The market closed higher last week on hopes of an imminent easing of coronavirus restrictions. The S&P/ASX 200 Index (ASX: XJO) finished the week up nearly 3% as Scott Morrison announced a staged reopening of the economy.
Treasury estimates the coronavirus shutdown is costing the economy $4 billion a week. The economic hit is due to a combination of unemployment, productivity loss, and a drop in consumption.
Unemployment is predicted to hit 10% by June. But a recovery in GDP growth is expected by the end of the year, limiting the fall in GDP to 6% over 2020. Unemployment is predicted to improve slightly to 9% by the end of the year.
Market conditions remain challenging given the uncertainty around COVID-19 and unknown speed of recovery. Nonetheless, ASX travel shares soared as Morrison announced “some” interstate travel would be permissible under stage 2 of the 3-step plan to reopen the economy. Shares in Flight Centre Travel Group Ltd (ASX: FLT) rose by 8.1% on Friday while Webjet Limited (ASX: WEB) shares were up by 9.3%.
If all goes well under Morrison’s 3-step plan, 850,000 people will be back in work and around $9 billion pumped into the economy in about 8 weeks’ time. As restrictions ease, we take a look at the ASX shares that gained the most last week.
Afterpay Limited (ASX: APT)
Shares in Afterpay gained 36.8% last week to finish the week at $39.88. Afterpay shares have now gained a massive 348% from their March low. The buy now, pay later provider reported March was its third-largest underlying sales month on record. Underlying sales in the March quarter increased 97% compared to Q3 FY19.
Afterpay reported underlying sales of $7.3 billion for the year to the end of March, growing at 105% compared to the prior corresponding period. Healthy growth in merchant and customer numbers was recorded during the quarter – active customers grew to 8.4 million, up 122% on the prior corresponding period. Merchant numbers grew to 48,400 globally, up 78% on the prior corresponding period.
Afterpay has made pre-emptive adjustments to risk settings which have had a positive impact on loss performance lead indicators in the second half of March and early April. The company has a strong balance sheet and liquidity position, meaning there should be no requirement to raise capital in the foreseeable future.
EML Payments Ltd (ASX: EML)
EML Payments shares closed last week up 28.7% at $3.41. The payment solution company provides gift card and incentive programs, reloadable value cards, and virtual accounts for business payments.
In the 5 years to FY19, EML Payments’ earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 82% on a compound annual basis. Revenue increased 37% in FY19 to $97.2 million. Approximately 87% of revenue was generated from recurring revenue streams.
EML completed its acquisition of Prepaid Financial Services in April. Prepaid is a provider of white-label payments and banking-as-a-service technology. The terms of the acquisition were renegotiated with the enterprise value reduced by £94.5 million to £131.5 million.
PolyNovo Ltd (ASX: PNV)
PolyNovo shares rose 28.1% last week to close the week at $2.55. The medical company released a presentation last week which estimated its near-term total addressable market at $7.5 billion.
PolyNovo produces NovoSorb BTM, an implantable dressing that can be absorbed into the body as it heals. Currently used as a dermal scaffold, PolyNovo is also exploring the use of the technology in hernia repair, breast augmentation and reconstruction, and drug elation.
PolyNovo recorded record sales of the NovoSorb BTM product in the US in March. The product has received CE mark approval and has launched in Europe with excellent results. A factory is being built in Port Melbourne to produce hernia products with the global hernia market estimated to be worth $3.1 billion.
Appen Limited (ASX: APX)
Shares in Appen lifted 18.3% last week to finish the week at $30. Appen shares have now lifted 75% from March lows with the company benefitting from increased demand for its services due to the increasing importance of artificial intelligence for businesses.
Appen develops human-annotated datasets for machine learning and artificial intelligence. The company recorded a massive 42% increase in EBITDA in FY19 and has forecast EBITDA of $125 million to $130 million in FY20.
A pandemic-led increase in the use of search, social media, and eCommerce platforms is likely to support FY20 performance. The weaker Australian dollar and greater availability of crowd workers may also assist. Appen maintains a healthy balance sheet with cash resources in excess of $100 million so is well placed to weather the pandemic and respond to opportunities that arise.
Qube Holdings Ltd (ASX: QUB)
Qube Holdings shares finished last week up 15.9% at $2.52. Qube was reinstated to official quotation last week after a $500 million equity raising. The raising provides Qube with significant balance sheet flexibility with over $1,150 million in liquidity.
Qube Holdings provides import and export logistics services across Australia, New Zealand, and South-East Asia. Funds from the equity raising will be used to support continued investment in its core business. This includes capital expenditure on recent contract wins and strategic acquisitions. Additional opportunities are expected to arise in the current environment.
Qube expects to spend a minimum of $420 million on capital expenditure (capex) between April 2020 and June 2021. This will cover maintenance capex, capex to support contracts with BlueScope Steel Limited (ASX: BSL), Shell, and BHP Group Ltd (ASX: BHP), and the purchase of new equipment to support growth and productivity.
Qube has experienced a number of near-term impacts associated with COVID-19, but its investment in long-term strategic growth priorities remains unchanged. The business model remains resilient and continues to generate solid earnings from its diversified logistics activities.
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Kate O'Brien owns shares of Appen Ltd, BHP Billiton Limited, and POLYNOVO FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended Emerchants 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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