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Mesoblast limited (ASX: MSB) shares rocketed 39.1% higher on Friday to pare back last week’s losses. But after roaring back to life, is the Mesoblast share price back in the buy zone?

What happened to the Mesoblast share price last week?

It was a rollercoaster ride for investors last week as regulatory approvals dominated Mesoblast’s share price movements.

That kicked off on Tuesday with a briefing note from the United States Food and Drug Administration (FDA). The regulator noted concerns about the effectiveness of the company’s remestemcel-L treatment, Ryoncil, for paediatric steroid-resistant acute Graft Versus Host Disease (aGVHD).

It was an important signal ahead of the company’s pivotal meeting with the US Oncologic Drugs Advisory Committee (ODAC) on Thursday.

The disappointing note from the FDA triggered a sell-off that saw Mesoblast shares fall 37.0% lower in just two days.

However, contrary to expectations, ODAC voted 8 to 2 in recommending the treatment’s approval. That’s a good sign for the Aussie biotech company with a decision on the final FDA approval expected by the end of September.

The decision took many investors by surprise and triggered a 39.1% rally in the Mesoblast share price to $4.70 per share at Friday’s close.

Is the Aussie biotech in the buy zone?

Clearly, speculators who rolled the dice after the heavy share price falls have done well.

However, if you’re a long-term investor like myself, you should really be buying and holding for decades to come.

I personally like Mesoblast shares and their future prospects. The company has some promising treatments in Phase 3 trials including Ryoncil for aGVHD.

I think Friday’s share price rally just puts Mesoblast shares back to their initial intrinsic value.

If you’re a big believer in the biotech industry, I think Mesoblast is a good option. The key with biotech companies is a strong research and development pipeline coupled with positive momentum.

Mesoblast appears to have both of these factors which makes the future outlook strong. Of course, there will be more speed bumps along the way.

If you’re looking for less growth and a more mature company profile, I think CSL Limited (ASX: CSL) shares could be another strong biotech buy.

More reading

• Take a look at last week’s best performing ASX shares
• ASX 200 rises 0.6%, Mesoblast soars
• Why I’d buy today’s CSL share price over Mesoblast
• Why Baby Bunting, Evolution, Mesoblast, & Xero shares are zooming higher
• ASX 200 up 0.3%: NAB Q3 update, Mesoblast rockets, Newcrest guidance disappoints

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL 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.

The post Up 230% in a year! Is the Mesoblast share price a buy? appeared first on Motley Fool Australia.

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The Santos Ltd (ASX: STO) share price has been hit hard in 2020 while Woodside Petroleum Limited (ASX: WPL) shares have also slumped.

An oil price war and coronavirus pandemic have hammered the ASX energy shares lower. However, there are a couple of reasons why I prefer one big producer over the other.

Why I like the Santos share price over Woodside

For starters, the relative valuation metrics seem to point to Santos over Woodside right now. I’m particularly interested in the price-to-earnings (P/E) ratio.

Given the current market conditions, a P/E ratio can be a little misleading or unreliable. However, I think it still has some value when comparing two companies in the same industry.

The Santos share price trades at a P/E of 12.9 compared to 39.9 for Woodside. That to me says there’s a chance of more bang for your buck with Santos.

Both of these companies are enormous independent oil and gas producers, with Woodside ranked first and Santos ranked second.

That means we should see a large earnings hit for both producers in August. Woodside has already announced a record A$4.37 billion after-tax impairment loss thanks to falling energy prices.

Santos also announced a non-cash impairment charge of US$700-800 million (A$975-1,115 million).

That means the relative August earnings strength could be the key to deciding which ASX energy share to buy.

The Santos share price has slumped 29.4% in 2020 and is down 36.1% from its 52-week high.

It’s a similar story for Woodside with the ASX energy share falling 40.7% in 2020. Woodside shares are now down 43.6% from their 52-week high.

I think Woodside is arguably more of a speculative buy than Santos given the heavier falls. The fundamentals remain similar but Woodside could have more upside given its larger operations.

Given the expected volatility, I still think the Santos share price could be a better relative value buy as it currently stands.

Foolish takeaway

With travel and manufacturing activity remaining muted, I still see pain ahead for the Woodside and Santos share prices.

However, long-term investors willing to ride the storm could benefit to the upside when energy demand returns.

More reading

• 5 things to watch on the ASX 200 on Monday
• AGL share price fall a warning for the LNG sector
• 5 things to watch on the ASX 200 on Friday
• Woodside share price edges lower on half year results
• 5 things to watch on the ASX 200 on Thursday

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 Viva Energy Group Ltd (ASX: VEA) share price is up by 4.14% this morning after a reported 32.6% fall in profits for the half year ending 30 June 2020.

COVID-19 restrictions have had a significant impact on demand for fuel, which has impacted Viva’s bottom line. Viva supplies approximately one quarter of Australia’s liquid fuel requirements and travel restrictions mean demand for both automotive and aviation fuels has been in decline. 

What did Viva Energy report? 

Viva Energy reported fuel sales were impacted by border closures and ‘stay at home’ restrictions. Total sales volumes were down 10.5% on 1H2019, although did improve in May and June as restrictions eased. During 1H2020, sales of jet fuel have fallen by as much as 75% due to closures of domestic and international borders. Diesel sales were less affected throughout this period as a result of continued economic activity and a strong agricultural season. 

Despite these significant impacts, non-refining earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by more than 14% over the half due to improvement in retail fuel margins and relatively strong performance in non-aviation commercial segments.

CEO Scott Wyatt said, “The diversity of our retail and commercial business has provided resilience in extraordinary circumstances and we are well positioned to deliver further growth as restrictions continue to ease and the economy recovers.” 

Refining business struggles 

The refining business has been challenged in 2020 with oil markets and refining margins impacted by global events. As a result, the Geelong refinery moved to reduce production and bring forward major planned maintenance in April. While Viva believes this produced a superior outcome compared to a full shutdown over the period, the refinery nonetheless recorded losses of $49.4 million in 1H2020.

Refining margins are expected to remain uncertain as demand recovers over the remainder of 2020 and 2021. Viva has acknowledged that the operating losses of this part of the business are unsustainable. It is assessing the short and long term viability of this part of the business and has vowed to provide regular updates on refining performance. 

Profits and dividends 

The drop in sales volumes flowed through to profits, with underlying net profit after tax (NPAT) falling 32.6%. Nonetheless, the balance sheet remains robust with a net cash position of $480.9 million. This follows the divestment of the company’s stake in the Viva Energy real estate investment trust (REIT) earlier this year.

Taking this into account, Viva has maintained a dividend for 1H2020 with a payout ratio of 60% of distributable NPAT. It also intends to return all remaining proceeds from the divestment of the Viva Energy REIT to shareholders via a capital return and special dividend. 

At the time of writing, the Viva Energy share price is up 4.14% to $1.88 per share.

More reading

• Viva Energy share price surges 5% following business update

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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There have been a few interesting pieces regarding ASX shares in the news lately. One of them in The Australian is about companies paying dividends while receiving JobKeeper payments. The payments were to be passed onto employees to preserve their jobs. Thus, helping companies to press pause during the coronavirus pandemic.

In most cases, without the pandemic payments, thousands, if not millions, of people would have lost their jobs before dividends would have been sacrificed. This is part of a director’s fiduciary responsibility in Australia, punishable by law. However, and more importantly, it has highlighted just how fragile the economy is, and how close to the precipice we are.

Counter-intuitively, I believe this makes August is a great time to invest, before the subsidy finishes in September. However, investments need to be chosen with care. Consequently, if I were entering the market with $10,000 in August, these would be my carefully targeted choices.

An ASX share for short term credit

Managing cash flow is going to become more important for Australia’s small to medium enterprises (SME). As JobKeeper fades away in most parts of Australia, the impact of reduced revenues is likely to bite. While this may see unemployment lines grow, many companies will seek to smooth out cash flow as they return to normal.

One ASX share I have been watching in the short term credit space is CML Group Ltd (ASX: CGR). CML Group provides SME debtor funding via a range of mechanisms. The largest revenue earner for this company is invoice finance. This is where a company takes an invoice as security, and then provides funding for 80-90% of the invoice. It then receives the full amount of the invoice when it is paid.

It has other financing mechanisms, some of which are quite innovative, but this is of greatest interest to me. The company recently acquired a software as a service (SaaS) website, Skippr. This platform allows CML to develop a closer and more long term relationship with its SME customers.

I would invest $2,000 in CML Group. It is a small cap company worth only $76.15 million. At the time of writing it pays a trailing 12 month dividend of 6.86%.

SME Business loans

Another ASX share in a similar space is Tyro Payments Ltd (ASX: TYR). Although Tyro payments is generally known as an EFTPOS provider, it also provides short term credit solutions. The company has a business loan facility for up to $100,000 for first time SME’s, and $120,000 for subsequent loans. 

Moreover, Tyro has been selected as a loan provider under the SME Guarantee Scheme. This means the government will guarantee 50% of new loans issued by eligible lenders. The initial phase of the scheme remains available until 30 September 2020. Then, the second phase will run until 30 June 2021.

I would invest a further $4,000 in Tyro Payments. The loan capability is only one element of this company. I believe it has a long runway in front of it.

ASX shares in real estate

I have become increasingly focused on REITs to build larger income streams in my portfolio. One of these I have been researching a lot is Abacus Property Group (ASX: ABP). This REIT invests in real estate sectors that fortunately have little exposure to the coronavirus. Moreover, it is likely to remain prosperous as JobKeeper is reduced. 

The Abacus portfolio consists of 50.6% in office buildings, 34.4% in storage space, 6.8% in small convenience shopping centres, and about 8.2% in non-core assets. All of these have proven resilient. For example, offices have long leases and are leased by blue chip companies. Furthermore, convenience retail stores largely stayed open during the lock down. 

However, it is the self storage sector that I find interesting. Abacus has begun to show a growing interest in accumulating storage assets. Recently it increased its holding in rival ASX share National Storage REIT (ASX: NSR) to 8.09%.

What this means is that it has a more predictable, annuity style revenues. Offices and retail centres always require value adding to retain customers. Self storage does not. This market is dominated by small businesses and lone entrepreneurs. Hence, there is a lot of room for a focused company to consolidate assets. 

I would invest the last $4,000 in Abacus Group. With a low price-to-earnings (P/E) ratio of 10.5, the company has the potential to grow further. Moreover, Abacus has a very healthy trailing 12-month dividend yield of 6.8%.

Foolish Takeaway

Now is the time to prepare for a world with diminishing support from JobKeeper. While it will remain in selective circumstances, it will start to be withdrawn. In my view, the ASX shares that will benefit will be those that can stand alone without it, and those providing short-term credit.

More reading

• 3 excellent ASX dividend shares you can buy right now
• MoneyMe share price surges, but is it sustainable?
• 3 dirt cheap ASX real estate shares
• 3 ASX shares that could make you rich
• Why Adairs, Coles, Kogan, & Tyro shares are storming higher

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia 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 Bendigo and Adelaide Bank Ltd (ASX: BEN) share price has dropped by 4.86% in early trade after the Aussie bank reported a 48.8% slump in net profit after tax (NPAT).

Why is the Bendigo and Adelaide Bank share price falling?

Australia’s fifth-largest retail bank reported its earnings for the full-year ended 30 June 2020 (FY20).

While NPAT fell 48.8% lower to $192.8 million, cash earnings also slumped 27.4% to $301.7 million.

The group’s net interest margin (NIM) compressed 3 basis points (bps) to 2.33%. Total income on a cash basis climbed 0.9% from FY19 numbers to $1.61 billion.

Total lending climbed 5.1% to $65.3 billion with total deposits up 5.7% to $67.7 billion.

The bank’s consumer banking division outperformed with strong growth in retail lending totalling $3.1 billion. Lending applications jumped 50.3% with settlements up 18% on FY19.

Agribusiness lending climbed 1.3% despite a “challenging” year for Aussie agriculture with loan book growth supporting a higher NIM.

Bendigo’s business lending fell 6.7%, despite growing in the second half of the year thanks to Commercial Property Lending.

Operating expenses jumped 7.0% to $1.02 billion with a cost to income ratio up 350 bps to 62.7%.

Bad and doubtful debts (BDD) climbed to $168.5 million including a coronavirus collective provision of $127.7 million.

Excluding COVID-19 impacts, BDD comprised 8 bps of gross loans with the COVID-19 impact boosting that to 18 bps.

The Bendigo and Adelaide Bank share price has slumped following this morning’s announcement, which included a 33 bps increase in the bank’s common equity tier 1 (CET1) ratio to 9.25%.

The bank deferred its decision on a final dividend given the current uncertainty. 

Managing Director and CEO Marnie Baker noted the impact of COVID-19, record low interest rates and investment costs. Those factors weighed on earnings and forced a strategy change in FY20.

FY21 outlook

Management said market conditions “remain challenging” and couldn’t provide meaningful guidance for this financial year.

Foolish takeaway

The Bendigo and Adelaide Bank share price is down 31.49% for the year prior to this morning’s open. That’s a significant underperformance against the S&P/ASX 200 Index (ASX: XJO) which is down 8.4% in 2020.

The ASX bank share is worth watching as investors take in the latest results.

More reading

• Take a look at last week’s worst performing ASX shares
• Take a look at last week’s best performing ASX shares
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week

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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Despite the ongoing economic uncertainty created by the COVID-19 pandemic, there are many ASX technology companies that are growing rapidly to meet the demands of an evolving workforce. One such company is cloud-based communications platform developer Whispir Ltd (ASX: WSP). The Whispir share price has soared recently – up close to 90% since the beginning of July – after the company reported strong results for the June quarter.

The quarter brought record growth in net new customers, with the total number of customers increasing by 72 to 630 by 30 June. Annualised recurring revenues jumped 35.7% year on year to $42.2 million, while cash receipts were up 36.5% to $11.3 million. Prudent cost-cutting also meant that net cash used in operating activities was just $0.1 million during the quarter.

These were excellent results in challenging market conditions, and meant the company was on track to meet all of the key FY20 financial metrics outlined in its 2019 prospectus.

What does Whispir do?

Whispir is a software-as-a-service (SaaS) company that develops integrated communications platforms for corporate clients. It provides a central platform from which its customers can create customisable templates for email, web and social media communications, as well as manage workflows and drive insightful reporting.

The company has adapted its product offering to meet the unique demands businesses have faced during COVID-19. It has developed templates clients can use to keep their stakeholders updated on their operations throughout the pandemic. It has now also rolled out additional templates designed to manage return-to-work scenarios as lockdown restrictions ease across the country.  

As an example, the company reported that one of its clients, Mt Buller Ski Resort, had been using Whispir’s platform and its communications templates to manage its contact tracing requirements.

Why I think the Whispir share price is a buy

Despite the recent rally in the Whispir share price, it remains a relatively small company with a market capitalisation of just over $400 million. The underlying business is still gathering momentum, with net new customer numbers increasing quarter on quarter.

A high proportion of its annualised revenues are also coming from recurring sources. These more reliable income streams give the company greater freedom to manage expenditures and budget more accurately.

Whispir also has a healthy balance sheet, with cash and equivalents totalling $15.2 million as at 30 June 2020. This means it has the cash on hand to pursue expansion opportunities, as well as ride out any short-term market volatility.

In my view, all this means that the Whispir share price is well-positioned to deliver sustainable growth over the longer term.

Alongside other under-the-radar ASX software companies like Objective Corporation Limited (ASX: OCL) and MNF Group Ltd (ASX: MNF), Whispir is shaping up as one of the success stories to come out of the COVID-19 ‘new normal’.

More reading

• 4 exciting small cap ASX shares to watch closely
• Could these exciting ASX shares be future stars?
• These soaring tech shares are making savvy investors rich
• Are these small cap ASX shares future stars?
• Why Sezzle and these ASX shares recorded huge gains in July

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 and recommends Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Objective Limited. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended Whispir 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 Lynas Corporation Ltd (ASX: LYC) share price won’t be going anywhere today after requesting a trading halt.

The rare earths producer requested the trading halt following the release of its full year results and the announcement of a major equity raising.

FY 2020 results.

For the 12 months ended 30 June 2020, Lynas delivered revenue of $305.1 million and earnings before interest, tax, depreciation, and amortisation (EBITDA) of $59.8 million. This was a 16% and 40.6% decline, respectively, year on year.

Management advised that this weak result was caused by temporary production halts and weak market conditions during the year.

Also falling heavily was its cash flows from operating activities. They came in at $32.1 million, down from $104.1 million in FY 2019. Though, things would have been worse had it not been for the company’s focus on cost management during the year.

This left Lynas with a cash balance of $101.7 million at the end of FY 2020.

Lynas CEO and Managing Director, Amanda Lacaze, commented: “Our company entered the COVID-19 pandemic in robust financial shape, as a result of a number of years of prudent capital management. However, our FY20 financial performance has been affected by the COVID-19 related shutdown as well as lower market prices and the temporary production halt in December after we reached the annual concentrate processing limit for calendar year 2019.”

“While this was disappointing, we have built a resilient business and despite the lower market pricing, our performance in quarters not affected by the production halts remained strong. This resilience was also shown in the way our people quickly adapted to new ways of working and new COVID-19 protocols to protect the health and wellbeing of all staff,” she added.

Equity raising.

In addition to its results, Lynas has announced a fully underwritten equity raising to raise approximately $425 million.

Lynas is raising the funds via a 1 for 7.7 pro-rata accelerated non-renounceable entitlement offer and institutional placement at an issue price of $2.30 per share. This represents an 11.9% discount to last close price.

Proceeds from the equity raising will be used to fund major projects that are expected to be delivered in 2023 and will be essential steps towards the Lynas 2025 growth vision. These include the planned Kalgoorlie Rare Earth Processing Facility and associated upgrades at the Lynas Malaysia Plant.

CEO Amanda Lacaze commented: “The Lynas 2025 growth vision announced in May 2019 is an exciting opportunity to transform our business and grow with our key markets. Advanced manufacturing supply chains need Rare Earths and COVID-19 has brought into sharp focus the need for resilient and diversified supply chains.”

“Lynas is ideally placed to meet this need as we are a proven and profitable operation and the only significant producer of separated Rare Earths outside of China. By strengthening our balance sheet, we can mitigate global economic uncertainties and continue to progress our foundation project which is the Kalgoorlie Rare Earth Processing Facility. This facility provides the opportunity to develop a Critical Minerals processing hub in the Goldfields. The project has received strong support from the Kalgoorlie-Boulder City Council, Western Australian and Australian governments,” she concluded.

More reading

• Why the rise of electric vehicles could benefit ASX mining shares
• ASX 200 Weekly Wrap: Surging commodity prices snap ASX 200’s losing streak
• These were the best performing ASX 200 shares last week
• Why this ASX miner that’s missing the rally is one of my key picks for FY21
• Lynas share price lifts 10% on signing of US Department of Defense contract

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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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:

• Myer Holdings Ltd (ASX: MYR) remains the most shorted share on the Australian share market with 12% of its shares held short. The department store operator continues to be targeted by short sellers who appear to believe the shift to online shopping will accelerate its structural decline.
• Webjet Limited (ASX: WEB) has seen its short interest spike to 12%. A recent rebound in the Webjet share price appears to have caught the eye of short sellers. Especially given how recent border closures have hit the domestic travel market recovery hard. Webjet releases its results this week.
• Speedcast International Ltd (ASX: SDA) continues to have short interest of 11.7%. The communications satellite technology provider’s shares have been suspended since February while it declares itself bankrupt. Last week it made progress and announced that it has received a US$395 million equity commitment to complete its chapter 11 recapitalisation.
• Inghams Group Ltd (ASX: ING) has 10.2% of its shares held short, which is up week on week once again. Short sellers appear to believe a disappointing result is coming from the poultry company due to rising input costs and an unfavourable sales mix.
• Orocobre Limited (ASX: ORE) has seen its short interest push higher week on week again to 8.9%. The lithium miner continues to be a favourite of short sellers due to an oversupply of the battery making ingredient and weak demand.
• InvoCare Limited (ASX: IVC) has entered the top ten with short interest of 7.9%. Investors appear concerned that the funeral company may struggle during the pandemic from social distancing restrictions.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has seen its short interest remain flat at 7.8%. This may be in relation to the impact lockdowns are having on demand for its SCENESSE product. This product is used to prevent skin damage from the sun in people with erythropoietic protoporphyria.
• FlexiGroup Limited (ASX: FXL) has seen its short interest fall week on week to 7.8%. Short sellers remain unsure about the financial services company’s overall prospects despite its growing BNPL business.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest fall slightly to 7.7%. A series of better than feared updates out of the banking sector may have led to some short sellers closing positions.
• Zip Co Ltd (ASX: Z1P) has short interest of 7.5%, which is down notably week on week. Some short sellers may be closing their positions ahead of its full year results this month. If history is a guide, a strong result could lead to its shares rocketing higher.

More reading

• Can these two ASX buy now, pay later companies become the next Afterpay?
• 5 things to watch on the ASX 200 next week
• Should you invest in Splitit shares?
• Is the Bank of Queensland share price a better buy than Bendigo and Adelaide Bank?
• Is the Afterpay share price a buy?

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended FlexiGroup Limited and InvoCare 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 Beach Energy Ltd (ASX: BPT) share price is one to watch this morning after narrowly missing its full-year production guidance.

What were the key takeaways?

Revenue for the year ended 30 June 2020 (FY20) fell 17% from the prior corresponding period (pcp) to $1,728.2 million.

Beach had more than $600 million in sales gas and ethane revenues with more than 99% of gas sold under contract.

FY20 production fell 9% to 26.7 million barrels of oil equivalent (MMboe), below the 27-28 million MMboe guidance range. The Aussie energy group drilled 178 wells with an 81% overall success rate during the year.

FY20 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 19% to $1,108 million. Beach’s underlying EBITDA margin fell 400 basis points to 67%.

Net profit after tax (NPAT) slumped 13% lower on pcp to $500.8 million while underlying NPAT fell 18% to $461.0 million.

The Beach Energy share price is down 41.5% to $1.48 per share in 2020 prior to this morning’s open.

Net tangible asset backing jumped to $1.19, up from $1.02 per share in FY19. Net cash slumped 71% to $50 million but Beach did announce a final dividend.

Beach Energy paid out $45.6 million in dividends, unchanged from FY19, which translated to a 1.0 cents per share (cps) payment.

Combined with a 1.0 cps interim dividend, the Aussie energy group paid a 2 cps total dividend for FY20.

The Aussie energy group reported organic 2P reserves replacement above 200% for three straight years.

2P reserves increased by 8% from 326 MMboe to 352 MMboe during the year with 2P reservees life increased from 12.4 years to 13.2 years.

New rig contract

The Beach Energy share price is worth watching after the energy group reported a new offshore drilling agreement with Diamond Offshore General Company this morning.

The agreement will use the Ocean Onyx Semi-submersible rig to undertake Beach’s Victorian Otway offshore drilling program.

The agreement provides for the drilling of up to 9 wells (6 firm with 3 options) with operations expected to start between December 2020 and March 2021.

A new settlement agreement was also signed to dismiss all current legal proceedings with Diamond.

Outlook for Beach Energy share price

The group has reduced planned capital expenditure for FY21 by 30% with an expected slowdown due to the coronavirus pandemic. 

Production is expected to be 26.0-28.5 MMboe with capital expenditure of $650-750 million.

Underlying EBITDA is expected to fall by 10-20% to $900-1,100 million.

Beach reported a 5-year outlook with production on track to deliver 37-43 MMboe in FY25.

The Beach Energy share price is one to watch as management reduced its growth outlook based on COVID-19 and the expenditure deferral.

Beach’s 5-year free cash flow outlook has been revised from $2.7 billion to $2.1 billion based on a lower oil price assumption.

More reading

• The next battle facing these ASX stocks will come from within
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
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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 Kogan.com Ltd (ASX: KGN) share price is dropping lower on Monday following the release of its full year results.

At the time of writing the ecommerce company’s shares are down 3% to $21.12.

How did Kogan perform in FY 2020?

For the 12 months ended 30 June 2020, Kogan reported gross sales of $768.9 million, up 39.3% on the prior corresponding period. From this, revenue came in at $497.9 million, up 13.5% year on year. A key driver of this growth was the shift to online shopping during the pandemic, which led to a 35.7% increase in its active customer base to 2,183,000.

Thanks to a 4.7 percentage point increase in the company’s gross margin to 25.4%, Kogan’s gross profit increased 39.6% to $126.5 million. This margin expansion was underpinned by the growth in commission-based or seller-fee-based revenue across new verticals and Kogan Marketplace.

Also growing strongly was its adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA). Despite a big investment in marketing, Kogan reported a 57.6% increase in adjusted EBITDA to $49.7 million. And on the bottom line, the company reported a 55.9% increase in net profit after tax to $26.8 million.

In light of this strong form, Kogan declared a fully franked final dividend of 13.5 cents per share. This was up 64.6% on the prior corresponding period and brings its full year dividend to 21 cents per share.

What were the drivers of Kogan’s growth?

Kogan successfully delivered growth across its business in FY 2020. The Kogan Marketplace was arguably the highlight, with its second half sales growing 71.2% on the first half.

This was supported by Exclusive Brands revenue and gross profit growth of 26.4% and 43.7%, respectively, for the year. Also performing strongly were the Kogan Internet and Insurance businesses. Kogan Internet reported a 90.9% increase in customer numbers and the Kogan Insurance business grew commission-based revenue by 36%.

The laggard in the group was its Third-Party Brands segment, which reported gross profit growth of 3.3% for the year.

Retail revolution.

Ruslan Kogan, Founder & CEO of Kogan.com, revealed that the company is experiencing some very positive trends. 

He said: “There is a retail revolution taking place as more and more shoppers learn about the benefits of eCommerce. We’re seeing record numbers of first time customers, who then go on to make repeat purchases at a 40% faster pace than previously.”

“For us this is a very exciting trend that shows that once customers learn about shopping online, they change their ongoing behaviour. Once someone discovers the benefits of online shopping, I struggle to see why they would ever go back to the old way of doing things. After almost 15 years of preparation, the revolution occurring in retail represents a significant opportunity for Kogan.com,” he added.

Outlook.

Kogan isn’t resting on its laurels and notes that “there is always more that we can do and new ways we can delight our customers.”

In light of this, it intends to further develop and enhance the Kogan Marketplace, grow its Active Customer base by investing in its platform, expand its Exclusive Brands and Third-Party Brands product divisions, and review ongoing acquisition opportunities.

No guidance will be given for the year ahead. Instead it plans to provide regular business updates during the year.

Speaking of which, in July Kogan achieved unaudited gross sales growth of over 110% and gross profit growth of over 160%. In addition, monthly adjusted EBITDA was more than $10 million in July, which compares very favourably to FY 2020’s entire adjusted EBITDA of $49.7 million.

More reading

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• How to find the rare ASX retail share winners
• 4 ASX shares to buy now for a post-coronavirus world
• Can the Kogan share price keep going?
• ASX reporting season reveals some upside surprises

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 Kogan.com ltd. The Motley Fool Australia has recommended 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.

The post Kogan share price lower despite stunning FY 2020 growth appeared first on Motley Fool Australia.

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