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Many investors were spooked by the March bear market. ASX share prices were hammered across most sectors and even experienced players were worried. So, how can you position your portfolio for another ASX share market crash?

How to position your ASX share portfolio for another market crash

I think portfolio construction can sometimes be overcomplicated. In the end, it’s all about cash flow which flows through to valuation and growth.

Normally, when the market is volatile, cash is king. There’s a ‘”bird in the hand” theory, that returns today in the form of dividends are worth more than future returns from promised growth.

However, we’ve almost seen the opposite in 2020 thanks to the ‘two-speed’ economy. Growth shares like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) have outperformed the S&P/ASX 200 Index (ASX: XJO) by some margin.

That might tempt some investors to go all-in on growth and do away with ASX blue-chip dividend shares. I won’t be following that trend as I think diversification is really the key here.

If we see another market crash, I’d like to have a bit of gold exposure in my portfolio. ASX gold shares have been surging as investors’ hawkishness continues to push global gold prices higher.

Given the potential mega-merger announced in recent weeks, I think the Northern Star Resources Ltd (ASX: NST) share price is worth a look. The Northern Star share price is up 44.3% this year and could climb higher if we see another ASX market crash.

I also think a non-cyclical blue-chip share is good to have. That means I’d probably look to buy something like Coles Group Ltd (ASX: COL) for stable earnings and dividends through another period of volatility.

Finally, it’s worth thinking longer-term. The federal budget signalled that infrastructure could be the ticket out of the current recession. That means I’m looking at major construction and infrastructure groups for potential earnings on the back of juicy government contracts.

I think a major provider like Lendlease Group (ASX: LLC) could be worth buying as a speculative play for some growth and income upside in another ASX market crash.

No one has a crystal ball, so these are just a few shares I’d like to buy in the next downturn. Until we see another ASX market crash, however, I’m happy to sit tight with my current portfolio.

More reading

• Brainchip (ASX:BRN) share price jumps on quarterly update
• ASX 200 up 1%: Crown sinks on AUSTRAC news, South32 & CIMIC storm higher
• 4 ASX shares to buy for a rare Christmas surprise
• How the RBA is refuelling this ASX bull market
• ASX 200 Weekly Wrap: Promises of easy money push ASX 200 to post-crash high

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. 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 I’d position my ASX share portfolio for the next market crash appeared first on Motley Fool Australia.

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At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a stellar gain. The benchmark index is currently up 1% to 6,236.6 points.

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

Crown sinks lower on AUSTRAC news.

The Crown Resorts Ltd (ASX: CWN) share price is sinking notably lower on Monday after revealing that AUSTRAC has contacted the casino and resorts operator. According to the update, AUSTRAC has identified potential non-compliance by Crown Melbourne with anti-money laundering and counter-terrorism financing rules. AUSTRAC has concerns over ongoing customer due diligence and adopting, maintaining, and complying with an anti-money laundering and counter-terrorism financing program.

South32 delivers solid Q1 update.

The South32 Ltd (ASX: S32) share price is pushing higher today after the release of its first quarter update. For the three months ended 30 September, South32 achieved solid production across the board. In light of this, the company has been able to reaffirm its full year production guidance. Another positive was that management has ended its share buy-back suspension. It notes that its strong operating performance and financial position have allowed its resumption.

CIMIC to sell 50% of Thiess business.

The CIMC Group Ltd (ASX: CIM) share price is surging higher today after announcing a deal to sell 50% of its Thiess business. It has signed an agreement with Elliott Advisors, which values the world’s largest mining services provider at an enterprise value of $4.3 billion (on a 100% basis). The transaction is expected to generate a pre-tax gain of around $2.2 billion for CIMIC, and a post-tax gain of around $1.4 billion.

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Monday has been the Lynas Corporation Ltd (ASX: LYC) share price with a gain of almost 8%. This is despite there being no news out of the rare earths producer. The worst performer has been the Crown share price by some distance with a 8.5% decline. This follows its AUSTRAC update this morning.

More reading

• Why Cleanaway, Crown, Opthea, & Zoono shares are sinking lower today
• Why Dicker Data, South32, Tyro, and Uniti shares are pushing higher today
• South32 (ASX:S32) share price up 3% on solid Q1 update
• CIMIC (ASX:CIM) share price 5% higher after agreeing to sell 50% of Thiess
• How the RBA is refuelling this ASX bull market

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts 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 Aerometrex Ltd (ASX: AMX) share price is trading flat today despite the company’s release of a positive update on its MetroMap service. At the time of writing, the Aerometrex mapping share price is hovering at $1.31, after pulling back from $1.35 in early trade. This compares to the All Ordinaries Index (ASX: XAO) which is 0.9% higher at 6,442 points.

Let’s take a look at the company’s MetroMap developments.

What is MetroMap?

Aerometrex’s flagship service, MetroMap, is an online imagery web-serving application that offers high-quality imagery to a subscriber base. Each year, MetroMap provides its users up to four captures of each major capital city, and regional towns.

The company operates in an array of sectors including government, urban planning, construction, mining, transport, telecommunications, insurance and marketing.

Aerometrex estimates the addressable market opportunity for its service to be roughly between $75 million to $85 million annually.

MetroMap developments

The Aerometrex share price is flat today despite the company advising it has rolled out its MetroMap aerial imagery capture program to cover over 75% of the Australian population. The company said it flew over every capital city as well as 49 regional cities and towns within three months.

The increased coverage has been using Aerometrex’s large-format aerial camera system, MetroCam. This is a high-resolution camera that captures high-quality images at a 5cm pixel size. The company said its system is a 36:1 pixel ratio improvement on the best available commercial satellite imagery.

In addition, Aerometrex implemented a processing workflow and software system for its MetroCam service. The new system, called Pixel Cruncher, is designed to speed orthophoto processing by 800%. The critical component will see processing times reduce substantially to 12 to 24 hours, as opposed to one week.

What did the CEO say?

Aerometrex Managing Director, Mark Deuter, commented on MetroMap’s new developments. He said:

We have clearly demonstrated our ability to scale up MetroMap to a massive capture and processing program while still maintaining accuracy and further improving the quality and resolution of the product. Turnaround times for image processing are the equal if not better than any comparable product in the market.

We are very pleased to be providing the same quality and resolution of imagery to regional cities and towns as our major capital cities. The value of our MetroMap offering is increasing daily and is being appreciated by our subscribers.

About the Aerometrex share price

The Aerometrex share price has risen 87% since falling to its 52-week low of 70 cents in March. Although materially higher of late, the Aerometrex share price is down over 30% since the start of the calendar year and nearly 50% from its all-time high achieved in February.

More reading

• Here’s why the shares of this Nearmap (ASX:NEA) rival are surging higher today

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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the week with a strong gain. At the time of writing, the benchmark index is up 1% to 6,240.2 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

Cleanaway Waste Management Ltd (ASX: CWY)

The Cleanaway share price is down almost 2% to $2.25. This decline could be in response to media reports over the weekend. Those reports allege that workers were transferring medical waste from bins without protective gear at the height of the COVID-19 crisis. This was believed to be part of a plan to ship waste interstate to ensure it didn’t exceed its environmental license restrictions.

Crown Resorts Ltd (ASX: CWN)

The Crown share price has sunk 10% lower to $8.08. This morning Crown revealed that it has been contacted by AUSTRAC. According to the release, AUSTRAC has identified potential non-compliance by Crown Melbourne with anti-money laundering and counter-terrorism financing rules. This includes concerns in relation to ongoing customer due diligence and adopting, maintaining, and complying with an anti-money laundering and counter-terrorism financing program.

Opthea Ltd (ASX: OPT)

The Opthea share price has crashed 13.5% lower to $2.40 after announcing the pricing of its initial public offering in the United States. The biopharmaceutical company is offering 8,563,300 American Depositary Shares (ADS), representing 68,506,400 ordinary shares, at a price of US$13.50 per ADS. The aggregate gross proceeds are expected to be approximately US$128.2 million. Based on the current exchange rate, this offer equates to a 14.4% discount of A$2.38 per share.

Zoono Group Ltd (ASX: ZNO)

The Zoono share price has dropped a further 5% to $1.36. Investors have been selling the antimicrobial solutions provider’s shares since the release of its first quarter update last week. In fact, today’s decline means the Zoono share price is down 26% since that update. Zoono, which sells antimicrobial hand sanitisers and sprays, reported first quarter sales of NZ$15 million. This was down 28.2% from the NZ$20.9 million it achieved in the fourth quarter of FY 2020.

More reading

• Why IDP Education, WiseTech, Zip, & Zoono shares are tumbling lower today
• Why the Zoono (ASX:ZNO) share price is sinking 9% lower today
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• 5 things to watch on the ASX 200 next week
• Why the SKYCITY share price jumped 23% in September

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts 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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I think that ASX tech shares would be a great place to invest $1,000 into a portfolio right now.

Technology companies have some really strong advantages compared to typical industrial businesses. They can produce high profit margins and expand very quickly because software can be replicated for very little cost. That means they can rapidly grow profit, which usually equates to good share price performance.

Here are two ASX tech shares I’d gladly buy with $1,000 today. They are actually the same two ASX shares I wrote about a year ago and continue to look like strong opportunities.

Redbubble Ltd (ASX: RBL)

Redbubble is an ASX tech share which is an online marketplace company for selling artist products including wall art, phone cases, masks and so on.

It’s the type of business that benefits strongly from network effects. It’s already built the e-commerce platform, so selling more products will strongly help cashflow and profit.

The company is growing at a fast rate. In the first quarter of FY21 the company reported marketplace revenue growth of $147.5 million which represented growth of 116%. Gross profit soared 149%.

It was two other metrics that were the most pleasing in my opinion. The ASX tech share generated $22.1 million of earnings before interest and tax (EBIT) and operating cashflow of $27.1 million (up 165% compared to the prior corresponding period).

I think the above numbers show that Redbubble has now reached a very pleasing profitability phase. The fact that gross profit grew so much faster than revenue shows that its margins can keep increasing at a solid rate.

As the one of the largest artist website businesses in the world, Redbubble can attract the most potential customers, which then attracts more potential sellers and so on. It’s a very helpful cycle.

There’s still plenty of growth potential because of the global shift to online shopping. Redbubble can steadily open new product lines as well, which will increase its potential market.

Its balance sheet looks solid with $85.4 million of cash at 30 September 2020.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is another ASX tech share that is looking like a really strong growth candidate in my opinion.

It facilitates digital giving, which is very useful in this era of COVID-19 social distancing and restrictions. Its main client base is large and medium US churches. Pushpay provides them with an app to connect with its congregation. Livestreaming functionality is particularly helpful.

The company is seeing enormous growth. In FY20 it grew revenue by 32% and its total processing volume rose by 39%. I think the company can continue to generate good double digit growth for many years to come.

Indeed, in FY21 alone the company is expecting to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to a range of US$50 million to US$54 million.

As I mentioned in my introduction, one of the most attractive things about ASX tech shares is how quickly their profit margins can grow. In FY20 Pushpay saw its gross profit margin improve from 60% to 65%. It also saw its EBITDAF margin grow from 17% to 22%. This will mean that more revenue falls to the bottom line in the coming years.

Pushpay is actually aiming for US$1 billion of revenue from the large and medium US church sector. If the ASX tech share achieves that goal then it would be substantially more profitable later this decade compared to FY20.

At the current Pushpay share price it’s trading at 41x FY21’s estimated earnings. But I think there’s more growth to come.

More reading

• Is the Redbubble Ltd (ASX: RBL) share price a buy after soaring 30% this week?
• 10 must-buy ASX shares to snap up before it’s too late
• Where I’d invest $10,000 in ASX shares for growth
• Brokers name 3 ASX shares to buy right now
• Why Beacon Lighting, Medibank, Redbubble, & Tyro shares are racing higher today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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 S&P/ASX 200 Index (ASX: XJO) has started the week in very strong form. In late morning trade the benchmark index is up 0.7% to 6,219.5 points.

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

Dicker Data Ltd (ASX: DDR)

The Dicker Data share price is up 5% to $8.89 following the release of its third quarter update. According to the release, the distributor of computer hardware and software has achieved revenue growth of 14.9% to $1,481.5 million for the nine months to 30 September. Things were even better on the bottom line, with net profit before tax up 28.3% to $60.8 million over the nine months.

South32 Ltd (ASX: S32)

The South32 share price is climbing almost 4% higher to $2.19. This follows the release of the mining giant’s first quarter update. South32 delivered production in line with expectations, which led to management reaffirming its full year guidance. In addition to this, its strong operating performance and financial position has allowed the company to resume its share buy-back program.

Tyro Payments Ltd (ASX: TYR)

The Tyro share price is up 3.5% to $4.30 following the release of its weekly COVID-19 trading update. That update revealed that Tyro has processed $1.025 billion of transactions month to date. This is up 11% on the prior corresponding period. In addition to this, this morning Ord Minnett retained its accumulate rating and lifted its price target on Tyro’s shares to $5.00.

Uniti Group Ltd (ASX: UWL)

The Uniti share price has risen over 2% to $1.27 following its first quarter update. The telco reported record net operating cash flow of $10.5 million for the quarter. Management also revealed that key financial performance metrics for first three months of FY 2021 are above budgeted levels. This includes above-budget growth in new FTTP connections and activations.

More reading

• South32 (ASX:S32) share price up 3% on solid Q1 update
• 5 things to watch on the ASX 200 next week
• ASX 200 falls, Tyro (ASX:TYR) up on merchant deal
• Why Beacon Lighting, Medibank, Redbubble, & Tyro shares are racing higher today
• Tyro (ASX:TYR) share price shoots higher on Bendigo and Adelaide Bank (ASX: BEN) deal

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 Tyro Payments. The Motley Fool Australia owns shares of and has recommended Dicker Data 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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Shares in insurance software developer FINEOS Corporation Holdings plc (ASX: FCL) have soared almost 90% higher so far this year. Despite the market challenges posed by the COVID-19 pandemic, FINEOS has managed to achieve a number of impressive milestones in 2020, including signing the largest insurance company in the United States and recently acquiring software company Limelight Health, Inc.

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.

In its FY20 results, Dublin-based FINEOS beat its own revenue targets, reporting growth in revenues of close to 40% year on year. Of the 87.8 million euros in total revenues in FY20, 27 million euros came from recurring subscriptions, while 58.3 million euros was services revenue from new clients and accelerated implementation and upgrades for existing clients. And despite the ongoing disruptions from COVID-19, the company is still optimistic for FY21, forecasting top line revenue growth of 20%, underpinned by 30% growth in subscription revenues.

The Limelight acquisition could help to rapidly accelerate the company’s growth forecasts. Silicon Valley-based Limelight Health is a leading provider of software for the United States insurance industry. The acquisition helps boost FINEOS’ presence in the US market, and it means that FINEOS can now leverage Limelight’s experienced US-based sales and marketing team to increase market penetration and brand recognition.

This also comes on the heels of FINEOS’ February announcement that it had signed the Prudential Insurance Company of America, the largest insurance company in the US. FINEOS is clearly sending the signal to the market that it views a US expansion as a key priority over the next 12 months.

Should you invest?

Along with other up-and-coming tech companies like Nitro Software Ltd (ASX: NTO), Bigtincan Holdings Ltd (ASX: BTH) and Megaport Ltd (ASX: MP1), I believe FINEOS Corporation is cementing itself as part of a new generation of young companies that could become the next WAAAX shares. Despite the upheaval caused by the pandemic, these junior companies have all found ways to thrive.

With a market capitalisation of a little over $1.5 billion, FINEOS has grown into a solid mid-cap stock. It is generating consistent subscription revenues and has a portfolio of top tier insurance companies as clients. It is taking on additional risk through a US expansion, however this is already showing results through key client wins. Plus, it has shown an appetite for strategic acquisitions that could complement its business model.

Despite challenging market conditions, I believe this company has laid a solid foundation for future growth. The FINEOS share price will be an exciting one to watch over the next 12 months.

More reading

• South32 (ASX:S32) share price up 3% on solid Q1 update
• Ampol (ASX:ALD) share price drops lower after Q3 update
• CIMIC (ASX:CIM) share price 5% higher after agreeing to sell 50% of Thiess
• 1 ASX share to buy for the WA housing boom
• What happened to the Mesoblast Limited (ASX:MSB) share price?

Rhys Brock owns shares of FINEOS Holdings plc, BIGTINCAN FPO, MEGAPORT FPO, and Nitro Software Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO and MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia has recommended BIGTINCAN FPO, FINEOS Holdings plc, MEGAPORT FPO, and Nitro Software 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 South32 Ltd (ASX: S32) share price has started the week in a positive fashion.

In morning trade the mining giant’s shares are up almost 3% to $2.17.

Why is the South32 share price pushing higher?

Investors have been buying South32’s shares on Monday following the release of its first quarter update this morning.

For the quarter, the company achieved alumina production of 1,315kt, aluminium production of 248kt, manganese ore production of 1,461kt, and metallurgical coal production of 1,651kt.

As a comparison, a note out of Goldman Sachs reveals that it was expecting production of 1,328kt, 248kt, 1,302kt, and 1,650kt, respectively. While this means it alumina production fell slightly short of expectations, its manganese made up for this with significantly better than forecast production.

This ultimately led to South32 delivering a US$70 million increase in its net cash position over the three months to US$368 million. This was despite a build in working capital as commodity markets improved.

Share buy-back to resume.

Pleasingly for shareholders, this strong operating performance and the further strengthening of its financial position, has allowed South32 to lift its on-market share buy-back suspension.

Its US$1.43 billion capital management program is 92% complete with US$121 million remaining to be returned to shareholders.

South32’s CEO, Graham Kerr, was very pleased with the quarter, particularly given the challenges it faces from operating in the current environment.

He commented: “Despite the health crisis, we have maintained annual production guidance at all operations. We delivered a 19 per cent increase in manganese ore production and a 22 per cent increase in metallurgical coal production.”

“With another quarter of strong operating performance behind us and the further strengthening of our financial position, we have lifted the suspension of our on-market share buy-back. Our capital management program has US$121 million remaining and recommencing our buy-back will deliver immediate value to our shareholders,” Mr Kerr concluded.

More reading

• 5 things to watch on the ASX 200 next week
• 2 ASX shares looking dirt-cheap today
• New Chinese government threat leaves these ASX mining stocks on tenterhooks
• ASX shares Tesla (NASDAQ:TSLA) needs to survive
• EcoGraf (ASX:EGR) shares up 72% in a week

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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The Ampol Ltd (ASX: ALD) share price is trading lower following the release of its unaudited third quarter result this morning.

At the time of writing the fuel retailer’s shares are down 0.5% to $24.99.

How did Ampol perform in the third quarter?

The three months ended 30 September were once again tough for Ampol, which was formerly known as Caltex.

According to the release, on a replacement cost of sales operating profit (RCOP) basis, Ampol delivered third quarter RCOP earnings before interest and tax (EBIT) of $58 million. This was down 26.5% from the second quarter and 62.3% on the prior corresponding period.

RCOP excludes the unintended impact of the fall or rise in oil and product prices. The company believes this presents a clearer picture of its underlying business performance.

Things weren’t any better on the bottom line, with RCOP net profit after tax coming in at $24 million. This was down 40% from the second quarter and 74.4% from a year earlier.

What was dragging on Ampol’s performance?

The company’s Lytton refinery was the key reason for Ampol’s weaker profits during the third quarter.

Lytton posted an $82 million loss before interest and tax, which led to its Fuels & Infrastructure segment posting a $19 million loss.

This took the gloss off a strong performance by its Convenience Retail business, which delivered EBIT of $87 million. This was more than double what it achieved in the prior corresponding period ($41 million) and over triple its third quarter EBIT of $23 million.

Management advised that this was reflective of favourable industry retail fuel margins, strong shop performance, and solid management of controllable costs.

Ampol’s Managing Director and CEO, Matt Halliday, commented: “The resilient performance of our integrated business in the third quarter, particularly in Convenience Retail, was pleasing considering weak economic conditions and the continued impacts of COVID-19 on hydrocarbon demand. Our focus remains on optimising value across our integrated supply chain against prevailing market conditions to maximise value for shareholders.”

More reading

• Why ASX oil stock laggards are well placed to bounce in the COVID recovery trade
• Ignore EBITDA and P/E ratios? This fund manager does
• Why the Ampol (ASX:ALD) share price is on the rise today
• Macquarie says ASX value shares will outperform growth stocks from here

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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The CIMC Group Ltd (ASX: CIM) share price is pushing notably higher on Monday morning.

In early trade the engineering company’s shares are up a sizeable 5% to $21.90.

Why is the CIMIC share price charging higher?

Investors have been buying the company’s shares after it announced that it has entered into an agreement with Elliott Advisors regarding the sale of a 50% equity interest in Thiess, the world’s largest mining services provider.

According to the release, Elliott Advisors is one of the oldest fund managers of its kind and manages more than US$40 billion in assets. This includes equity positions in private and listed companies in Australia and globally.

Thiess is a mining services provider that delivers open cut and underground mining in Australia, Asia, Africa, and the Americas. It provides services to 25 projects across a range of commodities.

The business has a diverse fleet of plant and equipment of more than 2,200 assets, a team of around 14,000 employees, and generates annual revenues in excess of $4.1 billion.

Transaction details.

The release explains that the price for Elliott’s 50% equity interest in Thiess implies an enterprise valuation of approximately $4.3 billion (based on 100% of Thiess). This is subject to certain adjustments.

The transaction is expected to generate a pre-tax gain of around A$2.2 billion for CIMIC, and a post-tax gain of around $1.4 billion.

Management notes that it will strengthen its balance sheet, reduce its factoring balance by approximately A$700 million, and its lease liability balance by approximately $500 million.

The transaction also includes customary future share transfer options. These include a potential initial public offering or sale to a third party, and an option for Elliott to sell its interest in Thiess to CIMIC between three and six years from completion.

CIMIC’s Group Executive Chairman, Marcelino Fernández Verdes, commented: “The sale agreement reflects Thiess’ ongoing strategic importance as a core activity for CIMIC. It capitalises on the robust outlook for the mining sector and, together with Elliott, we will pursue market opportunities in line with Thiess’ growth and diversification strategy.”

More reading

• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• These were the best performing shares on the ASX 200 last week
• ASX 200 rises, Cimic (ASX:CIM) share price climbs
• ASX 200 down 0.2%: Big four banks drop, CIMIC jumps, CSL slides lower
• Why ARB, CIMIC, Janus Henderson, & Netwealth shares are charging 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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