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The ASX share market is currently going through a correction as fears intensify about COVID-19 spreading in Europe and the UK again. There’s also the US election on the horizon.

The best time to buy shares is when share prices are lower rather than higher. The phrase is ‘buy low, sell high’ not ‘buy high, sell low’.

I think it’s an opportunity to buy ASX shares when most of the market sells off. I think the below businesses are opportunities with share prices going lower:

City Chic Collective Ltd (ASX: CCX)

City Chic is one of the most promising ASX shares in my opinion. At the time of writing the City Chic share price has fallen 2.7% today and it’s down 10% over the past week.

Part of the decline is due to the fact that it was unsuccessful at acquiring Catherines. It has raised capital but doesn’t have any immediate places to invest it.

However, I think the ASX share has plenty of growth potential. The retailer of plus-size clothing, footwear and accessories for women generates a lot of its earnings in the northern hemisphere. Perhaps its earnings will be disrupted again by lockdowns in the UK, however thankfully it sells a large proportion of its items online. In FY20, around 65% of its sales were made online. I think this shows the company is well placed with whatever happens next with COVID-19, whether things get better or worse in its key markets.

The loss in the Catherines auction was disappointing. But I think it’s very pleasing to see that the ASX share isn’t chasing acquisitions just for the sake of it at any price. City Chic expects that there will be other opportunities to add brands and take market share more aggressively. It’s just a temporary setback. 

At the current City Chic share price it’s trading at 21x FY21’s estimated earnings.

BWX Ltd (ASX: BWX)

BWX is a leading natural beauty business. The BWX share price is down 3.6% at the time of writing.

I believe that BWX has really turned the corner after a difficult 2018. In FY20 it grew revenue by 26% and statutory net profit rose 59% to $15.2 million. The gross profit margin increased to 58%.

A lower BWX share price is attractive to me because it is growing its international earnings rapidly. Sukin is expanding in North America and Europe is a particularly attractive idea.

The ASX share has improved its balance sheet position and in FY21 it’s expecting earnings before interest, tax, depreciation and amortisation (EBITDA) growth of at least 10%.

There is growing demand for natural beauty products, I think BWX is well placed to benefit from this.

At the current BWX share price it’s priced at 28x FY22’s estimated earnings.

EML Payments Ltd (ASX: EML)

The EML share price is down 2% right now and it has fallen 20% since the end of August 2020 and it’s down 35% from 10 June 2020.

It provides gift cards and other similar products. There are general purpose reloadable cards, gift and incentive cards and virtual card account numbers.

You’d think that the mass closure of retail stores would be fairly bad news for EML’s physical gift cards segment, but its other divisions could make up for that.

In FY20 it saw group revenue rise 25% to $121.6 million and underlying EBITDA grew 10% to $32.5 million.

The PFS acquisition was a really smart move and getting it for a cheaper price was a wise move.

I think the ASX share is more resilient than some investors think and over the long-term I think it has attractive growth prospects, particularly once COVID-19 fades into history (hopefully sooner rather than later).

Foolish takeaway

I think all three of these ASX shares could be worth buying during this ASX share market downturn. They have good growth prospects and lower share prices are attractive when it’s a selldown of the whole market.

More reading

• 3 ASX growth shares I’d buy today for growth and income
• Why the City Chic (ASX:CCX) share price crashed 15% lower today
• Why City Chic, Fortescue, Nearmap, & Zip shares are dropping lower today
• 3 ASX tech shares that are still in the buy zone
• Where I’d invest $20,000 into ASX shares right now

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BWX Limited and Emerchants 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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An investors dream is to find the next A2 Milk Company Ltd (ASX: A2M) in its early days. Here are two microcap ASX shares in the health food and dairy spaces that I think could become giants in the future.

2 ASX shares with huge growth potential

1. Pure Foods Tasmania Ltd (ASX: PFT) 

Pure Foods Tasmania was formed in 2015 with the aim to acquire, grow and develop premium food businesses in Tasmania. The company has a market capitalisation of $42 million with two acquired businesses and a third acquisition in progress. 

The two already acquired businesses are Tasmania Pâté and Woodbridge. Tasmania Pâté is one of Australia’s largest pâté businesses and a supplier to large retail outlets including Costco Wholesale Corporation (NASDAQ: COST), Aldi and Woolworths Group Ltd (ASX: WOW). Woodbridge is a boutique producer of ultra-premium Tasmania smoked salmon and trout with over 60% of its products exported to Asian markets and sold to high-end food service retailers throughout Australia. Finally, earlier this month, Pure Foods announced it is acquiring Daly Potato Company, a producer of premium potato salads which are sold to major supermarket chains. 

In FY20, the company delivered a 13% increase in revenue to $4.27 million, a net loss of $196,500 and $4.13 million in cash as at 30 June. The company plans to target the plant-based cheese market which is forecasted to reach $3.9 billion by 2024. It will launch new, Tasmanian plant-based dairy products into national, independent, direct-to-consumer and export retail channels. Furthermore, the company recently launched its new online store which aims to provide a hub for consumers around Australia looking for premium products from Tasmanian producers. The Pure Foods share price has surged 268% in year-to-date trading. Interestingly, some of the original shareholders of Bellamy’s are also the founders of Pure Foods. Its experienced founders could see this ASX share continue to outperform.  

2. Wide Open Agriculture Ltd (ASX: WOA) 

Wide Open Agriculture offers regeneratively grown animal and plant-based products to Australian and Asian markets. This means that it grows plants and raises animals on farms that regenerate the land – bringing new life to soil health, plants, wildlife and waterways. Its products are therefore free of chemicals and pesticides, high quality and locally sourced with a short, transparent supply chain. The company currently has a market capitalisation of $89 million.

In FY20, the company generated $2.2 million in revenue and a loss of $1.85 million. Its products are currently only sold in Western Australia with limited marketing and a large opportunity to penetrate new domestic territories and launch globally. Wide Open Agriculture believes it has a first mover advantage in the production of lupin-based protein that can be used to create alternative meat, dairy, beverage and convenience food products. 

Moving forward, the company is looking to increase its revenue by penetrating into new domestic markets, expanding its product offering online and exporting to Asian markets. Furthermore, it aims to launch its own new products in lupin protein and build a manufacturing capability to produce oat milk. I believe the company is in its early days with a significant revenue opportunity at hand. The Wide Open Agriculture share price has increased more than 700% year to date but the company’s ability to operationally execute and grow revenues could see its share price run continue well into the future.

More reading

• Why I would buy CBA (ASX:CBA) and this beaten down ASX share
• Is the A2 Milk (ASX:A2M) share price going above $20?
• 5 things to watch on the ASX 200 on Monday
• 3 ASX 200 growth shares to buy right now
• 2 ASX shares I’d buy in a heartbeat

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Costco Wholesale. The Motley Fool Australia owns shares of A2 Milk and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Don’t be put off by the falls on the S&P/ASX 200 Index (Index:^AXJO). The pull back is still regarded by experts as a buying opportunity and brokers have listed their latest ASX buy ideas.

The top 200 stock benchmark lost ground for the fourth consecutive day as it retreated by 0.7%. Renewed worries about COVID-19 and the November US Presidential Election are giving investors reason to take profit.

But these risks are unlikely to kill the Santa Rally in December, in my view, and the sell-off gives you a chance to buy some beaten down stocks.

Top buy in the telecom sector

One that UBS is urging you to buy now is the Telstra Corporation Ltd (ASX: TLS) share price.

Shares in our largest telco is hovering around a two-year low and the broker is calling it the top pick in the sector.

At its current price, the market is pricing in most (if not all) of the dividend cut and earning per share (EPS) risks.

No good news priced into Telstra’s share price

On the other hand, there is no upside priced in for 5G opportunities, longer-term NBN optionality and possibility that Optus will behave more rationally. On that last point, UBS reckons this could happen in 2021.

“We think risk vs. reward therefore looks very favourable here, and TLS is now our preferred Buy across our TMT coverage,” said UBS.

“We remind that TLS traded at ~$3.50 as recently as Aug-20, after its postpaid mobile price increases.

“However, we believe unfavourable Optus marketing & downgrades to TLS’s long-term ROIC targets have led some investors to lose faith in potential mobile market repair.”

The broker calls Telstra a “high conviction buy” and its 12-month price target on the stock is $3.70 a share.

Senex Energy upgraded

Another “buy” idea from Morgans is the Senex Energy Ltd (ASX: SXY) share price.

The broker upped its price target on the gas company to $0.48 from $0.42 cents and reiterated its “add” recommendation after Senex was picked as the preferred tenderer for two new exploration blocks in the Surat and Bowen Basins.

Trading at a discount

“Of key importance to SXY, the Surat block sits immediately adjoining its flagship Atlas operation. We already consider Atlas to be SXY’s highest value asset,” said Morgans.

“SXY is confident this is low-risk commercial ground given it is surrounded by existing Atlas ground to the west and Shell ground to the north.

“The new block will grow Atlas acreage by 31% to 76km² (from 58km²), and will add an immediate 41 PJ [petajoule] to reserves once a production license is obtained.”

This should support around 15 years of expanded production from Atlas.

As for the Bowen Basin, management considers the ground prospective given it sits on trend between the existing Scotia and Meridian gas fields.

More reading

• Why the Regional Express (ASX:REX) share price is taking off today
• Buy these ASX dividend shares to beat low interest rates
• ASX 200 hits 3-month low! Is it time to buy ASX shares today?
• Why the News Corp (ASX:NWS) share price is plunging today
• Why you should look beyond the second wave to the blue investment skies beyond

Motley Fool contributor Brendon Lau owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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 Afterpay Ltd (ASX: APT) share price has been the most resilient among its buy now, pay later (BNPL) peers. Could the recent strength in the Afterpay share price make it a buy at today’s price? 

Afterpay share price finding its footing 

The Afterpay share price has found its footing around the $75 mark despite this month’s highly volatile trading sessions. The broad tech sell off in the United States market clawed back its losses on Monday and could be the start of a much needed reversal. I believe Afterpay’s tenacity is a good sign for its shares moving forward. 

Are the banks or Paypal a threat? 

The Australian Financial Review outlined the concerns that Paypal could slow Afterpay’s growth in the US. Paypal charges merchants significantly less for sales with a product that is very similar to Afterpay. 

The Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd. (ASX: NAB) both launched no interest credit cards to combat BNPL products. CommBank Neo and NAB’s StraightUp card provide customers with up to $3,000 of credit with no interest payments, no late payments and no foreign currency fees but with a fixed, monthly fee. These products are nothing new and, from a cost perspective, much more expensive than BNPL products. 

COVID-19 tailwinds 

COVID-19 has accelerated structural shifts in consumer behaviour and preferences that align with Afterpay’s business model. The increase in e-commerce and online sales is not only good for its business model, but also helps position the company as a platform for retailers, rather than a standalone form of credit.  

Global expansion 

The path to global dominance continues for Afterpay as it announced plans to launch in Canada in August 2020. Furthermore, Afterpay has made an agreement to acquire ‘Pagantis’ to launch in Spain, France and Italy with regulatory approval to also operate in Portugal. These four countries have an addressable e-commerce market worth more than $247 billion. The acquisition will hit the ground running with a fully staffed and experienced team, existing multi-lingual technology stack and IP and a pathway to access other EU member states. 

Afterpay also intends on leveraging its Tencent Holdings relationship to explore opportunities in Asia. It has currently made a small acquisition of a Singapore-based company operating in Indonesia. 

Foolish takeaway

It’s good to see the Afterpay share price settle and ignore the noise of the broader market. There could be good news coming out of the company in the near term to confirm its expansions and acquisitions, which could give the share price a much needed push. With that said, the general market is still looking very weak and more volatility is to be expected following soaring COVID-19 cases in Europe as well as the impending US election. 

More reading

• BrainChip (ASX:BRN) and Afterpay (ASX:APT) were among the most traded shares on the ASX last week
• ASX 200 down 0.9%: Tech shares push higher, gold miners sink, New Hope results
• Up 79% this year, is the NextDC (ASX:NXT) share price the next Afterpay (ASX:APT)?
• Afterpay (ASX:APT) one of top 10 lockdown winners
• What you need to know about Tyro’s share price roller coaster today

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T 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.

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On Tuesday the S&P/ASX 200 Index (ASX: XJO) continued its poor run and dropped to a three-month low of 5,763.2 points.

While this is disappointing, I believe it has created a buying opportunity for patient investors.

Two beaten down ASX shares that I think are in the buy zone right now are listed below. Here’s why I like them:

a2 Milk Company Ltd (ASX: A2M)

The a2 Milk share price is down a sizeable 18% from its 52-week high. Investors have been selling the infant formula and dairy company’s shares since the release of its full year results in August. Although a2 Milk delivered strong growth in FY 2020, the market was expecting an even stronger result. In addition to this, this result appears to have been boosted by pantry stocking during the height of the pandemic. As a result, there are concerns that this could have brought forward sales and lead to subdued demand in the first quarter.

While this could prove to be the case, management remains confident that it will still deliver strong revenue growth in FY 2021. After which, I believe a2 Milk is well-positioned for long term growth thanks to the popularity of its products in China, its relatively small market share, and its growth through acquisition opportunities. This could make the recent a2 Milk share price weakness a real buying opportunity.

Commonwealth Bank of Australia (ASX: CBA)

This banking giant’s shares have fallen heavily in 2020 because of the coronavirus crisis. Since peaking at a 52-week high of $91.05 in February, the CBA share price has lost a whopping 31% of its value. Investors appear concerned by a potential spike in bad debts because of the pandemic’s impact on businesses and employment.

Although these concerns are certainly not unwarranted, I believe the selloff has been severely overdone and left CBA’s shares trading at a very attractive level. Especially given its strong balance sheet and decent dividend yield.

More reading

• How ASX shareholders are dudded by quarterly reports
• BrainChip (ASX:BRN) and Afterpay (ASX:APT) were among the most traded shares on the ASX last week
• 2 ASX shares to buy today for house price rise
• CBA, Macquarie face new $167m dirty cash allegations
• Is the A2 Milk (ASX:A2M) share price going above $20?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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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Small cap shares traditionally carry a lot more risk than their large cap counterparts.

However, if you focus on companies with proven business models, positive outlooks, and strong business traction, I believe you can reduce this risk materially.

Three small cap ASX shares which tick a lot of boxes for me at present are listed below. Here’s why I think they are worth watching:  

Bigtincan Holdings Ltd (ASX: BTH)

The first small cap ASX share to look at is Bigtincan. It is a provider of sales enablement software which provides businesses with the information, content, and tools to sell more effectively. Demand for its platform has been growing strongly in recent years and even during the coronavirus crisis. This led to it recording strong recurring revenue growth in FY 2020 and guiding to more of the same in FY 2021.

MNF Group Ltd (ASX: MNF)

Another small cap ASX share I’m a fan of is MNF Group. It is a leading provider of Voice over Internet Protocol (VoIP) technology to businesses and consumers. VoIP technology is used to convert analogue audio signals into digital data so you can use a telephone over the internet. Demand for VoIP services has been growing very strongly this year because of the work from home initiative. The good news is that I don’t believe this is a one-off. I’m confident the pandemic has accelerated a structural shift that MNF Group is in pole position to benefit from. 

People Infrastructure Ltd (ASX: PPE)

A final option to look at is People Infrastructure. It is a leading workforce management company that provides innovative solutions to workforce challenges. Despite being impacted by the pandemic, People Infrastructure was a positive performer in FY 2020. It reported normalised EBITDA of $26.4 million, up 49.2% on the prior corresponding period. And while it hasn’t been able to provide guidance for FY 2021, management remains focused on driving growth both organically and inorganically.

More reading

• 3 ASX tech shares that could take off in FY21
• These exciting small cap ASX shares could be stars of the future
• 3 ASX shares for beginners to buy
• 2 ASX dividend shares to buy after the selloff
• 3 very exciting small cap ASX shares to watch

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 and recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended BIGTINCAN FPO and People Infrastructure 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 Australian Securities and Investments Commission (ASIC) has warned fund managers that the name of their products must resemble the underlying assets.

The watchdog revealed Tuesday it performed surveillance on 37 managed funds that together manage $21 billion.

ASIC deputy chair Karen Chester said the exercise showed up two major problems.

“First, confusing and inappropriate product labels across 14 ‘cash’ funds with under $7 billion in assets,” she said. 

“And second, redemption features not matching the liquidity of underlying assets, with a significant mismatch in 3 funds with under $1 billion in assets.”

When share markets are volatile, retail investors turn to alternative options, according to ASIC. And the name of the fund is often used to judge what they’re investing in.

Funds labelled ‘cash’ were the most problematic, with 14 out of 22 having “confusing or inappropriate” names.

“Some funds that were labelled as ‘cash funds’ had asset holdings more akin to a bond or diversified fund, which have significantly higher risk and less liquidity compared to a traditional cash fund,” stated ASIC. 

“This was especially prominent in funds that use words such as ‘cash enhanced’ and ‘cash plus’ in their labelling.”

The study found those ‘plus’ and ‘enhanced’ products had on average more than 50% and 70% respectively invested in assets other than cash or cash equivalents (like fixed-income securities and mortgages).

Truthful labelling is not optional: ASIC

Chester said managed funds are not regulated or government-guaranteed, so managers must not mislead customers.

“Funds should be ‘true to label’. This is not a nice-to-have,” she said.

“Inappropriate labelling of a fund can mislead investors into believing that the fund is much safer or more liquid than it actually is. Put simply, a fund should not use terms such as ‘cash’ or ‘cash enhanced’ unless its assets are predominantly in cash and cash equivalents.”

Incorrect labelling also punished fund managers that were doing the right thing, according to Chester.

“If consumers cannot rely on product labels, then it is difficult for funds to compete on a fair basis – disadvantaging both compliant fund managers and end-consumers.”

ASIC cracks the whip

After the surveillance, ASIC went to 13 offending fund operators to request remediation.

The authority stated nine funds have voluntarily changed or will change the names to match the actual product. One fund will change the asset allocation to match the existing name.

Three fund operators will review their products and one fund wound itself up.

The authority urged any investors that have suffered losses from incorrect labelling to first contact the fund operator. 

If that doesn’t work out, they can lodge a complaint with the Australian Financial Complaints Authority (AFCA).

More reading

• Telstra (ASX:TLS) share price is one of the latest ASX buy ideas from brokers
• Is the Afterpay (ASX: APT) share price a buy? 
• Why I would buy CBA (ASX:CBA) and this beaten down ASX share
• 3 quality small cap ASX shares with very strong growth potential
• Why the Chalice (ASX:CHN) share price rocketed 28% today

Motley Fool contributor Tony Yoo 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 Chalice Gold Mines Limited (ASX: CHN) share price is up 28.5% in late afternoon trading. This comes after the company released positive results from an airborne electromagnetic (AEM) survey in its 100%-owned Julimar Project in Western Australia.

Chalice’s shareholders have largely been celebrating all year. Despite the share price falling 47% during the wider COVID-19 market selloff in February and March, year-to-date the Chalice share price is up a whopping 804%. And any investors who bought shares at the 16 March lows will be sitting on a gain of 1,256%.

By comparison, the All Ordinaries Index (ASX: XAO) is down 12% in 2020.

What does Chalice Gold Mines do?

Chalice is an Australian gold and mineral exploration company based in Perth, Western Australia. The company has a portfolio of large, precious and base metal projects in premier locations across Australia.

Chalice holds the 100%-owned Pyramid Hill Gold Project in Victoria’s under-explored northern Bendigo gold district. The company also is exploring for nickel at its King Leopold Nickel Project in WA’s frontier Kimberley region.

Its 100%-owned Julimar Nickel-Copper-PGE Project is located north-east of Perth on private land and state forest. Chalice staked the project in early 2018 as part of its global search for high-potential nickel sulphide deposits.

What did Chalice’s airborne survey reveal?

This morning, Chalice reported its helicopter-borne low frequency electro-magnetic (EM) survey outlined three new extensive EM anomalies at its Julimar project.

Airborne EM is often the first step to detecting shallow conductive sources, such as nickel sulphide mineralisation.

Of the three anomalies, the highest priority target is the Hartog EM Anomaly. This extends for approximately 6.5 kilometres in the same region where Chalice made a significant greenfield PGE-Ni-Cu-Co discovery in March.

The company is fully-funded with $46 million in cash as at 30 June. It has 4 rigs continuing the resource drill with assay results due on 50 holes.

Chalice managing director Alex Dorsch said:

We have speculated for some time that the area north of our recent Gonneville discovery is highly prospective. We have now supported that claim with major new, laterally extensive geophysical targets from the first airborne EM survey over the company’s granted tenure, which is a very exciting and important development…

We are expecting initial feedback shortly regarding access to the state forest for the next stage of reconnaissance exploration activities. We are hopeful of being able to assess the compelling new anomalies and aim to expand Julimar into a district-scale, multi-discovery opportunity.

With today’s share price surge in mind, investors are clearly expecting Chalice to be granted access to the state forest, as well as some positive drill results.

More reading

• Why the iCandy (ASX: ICI) share price is on a wild ride
• ASX 200 Weekly Wrap: ASX 200 snaps 4 week losing streak… just
• Is it time to buy into these three ASX cannabis shares?
• RED 5 (ASX:RED) share price up 4% on feasibility study
• The Mayne Pharma (ASX:MYX) share price leaps almost 8% higher

Motley Fool contributor Bernd Struben 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 Regional Express Holdings Ltd (ASX: REX) share price jumped today even the broader market retreated.

The REX share price gained 4.1% to $1.14 in the last hour of trade after it revealed it was close to striking a funding deal that will see it compete directly against Qantas Airways Limited (ASX: QAN) and the recapitalised Virgin Australia.

Regional Express share price on a high

The outperformance of the Regional Express (REX) share price stands in contrast to the 0.5% fall in the S&P/ASX 200 Index (Index:^AXJO). The Qantas share price is also trading 2.2% lower at $3.76 at the time of writing.

Other travel related stocks are also on the nose. The Flight Centre Travel Group Ltd (ASX: FLT) share price lost 4.3% to $12.83 while Webjet Limited (ASX: WEB) share price dived 6.4% to $3.56.

REX share price heading for the big league

Investors are excited about how REX may be transforming into a significant domestic carrier as it services the lucrative Melbourne, Sydney and Brisbane markets.

The airline is a minor player flying between regional towns and under the shadow of Qantas and Virgin before COVID-19.

The pandemic caused a major shake-up of the industry that REX is determined to leverage off – if it can get the cash for its transformation.

Details for the convertible notes

Management signed a term sheet with PAG Asia Capital (PAG) that could see the investment firm pump $150 million into REX via first-ranking senior secured convertible notes.

Should the deal proceed, REX can draw on the first $50 million tranche of the funding at the end of December 2020. Management can draw on the balance over the following three years.

The note can be converted into ordinary REX shares at $1.50 a pop, subject to certain adjustments. If PAG were to convert the first tranche of notes into shares, the funder will own around 23% of REX (based on REX’s current share base).

Should PAG convert all the notes, it would hold around 48% of the airline’s shares.

Once in a lifetime opportunity

After the first draw down in December, PAG will be entitled to nominate two directors to REX’s board.

“PAG is a well-respected and highly successful investment group which manages more than USD40 billion,” said REX’s chairman Lim Kim Hai.

“With PAG’s support, I have every reason to believe that Rex can successfully launch its domestic major city jet operations.”

But this isn’t a done deal. PAG will need to complete its due diligence and there’s the usual formalities that need to be followed. These include shareholder approval and the green light from the Foreign Investment Review Board as well as other regulators.

The Regional Express share price held up relatively well through the pandemic. The stock dipped around 4% since the start of the year when the the QAN share price slumped by nearly half.

More reading

• Telstra (ASX:TLS) share price is one of the latest ASX buy ideas from brokers
• ASX 200 hits 3-month low! Is it time to buy ASX shares today?
• Why the News Corp (ASX:NWS) share price is plunging today
• Leading brokers name 3 ASX shares to sell today
• Why you should look beyond the second wave to the blue investment skies beyond

Motley Fool contributor Brendon Lau owns shares of Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel 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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Fortunately for income investors in this low interest rate environment, there are a good number of quality dividend shares offering attractive yields.

Two top ASX dividend shares that I think investors ought to consider buying right now are listed below. Here’s why I would buy them:

Bravura Solutions Ltd (ASX: BVS)

Due to a sharp pullback in the Bravura Solutions share price in 2020, I think it would be a great option for income investors. Bravura is a leading provider of software products and services to the wealth management and funds administration industries. Among its portfolio you’ll find the Sonata wealth management platform, the Rufus transfer agency solution, the Garradin back office solution, and the Midwinter financial planning solution.

Combined, I believe these have positioned Bravura perfectly for growth once the pandemic passes. For now, I estimate that it will pay shareholders an 11.5 cents per share dividend in FY 2021. Based on the current Bravura share price, this equates to a 3.3% dividend yield.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

Another option for income investors to consider buying is the Vanguard Australian Shares High Yield ETF. I’m a big fan of this ETF due to the diverse group of high yielding shares that it gives investors exposure to through just a single investment.

Among its holdings you’ll find many blue chip favourites such as the big four banks, BHP Group Ltd (ASX: BHP), Coles Group Ltd (ASX: COL), Fortescue Metals Group Limited (ASX: FMG), and Telstra Corporation Ltd (ASX: TLS). Estimating the yield on offer in FY 2021 is tricky because of the pandemic, but I would expect something in the range of 4% to 5%. This is likely to improve greatly in the future as companies bounce back from the crisis and are able to share more of their profits with shareholders.

More reading

• Telstra (ASX:TLS) share price is one of the latest ASX buy ideas from brokers
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• How to reinvest an ASX dividend payment
• Is it time to buy Telstra and these high quality ASX 200 shares?
• Afterpay (ASX:APT) one of top 10 lockdown winners

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd and Telstra Limited. The Motley Fool Australia owns shares of 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.

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