Tag: Motley Fool

The NIB Holdings Limited (ASX: NHF) share price is rebounding on Tuesday after a selloff yesterday.

At the time of writing, the private health insurer’s shares are up 3.5% to $7.26.

Why is the NIB share price charging higher?

Investors have been bidding the NIB share price higher today after a leading broker suggested that Monday’s weakness was a buying opportunity.

According to a note out of Citi, its analysts have upgraded NIB’s shares to a buy rating with a $7.85 price target.

Based on where its shares are currently trading, this implies potential upside of 8.1% for investors over the next 12 months.

Citi also now expects a fully franked 28 cents per share dividend in FY 2023, which equates to a 3.9% yield, boosting the total potential return to approximately 12%.

While Citi acknowledges that NIB’s first-half result was below expectations, it remains positive due to its above-system growth in the core ARHI segment.

What else are brokers saying?

Elsewhere, the team at Ord Minnett has also upgraded NIB’s shares. Albeit to a hold rating with a $7.00 price target.

Finally, over at Morgans, its analysts have retained their hold rating with a reduced price target of $7.55. It saw positives and negatives from the result. The broker commented:

We would summarise this result as a headline miss, with the lower than expected ARHI net margin (8.6% versus 10.6% in the pcp) raising some concerns about the potential speed of future profit normalisation in this business. But, we think those concerns shouldn’t completely overshadow what was a sound 1H23 underlying business performance, highlighted by 9%-13% revenue and NPAT growth on the pcp respectively.

The post Is the NIB share price a bargain buy following Monday’s dive? appeared first on The Motley Fool Australia.

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More reading

• Why A2 Milk, BlueScope, NIB, and Pilbara Minerals shares are dropping today
• NIB share price tumbles 10% despite higher profit and bolstered dividend

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended NIB Holdings. 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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Earnings for this healthcare giant were slashed by a colossal 54% in the first half, yet I’m hungrier than ever for more Sonic Healthcare Ltd (ASX: SHL) shares.

On Thursday, shares in the laboratory, pathology, and radiology services provider blasted 14.2% higher despite revenue and profits cratering. On top of that, the figures presented missed consensus estimates by 1%.

So, why on earth would I be wanting to increase my stake in Sonic Healthcare now?

At present, the company holds a 1% weight in my portfolio. Ideally, I’d now like to grow that position to between 2% to 3%… and here’s my reasoning.

The COVID comedown

It’s no secret that COVID-19 testing provided a temporary tailwind to Sonic’s top and bottom lines. We are now seeing that fade away as we return to our ‘new normal’. The diminishing COVID revenues have been an anchor on the Sonic Healthcare share price over the past year.

This might be unnerving for some shareholders. However, I take solace in the fact the core business is now fundamentally stronger than it was prior to the PCR testing frenzy.

As noted in its first-half results, Sonic’s ‘base business revenue’ — comprising of laboratory, pathology, radiology, etc. revenue excluding COVID-19 testing — increased by 9% compared to the prior corresponding period to $3.7 billion.

Prior to 2020, the company had been growing its top line at around 10% per annum on average. I think there is an underappreciation for this base revenue. While it’s not a trendy new industry, the diagnostic services market is incredibly large and estimated to grow at a compound annual growth rate (CAGR) of 13% out to 2030.

Where will Sonic Healthcare find growth?

I believe Sonic Healthcare will be able to sustain its 10% revenue growth by expanding into higher value — and possibly more in-demand — areas of diagnostics such as genetic, microbiome, and molecular diagnostics.

Molecular diagnostics

Speaking of molecular diagnostics: this is an area of diagnostics that Ark Invest highlighted in its Big Ideas 2023 report.

Analysts at Ark estimate the total addressable market for this type of diagnostic testing for cancer alone could be US$95 billion. Likewise, annual revenue derived from this form of testing is forecast to grow above 20% per annum through 2030 and beyond.

My guess is this played a key role in Sonic’s decision to acquire ProPath in 2021. ProPath is a specialist in molecular pathology, serving 1,000 physicians and more than 20 hospital groups in the United States.

Hence, the addition of ProPath taps into the potential growth engine of molecular diagnostics — enabling a path for more upside in Sonic Healthcare shares.

Aging population

In my opinion, Sonic Healthcare could also grow faster for longer than most investors think due to an aging population. As people live longer as a byproduct of medical advancements, the rate of occurrence of cancers could trend higher.

As pictured above, the burden of cancer is estimated to increase by more than 60% from 2018 to 29.4 million new cases globally in 2040. In turn, I believe the demand for genetic predisposition testing, diagnosis, and prognosis of cancers will similarly expand over the next two decades.

There was an early indicator of the high growth rate in this market within Sonic’s half-year presentation. In the US, revenue growth from ThyroSeq (thyroid cancer genetic test) was above 25%.

The potential reacceleration of earnings growth from this structural tailwind plays a significant role in my desire to buy more Sonic Healthcare shares.

What else is appealing about Sonic Healthcare shares?

There are a few others reasons why I personally see more upside to this global healthcare giant. To avoid this article becoming more of a novel, I’ll list these additional positive factors below:

• Despite COVID-19 testing revenue diminishing, molecular testing for various viruses will undoubtedly persist in the future.
• The company is positioned for further inorganic growth as management utilised COVID-19 profits to deleverage its balance sheet.
• Plenty of runway for increased dividends or more buybacks

Lastly, my ultra bull case for Sonic Healthcare shares is centred around where value will accumulate along the value chain in the future.

I believe there is potential for laboratory testing to absorb a greater proportion of attributed value as the industry pivots to a preventive approach, rather than reactive. Greater margins could be recognised by the likes of Sonic as a result.

This is quite a speculative assumption. Realistically, such a scenario is purely the ‘cream on top’ of my investment thesis.

The post Why I’m more eager than ever to buy Sonic Healthcare shares following earnings appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why Bapcor, Magellan, Sonic Healthcare, and Telstra shares are charging higher
• Sonic Healthcare share price surges 9% on ‘amazing’ profit result
• Banking on term deposits to retire rich? I’d buy ASX 200 dividend shares instead
• 2 quality ASX 300 shares trading at bargain-basement prices today

Motley Fool contributor Mitchell Lawler has positions in Sonic Healthcare. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare. 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 BHP Group Ltd (ASX: BHP) dividend isn’t quite what it was this time last year.

This morning, the S&P/ASX 200 Index (ASX: XJO) listed mining giant reported its half-year results for the six months ending 31 December (1H FY23)

Those results showed the miner is still making hay, with revenue of US$25.7 billion and profits after tax of US$6.5 billion.

Yet year on year the results were significantly lower, with revenue down 16% from 1H FY22 and profits down 32%.

What about the BHP dividend?

As you’d expect, the lower profits led to a lower dividend payout.

The BHP board declared an interim, fully franked dividend of 90 US cents. That’s down 40% from the US$1.50 interim dividend paid out last year.

The current 90 cents per share payment works out to a total return to shareholders of US$4.6 billion and a 69% payout ratio.

The record date for the dividend payout is 10 March 2023 with payment due on 30 March.

Eligible shareholders wanting to participate in BHP’s dividend reinvestment plan (DRP) need to do so by 13 March.

Investors appear underwhelmed with the results. In late morning trade, shares in the ASX 200 miner are down 2%.

As my Fool colleague James Mickleboro pointed out this morning, “BHP has beaten Goldman’s dividend estimate of 88 US cents per share, but it has fallen short of the consensus estimate of 98 US cents per share.”

“Naturally, this will disappoint investors but it may not come as much of a surprise,” Josh Gilbert, market analyst at eToro said.

“BHP’s pending acquisition of Oz Minerals will be critical to future growth with the focus towards copper and nickel, two commodities that are a focal point in Australia’s clean-energy transition,” Gilbert added.

Copper is currently the second biggest revenue generator for the big miner.

The post The BHP dividend has been slashed by 40%. Here’s the lowdown appeared first on The Motley Fool Australia.

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More reading

• Goldman tips 20% surge in iron ore price. Should I buy ASX 200 mining shares?
• Why is the BHP share price tumbling today?
• BHP share price on watch after first-half earnings miss
• Earnings preview: Here are the ASX shares reporting on Tuesday
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Tabcorp Holdings Ltd (ASX: TAH) share price is up 4.5% on Tuesday morning.

Shares in the S&P/ASX 200 Index (ASX: XJO) gambling company closed yesterday trading for $1. Shares are currently changing hands for $1.05.

This comes following the release of Tabcorp’s half-year results for the six months ending 31 December (1H FY23).

Here are the highlights.

Tabcorp share price soars on revenue and earnings lift

• Revenue of $1.28 billion, up 11% from the $1.15 billion reported in 1H FY22
• Earnings before interest, taxes, depreciation and amortisation (EBITDA) of $197 million, up 24% compared to the 1H FY22 pro forma EBITDA
• Statutory net profit after tax (NPAT) of $52 million
• Operating expenses (OPEX) increased 4% year on year to $323 million
• Fully franked interim dividend of 1.3 cents per share declared, down from 6.5 cents per share in 1H FY22

What else happened during the half year?

Tabcorp credited the 24% increase in half-year EBITDA – a figure that looks to be boosting the share price this morning – to 58% growth in its cash wagering revenue. This followed on a strong rebound from the COVID-impacted earnings in 1H FY22 when restrictions on public gatherings remained in place.

The company noted its dividend payout ratio reflects 61% of NPAT before significant items and equity accounted loss.

The demerger from The Lottery Corporation was reported as “seamless” with the separation process remaining on track.

The half-year also saw the ASX 200 gambling company launch its new TAB App, alongside acquiring a 20% stake in online racing and sports bookmaker Dabble.

And Tabcorp improved its funding position, raising $425 million equivalent in debt from the US Private Placement market.

What did management say?

Commenting on the results sending the Tabcorp share price soaring today, CEO Adam Rytenskild said:

Today’s results highlight that our transformation strategy, which commenced on 1 June 2022, is working… The COVID lockdowns presented an opportunity for digital only operators, but our retail customers have quickly returned, and our digital transformation is amplifying that opportunity.

I’m particularly pleased that, with new entrants entering the market and retail venues reopening, TAB held digital revenue market share for the first time since 2019. To retain our market share, while a new entrant took share from competitors and retail reopened, highlights that customers are loving the new TAB App.

What’s next?

Looking ahead to what might impact the Tabcorp share price down the road, Rytenskild said the company is targeting 30% digital revenue market share by FY25, up from 25% currently.

The company is also aiming to cut its operating costs to between $600 million and $620 million in FY25.

As for the full 2023 financial year, Tabcorp upgraded its OPEX guidance to 2% to 3% growth on FY22 pro forma OPEX, from the prior 3% to 4% growth.

Its FY23 Capex guidance of $150 million and depreciation & amortisation guidance of $250 million to $260 million remained unchanged.

Tabcorp share price snapshot

As you can see in the chart below, the Tabcorp share price is now well into the green over the past 12 months, up just over 7%.

The post Tabcorp share price rocketing on strong post-COVID rebound results appeared first on The Motley Fool Australia.

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More reading

• 4 ASX 200 stocks smashing new 52-week highs on Wednesday
• Here are the top 10 ASX 200 shares today
• Why ARB, Centuria Capital, Nick Scali, and Tabcorp shares are dropping

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Major investment bank Goldman Sachs has made an exciting prediction for the iron ore price, which could have big implications for S&P/ASX 200 Index (ASX: XJO) mining shares. These include BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO), Fortescue Metals Group Limited (ASX: FMG), and Mineral Resources Ltd (ASX: MIN).

As miners, changes in commodity prices can have a significant impact on company financials. In simple terms, it generally costs the same amount of money to mine a tonne of iron, so extra revenue for that production largely adds straight onto net profit before tax.

Goldman predicts a strong iron ore price

According to reporting by the Australian Financial Review, Goldman Sachs is predicting the iron ore market could swing to a “significant” deficit in the second quarter of 2023.

A seasonal boost in Chinese steel production during March and April could happen at the same time as a “near-term” supply squeeze, which may mean that there’s a 35 million tonne deficit in the second quarter.

Goldman has a three-month target of US$150 per tonne for the iron ore price, while the six-month target is US$135 per tonne. That means that the iron ore price could rise by 20% over the next three months, and almost 10% over the next six months. That sounds like good news for ASX 200 iron ore shares.

The AFR reported that Goldman points out that since the start of the fourth quarter last year, onshore iron ore inventories have fallen by 45 million tonnes to sit almost 30% below the prior corresponding period, the weakest since 2016.

But these prices are because of seasonal patterns rather than a strong recovery from China’s property market. However, Chinese steel production is increasing, with blast furnace utilisation rates increasing in February compared to January.

The iron ore price is not expected to go above US$200 per tonne, unlike 2021.

Metals strategist Nicholas Snowdon commented that steel mills are suffering from iron shortages after destocking during the 2022 lockdowns:

This offers a significant right tail skew to the onshore iron ore stock cycle this year, likely providing a powerful amplifier to near-term price upside as supply chain confidence stimulates restocking appetite.

Iron ore possesses one of the most supportive fundamental setups into the second quarter across the industrial metals.

While we expect property-related new starts demand to decline less precipitously, we do not see reopening as a regime shift in ferrous as we expect for the rest of the base metals complex.

However, Goldman Sachs expects default rates to remain “high” in China, which could weaken the effectiveness of stimulus channels for property.

Is this a good time to buy ASX 200 mining shares?

The recent BHP result shows what a decline in resource prices can do – attributable profit fell 32% to US$6.5 billion, while the interim dividend was cut by 40% to 90 US cents per share.

It sounds like a promising time for iron ore miners, however the iron ore price may not stay that high for long according to the prediction. So, when the iron ore prices go back down, that could see the share prices fall, presenting a better opportunity.

The post Goldman tips 20% surge in iron ore price. Should I buy ASX 200 mining shares? appeared first on The Motley Fool Australia.

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More reading

• Why is the BHP share price tumbling today?
• BHP share price on watch after first-half earnings miss
• Earnings preview: Here are the ASX shares reporting on Tuesday
• 5 things to watch on the ASX 200 on Tuesday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 BHP Group Ltd (ASX: BHP) share price is trading lower on Tuesday morning.

In morning trade, the mining giant’s shares are down 3% to $47.11.

Why is the BHP share price falling?

Investors have been hitting the sell button in response to the Big Australian’s half year results.

According to the release, BHP reported a 16% decline in revenue to US$25,713 million, a 28% decline in underlying EBITDA to US$13,230 million, and a 32% decline in profit after tax to US$6,457 million.

Management advised that this was driven by lower average realised prices for iron ore, copper, and hard coking coal. This was partially offset by higher prices for weak coking coal, thermal coal, and nickel.

In light of this sizeable profit decline, BHP elected to cut its dividend by an even larger 40% to 90 US cents per share. This will be paid to eligible shareholders at the end of next month on 30 March.

Earnings miss

While a decline in revenue, earnings, and dividends was in fact expected by the market, the extent of the decline appears to have taken many by surprise. This is what has put pressure on the BHP share price today.

For example, Goldman Sachs was expecting underlying EBITDA of US$13.7 billion and the market was forecasting US$14.3 billion.

Whereas BHP reported underlying EBITDA of US$13.23 billion, which is 7.5% lower than consensus estimates.

In addition, the market was forecasting a fully franked interim dividend of 98 US cents per share. This means that BHP’s 90 US cents per share dividend is 8.2% lower than expectations.

Following this decline, the BHP share price is now trading 12% below its recent demerger-adjusted record high.

The post Why is the BHP share price tumbling today? appeared first on The Motley Fool Australia.

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More reading

• Goldman tips 20% surge in iron ore price. Should I buy ASX 200 mining shares?
• BHP share price on watch after first-half earnings miss
• Earnings preview: Here are the ASX shares reporting on Tuesday
• 5 things to watch on the ASX 200 on Tuesday
• Should you dig into BHP shares before the ASX 200 miner reports next week?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Magnis Energy Technologies Ltd (ASX: MNS) share price is soaring on news it has signed a three-year offtake deal with Tesla Inc (NASDAQ: TSLA).

The ASX lithium share opened at 49 cents, up 22.5% on Friday’s closing price, and is now at 47.5 cents.

The lithium-ion battery technology and materials company requested a trading halt before the market open yesterday pending the announcement.

Small-cap ASX lithium share gets a big customer

Magnis has entered into a binding offtake agreement with Tesla for the supply of anode active materials (AAM) from February 2025.

Tesla has committed to purchasing a minimum 17,500 tonnes per annum (tpa) with the option to buy up to 35,000 tpa for a minimum three-year term at a fixed price.

The deal was signed over the weekend. It is conditional on Magnis securing a location for its commercial AAM facility by 30 June. It also has to start production at a pilot plant by 31 March 2024.

Production at the commercial facility needs to be underway by February 2025. The agreement is also subject to customer qualification.

This is big news for the ASX small-cap, with the company describing it as a “material transaction”.

Magnis Chair Frank Poullas commented:

We are really excited to bring our high performing AAM to market that requires no chemical or thermal purification throughout the whole process, which differentiates this sustainable material in the market and provides great value to all parties.”

What’s next for the Magnis share price?

The Magnis share price has been rising, up 25% in the year to date following today’s news. This compares to a 5.5% bump in the S&P/ASX All Ordinaries Index (ASX: XAO).

Magnis has commenced large-scale development of its pilot plants for both AAM and graphite concentrate from its Nachu mine in Tanzania. The company has ordered equipment and hired staff.

Next, it has to choose a location in the United States for the AAM commercial facility.

Meanwhile, the company needs to get its lithium materials certified by the United Nations for transport.

Last Friday, Magnis told investors there would be a delay in the certification due to a bad cell result.

Magnis has a 61% interest in the plant, which commenced commercial lithium cell production in August 2022. It began the process of securing independent certification from the UN late last year.

The independent certification process ensures that the batteries are safe to transport in large quantities by air, sea, rail, or road. The certification is based on international safety standards, including Standard UN38.3.

Certification will allow Magnis to ramp up the size of its sales.

In its statement, Magnis said all 10 cells submitted for UN certification had to pass and one cell failed.

The company said:

In one of the last tests performed, a cell reported an irregular result which has resulted in the process starting again with a new batch of cells.

In order to compress the timeline to achieve certification, additional accredited independent certifiers have been appointed. 

The Magnis share price tumbled by 8% to 40 cents on the news.

The post Magnis share price rockets 23% on Tesla deal appeared first on The Motley Fool Australia.

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More reading

• Why is ASX lithium share Magnis in a trading halt?
• Boom! Why has Tesla stock rocketed 68% so far in 2023?
• ‘Lifetime lows’: Expert reckons these shares are ‘screaming buys’ right now

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. 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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ASX dividend shares can quickly unlock cash flow. But, how much is needed for an individual to decide they can live off dividends for the rest of their lives and retire?

It could be a tricky question to answer – every household’s finances are different. Some people may have a big mortgage, others may own their own home debt-free. One household may have a fancy sports car, with an equally eye-catching car loan.

Each household may also have different lifestyle goals in retirement. How much we need to pay for the essentials is one thing, but funding an annual cruise would add a lot more to the cost.

Estimates for comfortable retirement

Research by the Association of Superannuation Funds of Australia shows that if a couple who own their own home wants to have a comfortable retirement, they will need an annual income of $67,000. A single person would need an annual income of over $47,000.

That spending includes a reasonable allowance for leisure, holidays, health services, and so on.

But for an individual, or household, who doesn’t own their own home, the rent or mortgage could mean an extra $10,000, $20,000, $30,000 — or even more — is needed in additional investment income from ASX dividend shares.

How much do we need invested in ASX dividend shares

Once the investor has roughly figured out how much they’re going to spend per year in retirement, then we can figure out the investment income needs. Certainly, a financial planner would be very helpful here for working out what the specific goals and objectives are.

But, in simple terms, it’s a combination of the dividend yield and the size of the portfolio.

A $1 million portfolio could have a 2% dividend yield and pay $20,000 per year in dividends.

A $300,000 portfolio might have a dividend yield of 10% and pay $30,000 per year in dividends.

Of course, in general terms, the higher the dividend yield, the riskier it might be and the higher chance there could be a dividend cut in the short-to-medium term.

For quality ASX dividend shares, I prefer to look at names that have dividend yields of between 3% to 9% and have a record of growing dividends over time.

If we use the mid-point of the range I just said – 6% – and target $67,000 of annual dividend income, then it suggests the portfolio would need to be over $1.1 million in size.

The 6% figure is just an average though. As an example, there are some names that could pay a dividend yield of around 6% in 2023 such as Telstra Group Ltd (ASX: TLS) and Charter Hall Long WALE REIT (ASX: CLW).

There are others with lower current yields, such as Wesfarmers Ltd (ASX: WES) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), but they have an objective of growing shareholder payouts.

Then there are ASX dividend shares that have very high dividend yields, like Shaver Shop Group Ltd (ASX: SSG) and Metcash Limited (ASX: MTS).

If an investor wants to choose businesses that are seen as defensive ASX shares but still reach that passive income goal, then they’d need to keep saving and growing their wealth until they get to the target dividend amount.

Foolish takeaway

ASX dividend shares could be the key to unlocking a life of pleasing dividends and easy cash flow. But, it could take a portfolio of around $1 million to achieve the targeted amount. Yet, of course, there are still investment risks, as well as volatility, to keep in mind.

The post How much do you need in ASX shares to give up work and live only off dividend income? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Telstra Group, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has recommended Metcash. 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 Altium Limited (ASX: ALU) share price is on the slide on Tuesday.

In morning trade, the electronic design software company’s shares are down 6% to $37.43.

Why is the Altium share price sinking?

Investors have been selling down the Altium share price today following the release of the company’s half year results after the market close on Monday.

In case you missed it, Altium reported a 17% increase in revenue to US$119.5 million and a 30% jump in net profit after tax to US$29.6 million.

The company’s top line growth was driven largely by a 16% increase in Design Software revenue to US$91.6 million and a 22% increase in Octopart revenue to US$27 million.

Whereas its bottom line growth reflects the benefits of operating leverage, which boosted its EBITDA margin up 2.1 percentage points to 36.2%.

This allowed Altium to declare an interim dividend of 25 Australian cents per share, which is up 19% on the prior corresponding period.

Finally, the company has reaffirmed its full year guidance for total revenue of US$255 million to US$265 million, which represents 15% to 20% annual growth. Altium also continues to expect an underlying EBITDA margin of 35% to 37%.

Broker reaction

The team at Bell Potter was relatively pleased with Altium’s result. However, it notes that the company missed on the top line but beat on the bottom line.

The broker commented:

1HFY23 revenue grew 17% to US$119.5m but was 2% below our forecast of US$121.6m. The miss was driven by a mix of currency and lower than expected revenue in Russia and China.

EBITDA grew 24% to US$43.3m and was 4% ahead of our forecast of US$41.7m. The beat was driven by lower expenses than forecast (US$77.3m vs BPe US$80.4m) which resulted in a higher than forecast EBITDA margin (36.2% vs BPe 34.3%). Cash flow was strong with operating cash flow exceeding NPAT and this was despite a hike in tax paid (US$9.6m vs US$3.4m in the pcp). The interim dividend increased 19% to A25.0c 40% franked which was ahead of our forecast of A23.0c unfranked.

In response to the result, Bell Potter has retained its hold rating with an improved price target of $42.50.

Over at Goldman Sachs, its analysts echoed Bell Potter’s view. It commented:

ALU reported 1H23 Sales/EBITDA that was -1%/+1% vs. GSe, with weaker Octopart and License revenues offset by solid B&S pricing and cost control.

The broker also notes that “subscriber performance was marginally weaker than expected,” which could be what is putting a bit of pressure on the Altium share price today.

Goldman has retained its neutral rating and $42.00 price target.

The post Why is the Altium share price sinking 6% today? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Altium share price on watch following strong first half growth
• 4 ASX 200 stocks smashing new 52-week highs on Wednesday
• Why I think this ASX 200 tech share could turn into a global superstar
• If I had a spare $1,000, here’s where I’d invest in the stock market now

Motley Fool contributor James Mickleboro has positions in Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Pilbara Minerals Ltd (ASX: PLS) share price is down 13% in just one week. With the ASX lithium share’s FY23 half-year result coming up this week, is it time to buy shares?

It has been a very fruitful time to be producing lithium over the last 12 months with how high the lithium price has gone.

Pilbara Minerals is expected to report that it made a lot of net profit after tax (NPAT) in the first six months of FY23.

How much profit is Pilbara Minerals expected to make?

The ASX lithium share is expected to report that it made an NPAT of over $1 billion.

Commsec has reported on estimates derived from Bloomberg regarding analyst expectations.

How much profit the miner reports could influence the Pilbara Minerals share price.

The current estimate suggests that the lithium miner may have made $1.28 billion in profit.

For only six months, that’s a large amount of money for a miner that only has a market capitalisation of $13.3 billion, according to the ASX.

Pilbara Minerals has essentially already indicated that it has made a boatload of cash with its quarterly updates.

For example, in the three months to December 2022, it said that its cash balance had increased by $851.1 million to $2.23 billion. The miner also revealed that it shipped 148,627 dry metric tonnes (dmt) of spodumene concentrate, while the average realised spodumene concentrate sales price increased 33% quarter over quarter to US$5,668 per dmt.

Will a dividend be declared?

Pilbara Minerals has indicated that in FY23 it would start paying a dividend.

The target dividend payout ratio has been established at 20% to 30% of free cash flow. The mid-point of that guidance would translate to the ASX lithium share paying around a quarter of its cash flow as a dividend.

Commsec’s disclosure of Bloomberg’s figure shows that Pilbara Minerals could pay a half-year dividend of 3.5 cents per share.

Pilbara Minerals indicated that it will start paying income tax in February 2023, so the dividend is expected to be fully franked.

At the current Pilbara Minerals share price, the projected half-year dividend could be a grossed-up dividend yield of 1.2%.

Is the Pilbara Minerals share price a buy?

Considering the company is still up more than 40% compared to 12 months ago, it certainly isn’t ‘cheap’.

I think it really depends on what the lithium price does over the next few years, or at least the next 12 months. But, my crystal ball isn’t working at the moment.

I do like the miner’s plans to be involved in more of the lithium value chain, which should unlock more earnings for the business. The recent update about using a chemical converter to benefit from lithium hydroxide sales is very intriguing as well.

For the above reasons, I think it’s a long-term buy, but there could be better prices ahead.

The post Should I dig in and buy Pilbara Minerals shares before the ASX 200 lithium miner reports on Thursday? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why A2 Milk, BlueScope, NIB, and Pilbara Minerals shares are dropping today
• Why are ASX lithium shares being hammered on Monday?
• Why is the Pilbara Minerals share price crashing 7% today?
• Why Baby Bunting, Integral Diagnostics, Pilbara Minerals, and Zip shares are falling

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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