On 3 March, small cap ASX tech share Codan Limited (ASX: CDA) released an investor presentation that recapped its recent half-year FY20 results. 

Codan's half-year results were widely positive, with record revenues of $171 million, net profit after tax of $30.4 million, and $51 million in net cash. An electronics products company with a presence in more than 150 countries, over 85% of Codan's sales come from overseas. In H1FY20, Codan saw a strong increase in demand across all its business units, including metal detection, communications, and tracking solutions.

Metal detection

Through its Minelab brand, Codan is now a world leader in metal detectors, having achieved half-year sales of over $100 million for the first time in its trading history.

Minelab provides a wide range of metal and gold detection products, targeting all levels of users —from the amateur treasure hunter to the professional gold prospector. To achieve this, Codan offers metal detectors from a starting price of US$99 all the way up to US$7,999.

As part of its offering, Codan also sells landmine detectors to NGOs and governments of countries impacted by current and past wars.

Communications

In H1FY20, Codan struck 2 strategic partnerships with both the Kenyan and Philippines governments. This is a good area for growth, as the dynamics of the large military communications segment allow for longer sales cycles and upselling. Once a partnership has been established, Codan can transition from selling individual pieces of radio equipment to becoming a full solutions provider.

Tracking solutions

Codan's Minetec brand has managed to further secure 2 important collaborations. Thanks to its Caterpillar partnership, Minetec's Minestar communication system was deployed into Newmont's Tanami mine and in a large block of an Indonesian cave mine. The same Minestar tracking system was also recently installed in BHP's own Olympic Dam mine in South Australia.

FY20 outlook

Due to strong backorders and continued strength in gold detection sales, management believes the company to be well positioned for the second half of 2020.

However, Codan admits that it might be difficult to replicate the important customers wins in the communications segment, which brought in over $21 million in H1FY20.

Codan's recent share price performance

The Codan share price is currently $4.89 at the time of writing, down approximately 30% over the past 2 weeks, which is a steeper drop than the S&P/ASX 200 Index (ASX: XJO) has experienced in the same period.

With no significant news released since its half-year results, such a price drop could be caused by any number of reasons. As Codan shares have returned some 58% over the past year – even after the recent fall – my guess would be that investors are banking some of those nice profits.

Foolish takeaway

I appreciate how this "small" Australian company has managed to carve out its own niche in several highly specialised segments through solid execution.

I also like the board's policy of continuing to pay out 50% of all profits as dividends. I believe this strikes the perfect balance between paying income to shareholders and retaining earnings for future growth.

The post A small cap ASX tech share for the long term investor appeared first on The Motley Fool Australia.

More reading

• How much superannuation do you need to retire? It's probably a lot less than you'd think
• Here are the top 10 ASX 200 shares today
• ASX 200 suddenly turns lower as fresh war fears hit before Easter
• Why did the ASX 200 just plunge 1.4% in Thursday afternoon trade?
• This monthly income ASX ETF yields 7%, and every ASX investor should take note

Motley Fool contributor Giacomo Graziano has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

With the world reacting to COVID-19 news, markets have now been falling for the better part of 2 weeks. 

Sectors directly impacted have been sold off sharply, and these include travel, tourism, hospitality, and other discretionary spending sectors. 

In the travel segment, I have been watching HelloWorld Travel Ltd (ASX: HLO) for some time now and — as they say — if you like a share at $5, you should love it at $2.50 (its price at the time of writing). 

Let's take a deeper dive into HelloWorld business operations.

What does HelloWorld do?

HelloWorld is a multi-brand travel products and services distribution provider, with both a retail and an online presence. With over 2,496 travel agencies in its network, HelloWorld has grown to be one of the largest travel franchises in Australia. The company's other segments include corporate travel management, air ticket consolidation, and freight services.

What I like

Based on full 2019 numbers, HelloWorld has been firing on all cylinders. In H120, total transaction value (TTV) increased by 12.9%, revenue was up by 9.8%, and earnings before interest, tax, depreciation and amortisation (EBITDA) was up by 14.8%. Business growth was underpinned by strong retail network expansion and acquisitions in the corporate travel segment.

Meanwhile, the HelloWorld share price has shed over 34% of its value in the past year and is now trading on a cheap price-to-earnings (P/E) ratio of 8.04. Debt is well covered by income with an interest coverage ratio of over 20, which compares well with the broader market's ratio of 7.8.

What I dislike

The business is performing well on multiple metrics, however as a potential shareholder I would want to see HelloWorld's earnings grow over time. Unfortunately, this hasn't happened, with earnings-per-share (EPS) only increasing from 18.1 cents to 18.2 cents over the past couple of years. Such sluggish growth could signal that the company has been growing predominantly by acquisition and is now struggling to grow organically.

Further, as travel belongs to the bucket of discretionary spending, forsaken consumer spending is unlikely to be recuperated at a later stage. That is why, due to COVID-19, management has been guiding for flat or negative growth in 2020 and no one knows how long this situation will persist.

Foolish takeaway

There is no question that COVID-19 is severely impacting HelloWorld's business in the short and, possibly, medium term. However, as the famous contrarian investor motto goes "the best time to buy is when there's blood in the streets, even if the blood is your own." As such, I will be keeping an eye on HelloWorld share price, ready to buy once the price is too cheap to ignore.

The post Why I'm keeping this ASX travel share on my watchlist appeared first on The Motley Fool Australia.

More reading

• 3 buy-rated ASX shares in today's falling market
• These 3 ASX stocks are paying better than 7% dividend yields
• ASX travel shares are hovering near yearly lows – time to buy?

Motley Fool contributor Giacomo Graziano has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Helloworld 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.

In 2020, most ASX telcos finally gave up on their dreams of international expansion and world domination. Long gone are the days when Telstra Corporation Ltd (ASX: TLS), and its competitors, could define themselves as fast-growing tech companies.

The telecommunications sector has instead realised that it is a utility-like business, selling highly commoditised products with low margins and profits.

This is not all bad news though. In such an environment, incumbents usually have a competitive advantage as they already have costly infrastructure put in place. Thin margins coupled with heavy capital expenditure will prevent more competitors from joining the fray. This will lead to consolidation within the industry, which is already happening with recent mergers.

Fortunately, consolidation and savvy cost cutting initiatives should allow these ASX telcos to pay stable – albeit not growing – dividends for years to come.

Telstra

As the largest telecommunication company in Australia, Telstra does not require an introduction. At current prices, it provides a nice fully franked dividend grossed up to around 4%.

For the next 2 years, Telstra is forecasted to maintain its dividend steady at about 16 cents per share, which implies a dividend well covered by earnings with a payout ratio of around 75%.

Although the dividend appears stable, with a current price-to-earnings (P/E) ratio of 19, I think Telstra's shares are fairly overvalued at present.

Spark New Zealand Limited (ASX: SPK)

Spark operates in New Zealand and is listed on the NZ exchange as well as on the ASX. With a market cap of $7.5 billion, it is the second largest telco within Australasia. Spark rebranded in 2014, when it changed name from the previous Telecom New Zealand.

As with the rest of the sector, Spark seems fully valued at present with a P/E of around 19. Further, revenue and earnings are both set to remain stable or drop slightly going forward, which I think is bad news for its dividend.

With a dividend yield of 4.88%, Spark appears to be the largest dividend payer within the industry. However, with a payout ratio close to 94%, I believe the dividend could be under threat and would not be surprised if it were trimmed.

TPG Telecom Limited (ASX: TPM)

Since the merger with Vodafone Hutchison was announced in 2018, the TPG share price has been quite volatile. At present, TPG sports a P/E of 35, which is roughly double the P/E of the broader market.

With an extremely low payout ratio of 21%, the dividend has ample runway to increase in the coming years. However, between the stretched valuation and the very low dividend starting base of 0.6%, TPG might not be the best choice for income-oriented investors.

The post Can ASX telco shares provide stable dividend income going forward? appeared first on The Motley Fool Australia.

More reading

• 2 defensive ASX dividend stocks for reliable income
• Here are the top 10 ASX 200 shares today
• Why now could be the perfect time to buy ASX dividend stocks
• Is Telstra stock a buy at $5.37 a share?
• 3 must-own ASX dividend shares which belong in every portfolio

Motley Fool contributor Giacomo Graziano owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra 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.

With more than 40 coal mining companies, the ASX is littered with heavily polluting and not-so-environmentally-friendly businesses. How good would it be if we could make money on the share market while also having a positive environmental impact?

Two under the radar, yet eco-friendly ASX companies within the energy renewable sector are New Energy Solar Ltd (ASX: NEW) and Infigen Energy Ltd (ASX: IFN).

New Energy Solar

With 16 plants in operation in Australia and the US, New Energy buys and develops large-scale solar plants with long term distribution contracts. New Energy has just inaugurated its 16^th plant, which is set to increase its overall production capacity by 70%, from 454MWDC in the previous year to 772MWDC. Further, most of New Energy's production is contracted out to reliable off-takers for a weighted average length of 16 years.

New Energy was listed in December 2017 and has now a market cap of $484 million and a price-to-sales (P/E) of 20. It is currently trading at a discount to its net asset value (NAV), which was last measured at $1.55 per share. The discount to NAV indicates that this could be a good time to purchase shares, which also come with a juicy dividend yield of 5.8%.

Something to be aware of is that New Energy is managed by an external asset manager. This means that the company must pay an annual management fee, as a percentage of enterprise value, and an acquisition and disposal fee. Due to the fee setup, there is some concern that management might take on projects just to increase its fee revenue, rather than creating shareholders value.

Infigen Energy

Infigen has been shifting from being an owner of wind farms and wholesale distributor to becoming a vertically integrated utility. Infigen has a current operating capacity of 600-700MW through its 9 wind farms (7 fully owned) and firming assets. Management recently stated that it's aiming to increase its energy production to 1300-1400MW, with up to 75% of that contracted out long-term. 

Infigen is the fifth-largest utility on the ASX with a market cap of $645 million. At its current price, Infigen shares can be acquired at a P/E of 15, which is much lower than the median utilities sector P/E of 31. It currently pays a dividend of around 3%, which is well covered by earnings and by a conservative payout ratio of 46%.

Foolish takeaway

So there you have it, two eco-friendly ASX shares to consider if you're looking to create wealth while maintaining a positive environmental and social impact. Out of these two companies, my preferred pick would be Infigen as I am not a fan of New Energy's external management.

The post 2 under the radar ASX shares for the eco-friendly investor appeared first on The Motley Fool Australia.

More reading

• 5 ASX ETFs to buy and hold for 10 years
• 3 ASX shares that could double over the next decade (or much sooner)
• 3 quality ASX shares to buy for a beginner investor
• Top brokers name 3 ASX shares to buy next week
• What are the ASX's top 3 index funds for passive investing?

Motley Fool contributor Giacomo Graziano has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

When buying shares for long-term income, I like to find undervalued businesses, with solid fundamentals and good dividends. As such, I will buy shares that compare favourably with the market on metrics like price-to-earnings (P/E), dividend yield, payout ratio, and expected growth.

The following ASX shares are currently screening as undervalued according to the above 4 metrics.

Nick Scali Limited (ASX: NCK)

Nick Scali is a well-established furniture retailer with over 50 years of history in Australia. Since 2017, Nick Scali also expanded internationally opening its first shop in New Zealand.

At the current share price of $7.05, you could buy shares in the prominent furniture retailer for a P/E of about 13.5. That is not all, Nick Scali also sports a dividend yield of 6.4%, fully franked at 9.08%.

Earnings are set to decrease for the next couple of years. However, with a low payout ratio of 48%, the Nick Scali dividend is set to remain stable or get reduced only slightly.

Qantas Airways Limited (ASX: QAN)

Qantas has been in operation since 1920 when it was founded in Queensland. Thanks to its two flagship airlines, Qantas and Jetstar, it operates the largest airline business in Australia. Qantas also has a large cargo handling segment through its 22 dedicated terminals around the world.

At a current share price of $7.32, Qantas shares can be snapped up for a P/E 13.4, significantly lower than the market P/E of 18.4.

Not only that, Qantas comes with a dividend yield of 3.4%, fully franked at 4.87%, and a low payout ratio of 45%. For the next two years, the company is further set to grow its earnings at a rate of 8.2%.

Computershare Limited (ASX: CPU)

Computershare is the world largest provider of share market services. Not only that, Computershare provides services in the business segment, register maintenance, employee share plans, and mortgage broking services. It is a top ASX 100 company, with a market cap of over $9.2 billion.

It is hard to believe that such a quality business could be purchased today for $17.04 per share, implying a P/E of 15.6.

Due to a low 40% payout ratio, the dividend is starting at a lower 2.58%, partially franked at 2.91%. For the next 2 years, Computershare is set to grow earnings at 7.4% and dividends at 4.5% per annum.

Brickworks Limited (ASX: BKW)

Brickworks is one of the world largest manufacturers of building materials. Brickworks is expanding aggressively in North America, where it has recently purchased a couple of large brick makers. It further owns a stake in Washington H. Soul Pattinson and Co. Limited (ASX: SOL) worth a cool $2.1 billion.

Brickworks is trading a P/E 13.4, which is significantly lower than the broader market.

What I like most about Brickworks is its proud dividend history. It has increased its dividends for the past 43 consecutive years and has a current yield of 2.98% fully franked at 4.26%.  

Although earnings are forecasted to decrease in the near term, I believe the long-term prospects for Brickworks to be intact.

The post 4 ASX shares to buy now for sustainable dividends in 2020 and beyond appeared first on The Motley Fool Australia.

More reading

• 3 ASX 200 shares down at least 30% to buy now
• Why Greatland Resources, Newmont, Northern Star, and Qantas shares are rising today
• Why Qantas shares nosedived 16% in March
• 2 incredible ASX shares to buy in April
• Why I'd buy these 3 ASX income shares this week

Motley Fool contributor Giacomo Graziano has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks and Computershare. 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.

For the past couple of years, buy now, pay later (BNPL) shares have been a great success story on the ASX.

Afterpay Ltd (ASX: APT) is now among the top 100 largest ASX companies with a market cap of over $7.7 billion, and is not alone. Zip Co Limited (ASX: Z1P) has reached a size of $1.38 billion, Flexigroup Limited (ASX: FXL) is almost $750 million and, behind them, there is a host of smaller players including Sezzle Inc (ASX: SZL), Splitit Ltd (ASX: SPT), and Openpay Group (ASX: OPY).

It is not an easy task to value businesses that are growing at rates close to 100%, while having no current earnings. Most of these companies are suffering large operating losses, which forces them to regularly raise capital just to stay afloat and pay their obligations as they fall due.

Afterpay 

Afterpay is the largest and best-known company amongst the BNPL players and is currently raising $30 million in capital through a share purchase plan. The SPP was originally planned for June, but was put on hold while awaiting for an AUSTRAC audit report. Current shareholders will be able to purchase up to $15,000 in new shares at a price of $23 through the new share purchase plan.

Other investors can invest at the current share price of $29.61, which implies a price-to-sales ratio of 31.49 and a 1-year sales forecasted growth rate of 77%.

The good news is that analysts forecast Afterpay to reach profitability in 2020, with 7.7 cents per share in earnings, which implies a forward-looking price-to-earnings (P/E) ratio of about 380.

Zip 

After raising $60 million from institutional investors in November, Zip has now just completed a further $10 million share placement at a price of $3.7 per share. By 27 December, Zip will report whether its share placement has been successful and fully subscribed.

Meanwhile, investors can snap up shares on the open market for $3.52, which implies a price to sales ratio of 13.53 and a 1-year sales forecasted growth rate of 91.1%.

Zip is also forecasted to reach profitability in 2021, with 3.9 cents per share in earnings, which implies a 2-year forward-looking P/E of 93.

Foolish takeaway

Overall, a positive sign for BNPL shares is that the road to profitability appears to be clearly ahead, as both Afterpay and Zip are currently forecasted to book a profit within the next couple of years.

At the same time, there are several headwinds on the horizon, including fierce competition, shareholders dilution, regulatory risk, and stretched valuations.

As such, as a matter of personal preference, I would hold off from investing in BNPL shares at these levels.

The post How much would you pay for fast-growing buy now, pay later shares? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• 2 ASX financial stocks that could double – or even triple – in value
• ASX share market sell off: Buy in the dip or stay on the sidelines?
• Down 55%! Can this ASX financial stock stage a major comeback?
• 5 most traded ASX 200 shares since the war began

Giacomo Graziano has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

Given the opportunity, who wouldn't like to go back in time and invest in the share market 25 years ago? If you had, compound returns from the market (10% on average) would have turned a meagre $10,000 in to more than $120,569 today?

This is one of the reasons why, as parents, we feel the need to start investing early for our children. That way, they too can enjoy the benefits of compound returns and learn about the wonderful wealth creation machine that is the share market.

This is where investment bonds come in.

What are investment bonds?

An investment bond, or insurance bond, is a product offered by an insurance company or friendly society. The bond combines an investment fund and a life insurance policy in one product.

A couple of features make insurance bonds ideal for investing for children.

First, investments are taxed within the fund at a 30% flat rate, separate from our own taxable income, which makes the product ideal for investors in a high tax bracket.

Second, the bond holder can nominate a beneficiary (anyone younger than 25 years old) to whom the investments will be transferred upon reaching a certain date or age. If held until "maturity", the investment bond will be vested in the beneficiary without any tax consequence.

How to use investment bonds to invest 

There are many insurance companies offering investment bonds, and all fund choices within are different. However, as a rule, the policy holder can choose between several funds both actively and passively managed, including from popular providers such as Vanguard and Blackrock.

Once you have gone through the registration process and the choice of fund, you need to make an initial contribution, starting from a few hundred dollars, then set up recurring monthly, quarterly, or annual contributions into the fund.

The funds can then be withdrawn after 10 years without any tax consequence, or any time before that date with some tax implications.

It sounds great. How much will it cost me?

There are a few different fees to be aware of.

The investment bond manager charges an annual management fee of between 0.3% and 2% based on asset under management.

The underlying fund provider – for example, Vanguard – charges a fee depending on the choice of fund plus some transaction fees, anytime additional fund units are purchased.

Some important rules to keep in mind

Investment bonds are "tax free" only if no withdrawal is made within the first 10-year period. This is known as the 10-year rule.

There is a further rule known as the 125% contribution rule, which requires additional contributions to be maximum 125% of the amount that was contributed in the previous year. This is set up to prevent tax avoidance.

Foolish takeaway

I believe the gift of shares to be one of the most powerful and rewarding gifts we can give our children. As parents, investment bonds offer us a good combination of ease of use, flexibility, and tax efficiency.

The post How to invest for a child using investment bonds appeared first on The Motley Fool Australia.

More reading

• 5 ASX ETFs to buy and hold for 10 years
• 3 ASX shares that could double over the next decade (or much sooner)
• 3 quality ASX shares to buy for a beginner investor
• Top brokers name 3 ASX shares to buy next week
• What are the ASX's top 3 index funds for passive investing?

Motley Fool contributor Giacomo Graziano has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

After a 21.55% run this year, the S&P/ASX 200 (INDEXASX: XJO), which collects the 200 largest companies in Australia, has delivered an incredible return.

However, with blue chip companies such as Commonwealth Bank of Australia (ASX: CBA), Woolworths Group Ltd (ASX: WOW), and Telstra Corporation Ltd (ASX: TLS) trading at excessive prices and with low or negative expected growth, where does an investor have to turn to find growth at a reasonable price going forward?

Look no further than Link Administration Holdings Ltd (ASK: LNK), which I believe to be one of the best dividend growth stocks currently on the ASX.

What does Link Administration do?

Link provides share market and financial administration services in Australia and the UK. With a market cap of $3.13 billion, Link currently ranks at number 129 amongst the ASX 200. 

In Australia, Link is the largest provider of superannuation financial services and second-largest provider of share market services. Further, Link owns almost 45% of PEXA, the leading Australian platform for online property conveyance, which is currently loss-making but growing at a fast rate.

Why is Link Administration an opportunity

As opposed to other sluggish top ASX stocks, Link has seen top line growth of 21% and bottom-line growth of 96% annualised for the past 3 years. However, going forward, analysts expect earnings to grow at a slower rate of 7.61%.

Link's current price-to-earnings (P/E) ratio of 9.8 compares favourably to the wider market P/E of 18, indicating extreme pessimism or signs of undervaluation.

Meanwhile, Link's dividend yield is 3.52% fully franked and grossed up to 5.03%. Although the dividend was not raised in 2019, earnings payout ratio hovers around 36%, allowing ample room for the already large dividend to increase over time.

Is December the right time to buy Link shares?

Due to several one-off expenses and difficult trading conditions, the Link share price is down about 12% in 2019, significantly underperforming the broader market.

Given the undervaluation, Link itself has been repurchasing its shares aggressively and plans to retire up to 10% of its current shares outstanding in the coming months.

As I consider these difficulties temporary in nature, the current share price of $5.88 constitutes a great buying opportunity for investors focused on creating long-term wealth in the share market.

Foolish takeaway 

At current levels, Link's profitable side of the business is trading at lower multiples than most other listed companies on the ASX, including the big banks which have had one of their worst years on record. As a bonus, Link comes with a 45% stake in PEXA, valued at $700 million, which is the largest and fastest growing online conveyancing provider.

The post Why Link Administration is one of the best ASX dividend growth shares appeared first on The Motley Fool Australia.

More reading

• How much superannuation do you need to retire? It's probably a lot less than you'd think
• Are CBA shares still a good buy for passive income?
• 2 defensive ASX dividend stocks for reliable income
• Here are the top 10 ASX 200 shares today
• 2 ASX 200 shares to buy ahead of anticipated rally: expert

Motley Fool contributor Giacomo Graziano owns shares in Link Administration Holdings, Commonwealth Bank of Australia and Telstra Corporation Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended Link Administration Holdings Ltd. 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.