Tag: Motley Fool

As geopolitical tensions rise among global powerhouses, there has never been a better time to invest in ASX defence shares. And demand is increasing for breakthrough technologies and specialist equipment from Australian defence contractors.

Here’s why I believe these 4 ASX defence shares are undervalued and their share price could shoot higher in the coming years.

Austal Limited (ASX: ASB)

The shipbuilding giant designs and manufactures high performance vessels for commercial and defence customers worldwide. Most notably, Austal builds and services warships for the Australian Royal Navy and the United States Navy.

Early this month, the Australian shipbuilder delivered its expeditionary fast transport, USNS Newport to the US Navy. This brings the total number of ships built for the US Navy to 24, including 3 combat ships this year.

The Austal share price has sunk almost 16% after reporting its strong full-year results for 2020. The company has an order book of $4.3 billion to be fulfilled with 10 new ships to be built. As maritime relations become frosty between nations, I think the $3.16 Austal share price could be seen as a bargain in a few years.

Electro Optic Systems Hldg Ltd (ASX: EOS)

Electro Optic Systems is Australia’s largest aerospace entity. It’s also the largest defence exporter in the Southern Hemisphere, focusing on defence, space, and communications technology. Key applications include telescopes and dome enclosures, laser satellite tracking systems and fire control systems.

The defence company recently reported that it had resumed delivery of a major overseas contract worth $150 million. Electro Optic noted this was a key step in restoring cash flow that was disrupted by COVID-19.

The Electro Optic share price has misfired since reporting its FY20 results in late August, falling 17% to $5.13. As international borders start to reopen, the defence contractor is working towards clearing its $610 million worth of backlog products. In my opinion, this in-turn could lead the Electro Optic share price to dramatically rise.

DroneShield Ltd (ASX: DRO)

A leader in drone security technology, DroneShield designs and develops detection systems to protect people, organisations and critical infrastructure from drones.

The DroneShield share price has been making tailwinds in the past month thanks to a raft of positive announcements. Last week, the company secured funding from the US Defence Department to develop its DroneSheild Complete Command-and-Control (C2) system. The worldwide leader in drone security technology also received an order from a major Southeast Asian country.

The DroneShield share price is up 56% in the last 4 weeks from Friday’s market close of 20.5 cents. With a market capitalisation of $79 million, the company should reward shareholders if it can secure meaningful contracts in the future.

Orbital Corporation Ltd (ASX: OEC)

Advanced aerospace manufacturer, Orbital provides integrated engine systems for tactical unmanned aerial vehicles (UAV). Its tier 1 client base includes Insitu (a Boeing company), Northrop Grumman, Textron Systems and a large Singapore defence company.

Engine development works are under way as Orbital seeks to build a hybrid propulsion system for the next generation of vertical take-off and landing UAVs. The company hopes to improve earnings and profitability on the sale of its flight critical components under the Insitu long-term agreement. In addition, Orbital is targeting new customer contracts and involvement in defence UAV programs.

The Orbital share price has dropped more than 35% from its 52-week high to $1.05. The underlying importance of drone technology could be a major benefactor to Orbital’s bottom line. In light of this, I believe the Orbital share price is great value.

More reading

• 3 booming ASX shares for the new space age
• A definitive guide to September ASX share trends
• Why the DroneShield (ASX:DRO) share price is up even higher today
• Why the DroneShield (ASX:DRO), BrainChip (ASX:BRN) and Recce (ASX:RCE) share prices are rising today
• Electro Optic (ASX:EOS) share price up on resumed contract

Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited, Electro Optic Systems Holdings Limited, and Orbital Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings 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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Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) remains the most shorted share on the ASX by some distance after experiencing another increase in its short interest. Almost 15.8% of its shares are held short at present. Short sellers appear to believe Webjet’s shares are overvalued given current trading conditions.
• Speedcast International Ltd (ASX: SDA) has seen its short interest remain flat at 10.6%. The communications satellite technology provider’s shares remain suspended whilst it completes its chapter 11 recapitalisation.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest reduce materially to 9.4%. Last week the department store operator’s shares crashed lower following the release of its full year results. Myer posted a 41.6% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to $305.3 million.
• InvoCare Limited (ASX: IVC) has short interest of 9.2%, which is up week on week once again. Short sellers continues to increase their positions following a weak half year result by the funerals company.
• IOOF Holdings Limited (ASX: IFL) has entered the top ten with 8.5% of its shares held short. Short sellers don’t appear convinced by the company’s plan to acquire the National Australia Bank Ltd (ASX: NAB) wealth business, MLC Wealth for $1,440 million.
• Inghams Group Ltd (ASX: ING) has 8.2% of its shares held short, which is up slightly week on week. Short sellers aren’t giving up on the poultry company despite a high level of insider buying recently.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has also seen its short interest increase slightly to 8.1%. However, last week the biopharmaceutical company’s shares stormed higher after it announced plans to extend the use of its SCENESSE product to treat xeroderma pigmentosum.
• FlexiGroup Limited (ASX: FXL) has 7.7% of its shares held short, which is flat week on week. This morning the financial services company’s shares are pushing higher after it announced plans to expand its buy now pay later platform into New Zealand.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest rebound to 7.3%. Short sellers have been going after the regional bank this year after it warned that trading conditions were expected to remain tough for some time to come.
• Nearmap Ltd (ASX: NEA) has entered the top ten with 7% of its shares held short. Much to the delight of short sellers, last week the aerial imagery technology and location data company’s shares crashed lower following a surprise capital raising.

More reading

• Top brokers name 3 ASX shares to buy next week
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• ASX 200 drops 0.8%, Nearmap (ASX:NEA) sinks

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 Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended FlexiGroup Limited, InvoCare Limited, and Nearmap 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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

Last month, Tesla (NASDAQ: TSLA) and Apple (NASDAQ: AAPL) carried out 5-for-1 and 4-for-1 splits respectively. Leading into the splits, both stocks furiously rallied to new highs on the news.

With investors treating both split decisions so bullishly, it’s important to highlight the splits’ influence on market fluctuations in the past, and if this is truly an investable event. Let’s take a closer look.

What is a stock split?

Stock splits occur when a company decides to expand its existing share count by a certain number. Every shareholder receives additional shares for each share they previously held. For example, Tesla’s 5-for-1 split resulted in shareholders receiving 5 shares for every 1 share previously held.

The new price per share is determined by dividing the previous share price by the factor by which the share float grew. This event has zero impact on a company’s valuation or future prospects. Instead of 1 share at $2000, you have 5 shares at $400.

Some historical context

Stock split popularity coincided with two noticeably troubling stock market crashes. The concept of a split was invented in 1927 where it was liberally used until the Great Depression ravaged markets in 1929.

Splits can make it easier for inexperienced investors to try their hand in investing, thinking they are getting compelling deals. Some investors in 1929, however, didn’t have access to investing resources and didn’t fully grasp the lack of effect a stock split has on value. The pain was quite real for some in the years that followed with stock market averages dropping by 80% by 1932.

What about the Dot-com bubble? Since 1980, markets have averaged 44 stock splits per year. From 1998-2000 — the peak of the Dot-com bubble — that number more than doubled to 91 average annual splits.

That noticeable bump again coincided with the market peaking and later experiencing a painful crash. Just like in 1929, stock splits were taken — by some — as an event making stocks more affordable and valuable to shareholders. That is simply not the case. For hot Dot-com stocks like Qualcomm it took until last year to reclaim its all-time highs of $89.66 — nearly 2 decades after the technology bubble popped.

Splits today

This year, Apple’s and Tesla’s share prices rocketed higher in the weeks leading up to the announced splits. For example, in the 2 weeks prior to the event Tesla’s equity value jumped 81% with no other news. The chart below clearly depicts the notable outperformance Tesla has enjoyed over the S&P 500 since the announcement was made August 11th. It has since given back over half of that equity bump, but the stock is still far outperforming the S&P 500, as shown below. Apple’s price action has been slightly less volatile but similar. While the wildly swinging charts of Apple and Tesla do look eerily similar to split stocks in 1929 and 2000, there is reason to believe this time is different. Why?

Today, cautionary resources on the irrelevant nature of a stock split are more readily accessible. Furthermore, the advent of fractional shares removed some of the demand for cheaper shares. Now investors can buy a small piece of an Apple share, rather than having to shell out well over $100 to do so. This essentially removes any unique benefit from splitting a stock. Fractional shares foster the same affordability for investors starting out that splits do, without all of the drama.

Another interesting difference between this period of high-profile stock splits vs. prior periods? A 2020 federal funds rate that is below 1% versus over 5% in 1929 and 2000. Today’s historically low interest rates provide weaker direct competition to equity.

With a Federal Reserve explicitly telling you it’s committed to higher inflation in recent meetings, that rate should continue to stay low and be a boon to equity valuations (raising rates is deflationary). While Apple and Tesla may be enjoying share returns due to a less-than-meaningful stock split, the returns could stick around amid monetary policy that is far more favorable than in 1929 or 2000.

So what? 

While I would totally avoid chasing parabolic stock price rises in response to stock splits, I do not believe this round of splits is depicting a market peak like it has in the past. Readily accessible resources on how little stock splits actually matter, fractional shares, and a Fed fixated on boosting inflation all provide a more comfortable setup for stock markets to continue pushing higher. Still, investors would be well-served tune out the noise associated with splits altogether.

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

More reading

• How to tell if this is the end of the ASX bull market
• 3 ways Aussies can buy Tesla (NASDAQ:TSLA) shares
• 3 exotic ASX tech ETFs you might want to add to your portfolio today
• Why Tesla stock jumped again on Thursday
• Can 5G save the smartphone market?

Bradley Freeman owns shares of Qualcomm. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple and Tesla. The Motley Fool Australia has recommended Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

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It’s been a tough year for Sydney Airport Holdings Pty Ltd (ASX: SYD) shares. The travel industry has been hammered by the coronavirus pandemic and the Sydney Airport share price has slumped 34.3% lower.

However, I think there is still a lot to like about Sydney Airport shares. Here are a few things I’m weighing up to decide if they represent a good value buy today.

Why the Sydney Airport share price could be good value

I think you have to look at Sydney Airport shares as a long-term buy. Clearly, the company’s earnings will be significantly hampered until at least mid-next year but potentially for many years.

It’s best to look at Sydney Airport as an infrastructure company rather than a travel company. The group operates the busiest airport in the country and is underpinned by a blue chip asset base.

Sydney Airport just completed a $1.3 billion capital raising to maintain its balance sheet strength. Shareholders supported the raising with a 93% uptake rate at a 1.7% share price discount.

That flexibility will be the key to managing the COVID-19 impact and preparing for a rebound in coming years.

Traffic numbers have plummeted as state and international borders have been slammed shut. That means any hopes for short-term cash flow are probably misguided.

But if you look ahead, domestic and international travel will return. That means the Sydney Airport share price could be worth a look given the steep discount it’s trading at right now.

No doubt there are risks to buying any travel-related ASX shares right now. However, the company’s assets and operations are vital from an economic and national security standpoint.

Sydney Airport has historically paid a very healthy dividend as well. The long-term outlook still remains solid in my view.

With a market capitalisation of over $14.0 billion, I think Sydney Airport could be a buy. It has the size, strength and strong shareholder backing to withstand short-term challenges.

Foolish takeaway

I think it’s foolish to bet on the Sydney Airport share price as a short-term dividend play. The group’s shares are paying 6.9% on paper but I wouldn’t bank on that in 2020.

Instead, I look at Sydney Airport shares as a long-term infrastructure play. With a strengthened balance sheet and steep share price discount, the Aussie airport company could be in the buy zone.

More reading

• 5 things to watch on the ASX 200 next week
• Half of ASX 200 stocks at risk as China-Australia relations hit new low
• ASX 200 rises 1%, CSL (ASX:CSL) leads the way
• Why Jumbo, St Barbara, Sydney Airport, & Uniti shares are dropping lower
• Sydney Airport share price lower after completing $2 billion equity raising

Motley Fool contributor Ken Hall 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 De Grey Mining Limited (ASX: DEG) share price has returned from its trading halt and is tumbling lower today.

In early trade the gold-focused mineral exploration company’s shares were down as much as 13% to $1.25.

They have since recovered from most of this decline but are currently still down 4% to $1.38.

Why is the De Grey share price tumbling lower?

Investors have been selling De Grey’s shares this morning after it announced a $100 million capital raising.

According to the release, the company has received commitments for a placement of approximately 83.4 million shares priced at $1.20 per share to raise $100 million before costs. This placement price represents a sizeable 16.4% discount to the last close price.

Management advised that the placement was in high demand and was more than three times overbid. It feels this provides a strong endorsement of its assets.

The company experienced high levels of institutional participation in the placement. This includes many Australian funds and global precious metals and other specialist resource funds from the Northern Hemisphere.

Major shareholder DGO Gold Ltd (ASX: DGO) has committed to invest a further $12 million. This will result in a holding of 15.8% at completion. The company’s non-executive director, Peter Hood, has also committed to a further investment of $360,000. Though, these remain subject to shareholder approval.

Why is De Grey raising funds?

The proceeds of the placement will be used to fund a number of operational activities.

These include ongoing extension and definition drilling of the Hemi discovery, testing of mineralised intrusions close to Hemi, regional exploration of intrusion and shear-hosted targets, enhanced site infrastructure, and early stage project de-risking studies.

The company’s Managing Director, Glenn Jardine, commented: “The Hemi discovery in the Mallina Basin is rapidly moving towards our goal of defining a Tier 1 project with true district-scale potential. Mineralisation in the Hemi area has been identified over an area spanning +2,500m north-south and +2,000m east-west, with depths of +400m in areas tested.”

“We already have 2.2 million ounces of Mineral Resources from our shear hosted deposits and expect to add substantially to this through the delivery of a maiden Mineral Resource Estimate for the Hemi discovery by mid-2021,” he added.

Before concluding: “De Grey has never been better placed to achieve our goal of realising a Tier 1 gold project at Hemi.”

More reading

• Why Brainchip, De Grey, Mesoblast, & SKYCITY shares are pushing higher
• De Grey share price rockets 17% higher on new gold find
• Why Brainchip, De Grey Mining, Nufarm, & Pointsbet shares are storming higher
• Why Bega Cheese, De Grey Mining, Northern Star, & Reece are storming higher
• Meet the group reaping the biggest profit from the gold bull run

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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Despite a recent blip, the share price of IDP Education Limited (ASX: IEL) has rallied strongly over the last few weeks. Since the beginning of August, shares in the company have surged well over 40% higher to $19.21 as at the time of writing. And while this is still well short of the 52-week high of $25.17 IDP’s shares posted back in February, it is a reassuring sign for a company that has been hit hard by COVID-19 travel restrictions.

IDP Education organises study placements for international students. Prior to the COVID-19 pandemic, IDP was on an exciting growth trajectory. By February, FY20 year-to-date revenue had already surged 22% higher year-on-year to $480 million, driven by increasing student volumes. The company was also strengthening its sales pipeline, with applications up 42% year-on-year.

All this meant that FY20 was shaping up to be a breakout year for IDP. And the market agreed: in the 2 weeks after its first half results announcement in February, IDP shares skyrocketed almost 50%.

But then COVID happened, and just as it seemed like things were really starting to get going, the wheels fell off. In April, the company was forced to admit that the measures governments were putting in place to halt the spread of coronavirus were having a material impact on its operations. Schools and universities in its destination markets (like Australia, the UK and the US) were closing, and international travel was being severely restricted.

Despite reassurances by the company that it was cutting costs and making efforts to strengthen its balance sheet, the share price collapsed – dropping as low as $9.90 by mid-March. A year that was shaping up to be the best in the company’s history was fast turning into one it would sooner forget.

So, what changed?

Investors responded favourably to IDP’s full year results announcement, released to the market in the second half of August. The company reported an 11% year-on-year uplift in earnings before interest and tax to $107.8 million, while net profit after tax and amortisation rose 3% to $70.4 million.

Additionally, IDP delivered on the promises it had made to shareholders back in March. The company ended FY20 with over $300 million in cash, thanks to a $254 million equity raise and a $175 million working capital facility. It also slashed overhead costs by $35 million over the second half of the financial year.

IDP also boosted its online and digital presence in response to COVID-19. Many of its International English Language Testing System (IELTS) in-person centres were closed due to the pandemic, so IDP rolled out an online alternative that still allowed students to progress their study applications during lockdowns.

Should you invest?

With restrictions on international travel still likely to persist well into 2021 – not to mention the stop-start way many economies are trying to emerge from COVID-19 lockdowns – the road ahead could still be very bumpy for IDP, particularly over the near-term.

However, the company is flush with cash at the moment and it is managing its costs responsibly. It also still has a strong sales pipeline with demand for overseas study from international students remaining robust throughout the pandemic. So, although there is still plenty of risk, IDP Education is doing everything it can to position itself for a strong rebound once international travel restrictions ease.

More reading

• Top brokers name 3 ASX shares to buy next week
• Goldman Sachs tips IDP Education (ASX:IEL) share price to charge higher
• Why Afterpay, Clinuvel, IDP Education, & Saracen shares are charging higher
• Why the IDP Education share price rocketed 50% higher in August
• These were the best performing ASX 200 shares in August

Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd. 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 chances of a second market crash could remain elevated over the coming months. Rising unemployment coupled with weak GDP growth may cause investor sentiment to decline.

While this may cause paper losses for investors, it could also present a rare buying opportunity. Sharp stock market declines are relatively uncommon, and have historically been followed by sustained bull markets.

As such, buying cheap stocks in a bear market may improve your long-term financial prospects, and could even help you to retire early.

A second stock market crash

Considerable risks remain in place that could cause a second market crash. As well as the prospect of a further rise in coronavirus cases, other threats could derail the financial performances of companies and cause investor sentiment to weaken.

For example, the US election later this year may lead to fiscal policy changes that cause investors to adopt a more cautious attitude towards equities. Similarly, Brexit could lead to reduced business confidence that acts as a short-term drag on investor sentiment.

Therefore, investors may yet experience another opportunity this year to buy stocks at extremely low prices due to a market crash.

A rare event

Even though the prospects for a second market crash may be relatively high, history shows that bear markets are uncommon. In fact, the last major decline in stock prices occurred over a decade ago. Therefore, most investors are only likely to experience a handful of bear markets during their lifetimes.

This means that taking advantage of the low prices created by a stock market decline could be very important to your retirement prospects. They may enable you to buy high-quality businesses at relatively low prices. History shows that no bear market has ever lasted in perpetuity – even if at the time it felt as though a bull market was unlikely to ever return. Therefore, through buying a diverse range of stocks during rare opportunities when they are cheap, you could improve your prospects of retiring early.

Retirement prospects

While stock prices could be volatile for some time after the recent market crash, equity prices are likely to rally over the long run. With most investors having a number of years left until they plan to retire, they are likely to have sufficient time for their holdings to recover – even if there is a second downturn this year.

Therefore, if a high-quality stock is trading at a low price today, buying it for the long run could be a shrewd move. Certainly, a second market decline could make it even cheaper. But, in many cases, that outcome has been priced in by investors through lower valuations. Therefore, building a portfolio over the coming months, and continuing to add to it even if there is a further bear market, could be a sound overall strategy.

More reading

• Did Apple and Tesla stock splits signal the stock market top?
• Is the Sydney Airport (ASX:SYD) share price a cheap buy?
• Why the De Grey Mining (ASX:DEG) share price tumbled 13% lower today
• Can IDP Education bounce back stronger after COVID-19?
• Macquarie (ASX:MQG) share price sinks lower on FY 2021 guidance update

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.

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The Macquarie Group Ltd (ASX: MQG) share price has come under pressure on Monday following the release of an update.

At the time of writing the investment bank’s shares are down 4.5% to $120.60.

What did Macquarie announce?

Ahead of its appearance at the virtual Jefferies Asia Forum this week, Macquarie released an update on its short term outlook.

According to the release, Macquarie expects market conditions to remain challenging in the near term. Especially given the significant and unprecedented uncertainty caused by the COVID-19 pandemic and the uncertain speed of the global economic recovery.

And while the company acknowledges that these trading conditions make short-term forecasting extremely difficult, it is providing guidance for FY 2021 this morning.

Macquarie currently anticipates its first half result to be down approximately 35% on the prior corresponding period. And although it expects an improvement in the second half of FY 2021, it is still guiding to a second half decline of 25% over the second half of FY 2020.

However, this remains subject to a large number of factors. These predominantly include the duration and severity of the COVID-19 pandemic, the speed of the global economic recovery, and global levels of government economic support.

In addition, other more traditional factors include the completion rate of transactions and period-end reviews, the impact of foreign exchange, potential regulatory changes and tax uncertainties, market conditions, and the impact of geopolitical events.

What does this mean for the full year?

In the first half of FY 2020 Macquarie posted net profit after tax of $1,457 million. For the full year it recorded a net profit after tax of $2,731 million, which implies a second half profit of $1,274 million.

Based on this, in FY 2021 Macquarie looks set to deliver a first half profit of $948 million and a second half profit of $955 million. This will bring its full year profit to $1,903 million, down 30.3% year on year.

One positive is that its capital position appears strong. Management advised that it continues “to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment.”

More reading

• 3 personal finance tips to help strong investing
• Why you should use the market sell-off to buy these ASX stocks
• Latest ASX stocks top brokers are urging you to buy today
• New to investing? Here are 5 ASX dividend shares to buy now
• ASX 200 Weekly Wrap: Friday crash pulls ASX back below 6,000 points

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Four Corners episode on The New Space Age aired on 31 Aug 2020. As always, the program presented a fantastic documentary, this time on the rush into space and the part Australia is playing in it. Moreover, it also focused on the international tensions and competitiveness arising out of the space race. In addition, throughout the program, several themes emerged in which some ASX shares are already deeply embedded.

Whilst I believe Australia does not have enough companies working in this area, those that have made inroads are punching above their weight.

Space situational awareness

This was one of the most fascinating parts of the program for me. Every time humans send something into space, we create more space junk in orbit. Current scientific consensus is that there are around 500,000 pieces of space debris larger than 1 cm in Earth’s orbit. Travelling at 30,000 km per hour, junk as small as 1 cm will severely damage or destroy a satellite on impact.

Electro Optic Systems Holdings Limited (ASX: EOS) is one of the early pioneers in this area through its sensor technology. For over 40 years, this ASX share’s laser technology has been the standard for all space data and catalogues. Moreover, Electro Optic space tracking and debris monitoring systems now provide the benchmark for space catalogue acquisition and maintenance.

Situational awareness is increasingly important to identify active and expired satellites and orbital debris to reduce the likelihood of collisions. In addition, Electro Optic has built and operates the world’s only autonomous (robotic) space laser tracking system.

Computing power in space

Brainchip Holdings Ltd (ASX: BRN) has developed an artificial intelligence (AI) technology that is ideally suited for use in space. Moreover, this ASX share has recently partnered with space mission veteran Vorago Technologies. To illustrate further, Vorago is currently in the process of planning for 19 upcoming space missions.

The Brainchip technology is well suited to space missions because it is an advanced AI chip with a low power requirement. The chip is a complete neural processor and does not require an external CPU, memory or deep learning accelerator. The reduction in component count, size and power consumption are paramount concerns for aerospace and spaceflight applications. In addition, because of the nature of this new technology, it provides for continuous operation when new discoveries or unforeseen circumstances occur.

ASX shares for space materials

Carbon composites are used throughout most assets that travel into space. It is lighter, can handle high temperatures, and has very low thermal expansion. Xtek Ltd (ASX: XTE) is a defence materials ASX share which signed an agreement with the Australian Space Agency in 2019. The agreement was to further develop its lightweight composite materials for application within the space flight industry.

Furthermore, Xtek has been working with private firm, Skykraft, since 2019. This resulted in a grant from the Space Agency to design a small satellite launch stack. Skykraft is developing technology to launch what it calls constellations of satellites. These are low orbit satellites that work together on a areas such as communication, travel, banking, and security.

The concept of constellation of satellites is not new. NASA has tried this before with large satellites. However, due to cost reductions brought about by Elon Musk’s SpaceX, lightweight Xtek materials are likely to enable constellations of small scale satellites.  

Foolish takeaway

Yet again, ASX shares are punching above their weight in an industry of global importance. Moreover, companies like Electro Optic are already deeply ingrained in the management of issues related to space missions. I believe Brainchip is also likely to see its technology become the new standard for computing power in space, particularly given the advanced nature of its chip. Lastly, the Xtek work with Skykraft is also carving out a new niche in the space industry. If successful, it will also change how we engage with the final frontier. 

Aside from their work in space, each of these ASX shares plays a key role in defence and security markets globally.

More reading

• BrainChip (ASX:BRN) share price rockets 24% higher on Akida update
• Turn $6k into $60k, a guide to growth investing
• A definitive guide to September ASX share trends
• Why the DroneShield (ASX:DRO) share price is up even higher today
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower

Daryl Mather owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings 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 BrainChip Holdings Ltd (ASX: BRN) share price is rocketing notably higher again on Monday morning.

At the time of writing the ultra low power high performance artificial intelligence technology provider’s shares are up a massive 24% to 80 cents.

What did BrainChip announce?

This morning BrainChip announced that it has validated the Akida Neuromorphic System-on-Chip (NSoC) design with functional silicon.

The Akida NSoC is a complex integrated circuit that includes multiple interfaces, Data-to-Event Converters, a CPU complex, on-chip memory, and a neuron fabric to implement a complete neural network with no external components required.

It is comprised of cores that are organised in groups of four to create nodes, which are mesh networked. These cores can be implemented for either convolutional layers or fully-connected layers.

Management notes that this flexibility allows users to develop networks with ultra-low power Event-Based Convolution as well as Incremental Learning. The nodes can also be used to implement multiple networks on a single device.

“Significant achievement.”

The company’s CEO, Louis DiNardo, was very pleased with the development.

He commented: “We have validated the functionality of the Akida silicon and performed significant testing. The devices received from the MPW [Multi-Project Wafer] will provide engineering samples and evaluation boards for our early access customers.”

“Now our focus is on continued development of software and firmware drivers. We expect to produce a production mask set in the fourth quarter of 2020 and then move forward with volume production wafer fabrication, assembly and test operations.” Mr DiNardo added.

The CEO concluded: “The BrainChip team is very proud of this significant achieve and milestone in our quest to introduce Akida and achieve commercial success with a revolutionary product that solves the real-world challenges of implementing artificial intelligence at the Edge.”

More reading

• 3 booming ASX shares for the new space age
• Turn $6k into $60k, a guide to growth investing
• A definitive guide to September ASX share trends
• Why BrainChip, Evolution, Nearmap, & Zip shares are tumbling lower
• Why the Jaxsta share price rocketed by over 300% 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 BrainChip (ASX:BRN) share price rockets 24% higher on Akida update appeared first on Motley Fool Australia.

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