By - Kunal Sawhney
Summary
- Sinusoidal equity market trends have kept investors vigilant of prevailing micro and macro factors amidst second wave of infections and wider lockdown fears.
- Few ASX stocks continue to show reliance at the back of vital business developments and deserve closer attention, while investors seek to diversify their portfolio.
- With latest consumer sentiment and business confidence updates, this seems to be a big week of action with US earnings season updates, and labour survey data to be released.
Markets witnessed a rather gloomy show last week with the benchmark S&P/ASX 200 Index trading lower in four out of five trading sessions, closing the week 2.4% lower owing to intensified US-China tensions, deteriorating COVID-19 situation and brimming fears of a possible re-imposition of lockdowns in few cities.
On that note, the start to this week has been relatively good! On 13 July 2020, ASX 200 ended in green at 5977.5, with a rise of 58.3 points with most sectors reflecting rises.
However, proving that sinusoidal trends are here to stay, ASX 200 witnessed a week day on 14 July 2020 amidst heightened COVID-19 apprehensions, intensified threat of wider lockdowns and big-name tech stocks like Microsoft and Amazon weighing down on Wall Street. The index settled 0.61% down at 5941.
However, there is a reason share markets are action-packed zones. An index trading in red does not imply that stocks should not be dived into and investing should take a backseat. One should remember that no one day is same at the exchange and in the hardest moments lie opportunities that potentially bear fruits over time.
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In this backdrop, we have cherry-picked 3 stocks that have been buzzing in the market owing to their stance amid the novel coronavirus fears.
Ramelius Resources Limited (ASX:RMS)- Record June 2020 Quarter
Achieving its recently upgraded June 2020 Quarter Production Guidance (>80,000 ounces) with a record 86,517 ounces of gold produced, Ramelius’ growth trajectory did not stop right here. The Company went on to report record production with 230,426 ounces produced for FY20.
Adding flavour is the potentially strong balance sheet with cash and gold of $ 185.5 million, a lifted figure opposed to $ 125.4 million from March 2020 figure. A reduced debt figure of $ 24.4 million at the end of the June quarter instigated net cash position of $ 161.1 million. Moreover, on 23 June 2020, the Company achieved acquisition of 100 % of Spectrum Metals Limited (ASX: SPX).
The Company continues to deliver gold into its forward sales book as the current schedule requires, with an end of year position of 247,350 ounces at an average price of $ 2,135 / oz.
RMS’ full quarterly report is anticipated later in July 2020.
Bravura Solutions Limited (ASX:BVS)- Strong demand of product portfolio
With a dedicated mission of developing innovative technology solutions that power the world’s financial institutions, BVS has demonstrated strong long-term revenue and earnings growth for 5 years, as depicted below:
(Source: BVS’ Investor Presentation, 5 May 2020)
The Company reportedly remains in a robust financial position with cash of $ 100.3 million (31 December 2019). In August 2019, it acquired Midwinter, a provider of award-winning financial planning software for $ 50 million.
Following this was another significant acquisition of FinoComp, leading provider of registry-agnostic and highly flexible microservices, in October 2019 for $ 25 million. At year end, intangible assets increased to $192.8 million.
In 1H20, operating cash outflow (incl. taxes paid) was $3.8 million. In the same period, recurring revenue was reported up 17 % in 1H20 relative to pcp and comprised 78 % of total revenue. This was majorly catalysed as new clients are added and existing clients broaden their use of functionality, supported by the long-term nature of the Company’s client contracts.
Bravura also declared interim dividend of 5.5 cps, bringing the 1H payout ratio to 68 % of 1H20 NPAT.
Wealth Management sales pipeline remains strong, with significant opportunities across all key markets. The Company believes that it is well placed to take advantage of strong demand for its product portfolio across all markets underpinned by clients’ need for speed to market for new products, digital capabilities, evolving regulation and extracting operational efficiencies.
FY20 NPAT growth (excl. impact of acquisitions) is expected to be in the mid-teens. Acquisitions are expected to make an additional contribution of ~$ 3 million of FY20 NPAT.
Clover Corporation Limited (ASX:CLV)- Strong demand from customers globally
Once an R&D, manufacturing and marketing company, Clover Corporation is a technology, new product development and commercialisation focussed company whose microencapsulation technology enables nutritional oils to be added to infant formula, foods and beverages.
The Company has strong demand from customers worldwide, with an increase in forecast demand coming in Q4 from infant formula manufacturers. The forecast demand is reportedly above expectations, possibly driven by the market’s reaction to COVID-19 wherein customers are buying additional products (that has depleted the pipeline fill into distribution warehouses and retail outlets).
Clover has also leveraged from favourable movements in the exchange rate as majority of its sales are transacted in USD. The Company reported in its recent trading and COVID-19 report that it is in a strong inventory position with excellent supply partners and efforts of staff during a difficult time.
The Company expects demand patterns to return to a more normalized pattern in the next financial year. The Board expects a stronger 2H20 performance (assuming forecast demand results in fulfilled orders and global condition remains in present state). Moreover, the Board may consider reinstating company dividends at the end of the financial year in line with results.
(Note: Currency in AUD unless specified otherwise)