of its growth?

Management notes that in its core construction vertical, user numbers increased to ~68,000 from ~62,000 at end of FY 2020. This has been driven by new project rollouts, mobilisation of workforce for large infrastructure projects, and return to work on workers with COVID restrictions lifting.

And while NBN users plateaued during the quarter, it believes the vertical has a positive outlook given the recent Federal Government announcement of fibre to the home deployment.

Elsewhere, Velpic user number were up by 12% for the quarter from 17,000 to 19,000 users, showing continued uptake of online learning solutions.

Finally, a range of client orders have been received for its next generation of fever detection facial recognition solution. The solution will be deployed in various industries across Australia and North America.

Damstra’s CEO, Christian Damstra, commented: “We have started FY21 strongly and successfully completed the Vault transaction. We see this as a year of continued evolution with our business having increasing size, scale and product innovation to accelerate international growth.”

“From an investor perspective, this is important as we believe we have significantly reduced our overall risk profile while increasing our organisational capability. We now have a presence in South East Asia and will continue to add significant resources in North America,” he added.

More reading

• How far could your $10,000 go in this ASX tech share 
• Why the the Damstra (ASX:DTC) share price has surged 5%
• Top ASX Stock Picks for October 2020

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Damstra Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Damstra 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.

The post Why the Damstra (ASX:DTC) share price is climbing higher today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/37GpHAj

After surging to an all-time high of $14.05, shares in ASX furniture ecommerce company Temple & Webster Group Ltd (ASX:TPW) suffered a massive correction this week. Temple & Webster shares have plummeted almost 25% lower to $10.77 since the company’s annual general meeting (AGM) on Wednesday. It joined a number of other COVID-19 market darlings, including tech companies Megaport Ltd (ASX:MP1) and Whispir Ltd (ASX:WSP), that have suffered big selloffs this week as short-term investors took some of their profits off the table.

What sparked the selloff?

It’s hard to say what prompted the sharp decline in the Temple & Webster share price, as most news out of the AGM was positive. In his address to shareholders, company chair Stephen Heath touched on Temple & Webster’s impressive FY20 achievements. These included record annual revenues of $176.3 million and 483% growth in earnings before interest, tax, depreciation and amortisation (EBITDA).

CEO Mark Coulter then gave a trading update for FY21. First quarter EBITDA came in at $8.6 million, which was already greater than the company’s full year FY20 result. Revenue growth has been accelerating, with year-to-date revenues to October 19 up 138% against the prior comparative period.

There’s not much in those statements to deter investors. Could some of Temple & Webster’s forward-looking statements be overly optimistic? For example, the company assumes that COVID-19 lockdowns will create long-lasting structural changes in consumer behaviour. This may well be the case, but it’s still difficult to predict exactly how buying habits will change once lockdown restrictions ease. Particularly over the second half of FY21 and beyond.

There is also the potential that, as the recession starts to bite, consumers will have less disposable income to spend on luxury items like homewares and furniture. Additionally, as other industries including domestic tourism open up again, people have more options on where they can spend their money. Companies like Temple & Webster and JB Hi-Fi Ltd (ASX:JBH), which has also enjoyed a bump in revenues during lockdowns, might start to see their sales decline.

Investors may also have seen what Stephen Heath, Mark Coulter and co-founder and director Conrad Yui have been doing with their holdings. All three have sold significant parcels of their own shares in Temple & Webster in recent months. When those with inside knowledge of the company start selling off their holdings, it generally sends a message to the market that the share price might be getting overvalued.

Is now a good time to buy?

With the share price now essentially back to where it was in early September, now could be a good time to pick up shares in a growing company at bargain prices. Temple & Webster was a surprise success story to emerge out of COVID-19, but the company’s continued growth throughout the early stages of FY21 could signal that it still has plenty of gas left in the tank. Plus, the company ended FY20 with a strong balance sheet, consisting of almost $40 million in cash and nil debt.

There may be some lingering questions over how consumer behaviour will impact Temple & Webster’s sales over the longer-term. But the company is putting itself in a strong enough financial position to meet those challenges. I think it’s more likely the recent share price pullback has been driven by profit-taking from short-term investors, prompted in part by the actions of the company’s own leadership team. However, I think this could present new investors with a rare opportunity to pick up shares in this growing company at a significant discount.

More reading

• 5 major ASX 200 events this week
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• The best time to invest may feel uncomfortable
• 5 things to watch on the ASX 200 next week
• Got $1,000? You should buy one of these 8 ASX shares

Rhys Brock owns shares of MEGAPORT FPO, Temple & Webster Group Ltd, and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO and Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended MEGAPORT FPO, Temple & Webster Group Ltd, and Whispir 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.

The post Is Temple & Webster Group Ltd (ASX:TPW) still a buy? appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3mpiHLY

The 2020 market crash has caused a wide range of stocks to trade at cheap prices. This situation may persist in the short run due to risks such as coronavirus. However, over the long run a return to higher valuations seems likely based on the stock market’s past performance.

Therefore, now could be the right time to buy a diverse range of shares while they offer wide margins of safety. Over time, they could boost your portfolio’s performance and improve your chances of making a million.

A recovery after the market crash

While some shares have recovered to 2019 levels after the recent market crash, many other companies continue to trade at cheap prices. This may be because threats such as coronavirus, Brexit and the US election are weighing on their financial prospects and causing investor sentiment to weaken.

However, the past performance of the stock market shows that a reversion to average long-term valuations is likely over the long run. In other words, stocks with valuations that are significantly below their previous long-term averages are unlikely to trade at such low prices in perpetuity.

Therefore, investors who take advantage of the market crash through buying cheap stocks could benefit from their upward reratings over the long run. This may translate into capital returns that outperform the stock market’s growth rate in the coming years.

Economic growth prospects

Clearly, there is a risk of a second market crash later this year. However, investors who have a long-term outlook can take advantage of this potential threat, since they will have sufficient time to benefit from a subsequent recovery.

The world economy has always produced a turnaround after its periods of negative performance to post strong GDP growth over the long run. Therefore, in the coming years it is likely to follow the same pattern – especially with the scale of monetary policy stimulus that has so far been announced in major economies across the world. It has the potential to lift asset prices and push investors towards riskier assets in an era of low interest rates.

Making a million

Investing money in cheap stocks after the market crash could lead to higher returns than the wider stock market over the long run. However, even if you obtain a similar return to the stock market’s past annualised growth rate of around 8%, you could make a million within 30 years through investing $750 per month.

As such, now could be the right time to start buying undervalued shares. Investing either a lump sum now, or more modest amounts on a regular basis, could allow you to obtain impressive returns as market valuations gradually improve and the prospects for the world economy strengthen.

More reading

• Is Temple & Webster Group Ltd (ASX:TPW) still a buy?
• Why the CogState (ASX:CGS) share price is rocketing 36% higher today
• 5 major ASX 200 events this week
• The Magellan (ASX:MFG) share price fell 4% last week. Here’s why.
• How did ASX cannabis shares perform last quarter? 

Motley Fool contributor Peter Stephens 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 Market crash 2020 alert: Buying today’s cheap stocks could make you a million appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/31DcpAA

The CogState Limited (ASX: CGS) share price has been an exceptionally strong performer on Monday.

At the time of writing, the neuroscience technology company’s shares are up a massive 36% to a 52-week high of $1.08.

Why is the CogState share price rocketing higher?

Investors have been buying the company’s shares this morning following the announcement of an agreement with Japanese pharmaceutical company, Eisai.

According to the release, the agreement will see Eisai exclusively distribute Cogstate digital cognitive assessment technologies in healthcare and other markets world-wide.

The agreement excludes clinical trials, where Cogstate will continue to market its offering independently.

What are the terms of the agreement?

The release explains that Eisai will provide an upfront payment to Cogstate of US$15million, which is payable within 45 days.

The pharmaceutical company will also pay Cogstate a royalty on sales. This will be determined by a range of factors including the retail market price of Cogstate technology in all regions or calculated on a per user basis.

Eisai will also fund necessary product development activities to further tailor Cogstate solutions for each territory and use case and be responsible for all commercial activities in respect of the sale and marketing of the technology in all territories.

The agreement has an initial term of ten years for each country, from its first commercial product sale on a country by country basis. Eisai has agreed to make commercially reasonable efforts to make its first sales in the US within 1 year, the EU with 3 years, and China with 4 years.

Furthermore, the agreement provides for cumulative royalties of at least US$30 million over the term of the license, unless terminated earlier.

The minimum royalties will be no less than US$10 million for the period of years one to five and then no less than US$20 million for the period of years six to ten.

What is CogState’s technology?

The company’s technology optimises brain health assessments to advance the development of new medicines and to enable earlier clinical insights in healthcare.

It provides rapid, reliable, and highly sensitive computerised cognitive tests across a growing list of domains and support electronic clinical outcome assessment (eCOA) solutions. These can replace costly and error-prone paper assessments with real-time data capture.

More reading

• 5 major ASX 200 events this week
• The Magellan (ASX:MFG) share price fell 4% last week. Here’s why.
• How did ASX cannabis shares perform last quarter? 
• Why the Clinuvel (ASX:CUV) share price is pushing higher today
• Why the Marley Spoon (ASX:MMM) share price is crashing 17% lower today

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.

The post Why the CogState (ASX:CGS) share price is rocketing 36% higher today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/37GUfle

This week is shaping up to be less controversial than last week on the S&P/ASX 200 Index (ASX: XJO). It should be somewhat less eventful after the contentious AGMs of Crown Resorts Ltd (ASX: CWN), Qantas Airways Limited (ASX: QAN), and the Q3 update from AMP Limited (ASX: AMP) we saw last week.

Nevertheless, there are still some very interesting events coming up on the ASX this week. Some of these are due to recent developments, while others will provide an insight into companies known to be impacted by the pandemic. The following covers off just some of what is happening among ASX 200 shares this week. It is however, by no means a definitive list of all AGMs and events this week and, for example, excludes pending announcements from National Australia Bank Ltd. (ASX: NAB), South32 Ltd (ASX: S32), and St Barbara Ltd (ASX: SBM).

5 ASX 200 events this week

Tuesday

At 10.30am on Tuesday, Boral Limited (ASX: BLD) will hold its AGM. The troubled ASX 200 company is currently in the midst of a turnaround attempt and has had a turbulent 2020. The company has installed a new CEO, Zlatko Todorcevski. Meanwhile, current chair, Kathryn Fagg, has announced she will retire from the company in 2021.

The chair is retiring partially due to the role she played in the acquisition of Headwaters in the United States, resulting in a $1.2 billion write down. Moreover, there are questions over her plan to allow two  Seven Group Holdings Ltd (ASX: SVW) executives to join the board after Seven raised its ownership stake in Boral to 19.9%.

Investors will also be looking for an update on Boral’s portfolio review. With the number of Seven Group directors reduced back to one, it is unlikely the AGM will be contentious. 

At 11.00am, Bendigo and Adelaide Bank Ltd (ASX: BEN) will hold its AGM. Investors may be interested in the benefits to shareholders of the tie up with Tyro Payments Ltd (ASX: TYR) in merchant transactions. The ASX 200 bank’s AGM will also provide an indication of its performance in Q1 and anticipated recovery from the pandemic.

At 11.30am, Link Administration Holdings Ltd (ASX: LNK) will hold its AGM. This promises to be a very interesting event. The company is presently fending off a $2.8 billion non binding proposal. It has rejected the offer as undervaluing the ASX 200 company. Moreover, it is considering a demerger of its shareholding in property transaction company, PEXA. 

Wednesday

At 11:30am, the Australian Bureau of Statistics will release the Q3 consumer price index (CPI). This will provide investors with an idea of the scale of the repair underway to the Australian economy. For example, the June quarter report carried news of a -95.0%. fall in child care costs. The results of the CPI report will likely influence share prices across several ASX 200 companies. 

Thursday

At 10.30am, ASX 200 company JB Hi-Fi Limited (ASX: JBH) will hold its AGM. Investors will be looking at the Q1 results as a guide to whether the company can continue the high volume of sales achieved during the pandemic. I’ll also be mindful to exclude the effects of Victoria’s extended lockdown on JB’s results.

The company recorded an exemplary 33.2% growth in underlying net profit after tax between FY19 and FY20. In addition, online sales grew 56.6% year on year. This sets a high bar for the future.

More reading

• The Magellan (ASX:MFG) share price fell 4% last week. Here’s why.
• What zero COVID-19 cases in Victoria means for ASX 200 shares
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• 3 star ASX shares to buy for the rest of 2020
• 5 things to watch on the ASX 200 on Monday

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd and Tyro Payments. The Motley Fool Australia has recommended Link Administration 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.

The post 5 major ASX 200 events this week appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/2ToZ9el

Magellan Financial Group Ltd (ASX: MFG) saw its share price lose 4% last week, significantly underperforming the S&P/ASX 200 Index (ASX: XJO). This was despite an AGM presentation which included a forecast that FY21 costs would remain flat. Nonetheless, Magellan’s critics have expressed concern over the company’s planned investment of $155 million in start up investment bank Barrenjoey.

What is weighing on the Magellan share price? 

In a report in September, CLSA analyst Ed Henning said of the investment in Barrenjoey: “At face value the investment looks questionable, given investment banks tend to trade on lower multiples versus Magellan and the investment will likely initially be loss-making, although a $155m investment for a $10bn company that is highly cash generative is only relatively small.”

To illustrate further, the Magellan share price is trading at a price-to-earnings (P/E) ratio of 27, while investment banks tend to trade at a P/E of between 10 and 14.

For instance, Macquarie Group Ltd (ASX: MQG) is an diverse financial group. However, the investment banking arm is regularly in the top 3 deal makers every year. Macquarie currently trades at a P/E of 16. Another example is Bell Financial Group Ltd (ASX: BFG), a stockbroking and financial services company with an investment banking arm built in. Bell has a P/E of 12.5.

What is more, another rule of thumb metric for an investment bank is between 1 and 1.5 times revenue. Given that Magellan has paid $155 million for 40% of Barrenjoey, we know that the full valuation would be just under $400 million. Meanwhile, the start up hasn’t earned a cent yet, even though they have managed to capture some top flight operators from UBS. The Magellan share price fell by 5% on the day of this announcement.

The view from Magellan

Although listed in the AGM notes as a principal investment, $155 million is modest for a 10 billion dollar company. Chair and chief investment officer Hamish Douglass is dismissive of such criticism. During the company’s AGM he argued that Barrenjoey’s partnership model allowed for a nimble and entrepreneurial approach, designed to “uniquely position the business in the Australian market”. 

He went on to explain how the market opportunity likely extended beyond Australia and New Zealand. Moreover, that the company would boost Magellan’s intellectual capital through new, highly skilled staff entering the business.

Mr Douglass added:

We are excited about the prospects for Barrenjoey and it reminds me of the early days here at Magellan… Fourteen years later, it is incredible to see what can be achieved by talented people who are aligned in a common goal, with a common purpose, backed by a strong balance sheet, and not being constrained by existing systems or processes.

Magellan has also taken a sizable stake in FinClear. An unlisted financial services company that provides infrastructure to financial planners, stockbrokers, wealth managers and fintechs. The company’s technology plays a hand in at least 50% of transactions on the ASX. 

More reading

• What zero COVID-19 cases in Victoria means for ASX 200 shares
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week

Motley Fool contributor Daryl Mather 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.

The post The Magellan (ASX:MFG) share price fell 4% last week. Here’s why. appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3moQwNA

The market for cannabis-based products has continued to grow in 2020 despite the impact of the COVID-19 pandemic. The the quarter ended 30 September was no exception, with online sales jumping. Cannabis products are becoming more mainstream and healthcare professionals are increasingly embracing their benefits. This means competition in the Australian cannabis sector is increasing as industry players look to secure distribution channels and patient access. That said, this last quarter saw mixed results for ASX cannabis shares. While some reached new records, others struggled as shareholdings shifted. 

In significant industry news, the Therapeutic Goods Administration (TGA) made an interim decision to down-schedule CBD. The amendment would allow Australian patients to purchase CBD products upon consultation with a pharmacist, without the need for a prescription, from 1 June 2021. If the interim decision becomes final, this will provide another potential source of revenue for ASX cannabis shares.

With that in mind, let’s take a look at how ASX cannabis shares performed in the last quarter. 

Althea Group Holdings Ltd (ASX: AGH) 

Althea continues to go from strength to strength, launching online sales in Australia in July. This fast-tracked response to COVID-19 drove record revenue and patient numbers for the month. Total patients passed 8,000 with 740 patients prescribed Althea products for the first time. Unaudited revenue of $692,091 was recorded. A total of 628 Australian healthcare professionals had prescribed Althea products as at 31 July 2020. 

Althea’s online platform, Althea Concierge, has been updated to cater for online sales. Used in conjunction with telemedicine, Althea Concierge allows doctors to prescribe Althea medicinal cannabis products which are delivered directly to the patient’s door. This eliminates the need for multiple visits to the doctor and pharmacy while complying with regulatory requirements. 

Althea engaged with the TGA throughout the consultation process on the down-scheduling of CBD. CEO Josh Fegan said:

We see it as one of the biggest developments in our industry to date. The interim decision reflects the significant shift in community and government attitudes towards medicinal cannabis.

Althea launched a CBD preparation last year, so is well positioned to take advantage of this market opportunity. 

Althea subsidiary Peak Processing was granted a Canadian cannabis licence last month, and commenced operations immediately. Peak manufactures Cannabis 2.0 products on behalf of third parties such as cannabis-infused edibles, beverages, concentrates, and topicals. The plant will also supply medicinal products to Althea’s pharmaceutical operations, greatly reducing the cost of goods sold. 

Cann Group Limited (ASX: CAN) 

Cann Group saw major shareholder Aurora Cannabis Inc exit its position this quarter. The Canadian cannabis producer sold its 11.84% shareholding in Cann Group despite listing Australia as one of its “primary market opportunities” as recently as February. Aurora did not participate in Cann Group’s July capital raising, where the company raised $24.3 million to provide working capital. The Cann Group share price tanked in the aftermath of the raising, losing some 50% of its value.

Cann Group says Aurora’s exit has no impact on its business plans. It remains focused on developing a supply base with B2B customers and expanding manufacturing capacity. The company says it has secured multiple new offtake and supply agreements which will support short term revenues and de-risk expansion plans. Expansion of the company’s Mildura facility has been central to Cann Group’s growth strategy, but has hit a number of snags. 

An oversupply in the cannabis market late last year forced Cann Group to take a staged approach to construction of the Mildura facility. COVID-19 then slowed progress of potential funding options as well as the practical timing of construction. The company remains in discussions to secure a debt facility to fund the first stage of the expansion. More than $50 million has been spent on the project, which is intended to increase production capacity to 12,500 kilos annually. 

In FY21, Cann Group is forecasting revenues of $15 million, underpinned by existing supply contracts. New commercial supply agreements have recently been secured to supply product to the UK, Germany, and other European countries. Germany is Europe’s largest medicinal cannabis market, with 2019 sales exceeding all other European markets combined. Cann Group also has agreements in place to supply medicinal cannabis to pharmacies and hospitals in Australia through a distribution arrangement with Symbion Health.

Ecofibre Ltd (ASX: EOF) 

Ecofibre completed its acquisition of TexInnovate in the September quarter. The acquisition is aimed at accelerating the transition of Ecofibre’s Hemp Black business from R&D to commercialisation. The Hemp Black business focuses on developing textiles and materials from hemp, which has natural antimicrobial and conductive properties. TexInnovate is a portfolio of 5 businesses with expertise across a range of high-performance textile disciplines. 

The Hemp Black business pivoted rapidly at the onset of COVID-19, re-prioritising efforts from athleisure wear to PPE in response to global demand. By the end of FY20, Hemp Black had delivered $2.4 million in PPE sales. Ecofibre is aiming to embed Hemp Black’s technology across a range of industries, including high-performance apparel, personal protection, military, healthcare, and travel. 

Ecofibre’s Ananda Health business, which sells CBD products in US pharmacies, has been performing strongly, increasing profit before tax by 63% in FY20 to $20.8 million. The Ananda Food business, which sells hemp food products and nutraceuticals, has recorded steady growth, but profits have been slower than expected. Ecofibre has not provided FY21 revenue or profit guidance, but says it will consider paying a dividend for FY21. This is based on the company’s cash position, confidence in delivering profitable growth in Ananda Health, and a pathway to profitability for Hemp Black and Ananda Food. 

More reading

• Ecofibre (ASX:EOF) share price plummets 24%. Here’s why
• Why is the Althea (ASX:AGH) share price up 8% today?
• The Cann Group share price getting smoked after a strategic shareholder exits

Motley Fool contributor Kate O’Brien 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 How did ASX cannabis shares perform last quarter?  appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/37Fe0cV

The Clinuvel Pharmaceuticals Limited (ASX: CUV) share price is pushing higher this morning following the release of an update.

At the time of writing, the biopharmaceutical company’s shares are up 0.5% to $21.99.

What did Clinuvel announce?

This morning Clinuvel provided the market with an update on the use of its SCENESSE drug for the treatment of xeroderma pigmentosum (XP).

According to the release, the first male XP patient started SCENESSE treatment in September under a Special Access Program and has been closely monitored by the expert clinical centre responsible for medical care.

This includes regular clinical observations over the 42-day treatment period to assess the patient’s health, including the response to overall SCENESSE treatment.

Today’s update reveals that the patient tolerated the melanocortin drug well and no drug related adverse events have been reported.

In addition, specific attention was given to the consequences of ultraviolet (UV) exposure, pigmentation, and overall status of the patient’s skin. This is because XP patients are known to exhibit poikiloderma (a degeneration and disintegration of the skin) and are prone to frequent bleeding from chronic wounds.

At the end of the 42 days, the integrity of the skin of the patient has shown to be unaffected by SCENESSE.

CLINUVEL’s Clinical Operations Manager, Dr Pilar Bilbao, commented: “We are delighted with the consistent safety reports from the XP-C patient receiving systemic treatment with afamelanotide [SCENESSE]. This positive observation and clinical feedback from the treating physician form the basis for progressing the planned XP study, CUV150.”

This bodes well for the company and supports previous findings. The company notes that scientific evidence supports the use of afamelanotide, the active ingredient in SCENESSE, to protect skin from UV and light (systemic photoprotection), and repair UV-induced DNA damage.

Further details of the company’s DNA Repair Program will be provided in a strategic update, which is due to be released this month.

More reading

• These are the 10 most shorted shares on the ASX
• These are the 10 most shorted shares on the ASX
• These are the 10 most shorted shares on the ASX
• Here are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares

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.

The post Why the Clinuvel (ASX:CUV) share price is pushing higher today appeared first on Motley Fool Australia.

from Motley Fool Australia https://ift.tt/3jt0wDA