The S&P/ASX 200 Index (ASX: XJO) edged 0.25% higher last week, with the ASX miners’ strong performance offsetting falls in other sectors.
Higher commodity prices saw miners lead last week’s gains, with iron ore prices seeing a sustained rise since the start of the month as Chinese production resumes.
While the mining sector was enjoying gains, these 5 ASX shares didn’t fare so well, coming in as the biggest fallers last week.
Corporate Travel Management Ltd (ASX: CTD)
Corporate Travel Management led the fallers last week dropping 11.8% to $10.53. The company provides travel solutions spanning corporate, events, leisure, loyalty, and wholesale. Understandably, it has been hit hard by coronavirus travel restrictions.
When the crisis hit, Corporate Travel Management embarked on a comprehensive cost reduction program. The cost base has been reduced to $10–$12 million a month, down from $27–$27 million a month. This has been achieved through a combination of retrenchment, temporary stand downs, government initiatives such as JobKeeper, the elimination of non-essential expenditure, and reduced capex.
Corporate Travel benefits from its business model in which a high proportion of costs are variable. With a small physical footprint, the business saves on rent, with about 70% of its costs being people-related. This enabled a swift resizing of the business. The travel agent is one of the few that has not yet raised capital to shore up liquidity.
Domestic travel restrictions are likely to ease prior to international restrictions. This will benefit Corporate Travel, which is leveraged to the domestic market – about 60% of its total transaction volumes are domestic in nature. Domestic activity is highly profitable for Corporate Travel, particularly in Australia/New Zealand and Europe.
Challenger Ltd (ASX: CGF)
Shares in Challenger fell 10.9% last week to finish the week at $4.24. Challenger shares remain down 59% from their February high as the financial services company continued to feel the effects of the market sell-off in March.
Total assets under management decreased 8% to $79 billion in the March quarter, with performance reflecting the effect of the coronavirus pandemic on investment markets and consumer activity. Annuity sales declined during the period reflecting ongoing advisor disruption and the impacts of the pandemic.
The challenges faced by financial advisors in the wake of the Royal Commission have been exacerbated by the pandemic, impacting the ability to onboard new customers and effectively engage existing customers. This confluence of disruptive events is expected to continue to impact sales in the near term, and it is unclear what the impact on 4th quarter sales will be.
Unibail-Rodamco-Westfield (ASX: URW)
Unibail-Rodamco-Westfield shares dropped 10.4% last week to close the week at $3.79. The shopping centre operator has suffered due lockdowns in Europe, which have impacted its properties in the region.
Lengthened lockdowns mean conventions and exhibitions remain on hold, and foot traffic at shopping centres is down. Unibail’s convention and exhibition business in France has been affected, alongside retail activity in parts of Europe.
COVID-19 had a limited effect on the group’s March quarter turnover as rents are paid quarterly in advance in most of Europe and monthly in the US. The impact of the epidemic will be felt in the current quarter although at this stage it is too early to reliably estimate its extent.
Through to 29 February, Unibail’s tenant sales were up 2.8%, consisting of 3.3% in Europe and 1.6% in the US. Unibail’s turnover for the first 3 months of the year was up 1.8%, largely due to property development and project management revenues. This was partially offset by disposals completed in 2019 and mandated cancellation of major events in March.
Jumbo Interactive Ltd (ASX: JIN)
Jumbo Interactive shares closed last week down 9.8% at $11.86. Prior to last week, Jumbo Interactive shares had climbed 18% during May, so last week’s result may have been a result of profit taking.
Jumbo Interactive is a digital lottery retailer with over 2 million customer accounts. Its flagship service, Oz Lotteries, processes over $150 million in lottery ticket sales per annum. There hasn’t been a lot of news out of Jumbo Interactive of late. Interruptions from COVID-19 have been relatively minor thanks to the virtual nature of online lottery sales.
Prior to the onset of the COVID-19 crisis, almost 74% of Australian lottery tickets were sold via retail channels. With the push to working, spending, and learning online during the crisis, Jumbo Interactive is well placed for an increase in lottery demand.
Trading performance for FY20 includes forecast total transaction values of $335 to $341 million. Revenue is predicted to be $68.5–$69.9 million, up from $65.2 million in FY19. Profit is estimated to be in the range of $24.4–$25.3 million, down from $26.4 million last year.
Incitec Pivot Ltd (ASX: IPL)
Shares in Incitec Pivot fell 9.6% last week to finish the week at $1.98. The fertiliser company announced a $600 million equity raising last Monday with shares issued at $2. The company also decided not to pay an interim dividend for the half year.
Incitec Pivot said the raising was “pre-emptive” and aimed at increasing resilience in the current environment. Funds will be used to repay drawn balances of syndicated facilities. The fertiliser producer reported a 54% increase in profits in 1HFY20, which came in at $65 million. Demand for fertiliser is currently strong following good rainfall across eastern Australia.
CEO Jeanne Johns said, “although COVID-19 has not had a significant impact on our business operations to date, global economic uncertainty is likely to impact customer demand and heighten the risk to recovery in commodity prices.”
Nonetheless, Incitec Pivot says the long-term demand fundamentals of the mining and agricultural sectors remain compelling.
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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited and Corporate Travel Management Limited. The Motley Fool Australia has recommended Jumbo Interactive 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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