Tag: Motley Fool

Recent research from analysts at noted broker Wilson’s has painted a bullish outlook on 5G Networks Ltd (ASX: 5GN) shares. According to the report, 5G Networks is poised to emerge as a winner from the COVID-19 pandemic with multiple revenue drivers expected to fuel growth in the short and longer-term.

How has 5G Networks performed?

5G Networks recently released its financial report for FY20.

According to analysts, FY20 can be interpreted as a transition year for 5GN, with the company moving from lower margin products and services and focusing on high margin initiatives.

Highlights from 5G Networks’ report included revenue for FY20 of $49.3 million and earnings before interest, taxes, depreciation and amortisation (EBITDA) more than doubling to $6.6 million. In terms of revenue, the company reported a 16% growth in recurring revenue and 700% increase in operating cash flow.

5G Networks cited a number of key developments in FY20 for the company’s solid performance. These included key acquisitions of data centre services and migration of its product mix. According to 5G Networks, these developments have positioned the company to meet growing demand for cloud-based services. The company also noted its strong cash position of $23.5 million, which will allow it to pursue future acquisitions.

Although the company’s revenue line slightly missed expectations, analysts are still bullish on their outlook for 5G Networks.

Why are analysts bullish on 5G Networks shares?

Analysts from Wilson’s elaborated on their ‘Overweight’ rating on 5G Networks and cited several factors.

Firstly, analysts believe that the company has genuine short and longer-term revenue drivers. In the short-term, increased demand for cloud-based services and migration to the ‘cloud’ are tipped to drive revenue growth. In the longer term, revenue drivers include ongoing digital transformation programs and the increasing need for ICT security among businesses.

There are also strong profit drivers for 5G Networks, with primary revenue driven by new customer wins, operating leverage and synergies from acquisitions. Analysts also cited 5G Networks’ revenue quality improving with recurring revenue expected to increase, allowing for a growing revenue base.

Lastly, analysts cited 5G Networks’ consolidated offerings, which encompass a wide variety of software and hardware solutions. The launch of its Cloud Federation Platform earlier this year is also expected to accelerate 5G Networks’ expansion.

Foolish takeaway

Unlike many companies this reporting season, 5G Networks provided investors with guidance for FY21. The company forecasts revenue between $60 million and $65 million and EBITDA between $8 million and $8.5 million.

Personally, I agree with the bullish outlook from analysts at Wilson’s. With more people likely to be working from home post-pandemic and consumers transitioning to cloud-based platforms, the outlook for 5G Networks looks promising.

The positive outlook has been reflected in the company’s share price, which is currently trading near all-time highs. I think a prudent strategy would be to buy a small parcel of 5G Networks shares and build on holdings in the longer-term.

More reading

• My top 5G ASX share to buy right now
• 5G Networks share price falls 6% on FY20 results
• Why 5G Networks and these ASX shares just hit record highs

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. 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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2020 has been a watershed year for ASX dividend shares. Former dividend stalwarts like the big ASX banks, Transurban Group (ASX: TCL) and Ramsay Health Care Limited (ASX: RHC) have slashed, deferred or cancelled their prized dividend payouts already this year. More companies look set to follow. So where are dividend investors to turn in this Brave New World? Well, I’ve found 3 ASX dividend shares that have already not just reconfirmed their dividends in 2020, but have increased them. That’s a good start! 

3 ASX dividend shares increasing their payouts in 2020

1) Fortescue Metals Group Limited (ASX: FMG)

Fortescue has been a pillar of strength in the current dividend scene. Just yesterday, the company announced a final dividend of $1 per share. That means shareholders have received $1.76 per share in dividends for FY2020, which represents a 54% increase over FY19’s payout. That’s what a company can do when it is able to dig a tonne of iron ore out of the ground for US$12.94 and sell it for US$120 (the rough price of iron ore today). If iron ore prices stay even close to their current levels, Fortescue should be able to keep this train going in FY21 as well. With a dividend of $1.76 per share, Fortescue Metals is offering a trailing yield of 9.45% on current prices.

2) APA Group (ASX: APA)

APA is in the business of providing pipelines for gas distribution. It owns the largest gas pipeline network on the east coast of Australia and is responsible for delivering around half of the country’s total gas needs. The great thing about this kind of business is its predictability and defensive nature. Regardless of recessions or pandemics, we all need gas all of the time, whether it’s for industrial purposes or just cooking and heating our homes. APA’s next dividend will be paid on 16 September and will come in at 27 cents per share. That’s a nice increase from last year’s final dividend of 25.5 cents per share. On current prices, that gives APA shares a trailing 12-month yield of 4.61%.

3) Rural Funds Group (ASX: RFF)

Our final dividend share is this agricultural real estate investment trust (REIT). Rural Funds invests in farmland, which it rents out to clients for rental returns. Given the extremely defensive nature of farmland (we all need to eat), Rural Funds is able to give its investors a reliable stream of dividend distributions, which it aims to increase by 4% annually. 2020 has not been an exception to this rule with Rural Funds delivering a 4% increase for its 2020 payout to 10.85 cents per share. Just this morning, the company also announced a forecast of an 11.28 cents per share payout for FY2021. That takes confidence in this era of uncertainty and gives me assurance in this business as a solid income payer going forward.

More reading

• Leading brokers name 3 ASX shares to sell today
• Rural Funds share price rises on FY20 results
• ASX 200 rises 0.3%, Afterpay up on European plans
• ASX 200 up 0.2%: Afterpay expansion, Fortescue’s monster dividend, NIB disappoints
• Why Afterpay, Bubs, Fortescue, & Zip Co shares are charging higher

Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of APA Group and Transurban Group. The Motley Fool Australia has recommended Ramsay Health Care 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 NZME Ltd (ASX: NZM) share price has rocketed 41% higher after the media company revealed a 217% increase in profits. NZME gave a stronger than expected performance in 1H 2020, having quickly navigated the impacts of COVID-19. 

What does NZME do? 

NZME, which stands for New Zealand Media and Entertainment, is an integrated media company with a portfolio of newspapers, radio stations, and digital platforms. With its content accessed by more than 3.2 million Kiwis, NZME offers advertisers the opportunity to access its audience via a fully integrated multi-platform presence. 

What did NZME report? 

NZME released its results for 1H 2020 this morning, reporting 5% growth in operating earnings before interest, taxes, depreciation and amortisation (EBITDA) which reached NZ$28.9 million.

Although NZME’s operations are deemed an essential service, key revenue streams were significantly impacted by COVID-19. Advertising revenue fell 47% in April, 39% in May, and 23% in June. This led to a 17% decline in segment revenue for the half, which fell to $147.3 million. Operating revenue fell 13% to NZ$157.8 million, including an NZ$8.6 million government wage subsidy during the half. 

NZME took swift action to mitigate impacts of the downturn on profitability and cash flow, contributing to a NZ$24.6 million reduction in operating expenses. This flowed through to a 66% increase in operating net profit after tax (NPAT), which increased to NZ$6.8 million. Statutory NPAT increased by an impressive 217% to NZ$3 million, up from $0.9 million in 1H 2019. 

Although some actions taken in response to COVID-19 were temporary, NZME expects to achieve a permanent reduction in cost base. Costs were decreased by NZ$24.6 million in the first half, with approximately NZ$7 million relating to permanent cost reductions. The annualised permanent reduction in cost base is expected to be NZ$20 million per annum. NZME reduced net debt by NZ$19.5 million to NZ$55.2 million in 1H 2020. Debt reduction is expected to be lower in the second half, however, as net working capital is expected to grow. 

What’s the outlook for NZME? 

NZME says it has seen a stronger than anticipated recovery from COVID-19, but remains cautious regarding the future economic environment. Advertising revenue is expected to be down 16% in 3Q 2020 so cost containment remains a focus.

NZME is currently forecasting FY20 operating EBITDA of NZ$60–$63 million. Based on improvement in economic conditions, COVID-19 recovery, and permanent cost reduction, NZME is expecting profit growth in 2021. Based on this outlook and the company’s capital requirements, the company advised its board expects to be able to consider a dividend payment after 30 June 2021.  

The NZME share price is currently sitting at 39 cents per share, which is down 21% on this time last year.

More reading

• Analysts think 5G Networks shares could be a post-COVID-19 winner
• 3 ASX dividend shares that have increased their payouts in 2020
• AUB Group share price storms higher on strong profit and dividend growth
• Pro-Pac Packaging share price leaps 6% higher on FY20 results and dividend news
• The 1 Warren Buffett quote that tells us how to invest right now

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

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The AUB Group Ltd (ASX: AUB) share price has been a strong performer on Tuesday following its full year results release.

At the time of writing the shares of the insurance broker network are up 4.5% to $14.13.

How did AUB perform in FY 2020?

AUB was a positive performer in FY 2020 despite the pandemic and reported solid top and bottom line growth.

For the 12 months ended 30 June 2020, the company delivered a 9.2% increase in revenue to $335.36 million. This was driven by strong growth in its Australian Broking and New Zealand segments over the period.

Things were even better on the bottom line, with AUB delivering its strongest profit growth in seven years. It posted underlying net profit after tax of $53.4 million for FY 2020. This was up 15.2% on the prior corresponding period and ahead of its guidance. Underlying earnings per share came in at 72.45 cents.

In light of this strong performance, the AUB board declared a final fully franked dividend of 35.5 cents per share. This was an increase of 9.2% on the prior corresponding period. It means that for the full year, AUB will be paying a 50 cents per share fully franked dividend. This is up from 46 cents per share in FY 2019.

“Resilient and defensive”.

AUB Group’s CEO and Managing Director, Michael Emmett, was very pleased with the company’s performance in FY 2020 given the challenging economic environment.

He commented: “I am extremely pleased to report our FY20 results, the strongest year on year growth results for the Group in 7 years.”

“Despite a challenging external market environment with significant headwinds for our clients and insurance partners, AUB Groups’ portfolio has proven to be resilient and defensive, delivering a strong result while maintaining a consistent focus on our FY20 Execution Priorities that enhance our underlying growth drivers. FY20 was also a year of significant change for the business and I’m excited by the response from the partnership and our underwriting partners,” he added.

FY 2021 outlook.

The good news for shareholders is that management expects its strong form to continue in FY 2021. In fact, it has upgraded its guidance for FY 2021 with today’s release.

It is now forecasting underlying net profit after tax of $58.5 million to $61 million in FY 2021. This represents growth of 9.5% to 14.2% year on year. This is expected to be driven by Australian premium increases in the range of 5% to 6% and small bolt on acquisitions.

More reading

• Analysts think 5G Networks shares could be a post-COVID-19 winner
• 3 ASX dividend shares that have increased their payouts in 2020
• ASX stock of the day: NZME share price rockets 41% higher as profits jump more than 200%
• Pro-Pac Packaging share price leaps 6% higher on FY20 results and dividend news
• The 1 Warren Buffett quote that tells us how to invest right now

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 Pro-Pac Packaging Limited (ASX: PPG) share price has leapt higher today following the company’s announcement of its FY20 results. The Pro-Pac Packaging share price climbed 18.75% in early trade but, at the time of writing, has pulled back to a more modest gain of 6.25% 

Pro-Pac is a flexibles, industrial and rigid packaging company with a diversified distribution and manufacturing network throughout Australia and New Zealand.

How did the company perform?

The company was pleased to announce statutory net profit of $6.6 million for FY20. It also delivered sustainable improvements in working capital and a 44.4% reduction in net debt to $46.1 million.

Pre-AASB16 (the accounting standard for leases), earnings before interest, taxation, depreciation and amortisation (EBITDA) was 15.4% higher to $32.4 million compared to the prior corresponding period (pcp).

Revenue of $478.2 million was down 1.6% on the pcp as a result of shifting the business mix towards high margin products. However, it was offset by lower revenue levels from the industrial division.

Pleasingly, Pro-Pac Packaging was able to reinstate a fully franked dividend of 0.4 cents per share. 

In March, the group announced the successful refinancing of its senior debt facility for a further 3 years.

“Proud”

That’s the word Pro-Pac CEO and Managing Director Tim Welsh used to comment on the FY20 results. He said “I am proud of how the Pro-Pac team has continued to focus on our growth objectives and delivered a set of strong financial results despite the ongoing challenges of the COVID-19 pandemic,”

“The significant improvement in our balance sheet and our focus on driving growth though operational excellence delivers a strong foundation for Pro-Pac to become an industry leader in the manufacturing and distribution of packaging products,” he concluded.

Outlook

Pro-Pac Packaging describes FY21 as a year of consolidation, as it delivers on critical transformational projects that will drive a step change in its cost base in FY22 and beyond. The company also highlighted the importance of this transformation to its manufacturing capability and ability to address new markets. 

Key objectives for the coming 12 months include transitioning production from Pro-Pac’s Chester Hill Facility and the delivery of the enterprise resource planning (ERP) project to enable business rationalisation and efficiency.

Pleasingly, the company has advised the first two months of FY21 have started well and carried forward the positive momentum from FY20. It has advised a business update will be provided at the annual general meeting (AGM) in November.

About the Pro-Pac Packaging share price

The Pro-Pac Packaging share price is currently trading at 17 cents per share which is 183% higher than its March low. The Pro-Pac share price has increased nearly 42% in year-to-date trading. 

More reading

• Analysts think 5G Networks shares could be a post-COVID-19 winner
• 3 ASX dividend shares that have increased their payouts in 2020
• ASX stock of the day: NZME share price rockets 41% higher as profits jump more than 200%
• AUB Group share price storms higher on strong profit and dividend growth
• The 1 Warren Buffett quote that tells us how to invest right now

Motley Fool contributor Matthew Donald 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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Warren Buffett — chair and CEO of Berkshire Hathaway Inc. (NYSE: BRK.A)(NYSE: BRK.B) — is regarded as one of the best investors of all time. He is also regarded as one of the best teachers of sound investing principles.

Over his incredibly long and successful career, Buffett has made a name for himself for being able to distil complex investing ideas into pithy and relatable parables and quotes. You’ve probably heard some of his famous lines like “be fearful when others are greedy, and greedy when others are fearful”, or “it’s only when the tide goes out we can see who’s been swimming naked”.

But another Buffett quote has been doing the rounds lately, and I think it’s especially relevant to investors today.

It goes like this:

The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behaviour akin to that of Cinderella at the ball. They know that overstaying the festivities that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future, will eventually bring on pumpkins and mice.

But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hand.

Buffett’s warning

You might be forgiven for thinking that Buffett only made this remark last week. But it’s actually from the 2000 Letter to Shareholders that Buffett writes every year. Yep, that quote is 20 years’ old.

And yet it seems intoxicatingly relevant today. Investors have indeed enjoyed ‘recent triumphs’ in the last few months. How else would you describe the performance of ‘hot’ stocks like Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Fortescue Metals Group Limited (ASX: FMG)? Back in 2000, shares were also reaching new highs. And we all know how that ended.

The situation is far more pronounced over in the United States today. Shares have been going ballistic, there’s no other word for it. The tech-heavy Nasdaq index is at record highs. The Dow Jone Industrial Average is up more than 52% since 23 March and only just off its own record high. Shares like Apple, Amazon.com, Zoom and Tesla have been exploding, the former reaching a market capitalisation of US$2 trillion just last week. It feels to me like ‘one helluva party’, as Mr Buffett put it.

Investors know there is not much in the way of fundamentals holding up the markets right now. We are going through one of the worst recessions in a hundred years, from which (in my opinion) the recovery will be long and rather slow. Yet the party rages. Is it close to midnight? I have no idea, I’m just another giddy dancer without a clock. But I’m wishing I brought a watch with me, that’s for sure.

More reading

• Analyst says Tesla best-case scenario could see share price spike 70% to $3,500
• Apple becomes first company worth US$2 trillion. Here’s what we can learn
• These beaten down ASX energy shares could mirror the tech share price boom
• Why Tesla Stock Soared Past $2,000 on Thursday
• Tesla Gigafactory 1 to boost battery production capacity 10% after new $100 million panasonic investment

Sebastian Bowen owns shares of Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Berkshire Hathaway (B shares), and Tesla and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Apple and Berkshire Hathaway (B shares). 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 Monday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three that have just been given sell ratings are listed below.

Here’s why these brokers are bearish on these ASX shares:

Afterpay Ltd (ASX: APT)

According to a note out of UBS, its analysts have retained their sell rating but lifted their price target on this payments company’s shares to $27.00. This follows the announcement of its expansion into mainland Europe through the acquisition of Spanish buy now pay later provider Pagantis. It notes that this is consistent with its strategy and gives it the regulatory structure required for operating in the European Union. Nevertheless, UBS remains bearish on Afterpay and continues to believe it is vastly overvalued. It feels it should be valued on much lower multiples as an unsecured consumer lending business. Clearly the market doesn’t agree with UBS. Earlier today the Afterpay share price climbed to a new record high of $89.27.

ASX Ltd (ASX: ASX)

Analysts at Morgans have retained their reduce rating but increased the price target on this stock exchange operator’s shares to $77.08. According to the note, ASX Ltd delivered a full year profit that fell a touch short of the broker’s expectations. This was driven largely by higher than expected expense growth because of the pandemic. In light of this, it sees no reason to change its rating any time soon. It continues to believe its shares are expensive relative to its earnings growth profile. The ASX share price is trading at $89.34 this afternoon.

Fortescue Metals Group Limited (ASX: FMG)

A note out of Credit Suisse reveals that its analysts have downgraded this iron ore producer’s shares to an underperform rating with an improved price target of $15.00. According to the note, the broker was pleased with Fortescue’s performance in FY 2020 and particularly its final dividend. However, it isn’t enough to stop the broker downgrading its shares on valuation grounds. It feels the iron ore price could be close to its top and suspects Fortescue’s earnings could soon peak. The Fortescue share price is changing hands for $18.58 on Tuesday afternoon.

More reading

• This rising sentiment is spurring the share market’s bull run
• Why Afterpay, BINGO, Scentre, & Westpac shares are charging higher
• Why the Xero share price can crack $100 per share in 2020
• 3 ASX shares that could give investors a stock split in 2020
• ASX 200 rises 0.3%, Afterpay up on European plans

Motley Fool contributor James Mickleboro 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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The Nitro Software Ltd (ASX: NTO) share price is under pressure following the company’s release of its results for the half year ended June 30 2020. In early afternoon trading, the Nitro Software share price is down 8.13%. This comes on the heals of a very strong year for the company, which has seen its share price gain nearly 38% since 2 January. And the Nitro Software share price has rocketed an impressive 186% since its 16 March COVID-19 driven low.

What did Nitro Software report?

The global document productivity software company’s share price is down today despite the company reporting strong recurring revenue growth.

The company reported its first half 2020 subscription revenue grew to US$9.1 million, up 60%. Total revenue increased 14% over the same period in 2019, reaching US$19.1 million.

Annual recurring revenue (ARR) of US$20.2 million grew by 57%

Nitro increased its research and development (R&D) spend to US$3.8 million, up 7% from the prior corresponding period, as the company continues to invest in product innovation and evolution.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at a loss of US$1.6 million. The company pointed to foreign exchange losses largely due to IPO proceeds held in Australian dollars before converting to US dollars.

Nitro held a cash balance of US$43.9 million as at 30 June with no debt.

The company reported it serves 11,256 business customers. These include 68% of the 2019 Fortune 500.

Looking ahead, Nitro Software reported it expects to deliver its prospectus forecast for FY2020. It forecasts revenue will grow to US$40.5 million with an EBITDA loss of US$5.3 million, which it notes is subject to foreign currency fluctuations.

What did Nitro’s CEO say?

Nitro’s Co-Founder & CEO, Sam Chandler, said:

Throughout the past six months, the Nitro team has delivered on our growth targets despite the current economic environment, securing some of the world’s largest companies as new customers, expanding usage across our existing customer base, and achieving very strong growth in recurring revenue. The pandemic has led to an acceleration in digital transformation as organisations shift toward 100% digital workflows, supported by mostly remote workforces. Nitro’s products have a clear opportunity to deliver strong operational and financial value to businesses, now and in the future…

I’m excited about the road ahead. We are well positioned to take advantage of accelerating trends in digital transformation to deliver on our ambitious growth plans.

About the Nitro Software share price

The Nitro Software share price selloff today indicates the market was likely expecting more from its first half results. But even after this morning’s 8% slide, the Nitro Software share price remains up nearly 18% since the beginning of August.

More reading

• Why you should add these small cap ASX shares to your watchlists
• Why GUD, IGO, Nitro Software, & St Barbara shares are dropping lower
• All Technology Index celebrates 6 months with stunning outperformance

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended 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 Bingo Industries Limited (ASX: BIN) share price has leapt more than 12% after the waste management company revealed a 196% increase in profits.

Despite COVID-19 related disruptions, Bingo Industries delivered a better than expected result, sending the share price skyward. 

What does Bingo Industries do? 

Bingo industries is a fully integrated recycling and resource management company providing solutions across the waste management supply chain. Beginning as a small family-owned skip bin business in Western Sydney, the company has grown to provide collection, processing, recycling, and disposal services.

Bingo services more than 18,000 customers a year, leveraging its network of resource recovery and recycling centres, the largest across NSW and Victoria. 

How did it perform in FY20? 

Bingo Industries reported a 21% increase in revenue, which reached $486.7 million, up from $402.2 million in FY19.

The rise was driven by a 34.9% in post-collections revenue which reached $329 million. Post-collection infrastructure assets now account for about 70% of Bingo’s underlying EBITDA. Group underlying EBITDA increased 40.8% to $152.1 million and underlying EBITDA margin was 31.3%. This exceeded the company’s long term target of 30% a year earlier than forecast. Bingo declared a final dividend of 1.5 cents per share, bringing full year dividends to 3.7 cents per share, broadly in line with FY19. 

Statutory NPAT went up an impressive 196% to $66 million as Bingo benefitted from a business resilient to normal market cycles.

Nonetheless, the company did experience a drop in collections and post-collections volumes in April as COVID-19 restrictions were introduced. Commercial and industrial revenue was down approximately 20% as hospitality, entertainment, and office activity slowed. Post-collections volumes remained solid in 4Q FY20 with pricing stabilising post-May and remaining stable into FY21. 

Outlook for the Bingo Industries share price 

Bingo Industries is 3 years into a 5-year strategy to achieve strategic objectives set at its initial public offering (IPO). After achieving a number of developmental milestones in FY20, Bingo Industries has increased its network capacity to 4.6 million tonnes per annum with significant capacity supporting future growth.

Despite market volatility, Bingo has entered FY21 with solid momentum as volumes rebound from the fourth quarter downturn. Moving toward a post-COVID-19 environment, the Bingo Industries share price is well-placed to benefit from market tailwinds. That includes a boom in infrastructure investment. The recovery of residential and commercial building markets may trigger a surge in activity in FY22. 

CEO Daniel Tartak said:

We enter FY21 with a resilient business model and strong balance sheet. We are confident the business will continue to demonstrate its resilience and emerge from the current challenges bigger, better, and stronger.

We expect to resume our growth trajectory in FY22 as our key markets rebound. We continue to benefit from regulatory and market tailwinds and as we take advantage of the additional capacity within our existing network.” 

More reading

• ASX 200 up 0.7%: Big four banks storm higher, Blackmores disappoints, Xero acquisition
• Why Afterpay, BINGO, Scentre, & Westpac shares are charging higher

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

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The Rural Funds Group (ASX: RFF) share price is trading 2.27% higher following the release of its FY20 results.

The group is a real estate investment trust (REIT) that owns a diversified portfolio of Australian agricultural assets. 

What were the FY20 results?

The group has 61 properties across five agricultural sectors including almonds, cattle, cropping, vineyards and macadamias. The weighted average lease expiry (WALE) is 10.9 years. 78% of revenue comes from corporate or listed tenants.

Property revenue increased 8% to $72 million and earnings (total comprehensive income) per unit lifted 82% to 18.4 cents. This was an increase of 80% on the prior corresponding period (pcp). 

Adjusted net asset value (NAV) per unit increased 8% to $1.94 per unit.

Adjusted funds from operations (AFFO) per unit of 13.5 cents was in line with forecast.

Distributions per unit (DPU) of 10.85 cents was also in line with forecast and a 4% increase on the pcp. As a result, it’s in line with the 4% growth target for distributions.

Rural Funds Group gearing is at the lower end of the 30-35% target range. 

Independent valuations for almond orchards, macadamia orchards, cattle properties and water entitlements have helped boost the group’s earnings.

Outlook for Rural Funds share price

Rural Funds Group has a commitment to buy central Queensland properties that are suitable to the conversion of 5,000 macadamia orchards. As a result, its expected earnings growth will continue in future years.

To fund the acquisitions, the group is divesting poultry and almond assets. However, the divestment is conditional on completion of due diligence and Foreign Investment Review Board (FIRB) approval.

In addition, while planting of macadamia trees on new properties is expected to start late FY21, lessee discussions are ongoing. The group has advised the developments are expected to take several years.

Furthermore, forecast distributions for FY21 of 11.28 cents and within the 4% growth target has been reaffirmed as a result of the reconfiguration of the portfolio.

AFFO is expected to decrease in FY21 as funds are reinvested to macadamia orchard developments. The company advised they would produce higher income when leased.  As a result, AFFO is expected to be 11.7 cents per unit.

Pleasingly, Rural Funds confirmed no lessees had required rent relief.

Currently, the Rural Funds share price is trading at $2.25, a 2.27% increase. The group is just shy of its 52-week high of $2.27.

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Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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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