Tag: Motley Fool

I want to tell you the story of four companies.

The first is (shh… I have to say this quietly) a travel company.

The second is an online retailer.

The third is a consumer goods business.

The last is in the media monitoring game.

What these companies have in common is that they’re all recommendations of one of our investment advisory services, Motley Fool Share Advisor.

The other thing they have in common is that they’ve all been taken to the woodshed at one time or another over the past 18 months.

I’m sure I don’t need to tell you what’s impacting travel at the moment.

And shares of this company, Corporate Travel Management Ltd (ASX: CTD), (I own shares, for the record), have had a torrid time of late.

From around $22 in January, shares fell to under $5 by mid-March.

Ouch.

The online retailer is Kogan.com Ltd (ASX: KGN) (I own shares here, too). When the founder, Ruslan Kogan, sold a stack of shares in August last year. Before the sale, shares changed hands for $6.02. A couple of days later, they were $5.54. By early March, you could pick one up for $3.60.

The third company on our list was one of the market darlings in 2017 and early 2018. Shares sold for $7.70 a pop. The company is skincare peddler BWX Ltd (ASX: BWX), the name behind Sukin, and other brands. Fast forward almost exactly 12 months to January last year, and you could buy shares for $1.54 each.

The last on our list is iSentia Group Ltd (ASX: ISD), which provides data and analysis on ads and news mentions of companies, issues and people. Its shares sold for almost $5 in late 2015. By January of last year, they were only 25c.

Four businesses, each of which suffered precipitous drops, all for ostensibly decent reasons.

I mean seriously… travel?

And when a founder is selling, why hang around?

And BWX, which had torched a seemingly fast-growing business and butchered an acquisition?

Ditto iSentia, which had paid up for a business that ended up being worth literally nothing.

Four absolute dogs.

“Get rid of ‘em”, right?

I mean, just think for a second:

When Ruslan Kogan sells his shares… and the share price falls by more than 40%… aren’t you just a bit suspicious. I mean, he obviously knew something, right? And who wants to wear the pain of a 40% loss? Far better to cauterise the wound by selling and moving on, with a dirty look back at Ruslan, who obviously took us for mugs.

And when Corporate Travel fell… I mean the shares are off by more than 75%! Why hold onto that – if you’ll excuse the term – crap, anyway. Don’t we want shares that go up?

BWX was a basket case. Everyone could see that. Sales growth went into reverse. The company torched a heap of cash. And it lost its two most important executives.

iSentia was over. It was a shadow of itself. A botched acquisition, plus keen competitors and ubiquitous online data meant the company was never going to recover its former glory. And yes, that 95% share price fall!

The only problem is that I’m a stubborn bastard.

Despite what ‘everybody’ already ‘knew’, I didn’t sell any of them.

Not because I was being stubborn, per se. There’s no glory in that.

But because I refused to just listen to everyone else, and do what they were doing.

Truth be told, I’ve never really been one to care too much about what other people think.

I’m not one of the cool kids. Don’t feel the need to look or sound impressive.

But nor am I someone who makes a point of being disagreeable. Which hopefully makes me a good fit as an investor. 

But back to our Four Horsemen.

While people were bleating about Ruslan’s share sales, we saw no reason to panic. The numbers were good, and the trajectory was right.

Our thesis called for a steady long-term growth in customers, spending more across more product categories, encouraged by Kogan’s clever marketing and product choices. Oh, if you’re prone to conspiracy theories, Ruslan must have known something. (Also, Bill Gates and 5G are out to get you. He’s probably reading this right now…).

In the end, Ruslan Kogan left millions on the table. Shares went from $3.60 to currently sit north of $22. His sale, at just under $6, would have quadrupled in value. No, he’s not crying into his coffee, and nor should he be. We never had a problem with him selling, and good luck to him. In the meantime, his continued focus on running the company has made a lot of money for a lot of people.

So much for the conspiracy (but maybe that’s just what they want you to think )

And Corporate Travel?

Those $5 shares of the terminally injured business are now selling for around $13.40. Not dead after all.

What about BWX?

After a long time in the doldrums, they’re trading 300% higher than they were 18 months ago.

Four out of four coming righ…

Not so fast.

Poor old iSentia is still completely languishing, at almost the same level as last January.

So why include it?

Because I’m not perfect, and cherry-picking just the good stuff is disingenuous.

Sometimes, holding on doesn’t work out.

I’m not ashamed to admit I’m wrong sometimes.

(And, let’s be clear, any of these four companies could change course at any time. Beware of people declaring victory – or defeat!)

Investing isn’t about always being right (it’s not possible).

It’s about being right as often as possible, while making sure you make enough money from the winners to cover the losers with enough left over to beat the market.

It’s not easy.

It’s often emotionally – and financially! – challenging.

Very, very few companies go up and to the right on the old share price chart, without any volatility.

My point, then, is that letting the market tell you what to do is just plain silly.

The market thought Kogan shares were only worth $3.60. That Corporate Travel was only worth $5. And that BWX was worth only $1.50 and change.

Kogan shares now sell for six times that price. Corporate Travel for more than 2.5x. And BWX about 3x.

And yes, iSentia for peanuts.

But overall?

Overall, I’d be very happy to own those four companies. Yes, even the loser, if it meant I also got to own the winners. Of course, I’d be happy just to own the winners, but my crystal ball is on the blink.

I’m also pretty happy that our members at Motley Fool Share Advisor have benefited from these gains, too. We ask them to put their trust in us, and I imagine that’s easier said than done when the market falls out of love with the companies we recommend!

Remember, pessimism always sounds smart, but it’s usually self-indulgence and feelings of intellectual superiority dressed up as sober analysis.

You – and I – will make mistakes. We’ll be wrong. 

But so will the market.

Don’t let it – or the Negative Nevilles and Nellies – tell you what to do.

Fool on.

More reading

• Are Webjet and other ASX travel shares taking off?
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• These are the 10 most shorted shares on the ASX
• These were the best performing ASX 200 shares last week
• WiseTech and 2 more ASX shares outperforming this earnings season

Scott Phillips owns shares of Corporate Travel Management Limited and Kogan.com ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended BWX Limited and Corporate Travel Management Limited. The Motley Fool Australia has recommended iSentia Group Ltd and Kogan.com 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 Uniti Group Ltd (ASX: UWL) share price has dropped lower this morning following the release of its full year results.

At the time of writing the shares of the Telstra Corporation Ltd (ASX: TLS) challenger are down 3.5% to $1.58.

How did Uniti perform in FY 2020?

Uniti was a solid performer in FY 2020 and delivered strong sales and earnings growth thanks largely to the acquisitions of LBNCo, OPENetworks, and 1300 Australia during the year and organic growth in the second half.

For the 12 months ended 30 June 2020, the company delivered a 306% increase in revenue to $58.2 million.  

Thanks to a notable increase in its margins, Uniti’s earnings grew at an even quicker rate. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $26.5 million. This compares to negative EBITDA of $0.9 million a year earlier.

Pleasingly, this EBITDA growth looks set to continue in FY 2021. At the end of the period, the company’s annualised underlying EBITDA run rate stood at $41 million.

Its performance in the new financial year will also be boosted by the $532 million acquisition of OptiComm. This acquisition is expected to complete in October and be 23% earnings per share accretive (inclusive of synergies).

If the OptiComm acquisition completes successfully, management expects to be operating on an EBITDA run rate of $90 million per annum.

Management commentary.

Uniti Group’s Managing Director and CEO, Michael Simmons, was pleased with its transformational year.

He commented: “FY20 has seen Uniti Group completely transform from a loss-making, fledgling start-up to a highly profitable, diversified and growing organisation, with the platform set for further marked expansion over the coming years.”

“Whilst we are pleased to have secured a number of materially accretive business acquisitions during FY20, what we are most proud of is that our team has delivered strong organic growth in the last 6 months, a period in which no new acquisitions were undertaken and the nation was (and remains) in the midst of dealing with the impacts of COVID-19 and with no financial contributions received from JobKeeper.”

“This is evidence that we are building a business with highly defensive qualities, capable of making strategic acquisitions, integrating them effectively, and delivering forecast earnings accretion, enhanced by organic growth,” he added.

Outlook.

No real guidance has been provided for FY 2021, but the company has spoken about its plans.

Management has suggested that its acquisitions could continue for its Consumer & Business Enablement business in FY 2021, subject to market and regulatory changes.

It also advised that it expects its Wholesales & Infrastructure business to continue to grow in FY 2021. This is based on strong contracted pipeline. It notes that there has been minimal slowdown in the construction of new projects since COVID-19. As a result, strong net active port growth is expected despite higher vacancy rates and expected delays in/lower settlements in the property sector.

The company also revealed that adjacent market opportunities will be actively pursued during the year.

More reading

• The Reliance share price is rocketing up despite drop in net profit. Here’s why.
• Why Afterpay, Bubs, Fortescue, & Zip Co shares are charging higher
• Austal share price flat despite solid FY20 results
• Cynata Therapeutics share price jumps 14% on COVID-19 trial
• Four companies that got crushed (and why you had to own them)

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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Qantas Airways Limited (ASX: QAN) has announced the removal of the role of Qantas International chief executive officer.

Tino La Spina, who currently serves in the role, will exit the company at the end of the month.

The lengthy ongoing downtime of international flights as a result of COVID-19 forced the company’s hand, according to group chief executive Alan Joyce.

“The COVID crisis is forcing us to rethink our business at every level. It’s increasingly clear that our international flights will be grounded until at least mid-2021 and it will take years for activity to return to what it was before.”

The responsibility for international operations will be handed to Qantas Domestic CEO Andrew David, who also looks after Qantas Freight.

International fleet will be idle for a while 

Joyce warned last week that the airline would concentrate on the domestic business before even thinking about re-starting its international routes.

Even the Australia–US flights, which are usually a bread-and-butter earner for the airline, would need to wait.

“The US, with the level of prevalence there is probably going to take some time. It will probably need a vaccine before we could see that happening,” he said.

“We potentially could see a vaccine by the middle or the end of next year and countries like the US may be the first country to have widespread use of that vaccine. So that could mean that the US is seen as a market by the end of 21, hopefully we could, dependent on a vaccine, start seeing flights again.”

La Spina spent 14 years at Qantas, also serving as chief financial officer.

“He’s a talented executive who brings his trademark enthusiasm to every challenge. I know I speak for the rest of the executive team and for the board in thanking him sincerely for the huge contribution he has made,” said Joyce on Monday.

Qantas last Thursday announced a $2.7 billion loss-before-tax. Its share price had since risen to rest at $3.90 over the weekend, before dropping to $3.82 in early trade today.

More reading

• Top brokers name 3 ASX shares to sell next week
• Should you buy ASX shares before or after reporting season?
• ASX 200 down 1%: Qantas results, Afterpay hits record high, Webjet crashes lower
• Qantas reveals routes that are busier now than before Covid-19
• Qantas demands national action to avoid horrible ‘cliff’

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 Senex Energy Ltd (ASX: SXY) share price is this morning edging higher after the oil and gas company reported production and earnings before interest, taxes, depreciation and amortisation (EBITDA) growth at the top end of upgraded guidance. At the time of writing, the Senex share price has risen 3.8% to 27 cents. Senex Energy is delivering on its promised transformation into a material east coast natural gas producer with considerable expansion in the works. 

What does Senex Energy do? 

Senex Energy is an oil and gas exploration and production company. It has a portfolio of onshore assets located in Queensland and South Australia. Senex has 16 oil fields in the Cooper Basin, Australia’s largest onshore oil and gas province. The company also holds around 2,000 square kilometers of gas acreage in the Surat Basin on Australia’s east coast. 

What’s moving the Senex share price? 

The Senex share price was boosted after the company reported a 73% increase in production which reached 2.1mmboe. Sales revenue increased 28% in FY20 to reach $120 million. Underlying EBITDA increased 51% to $53 million and operating cashflow was up 16% to $52 million. During the financial year, Senex Energy completed its $400 million Surat Basin gas development project. This means a platform is now in place to support material production expansion and acceleration from extensive gas reserves positions. 

CEO Ian Davies said, “Our success in FY20 sees Senex’s transformation to a diversified oil and gas producer now complete. We have a low-cost business model with a diversified asset portfolio and material acceleration and expansion growth.” 

With the onset of coronavirus, Senex Energy implemented protocols to mitigate the impacts of the pandemic. This ensured business continuity and uninterrupted operations throughout the critical period. Capital works programs continued on schedule. Action was also taken to streamline operations which will deliver material and ongoing cost savings. “Senex remains a highly cost competitive, agile, and scalable business well positioned to deliver on its growth strategy,” said Davies. 

What’s the outlook for Senex Energy? 

Senex Energy’s outstanding production performance in FY20 has reset expectations. The company is now targeting production of 3.6 – 4.1mmboe from its foundation asset base. This is an increase of half a million barrels compared to baseline guidance provided earlier this year. With an ongoing focus on operating and cost efficiencies, Senex Energy has maintained FY22 earnings and cashflow targets despite the lower commodity price outlook. 

The balance sheet remains strong with $80 million in liquidity at 30 June 2020. Deleveraging is underway with a targeted net cash position by the end of FY22. Davies commented, “After an incredibly successful year, Senex has unquestionably delivered the foundations to achieve a step change in annual production, cashflow, and earnings”.

The Senex share price has recovered nearly 108% since its March low but has fallen 22.9% in year-to-date trading.

More reading

• Why the Senex Energy share price climbed 17% in July

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 AMP Limited (ASX: AMP) share price is up this morning, following the resignation of 3 senior executives. Chair David Murray, CEO of AMP Capital Boe Pahari, and non-executive director John Fraser have all resigned from their positions following pressure from major shareholders.

AMP is embroiled in a storm over its internal culture, with media reporting allegations of sexual harassment and a culture of fear. 

Why the resignations? 

AMP has reported the resignations are in response to feedback by major shareholders regarding the appointment of Boe Pahari. Pahari was appointed as CEO of AMP Capital on 1 July 2020. The promotion was followed by widespread outrage by female employees of AMP, who called for the sacking of Pahari and cultural change across the business. Prior to his appointment, Barahi had been penalised $500,000 following a sexual harassment claim brought by a female subordinate who no longer works at the company

Harassment complaint

According to media reports, Pahari encouraged a culture of regular socialising and drinking at after work engagements. “If you didn’t go out with him you were ostracised in the business and in the office,” once source told the Australian Financial Review (AFR). “You are either in his good graces or his enemy; there is nothing in between,” said another.

According to the alleged victim of the 2017 harassment complaint, the executive said she made him look like a “limp dick” when she declined to use his credit card to buy clothes, and encouraged her to use Whatsapp to communicate to evade company scrutiny. An external investigation was conducted into the 2017 complaint, which resulted in the aforementioned settlement. 

CEO David Murray said:

The Board has made it clear that it has always taken the complaint against Mr Paharii seriously. My view remains that it was dealt with appropriately in 2017 and Mr Pahari was penalised accordingly. However, it is clear to me that, although there is considerable support for our strategy, some shareholders did not consider Mr Pahari’s promotion to AMP Capital CEO to be appropriate.

Pahari will resume work at his previous level with a focus on AMP Capital’s infrastructure business. 

Chair replaced 

As reports of the alleged harassment gained traction, shareholders took issue with Pahari’s promotion to one of the most powerful positions in AMP.

The AMP board is now dealing with the fallout of the decision to promote Pahari, with David Murray saying his resignation reflects his accountability as chair. He will be replaced by Debra Hazelton, who has some 30 years experience in financial services.

In light of Murray’s resignation, John Fraser also decided to resign as non-executive director. CEO Francesco De Ferrari will assume direct leadership for AMP Capital while a new head of the business is sought.  

More reading

• AMP to release sexual harassment details, won’t sack anyone
• Investors call for AMP Capital CEO’s head
• Why today is a great day to add to your ASX share portfolio
• ASX 200 drops 0.7%, Telstra falls 7.7%
• Earnings: AMP share price soars despite $107 million drop in profits

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 Bubs Australia Ltd (ASX: BUB) share price is pushing higher on Monday after the release of an update.

At the time of writing the infant formula and baby food company’s shares are up almost 4% to 96 cents.

What did Bubs announce?

Investors have been buying Bubs shares this morning after it announced a memorandum of understanding (MOU) with joint venture partner Beingmate.

According to the release, the MOU gives Bubs the opportunity to acquire an ownership interest in one of Beingmate’s infant formula manufacturing facilities in Beihai China and obtain Beingmate’s support in securing a State Administration for Market Regulation (SAMR) brand slot.

The ultimate objective of this will be producing Bubs China label goat milk infant formula at one of Beingmate’s registered facilities with 100% Bubs Australian goat milk.

The company advised that a finished SAMR approved China label product, tailored to the Chinese market, will be sold by Bubs to the Beingmate joint venture company – Bubs Brand Management Shanghai.

The joint venture company, of which Bubs owns a 49% interest, will continue to distribute the Bubs China label product into China’s general trade channel, under the terms of the existing agreement.

SAMR difficulties.

The company appears to believe this is the best chance that it will have of joining A2 Milk Company Ltd (ASX: A2M) in the China market.

It notes that since April 2019, 92 product applications have been successful in obtaining SAMR registration. Of these, 77 are manufactured in China.

The remaining 15 products that are manufactured outside of China, 9 are Chinese owned brands manufactured in France. The only international brand to achieve certification during this period was Wyeth for 6 products that are manufactured in Singapore.

Beingmate currently has 51 infant formula products under 17 brands successfully registered by SAMR and being sold nationwide in China.

In light of this, Bubs intends to withdraw its existing SAMR brand applications previously made by Deloraine, and resubmit differentiated super-premium formulations targeting consumers in tier-one cities.

Invaluable support.

Bubs Founder and CEO, Kristy Carr, commented: “We are highly confident this step up in our collaboration with Beingmate, one of the largest Chinese owned enterprises in China’s Infant Nutrition industry, who is also our Joint Venture distribution partner, coupled with their extensive capability to manufacture locally in China, will provide invaluable support in securing our SAMR brand registration.This will ultimately provide Bubs with a faster route-to-market and full access into China’s Mother and Baby stores.”

“Given the current geo-political landscape and regulatory risks, this breakthrough localisation strategy for a ‘Created by Bubs’ product to be packed in China exclusively from our own Australian premium goat milk mitigates key risks and provides a secure pathway to gaining full access to the world’s largest and fastest growing Infant Formula market, valued at A$55 billion,” she added.

More reading

• I’d buy this ASX share this week
• The smartest 7 ASX shares to buy if you have $2,000
• Should you buy the beaten down shares of Bubs and Webjet?
• 2 five-star ASX growth shares to buy in August
• 2 ASX shares you could invest $500 into

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 BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BUBS AUST 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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During earnings season many S&P/ASX 200 Index (ASX: XJO) shares have proven to be surprisingly resilient. The two sectors below have had to shoulder a lot of the financial burden of the coronavirus pandemic. For instance, banks have had to comply with the directives of the Australian Prudential Regulation Authority (APRA). Moreover, shopping centres have been bound by the mandatory code of conduct.  This situation is unique to Australia. 

Consequently, these ASX 200 companies are selling at absurdly cheap prices. However, there are signs that investors have begun to take advantage of them.

Shopping centres

Scentre Group (ASX: SCG) hit the news today due to a stand off with Mosaic Brands Ltd (ASX: MOZ) over rent. The ASX 200 REIT has shuttered all of the Mosaic brand stores in its centres. This reveals a few interesting facts. First, the industry is becoming increasingly hard-line in its opposition to turnover based rentals. Second, it is beginning to assert its right to make a profit for shareholders. In addition, I feel that investors also believe it is time to get the show on the road again.

For example, the Vicinity Centres (ASX: VCX) share price rallied by 5.98% on Friday. This tells me that investors are willing to spend money on bargain assets, even though there is still a long way to full recovery. The REIT posted an FY20 statutory loss of $1.8 billion due to devaluation of property. Consequently, it currently has a price-to-earnings (P/E) ratio of 4.6. In addition, the company has a net tangible asset (NTA) value of $2.29 per security. This is almost double its Friday closing price of $1.33.

One final piece of important information is the recent cancellation of its interim FY21 dividend. However, previously it had a trailing 12-month dividend yield at this price of 12.14%. A dividend that had grown this steadily by 10.6% per year on average.

Personally, I think Vicinity Centres is easily the best ASX 200 shopping centre share at its current price. Over a 3-year period, I believe this company will see a rise in share price and a reinstatement of the dividend.

An ASX 200 Bank

Suncorp Group Ltd (ASX: SUN) is Australia’s 6th largest bank based on total assets, on total deposits it ranks 8th. However, banking accounts for approximately 27.8% of its FY20 revenues, insurance services drive the remainder. This ASX 200 share booked a 32.8% decline in cash earnings. This was due to a reduction in insurance profits of 34% and banking profits down by 33.5%. The root causes of this were lower revenue from invested funds and coronavirus impacts to banking.

Yet, on Friday the company saw its share price rocket up by 11.05%. Again we see investors looking for bargains that appear to be too good to be true. Nevertheless, even with a reduction in cash earnings, its statutory net profit after tax was $913 million versus $175 million in FY19. This was due to an FY19 impairment for losses on the sale of its subsidiary Suncorp Life & Superannuation Ltd. While still lower than FY18, it is a lot better than expected.

As a diverse provider of financial services, Suncorp has several areas in which it can grow. This, to me, justifies a high price to earnings ratio of 22.81. Its full year dividend for FY20 dropped by 55%. Although understandably lower than the company’s previous trailing 12-month dividend yield of 7.25%, it still managed to deliver a full year yield of 3.7%.

I like this ASX 200 company for a couple of reasons. First, the company’s expense ratio, similar to an operating margin, is high and consistent. Second, the banking element is only 27.8% so it is not carrying as much of the financial burden of coronavirus unlike the 4 large banks. Third, the impact to insurance came principally from investment losses, not from higher payouts.  As such its risk management in underwriting seems to be about right. 

Foolish Takeaway

These are just two of the ASX 200 shares that investors are buying up while they are at historically low prices. In both cases, the underlying business remains strong, and in both cases the companies have recorded lower than expected damage from the pandemic. While everything can be impacted by a market-wide crash, ASX 200 companies see less share price volatility than smaller growth shares.

Last, and most importantly, buying these companies at a low entry price means higher dividend yields when they are reinstated fully. However, be quick to act. These shares are already starting to rise. 

More reading

• Boral cops $1.3bn body blow to profits could signal impending cap raise
• Are Webjet and other ASX travel shares taking off?
• Last week’s worst performing ASX shares
• Fortescue and 2 more ASX 200 shares to watch this week
• G8 Education share price on watch after $239 million loss

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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 Infomedia Limited (ASX: IFM) share price has fallen 2.2% lower this morning following the company’s release of its full year 2020 financial results. The Infomedia share price has recovered nearly 36% from its March low but is still 14.4% down for the year.

Infomedia is a technology services global developer and supplier of electronic parts catalogues and service systems to the global automotive industry. In addition, Infomedia provides information management and analysis solutions for the Australian automotive and oil industries.

Why is the Infomedia share price on watch?

Investors are selling down the Infomedia share price this morning after the company recorded full year revenues of $94.6 million during FY 2020, a 12% increase over the prior year. This however, was a slowdown on the 16% annual revenue growth achieved during FY 2019.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at $46 million. That was up very strongly by 21% on the prior corresponding period. Meanwhile, net profit after tax (NPAT) grew solidly by 15% to $18.6 million, while cash EBITDA grew by 11% to $21.3 million for FY 2020.

Infomedia ended the financial year in a reasonably solid financial position. Cash and cash equivalents amounted to $103.9 million as at 30 June 2020. However, it should be pointed out that $83.9 million was raised from an institutional placement and share purchase plan during May.

Infomedia Ltd CEO, Mr Jonathan Rubinsztein said:

…In the first half, we benefited from the completion of the rollout of a global contract, a strong cadence of sales across each of the regions, and the progressive development and successful early stage pilots of our Next Gen parts and service platforms.

COVID-19 associated restrictions have resulted in delayed revenue in each of our regions. However, the period has also delivered positive outcomes, including deeper customer relationships and increased focus on leveraging technology and data insights in global automotive aftersales; revenue will follow the current build of contracted sales.

Market outlook and dividend

Infomedia believes that it is well placed to emerge from the challenges of FY 2020, brought on by the pandemic, in a stronger overall position. Pleasingly, Infomedia noted that stronger customer engagement was back for the company during June and July. Also, its current backlog of dealer based and large manufacturer contracts are anticipated to be rolled out later in 2021.

However, pandemic restrictions are anticipated to delay converting some sales opportunities to revenues. Softer revenues experienced during the fourth quarter are anticipated to continue during the first half of FY 2021. Also, COVID-19 restrictions are slowing down efforts to close some international acquisitions currently in Infomedia’s pipeline. As a consequence, Infomedia decided not to provide FY 2021 revenue guidance. However, the tech company believes it is well positioned to grow solidly over the medium term.

Mr  Rubinsztein added: “COVID-19 associated restrictions have resulted in delayed revenue in each of our regions. However, the period has also delivered positive outcomes, including deeper customer relationships and increased focus on leveraging technology and data insights in global automotive aftersales; revenue will follow the current build of contracted sales”.

Infomedia declared a final dividend of 2.15 cents per share, partially franked. This brought the total dividend for FY 2020 for Infomedia to 4.3 cents. That was a 10% increase on the prior year.

At the time of writing, the Infomedia share price has edged lower to $1.78. As mentioned, whilst the Infomedia share price has recovered significantly from the March bear market, it is still trading 28.2% lower than its 52-week high.

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Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Infomedia. 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 Boral Limited (ASX: BLD) share price is under the spotlight this morning with its new chief executive taking a broom to its balance sheet.

The building materials supplier announced it will take a pre-tax impairment charge of $1.3 billion against its full year results.

Most of this relates to Boral’s disastrous US expansion under its former CEO Mike King.

3 key takeaways from the billion-plus impairment

The new head honcho, Zlatko Todorcevski, is wasting no time in clearing some very big cobwebs as his feet has only been under the deck for less than two months.

More than 90% of the impairment amount relates to assets within Boral North America including goodwill, intangible assets and Boral’s investment in the Meridian Brick joint venture.

The move is noteworthy for three reasons (outside the obvious impact to Boral’s bottom line). First, I have to wonder if Boral is setting the scene for a capital raising when it officially releases its full year profit results on 28 August (more on its results below).

Cap raise on the cards?

This downgrade stands in contrast to a surprising recent surge in US housing activity and the upbeat quarterly update from its peer James Hardie Industries plc (ASX: JHX).

Write-down casts long shadow over sector

Boral’s billion-plus impairment included a $123 million charge relating to it Australian operations. Management justified the decision by pointing to the significant decline in housing construction, particularly in New South Wales.

It also highlighted the slower pace of infrastructure construction than previously expected and weak construction activity in Western Australia and the Northern Territory.

This dour assessment could weigh on sentiment towards other stocks exposed to these markets. These includes the CSR Limited (ASX: CSR) share price, Lendlease Group (ASX: LLC) share price and GWA Group Ltd (ASX: GWA) share price, just to name a few.

Boral’s FY20 results early release

Boral also effectively pre-released its FY20 results, which will officially be announced this Friday. Management said that underlying FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) will range between $820 million and $825 million.

Underlying net profit will come be at $175 million to $180 million and both figures exclude significant items like the write-down.

While the impairment is non-cash, don’t expect the group to pay a dividend. Management canned the idea of a final dividend payment after it paid an interim dividend of 9.5 cents in April.

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Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with me on Twitter @brenlau.

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 Fortescue Metals Group Limited (ASX: FMG) share price is pushing higher after the release of its full year results.

At the time of writing the iron ore producer’s shares are up 2% to $18.36.

How did Fortescue perform in FY 2020?

Fortescue certainly was on form in FY 2020 and delivered record shipments, revenue, earnings, and cashflow over the 12 months. Management advised that this reflects the successful execution of its integrated operations and marketing strategy, and strong customer demand.

For the 12 months ended 30 June 2020, Fortescue posted a 29% increase in revenue to US$12,820 million. This was driven by shipments of 178.2 million wet metric tonnes and a 21% lift in its average realised price to US$78.62 a tonne.

And combined with a small decrease in its C1 costs to US$12.94 per tonne, its earnings grew even quicker. Fortescue’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 38% to US$8.4 billion.

On the bottom line, the mining giant’s net profit after tax lifted 49% to US$4.7 billion or US$1.54 (A$2.29) per share.

Bumper dividend for shareholders.

Fortescue continued to generate strong underlying cashflows during the year. Net cash from operating activities came in at US$6.4 billion, up 47% on FY 2019’s result.

Together with its strong balance sheet, this allowed the Fortescue board to declare a fully franked final dividend of A$1.00 per share. Combined with its interim dividend of 76 Australian cents per share, Fortescue has increased its full year dividend by 54% to A$1.76 per share in FY 2020. This represents a 77% payout ratio of FY 2020 net profit after tax, which is consistent with its policy of a payout ratio of 50 to 80% of net profits.

To be eligible for this dividend, investors will need to own its shares before the ex-dividend date of 31 August. It will then be paid to eligible shareholders on 2 October.

FY 2021 guidance.

In FY 2021 the company is expecting a similar level of iron ore shipments. It has provided guidance of 175 to 180 million tonnes.

It is also forecasting flat to marginally higher costs of US$13.00 to US$13.50 per tonne. This is based on an exchange rate of 70 U.S. cents.

Capital expenditure is forecast to be US$3 billion to US$3.4 billion. This is inclusive of US$1 billion of sustaining, operational, and hub development capital, US$140 of exploration expenditure, and US$1.9 billion to US$2.3 billion for major projects. The latter includes its Eliwana, Iron Bridge, and Energy projects.

More reading

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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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