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  • Why Goldman Sachs is bullish on Mineral Resources shares

    A little boy holds his fingers to his head posing as a bull.

    A little boy holds his fingers to his head posing as a bull.

    Mineral Resources Limited (ASX: MIN) shares could be in the buy zone right now.

    That’s the view of analysts at Goldman Sachs, which remain very bullish on the mining and mining services company.

    What is Goldman saying about the Mineral Resources share price?

    According to the note, the broker has retained its buy rating with a $76.10 price target.

    Based on the current Mineral Resources share price, this implies potential upside of almost 8% for investors over the next 12 months.

    In addition, the broker is expecting a ~3% dividend yield in FY 2023, which lifts the total potential return to approximately 11%.

    Why is the broker bullish?

    Goldman Sachs notes that it has been attending a lithium investor tour, which included a site visit to the Wodgina mine in Western Australia.

    There were two key takeaways from the tour, that could be of interest to investors. Goldman explained:

    MIN expects the revised JV with partner Albemarle (ALB) to be finalised within the next 4-6 weeks with MIN likely to send spodumene to ALB’s 50ktpa hydroxide facility in Chengdu in China along with an expansion of ALB’s 28ktpa facility near Shanghai. MIN will enter China temporarily though and plan to build a 50ktpa hydroxide facility at Wodgina. MIN think they can build a 50ktpa Chinese designed and fabricated plant at Wodgina for around US$650mn (no hydroxide in GS base case).

    The ramp-up of Wodgina is going extremely well and MIN believes processing trains 1-3 may be able to operate ~25% above nameplate therefore producing ~900-950ktpa of 5.5-6% Li2O (vs. GSe modeled 750ktpa). Study work is advanced on train 4 (not in GS base case) which will likely be larger than the existing trains, producing potentially up to 500ktpa of spodumene, with approval likely in 1H CY23 and ramp-up sometime mid to late CY24.

    In light of the above, Goldman continues to “forecast a more than doubling of group EBITDA to over A$2.4bn in FY23 driven by higher lithium and low grade iron ore prices.”

    The post Why Goldman Sachs is bullish on Mineral Resources shares appeared first on The Motley Fool Australia.

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    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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  • Are ANZ shares an ASX 200 dividend buy right now?

    A senior couple discusses a share trade they are making on a laptop computerA senior couple discusses a share trade they are making on a laptop computer

    The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price has underperformed the S&P/ASX 200 Index (ASX: XJO) this year, but does its dip place the dividend-paying bank in the buy zone?

    Some experts are bullish on both the company’s stock and its dividends in the future.

    Right now, shares in ANZ are trading at $23.90 apiece. That’s 13.97% lower than they were at the start of 2022. Meanwhile, the ASX 200 has dumped 12.15% over the course of this year so far.

    Could the smallest of the big four banks offer 21% upside and growing dividends? That’s what one broker is tipping.

    Are ANZ shares an ASX 200 dividend buy?

    There’s a lot going for ANZ shares, and the bank’s dividends, right now if experts are to be believed.

    Baker Young managed portfolio analyst Toby Grimm flagged the stock as a buy last week, saying, courtesy of The Bull:

    Compared to the other three major banks, ANZ shares were recently trading on the lowest price-to-earnings (P/E) multiple and offer the highest prospective dividend yield.

    The big bank has offered investors $1.44 per share in dividends over the last 12 months. That leaves ANZ shares with a 6% dividend yield.

    Additionally, it posted 223.8 cents of earnings per share (EPS) over the 12 months ended 31 March, meaning its P/E ratio currently sits at around 10.7x.

    And it could be on the path to further improvement. Citi expects the company to grow its earnings over the coming financial years on the back of rate hikes, my Fool colleague James reports.  

    It also tips ANZ to pay out $1.56 per share in fully franked dividends in financial year 2023.

    That would see its stock trading with a 6.5% yield at its current price.

    Topping it off, Citi has slapped ANZ shares with a buy rating and a $29 price target, meaning the stock could offer investors a 21% return, plus any dividends. That’s certainly nothing to scoff at.

    The post Are ANZ shares an ASX 200 dividend buy right now? appeared first on The Motley Fool Australia.

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    Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper 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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  • This expert thinks the US stock market could fall another 20%: What should investors know?

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

    A shocked man sits at his desk looking at his laptop while talking on his mobile phone with declining arrows in the background representing falling ASX 200 shares today

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

    When Jamie Dimon talks, the market listens. As the longtime CEO of JPMorgan Chase (NYSE: JPM), the largest bank by assets in the U.S., not only has Dimon successfully navigated the company through multiple recessions and made JPMorgan a best-in-breed bank stock, but he always has a good pulse on the economy.

    With more than $3.8 trillion of assets, JPMorgan is exposed to every part of the economy from consumers to small businesses to the largest corporations — and in almost every sector, too. 

    In an interview today on CNBC, Dimon said he expected the U.S. to enter a recession in six to nine months. He also said that while he doesn’t know the future, the S&P 500, which has fallen roughly 25% from its all-time highs earlier this year, could fall “another easy 20%.” Let’s take a look at why Dimon is concerned and what investors should know.

    High inflation and rates could drain the consumer

    There are several reasons why Dimon is concerned, beginning with inflation. The Consumer Price Index (CPI), which tracks the prices on a market basket of consumer goods and services, rose a jaw-dropping 9.1% in June on a year-over-year basis. And there is no clear evidence that inflation has peaked yet. The CPI ticked up 0.1% in August from July, and economists expect the CPI to tick up another 0.2% from August when September inflation data comes out Thursday morning. Prices for things like rent have remained stubbornly high.

    High inflation has forced the Fed to aggressively raise its overnight benchmark lending rate, including three consecutive 0.75-percentage-point hikes at its last three meetings. 

    Rising interest rates increase the cost of consumer debt, which is why mortgage rates have soared lately. Payments on student loans are also expected to resume for the first time in more than two years, another burden for consumers.

    Dimon does believe the economy is still relatively healthy right now, but rate hikes can take time to work their way through the economy, so the economy has not felt their full impact yet. Hopefully, though, they will also slow the growth of prices or bring them down.

    Stocks face their own concerns

    If consumer demand dampens, companies are likely to feel the sting on their sales and profitability. Companies will also face a higher cost of debt and a higher cost of doing business. Many investors think analyst earnings projections are still too rosy, so if third-quarter earnings and guidance disappoint, expect downward revisions, which will potentially lead to lower valuations and lower stock prices.

    Dimon also worries about how Russia’s ongoing invasion of Ukraine will continue to impact the economy and markets. Previous oil sanctions as a result of the invasion sent oil prices soaring and rocked markets.

    “I mean, Europe is already in recession — and they’re likely to put the U.S. in some kind of recession six to nine months from now,” Dimon said today. Global economies are very interconnected, and large companies headquartered in the U.S. could very well be doing a big chunk of their business in Europe, so what happens abroad could spill over to the U.S.

    Finally, Dimon is concerned about the impact of quantitative tightening. The Fed is currently in the process of reducing its massive balance sheet by letting its bond holdings mature and run off. This effectively pulls liquidity out of the economy. The last time the Fed did this, in 2019, it contributed to a spike in interest rates on short-term loans between banks — an obscure but important part of the financial system known as the repo (short for “repurchase”) market — and it had to step back in to aid the market. Dimon is largely concerned because he doesn’t know exactly what to expect.

    What investors should know

    What can you do with all this as an individual investor?

    First, prudent management includes preparing for the worst. What happens next in the U.S. will depend on the state of the economy after the Fed is done with its rate hikes. Dimon did say that the U.S. economy is “actually still doing well,” and this is not the first time Dimon has spoken about potential struggles ahead. But a deep global recession may not be fully priced into stocks yet. And the one thing Dimon expressed certainty about was more market volatility. 

    I think it’s certainly normal to be nervous right now. But if you invest in companies with strong fundamentals and with a long-term horizon in mind, you are very likely to ride out any potential storm.

    Second, remember that Dimon is talking about what will happen in the short term. If you can afford to wait — at least three to five years — history shows that markets almost always go up over the long haul.

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

    The post This expert thinks the US stock market could fall another 20%: What should investors know? appeared first on The Motley Fool Australia.

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    JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bram Berkowitz 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 JPMorgan Chase. 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.

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



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  • Can ASX lithium shares charge higher over the rest of 2022?

    Happy woman on her phone while her electric vehicle charges.Happy woman on her phone while her electric vehicle charges.

    ASX lithium shares have seen plenty of volatility in 2022. But with the lithium price charging higher, could the final quarter of 2022 be a useful time to go hunting for opportunities?

    Keep in mind that a higher resource price for a commodity can provide a big boost for the net profit after tax (NPAT) and cash flow. If production volume doesn’t change and the costs of production don’t change, but the company gets more revenue for that production, then it’s largely bonus money for the company (after paying more to the government).

    There are a number of different ASX lithium shares to consider, including Pilbara Minerals Ltd (ASX: PLS), Liontown Resources Limited (ASX: LTR), Allkem Ltd (ASX: AKE), Core Lithium Ltd (ASX: CXO) and Mineral Resources Limited (ASX: MIN).

    So, what’s the outlook for the lithium price? Let’s go through what one of Australia’s leading economists currently thinks.

    Lithium demand expected to keep rising

    The resources and energy quarterly report from the chief economist of the Department of Industry, Science and Resources was very promising for ASX lithium shares.

    It noted that global sales of all types of electric vehicles increased 36% in the year to June 2022, compared to the same period in 2021. Chinese sales were up 110%, European sales went up 6%, and North American sales increased 27%.

    The report also pointed out that in May, the Chinese Government “cut purchase taxes on some low-emission passenger vehicles by 50%, while some municipal governments have also provided subsidies and incentives to encourage EV purchases. Global passenger EV sales are expected to continue to grow strongly”.

    Major global car makers are accelerating plans to transition to electric vehicles by developing new product lines and converting existing manufacturing capacity.

    The report suggested “strong underlying demand and EV manufacturers’ declarations of further increases in production, imply that EV sales could reach almost 40% of vehicle sales annually by 2030″. This would be an increase from 9% of sales in 2021.

    Worldwide demand for lithium carbonate equivalent will be 724,000 in 2022, then rise by 40% to reach 1,058,000 tonnes by 2024. Asia is reportedly the major source of lithium demand, despite the increase of new battery manufacturing capacity in Europe and the US.

    What about prices?

    In terms of the price, the report pointed out that “supply disruptions in August (due to extended power cuts in Sichuan province, amidst an intense heatwave) added pressure to lithium prices in China”. Sichuan reportedly produces more than 20% of China’s lithium.

    Many Australian producers have used long-term contracts, so the price received takes time to adjust to the current price. ASX lithium shares are seeing good prices, so it is flowing into contract prices.

    The spodumene price is forecast in the report to remain high and average US$3,280 a tonne by 2023 before moderating to US$2,490 in 2024.

    The report suggested that lithium is set to become a $10 billion-plus export industry within a year.

    Broker ratings on ASX lithium shares

    Brokers recognise the strong pricing of lithium, but some valuations may have run too hard.

    For example, UBS rates the Pilbara Minerals share price as a sell, with a price target of $2.65. But, UBS does rate Allkem as a buy, with a price target of $18.70.

    The post Can ASX lithium shares charge higher over the rest of 2022? appeared first on The Motley Fool Australia.

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    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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  • Even amid inflation, we all have to buy food. So why is the Woolworths share price struggling?

    A frustrated young woman shopper holds her hands up with a pained, annoyed expression on her face as she stands next to her trolley in a grocery store and examines the stock offerings on the shelf in front of her.A frustrated young woman shopper holds her hands up with a pained, annoyed expression on her face as she stands next to her trolley in a grocery store and examines the stock offerings on the shelf in front of her.

    The Woolworths Group Ltd (ASX: WOW) share price has been going backwards despite everything that’s happening with food inflation.

    Since mid-August, the Woolworths share price has dropped by approximately 15%.

    This comes at a time when food prices on the shelves have been going up. Shouldn’t that lead to higher revenue and net profit after tax (NPAT) for Woolworths? There may be more to it than that.

    Expert suggests it was a problem with the outlook

    Brad Potter, Tyndall AM’s Head of Australian Equities, said on a podcast published on Livewire that businesses in the consumer staples space like Woolworths, Coles Group Ltd (ASX: COL) and Endeavour Group Ltd (ASX: EDV) went into reporting season (in August) with high valuations.

    While results “met expectations”, the problem was that their “outlook statements didn’t, and therefore they all fell significantly on result day and on the days subsequent”.

    Potter pointed out that cost growth is hurting the industry. The implication was that this could then be having an impact on the Woolworths share price.

    What did Woolworths say?

    The company said the start of FY23 has been clouded by the cycling of the COVID outbreak at the beginning of FY22 in its Australian food business. This significantly impacted the most populous states of NSW and Victoria. Total food sales in the first eight weeks of FY23 were down 0.5% year over year.

    Operating conditions in the New Zealand food division remain “challenging”. Total sales were down 1% on the prior year in the first eight weeks. New Zealand food’s earnings before interest and tax (EBIT) is expected to be “materially below” the prior year, with things like the supply chain and team absenteeism still being impacted.

    Woolworths will spend significantly on areas such as its supply chain transformation, store renewals, e-commerce, and digital investments.

    Summarising the situation, Woolworths CEO Brad Banducci said:

    We expect the trading environment to remain volatile and challenging due to endemic COVID disruptions, ongoing supply chain challenges, higher costs across our business and cost-of-living pressures for our customers.

    However, we are increasingly more agile and purposeful in responding to these challenges and are focused on improving our underlying operating performance across all aspects of our value chain after three years of disruption.

    Is the Woolworths share price an opportunity or not?

    Experts are mixed on whether the business is fully priced or worth buying.

    Talking to Matthew Kidman on Livewire’s ‘buy hold sell’, First Sentier’s David Wilson called it a buy, suggesting that the company has regained its “mojo” and that it’s doing a number of positive things. Those improvements include reducing costs, growing market share and that it’s “really well placed from an online point of view”.

    However, Michelle Lopez from abrdn called the Woolworths share price a hold. She said:

    It’s a hold. This is a really well-run business. It’s defensive. We still feel food inflation is going to continue to play out, but it’s fully valued. And again, it’s one of those defensive names that is not a bad place to hide given what we’re about to come into. But the valuation is a hold.

    The post Even amid inflation, we all have to buy food. So why is the Woolworths share price struggling? appeared first on The Motley Fool Australia.

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    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 positions in and has recommended COLESGROUP DEF SET. 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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  • What can we learn from how Warren Buffett invested through sky-high inflation?

    warren buffettwarren buffett

    Over a period spanning more than eight decades and amassing a net worth exceeding US$90 billion, few people have experienced more in the investing world than the iconic Warren Buffett.

    During his time, the ‘Oracle of Omaha’ has diligently selected stocks throughout wars, countless corrections and crashes, and numerous crises. However, it is the timeframe known as ‘The Great Inflation’ in the 1970s, which draws an uncanny resemblance to the challenging environment investors are tasked with navigating right now.

    Fortunately, we have the benefit of reflecting upon how Buffett journeyed through a time of outlandishly high inflation and interest rates all those years ago. Perhaps some of the lessons can be applied at a time when the inflation rate is at 6.1% in Australia.

    So, how did Warren Buffett invest during a time not too dissimilar to now?

    Awake to the reality

    To pick the brain of one of the greatest capital allocators of our time, I reviewed the letter to shareholders on behalf of Berkshire Hathaway Inc (NYSE: BRK) between 1978 and 1980. This snippet lines up with a moment in time when US inflation rose from 7.6% to 13.6%.

    The first Buffett-ism to arise in my reading was the frank acknowledgment of the situation. In 1980, when inflation peaked, the Berkshire chair extensively detailed the devastating effect of high inflation on real returns, writing:

    At present inflation rates, we believe individual owners in medium or high tax brackets (as distinguished from tax-free entities such as pension funds, eleemosynary institutions, etc.) should expect no real long-term return from the average American corporation, even though these individuals reinvest the entire after-tax proceeds from all dividends they receive.

    To insulate against such a fate, Buffett noted that companies needed their capital to be ‘truly indexed’. This is to say, the company’s earnings need to rise at a greater pace than inflation without any additional capital employed to produce said rise.

    Surprisingly, Buffett admitted there were very few companies that could achieve such a feat — and Berkshire Hathaway was not one of them. This meant the ‘Oracle’ believed real returns were likely going to be negative throughout this inflationary timeline, yet still chose to invest — why?

    Staying the course

    Faced with a high rate of inflation, Warren Buffett — through Berkshire Hathaway — continued to accumulate portions of ownership in businesses he believed fit four all-important criteria.

    1. Businesses we can understand
    2. With favourable long-term prospects
    3. Operated by honest and competent people; and
    4. Priced very attractively.

    Turning to Berkshire’s 1979 letter, Buffett highlighted his preference for equities over bonds as a way of realising greater returns. This has always been important for Berkshire Hathaway due to its involvement in the insurance industry, whereby premiums are invested to cover future potential claims (and, still return a profit).

    To try and deliver on this goal, Berkshire invested heavily in the face of inflation. From 1978 to 1980, the company increased its equity outlay from US$134 million to US$325 million.

    At the peak of US inflation in 1980, Warren Buffett and his team had built sizeable positions in relatively defensive companies, including:

    • GEICO Corporation (insurance) — market value of US$105.3 million
    • General Foods Inc, acquired by Kraft Heinz Co (NASDAQ: KHC) (consumer staples) — market value of US$59.9 million
    • Handy & Harman (silver and gold refiner) — market value of US$58.4 million
    • Safeco Corporation (insurance) — market value of US$45.2 million

    Building wealth, Warren Buffett style

    Finally, there are two essential tenets to how the famed investor operated during the last major bout of inflation — opportunism and measure.

    In 1980, the Berkshire conglomerate raised US$60 million via the issuance of debt. Unlike other companies at the time, this was not out of necessity to improve its own operational liquidity. Instead, Warren Buffett explained:

    […] we borrowed because we think that, over a period far shorter than the life of the loan, we will have many opportunities to put the money to good use. The most attractive opportunities may present themselves at a time when credit is extremely expensive — or even unavailable.

    At such a time we want to have plenty of financial firepower.

    This isn’t to say the average investor should use debt to fund buying in the downturn. The point is: Buffett ensured there was capital available to go shopping while share prices were depressed.

    However, Berkshire remained tactful during the widespread opportunity. As noted in the 1980 letter, Warren Buffett and the team set their sights on businesses that generated cash. Despite the appeal of taking on more debt, Berkshire Hathaway maintained a high level of liquidity.

    Since 1982, the stock price of Berkshire Hathaway has grown by more than 65,000%. Evidently, the decision to invest through inflation has paid off in spades.

    The post What can we learn from how Warren Buffett invested through sky-high inflation? appeared first on The Motley Fool Australia.

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    Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended The Kraft Heinz Company. 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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  • Broker names 2 ASX dividend shares to buy with 6%+ yields

    If you’re searching for dividend shares to buy, then the two listed below could be worth looking at.

    Both have been named as buys by analysts at Morgans and tipped to provide big yields. Here’s what you need to know:

    Accent Group Ltd (ASX: AX1)

    The first ASX dividend share that has been tipped as a buy by Morgans is footwear focused retailer Accent.

    The broker currently has an add rating and $2.00 price target on its shares.

    While FY 2022 was a difficult and disappointing year, the broker remains positive on the company’s medium to long term outlook. This is thanks to its strong brand portfolio and expansion strategy. Morgans explained:

    AX1’s renewed focus on selling at full price will, in our view, support a recovery in the gross profit margin in FY23 back towards historical averages. We welcome AX1’s moderation of the pace of its store rollout in favour of a more selective expansion strategy focused on return on investment. We see AX1 as undervalued at the current share price.

    As for dividends, the broker is forecasting fully franked dividends of 9 cents per share in FY 2023 and 11 cents per share in FY 2024. Based on the current Accent share price of $1.32, this will mean yields of 6.8% and 8.3%, respectively.

    Dexus Industria REIT (ASX: DXI)

    Another ASX dividend share that Morgans rates as a buy is Dexus Industria. It is an industrial and office property company.

    Morgans currently has an add rating and $3.25 price target on the company’s shares. It commented:

    DXI’s key industrial markets remain robust with the outlook for solid rental growth backed by strong tenant demand. The development pipeline also provides near and medium term upside potential. A key focus will be the leasing up of the business park assets and a potential divestment could be a positive catalyst. While the portfolio remains well positioned we acknowledge there will be near-term uncertainty around interest rates.

    In respect to dividends, the broker is forecasting dividends per share of 16.4 cents in FY 2023 and 16.9 cents in FY 2024. Based on the current Dexus Industria share price of $2.50, this will mean yields of 6.6% and 6.8%, respectively.

    The post Broker names 2 ASX dividend shares to buy with 6%+ yields appeared first on The Motley Fool Australia.

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    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 Accent Group. 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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  • What’s the outlook for A2 Milk shares in the second quarter?

    baby, milk, formula, bellamy's, bubs

    baby, milk, formula, bellamy's, bubs

    The A2 Milk Company Ltd (ASX: A2M) share price has made some big movements this year, just like plenty of other ASX shares.

    In the middle of the year, it dropped to around $4. It’s now back to well above $5.

    After a significant decline from its peak – in revenue, profit, and share price terms – the infant formula company is now expecting to generate growth in the current financial year.

    Remember, the share market is often forward-looking, so an improvement in the outlook for the company can improve investor sentiment. Let’s check how things are looking for the FY23 first half and the overall 2023 financial year.

    What are FY23 expectations?

    China label infant formula sales are expected to be up in FY23 with “significant growth” in sales in the first half of FY23 compared to the first half of FY22. But, at this stage, FY23 second-half sales growth is expected to be impacted by a transition to the company’s pending new infant formula registration.

    Meantime, English label infant formula sales are expected to be up in FY23, with FY23 first-half sales expected to be broadly in line with the FY22 second half.

    Australian liquid milk sales are also expected to remain “broadly in line” with FY22, with reduced in-home consumption. Conversely, USA liquid milk sales are expected to be up, with a “significant” improvement in earnings before interest, tax, depreciation and amortisation (EBITDA) losses.

    A2 Milk is expecting to deliver high-single-digit revenue growth in FY23, with first-half revenue up significantly. It’s also expecting overall EBITDA growth in FY23.

    The company has also launched an on-market share buyback of up to $150 million to return capital to investors. This could help the A2 Milk share price because the value of the business is being spread across fewer shares.

    Trading update

    A2 Milk gave a small update on 30 September 2022, saying it has made a positive start to the year. It reported FY23 first-quarter sales are expected to be “marginally ahead” of plan, primarily reflecting the benefit of favourable foreign exchange, driven by the lowering of the New Zealand dollar.

    Due to the currency impact on the cost of sales and cost of doing business, not forgetting about the benefit to sales, FY23 first quarter EBITDA is expected to be “in line” with the company’s plan.

    A new competitor?

    According to reporting by Australian Financial Review, there is another infant formula business — Care A2 Plus — that is looking to list on the ASX with an initial public offering (IPO). Could another competitor in the space hurt the A2 Milk share price?

    This business reportedly uses single-sourced milk from Australian grass-fed a2 cows in Victoria. It has also received approval from the US to supply a large quantity (up to 4.8 million tins) of infant formula to try to alleviate the shortage there. The company applied within 24 hours of news that US import laws would be changing.

    More than 250,000 tins are due to ship to the US this month. Conversely, the ASX-listed A2 Milk didn’t manage to get approved.

    The AFR sources suggested that “Care A2 Plus could have a valuation of $400 million”, but the “US win had forced the company to revisit its numbers and what it might mean for any public float”.

    However, the newspaper also pointed out that this business made “negligible sales” last year. Care A2 Plus management pointed out that the company’s capacity is focused on the US, rather than Asia.

    Broker rating on the A2 Milk share price

    One of the latest ratings comes from Credit Suisse, which rates it as neutral. The price target is $5.25 – implying no capital growth over the next year.

    The broker pointed to an increased marketing presence from A2 Milk and thinks that it can grow its market share during FY23.

    Credit Suisse thinks that A2 Milk shares are valued at 30 times FY22’s estimated earnings.

    The post What’s the outlook for A2 Milk shares in the second quarter? appeared first on The Motley Fool Australia.

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    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 recommended A2 Milk. 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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  • Buy this ASX 200 share in the aftermath of Optus hack: expert

    co-workers wearing headphone and microphones high five in celebration of good news in an office setting.co-workers wearing headphone and microphones high five in celebration of good news in an office setting.

    The unauthorised access of personal data for millions of Optus customers has dominated headlines the past fortnight.

    Australia’s second largest telecommunications provider currently has a full plate battling fierce criticism from its own customers, the government and cybersecurity experts.

    While data hacks are devastating for the victims and the business, one stock analyst has suggested an opportunistic buy could be on the cards to cash in on Optus’ woes:

    Already going places, but now assisted by Optus’ failure

    Optus’ largest rival and the biggest telco in the country is Telstra Corporation Ltd (ASX: TLS).

    While the Telstra share price has fallen more than 9% year to date, Marcus Today analyst Layton Membrey reckons there is a golden buy opportunity right now.

    “This leading telecommunications provider is likely to generate new customers following a cyber attack at competitor Optus and the negative sentiment that followed towards Optus,” Membrey told The Bull.

    But it’s not just external events contributing to Membrey’s conviction.

    He likes the fundamentals of Telstra and where it’s heading in the long run.

    “Telstra recently reaffirmed full-year total income guidance of between $23 billion and $25 billion in fiscal year 2023.”

    Last week the team at Morgans also rated Telstra as a buy.

    “After a major turnaround, Telstra has emerged in good shape with strong earnings momentum and a strong balance sheet,” read Morgans’ memo.

    “In late CY22, shareholders vote on Telstra’s legal restructure, which opens the door for value to be released.”

    According to Morgans analysts, Telstra’s current 7 times enterprise value to earnings ratio doesn’t fairly reflect some of its “high-quality long life assets” such as InfraCo.

    “We don’t think this is in the price, so see it as value-generating for Telstra shareholders,” read the memo.

    “This free option, combined with likely reputational damage to its closest peer, following a major cybersecurity incident, means Telstra looks well placed for the year ahead.”

    Telstra shares are currently paying out a 3.5% dividend yield.

    According to CMC Markets, 11 out of 16 analysts currently rate Telstra shares as a buy, with 10 of them recommending it as a strong buy.

    The post Buy this ASX 200 share in the aftermath of Optus hack: expert appeared first on The Motley Fool Australia.

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    Motley Fool contributor Tony Yoo 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 positions in and has recommended Telstra Corporation Limited. 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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  • Can you buy Bunnings Warehouse shares on the ASX?

    retail shares wesfarmers

    retail shares wesfarmers

    Some investors may be wondering if they are able to buy shares of Bunnings Warehouse on the ASX.

    It’s a good question. Although it’s not an ASX share in itself, Bunnings is part of one of the largest retail businesses in Australia. Let’s take a look.

    How big is Bunnings?

    Well, Bunnings boasts about being the leading retailer of home and lifestyle products for consumer and commercial customers in Australia and New Zealand. Its store network is made up of 282 large warehouse stores, 67 smaller format stores, and 32 trade centres and frame & truss sites.

    But there’s more to Bunnings than just Bunnings Warehouses.

    It acquired South Australian retailer Adelaide Tools (which is now called Tool Kit Depot), which has 11 stores. Bunnings then acquired Beaumont Tiles in November 2021, which has 115 stores.

    At the last count, the business had around 53,000 team members.

    How to gain exposure to Bunnings Warehouse on the ASX

    Bunnings is part of the retail conglomerate Wesfarmers Ltd (ASX: WES).

    Wesfarmers has owned the business for almost 30 years, taking full ownership in 1994.

    It’s the crown jewel in Wesfarmers’ portfolio.

    In FY22, Bunnings generated $2.2 billion of earnings before tax (EBT), outperforming all other brands in the Wesfarmers stable. Kmart and Target made $505 million of EBT, Officeworks made $181 million of EBT, Wesfarmers chemicals, energy and fertilisers (WesCEF) made $540 million of EBT, and other small divisions contributed smaller amounts.

    Bunnings made $17.75 billion of revenue in FY22, which was an increase of 5.2%.

    I think one of the most impressive things about Bunnings is its return on capital (ROC), which was 77.2% in FY22. That says that the business makes a lot of profit on the money invested in it.

    What’s the outlook?

    In Wesfarmers’ outlook comments about Bunnings, the company said:

    Bunnings continues to be well positioned for a range of market conditions, and will benefit from the diversity of its business, focus on necessity products and strength of its offer across consumer DIY and commercial markets. The demand outlook across consumer and commercial is supported by a solid pipeline of renovation and building activity, as well as incremental DIY growth opportunities as customers continue to focus on maintaining and improving their homes.

    Bunnings remains focused on driving long-term growth by building more connected experiences across all channels, deepening its relationship with commercial customers, and evolving its supply chain to support the continued growth of the business.

    Another option: Invest in the buildings

    Owning Wesfarmers shares is the way to gain access to the operating business.

    However, there is an ASX property share that owns many of the warehouses that Bunnings operates from.

    BWP Trust (ASX: BWP) is the name – it’s a real estate investment trust (REIT) that claims to be the largest owner of Bunnings Warehouse sites in Australia, with a portfolio of 65 stores. Seven of the properties have adjacent retail showrooms that the BWP owns and are leased to other tenants, according to the REIT.

    At 30 June 2022, the portfolio had a value of $3 billion, generating $153.3 million of annual rent. The occupancy rate across its entire property was 97.5% due to three vacant properties. BWP’s portfolio had a portfolio weighted average lease expiry (WALE) of 3.9 years.

    In my opinion, Wesfarmers shares are the better way to gain direct exposure to Bunnings and its success, particularly if it sells more things online. But, the BWP Trust is an interesting alternative investment.

    The post Can you buy Bunnings Warehouse shares on the ASX? appeared first on The Motley Fool Australia.

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    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 positions in and has recommended Wesfarmers Limited. 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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