Economists say the next cash rate movement will be higher, after worse than anticipated October inflation has all but killed off the prospect of a further rate cut.

Meanwhile, Westpac has weighed in that it expects the cash rate to hold steady at this month's RBA meeting. 

As a refresher, the cash rate in Australia is set by the Reserve Bank of Australia (RBA) and acts as the benchmark interest rate for the economy. 

Changes in Australia's cash rate influence ASX stocks by affecting borrowing costs, investor preferences, and economic activity, with rate hikes generally pressuring share prices (but not always). 

Macquarie said we are increasingly closer to the beginning of rate hikes. 

Hikes are a headwind for stocks, as they impact valuations today and earnings tomorrow.

What is Macquarie's view?

The team at Macquarie said in a report released last week that with rising risk, the next move by the RBA is a hike. It reviewed asset and sector rotation ahead of past hiking cycles.

Just two weeks ago, we suggested the RBA was likely on hold, with hikes possibly starting in 2H CY26 as part of a global pivot due to stronger growth. With the latest core inflation print above the RBA's target band of 2-3%, the risk of hikes has increased.

Macquarie said this risk is not unique to Australia, as 6 of 10 developed markets it tracks have core inflation of at least 3%. 

It reinforced that it does not see this as a stagflation scenario, as higher inflation is partly due to stronger growth and the unemployment rate is still relatively low (albeit trending up slowly).

Sectors to favour/avoid

Macquarie said late cycle sectors tend to outperform in the lead up to hikes. 

The analysis suggests favouring resources, because they benefit from stronger growth, protect against inflation, and are less hurt by valuation drops when bond yields rise. 

Small resources have performed especially well in past cycles, and basic materials, transport, banks, and financial services also tend to outperform before the first RBA rate hike.

On the flip side, the team at Macquarie said cyclicals like media, retail and discretionary often underperform in the lead up to hikes as the market starts to anticipate the best has passed. 

We prefer US consumer cyclicals given potential for more Fed cuts. REITs and Defensives also tend to underperform ahead of RBA hikes. Defensives usually perform better after hikes actually start.

ASX stocks to target

In the report, Macquarie also listed individual holdings to target in the resources sector, including:

• Rio Tinto Limited (ASX: RIO)
• Pilbara Minerals Limited (ASX: PLS)
• South32 Limited (ASX: S32)
• Northern Star Resources Limited (ASX: NST)
• Genesis Minerals Limited (ASX: GMD)
• Perseus Mining Limited (ASX: PRU)

In the financial services sector, the broker named: 

• Challenger Limited (ASX: CGF)
• Australian Finance Group Limited (ASX: AFG)
• Zip Co (ASX: ZIP). 

ASX stocks to avoid

The report from Macquarie also listed the following stocks as ones in sectors that tend to lag ahead of hikes: 

• Wesfarmers Limited (ASX: WES)
• Super Retail Group Limited (ASX: SUL)
• Premier Investments Limited (ASX: PMV)
• Bapcor Limited (ASX: BAP)
• Scentre Group (ASX: SCG)
• Treasury Wine Estates Limited (ASX: TWE)
• Suncorp Group Limited (ASX: SUN)
• Origin Energy Limited (ASX: ORG)

The post Macquarie names best and worst ASX stocks to buy in a rising interest rate environment appeared first on The Motley Fool Australia.

AFG is a mortgage aggregator, or in layman's terms, the company that stands behind a mortgage broker with the financial firepower to fund the loans.

AFG does more than just fund loans; it's also a technology company with a product suite that helps brokers manage their loan book.

Strong quarterly numbers

And it appears that making it easier for brokers to do their business is translating to good business for AFG.

The company said in a recent update that it had a record-breaking first quarter, with mortgage lodgements reaching $30.6 billion, up 10.5% on the previous quarter and up 26.5% on the same quarter last year.

AFG Chief Executive David Bailey said at the time the results demonstrated the strength of the market, "highlighted by an increasing presence of investors and a continued rise in average loan sizes".

He went on to say:

Refinance activity has eased, now at just 17% of all lodgements. This marks a notable decline from 26% a year ago, as the wave of refinancing driven by fixed rate expiries and rate competition has moderated. First home buyer activity remains stable at 11%, consistent with the same quarter last year but slightly lower than the previous quarter. Affordability pressures and competition from investors may be influencing this segment.

The company's chair, Greg Medcraft, speaking at the company's annual general meeting last week, said FY25 had been a "defining year" for the company, which posted a net profit of $35 million, up 21%.

More strong growth to come

Mr Bailey told the AGM that the company was looking to grow the loan book in its AFG Securities division from $5.5 billion currently to $9 billion by FY29, which was an "ambitious" target.

Macquarie analysts, looking at the quarterly results, said the growth in the AFG Securities division of 22.7% over the quarter was a positive for the company, as it was a high-margin area for AFG.

The analysts said operating conditions continued to support net interest margins and the growth of the company's loan book.

The Macquarie team have a price target of $2.96 on the share, compared with $2.39 at the time of writing their report, and once dividends were factored in, they were predicting a total shareholder return over a year of 29.2%.

They are forecasting a dividend yield for AFG of 5.3% this financial year, increasing to 6.4% by FY28.

The post Macquarie says this finance company's shares could deliver almost 30% returns, including handsome future dividends appeared first on The Motley Fool Australia.

This provides shareholders a chance to hear from management and gauge how the business is tracking.

The market closely follows company AGMs.

Data collected by Macquarie Group Ltd (ASX: MQG) revealed that stocks have higher trading volume on AGM day, averaging a 41% increase. This is followed by a period of share price underperformance. However, on average, share prices recover in line with the market around four weeks after their AGM. 

In a 1 October research note, Stocks to buy & sell for 2025 AGM season, Macquarie said that after the guidance reset in August,  it expects net positive surprises for the AGM season. 

Macquarie also noted that, after three years of decline, ASX earnings trends had turned more positive in September, with earnings per share (EPS) upgrades of 4%.

The broker also named 5 stocks that it expects to deliver the most positive surprises during AGM season, as determined by Macquarie analysts. 

Here are the 5 companies named.

Aussie Broadband Ltd (ASX: ABB)

Macquarie's first pick is telecommunications stock Aussie Broadband. 

The stock has soared an impressive 67% for the year to date, while offering a small dividend yield of 0.68%. That's substantially higher than the All Ords Index, which has risen 10% over the same period. 

The broker has an outperform rating and price target of $5.90 on Aussie Broadband shares.

Aussie Broadband will hold its AGM on 14 October.

Stockland Corporation Ltd (ASX: SGP)

Property development company Stockland was the second stock named.

Stockland shares have also performed well recently, rising 28% for the year to date. 

Macquarie currently has a neutral rating and price target of $6.16 on Stockland shares.

Stockland will hold its AGM on 16 October.

Australian Finance Group Ltd (ASX: AFG)

Macquarie named mortgage broking group Australian Finance Group as its third pick. 

The company has soared 78% for the year to date. 

Macquarie currently has an outperform rating and price target of $2.86 on Australian Finance Group.

Australian Finance Group will hold its AGM on 17 October.

JB Hi-Fi Ltd (ASX: JBH)

Electronics retailer JB Hi-Fi was the fourth company named. 

JB Hi-Fi shares have risen 26% for the year to date. 

Macquarie has an outperform rating and price target of $118 on JB Hi-Fi shares.

JB Hi-Fi will hold its AGM on 30 October.

Downer EDI Ltd (ASX: DOW)

Macquarie named integrated services company Downer EDI as the final stock to deliver a positive earnings surprise during earnings season. 

Like the other four ASX All Ords stocks named, Downer EDI shares have substantially outperformed the ASX All Ords Index for the year to date, rising 42%. 

Macquarie has an outperform rating and price target of $7.65 on Downer EDI shares.

Downer EDI will hold its AGM on 11 November.

The post Macquarie names 5 ASX All Ords stocks to deliver the most positive surprises during AGM season appeared first on The Motley Fool Australia.

With the August reporting season done and dusted, scores of companies have ex-dividend dates next week.

If you're keen to buy any of these ASX shares while they are still trading cum dividend, time is running out!

To receive a stock's next dividend, you must buy or already own it before the ex-dividend day.

We provide a sample of the ASX shares going ex-dividend next week below.

35 ASX shares about to go ex-dividend

The post 35 ASX shares with ex-dividend dates next week appeared first on The Motley Fool Australia.

Macquarie noted that in week three of reporting season, results for the June half continued to beat market expectations, with a 'net beat' of 6%. In earnings season to date, the net beat has been 7%, well ahead of this time last year (which was a 'net miss' of 2%).

The broker said that profit margins are still the main source of positive surprises, though sales have also been a small positive surprise too.

Macquarie noted that growth stocks and small industrial ASX stocks have delivered the most earnings beats, while defensive companies and small resource businesses tended to miss market expectations.

Analysts from the financial institution suggested that 'domestic cyclicals' were the key outperformers as they are delivering strong, positive free cash flow surprises and are benefiting from RBA rate cuts. However, 'global cyclicals' have been underperformers, affected by tariffs, foreign currency exchanges and geopolitical risks.

What about dividends?

The broker said that the dividend per share statistic has so far been about 20% better than expected, much stronger than what was expected with earnings per share (EPS), suggesting a higher dividend payout ratio.

The dividends may also suggest that management are more confident on the outlook, in contrast to their soft guidance.

Businesses like Brambles Ltd (ASX: BXB), Seek Ltd (ASX: SEK), Lottery Corporation Ltd (ASX: TLC), Lendlease Group (ASX: LLC) and Downer EDI Ltd (ASX: DOW) all delivered much stronger dividends. Businesses like JB Hi-Fi Ltd (ASX: JBH) and Super Retailer Group Ltd (ASX: SUL) also delivered special dividends.

Macquarie's view on the ASX stock market and some picks

Despite a few painful falls for some businesses, such as James Hardie (ASX: JHX), CSL Ltd (ASX: CSL) and Sonic Healthcare Ltd (ASX: SHL), the market has hit new highs each week.

Macquarie explained:

This is because the market is not being driven by earnings, but by liquidity and the expectation of further rate cuts… Banks benefited most from the post-result volatility, outperforming ~4% in Week 3. Investors had been rotating out of banks to stocks seen as offering more value. But as those recovery plays faltered the money went back into Banks as they are liquid and their results risk has passed.

There are a few ASX stocks that Macquarie favours, where there is positive momentum for those ASX stocks, with "positive recent earnings revisions, plus a relatively domestic focus compared to other names we might select."

It named aged care operators Regis Healthcare Ltd (ASX: REG), loan broker Australian Finance Group Ltd (ASX: AFG), airline Qantas Airways Ltd (ASX: QAN), and retailer Harvey Norman Holdings Ltd (ASX: HVN).

We'll see very soon if Macquarie is right on these businesses.

The post What are Macquarie's top ASX stock picks for the final week of earnings season? appeared first on The Motley Fool Australia.

In the company's FY25 half-year presentation, it said that 75% of residential mortgages are now done through the broker channel and one in ten residential mortgages in Australia are written by an AFG broker. Approximately 550,000 borrowers are helped each year by AFG brokers.

There are a few reasons why the business looks like a compelling buy at this level, let's get into it.

Strong loan growth across the board

A key metric for the growth of the business is the total value of the loans it lodges.

In the quarter for the three months to 30 June 2025, the ASX small-cap stock lodged more than $27 billion of home loans, up 19% year-over-year. This was the highest quarterly volume in the company's history.

In the latest quarter, NSW lodgements increased 16% year-over-year to $8.88 billion, Victoria lodgements rose 17% to $8.14 billion, Queensland lodgements increased 21% to $5.26 billion, Western Australia lodgements surged 25% to $3.67 billion and South Australian lodgements grew 18% year-over-year to $1.71 billion.

These are strong tailwinds for the company's earnings over the next 12 months and beyond, if the lodgement growth remains pleasing.

Property price growth

If the size of each loan grows, then AFG can benefit as its total lodgements increase.

Rising property prices can help both drive demand for mortgages and increase the size of each loan.

According to the ASX small-cap stock, the average size of the loan nationally in the fourth quarter of FY25 was $678,333. That was up from $674,855 in the third quarter of FY25 and an increase from $640,605 in the fourth quarter of FY24.

As Australia's population and the number of existing properties increase, the potential for more loans also rises.

Well-liked by brokers

The strength of the ASX small-cap stock is based on how much brokers like it and what it can provide for them.

In the FY25 half-year result, AFG reported a 7% net increase in broker numbers, with one in six brokers now being an AFG broker.

The company boasts of providing market-leading broker technology. Its 'BrokerEngine Plus' delivers a 35% productivity improvement for brokers, while achieving a net promoter score (NPS) – a customer satisfaction rating of more than 50. Around 46% of AFG brokers were subscribed to BrokerEngine as of the FY25 first half result, up from 34% in the first half of FY24.

With defensive earnings and a growing book of loans, I believe this ASX small-cap stock has a compelling future.

The post Why I think this ASX small-cap stock is a bargain at $2.21 appeared first on The Motley Fool Australia.

Following their dominant performance over the past 2 years, the consensus view is that they have become fully valued or overvalued. 

The most extreme example is Commonwealth Bank of Australia (ASX: CBA).

A 21 July Australian Financial Review article revealed that Hedge Fund Sage Capital had recently doubled down on its short position in CBA shares. This comes despite the ASX 200 bank's dramatic surge over the past few months hindering the fund's returns. 

In his latest note to investors, Sage Capital portfolio manager Sean Fenton told investors that he was sticking with his position on CBA, noting that the bank had become the most expensive banking stock in the world. 

While CBA shares have declined around 8% from their June peak of $192, many experts believe they have further to fall. 

Broker Macquarie has a price target of $105 on CBA shares. Its price targets for the other three big 4 banks are also below current share prices. 

So, investors appear to be left with no attractive options in the big 4 banking space.

An alternative: non-bank lenders

Those looking for exposure to the financial services sector may wish to consider non-bank lenders. 

According to a 15 July report, Australian Non-bank Lenders by Macquarie Group, rate cuts and funding costs continue to support the non-bank sector. 

Macquarie said data had revealed that non-banks (as a whole) have increased their market share of new mortgage flows. The broker also expects conditions to continue to improve for non-bank lenders.

With market pricing in further rate cuts, mortgage competition may ease from the banks as deposit profitability becomes impacted, giving non-bank lenders room to compete and grow volumes or expand margin.

However, the broker also acknowledged that the competition dynamics had changed:

As our Lendi Mortgage Pricing Index shows, bank mortgage spreads are largely unchanged in the past 18 months. However, competition has moved from banks to non-banks. Discussions with management and brokers suggest some non-bank lenders are taking advantage of the improved funding environment and competing aggressively on mortgages. In addition, there are newer entrants into the market as well who focus on prime mortgages given easier credit decisioning. We expect the growth-oriented strategies of non-banks to put some pressure on margins and/or volumes.

Therefore, while investment opportunities exist within the non-bank sector, investors must be selective. 

Investors should keep this in mind when considering alternatives to the big 4 banks.

Where does the broker see value?

In its research note, Macquarie also named two non-bank lenders it expected to outperform and two on which it held a neutral view. 

The broker said non-banks had performed very strongly in 2025, rallying ~10-45%. 

At the beginning of 2025, Macquarie preferred Liberty Financial Group Ltd (ASX: LFG) and Pepper Money Ltd (ASX: PPM) due to tailwinds and on valuation grounds. 

However, after rallying 34% for the year to date, Macquarie has downgraded Pepper Money from outperform to neutral with a price target of $1.77. 

The broker has retained an outperform rating on Liberty Financial Group and price target of $4.30.

The broker also has an outperform rating on Australian Finance Group Ltd (ASX: AFG) and a price target of $2.20. Meanwhile, Resmiac Group Ltd (ASX: RMC) has been assigned a neutral rating and a price target of $0.95.

The post Are non-bank lenders a lucrative alternative to the big 4 banks? appeared first on The Motley Fool Australia.

At the time of writing, Australian Finance Group Ltd (ASX: AFG) shares are trading 1.66% higher for the day, at $2.145 apiece. Over the year, the group's share price has risen an impressive 52.13%, the majority of which (42.05%) has occurred since early April.

For context, the All Ords Index has risen 4.60% for the year to date.

AFG's climbing share price can be attributed to the Reserve Bank's latest interest rate cuts. Combined with higher property prices, the market shift has sparked more confidence in the sector.

AFG has an extensive broker network and is expected to be well-positioned to meet the rising demand for home loans. In particular, it's manufacturing arm – AFG Home Loans – is expected to drive the majority of business revenue growth and profitability.

Here's what Macquarie Group Ltd (ASX: MQG) has to say about the stock.

Macquarie's view on ASX All Ords stock

In a recent note to investors, the broker maintained its outperform rating on AFG shares and increased its 12-month target price to $2.20, up from $1.80. The upgraded target price represents a potential 2.56% upside.

"PT $2.20 (from $1.80), driven by higher multiple, implies ~13x 1Y fwd Cash EPS (from 10.5x), and compares to majors banks ex-CBA of ~16x. Our confidence reflects record lodgements, improved funding and operating leverage,'' the investor note said.

According to Macquarie, AFG's Home Load product activity and margin stabilisation are key growth drivers and support the broker's earnings outlook.

The group's total lodgement activity is a key driver of earnings in AFG's aggregation business. Total lodgements were up 18.7% year-on-year in Q4 2025. Volumes were 12.1% higher over the period, and the average loan size was 5.9% higher.

"Macquarie analysis of the AFG Home Loan lodgement data shows lodgements of ~ $1.81bn in 4QFY25, vs ~$1.78bn in the pcp, comprising AFG Securitisation (AFG Branded and AFG Funded product) and White-label product (AFG-branded, third-party funded product). 61% of was AFG's own funded AFG Securities products," the investor note said.

"AFG disclosed 61% of AFG HL product lodgements in 4Q25 were AFG's own higher margin AFG Securities products, vs 56% in the previous two quarters. This implies ~$1.1bn of AFG Securities product lodgements in 4Q25, and has stepped up compared to an average of ~0.9bn in the previous 6 quarters".

The post Macquarie places 'outperform' rating on this ASX All Ords financial services stock appeared first on The Motley Fool Australia.

The S&P/ASX All Ordinaries Index (ASX: XAO) is down 0.54% today and up 2.71% over the YTD.

In terms of ASX financial shares, there has been much focus on the strong performance of the big four ASX 200 bank stocks.

In particular, the extraordinary gains of Commonwealth Bank of Australia (ASX: CBA) shares, up by more than 80% since November 2023.

Perhaps it's time for investors to turn their attention to some promising small-cap ASX financial shares?

The interest rate-cutting cycle that has begun in the US, Australia, and many other nations is a tailwind for all ASX small-cap shares.

This is because they're typically young companies that tend to carry more debt than the larger companies to fund their early growth.

Blackwattle Small Cap Quality Fund portfolio managers Robert Hawkesford and Daniel Broeren discuss two small-cap ASX financial shares in their latest monthly report, both of which are up by more than 40% in 2025 alone.

Here's what they had to say.

2 ASX financial shares up by more than 40% in 2025

Generation Development Group Ltd (ASX: GDG)

The Generation Development share price is $5.35 on Friday, down 0.93% and up 54% in the YTD.

Generation Development Group is a market leader in retirement and investment solutions, including bonds.

The company has been in the news over the past year for its August 2024 acquisition of investment research and ratings company Lonsec and financial services firm Evidentia, which it bought and integrated into Generation Development in February.

Hawkesford and Broeren attribute this ASX financial share's 34% price surge in May to the re-election of the Labor Government.

They said Labor's re-election raised the likelihood of superannuation tax reform, which would make investment bonds more attractive.

The Labor Party has proposed raising taxes on superannuation earnings above $3 million, including unrealised capital gains.

The analysts also spoke favourably about Generation Development's strategic alliance with US global asset management giant, Blackrock.

Generation Group announced the alliance on 8 May.

The partnership's key goal is to help Australian retirees transition from accumulation to decumulation by providing sustainable income streams with longevity protection.

Generation Development Group's CEO, Grant Hackett OAM, said:

This transformational relationship brings together Generation Life's innovation in retirement income with BlackRock's global scale and expertise, delivering solutions that address the evolving needs of Australian retirees while creating long-term value for advisers,
superannuation funds, and shareholders.

The companies will co-design and distribute a product called Holistic Retirement Solutions. They hope to launch it over the next year.

The analysts said this product addresses longevity risk and benefits from long-term tailwinds from the retirement income covenant.

The retirement income covenant is an Australian law requiring superannuation trustees to develop a strategy to help members achieve sustainable income in retirement. This includes considering their financial needs and preferences.

Hawkesford and Broeren see a bright future for this small-cap ASX financial share.

The analysts said:

Despite the recent share price run, we still see plenty more upside as GDG capitalises on the structural tailwinds of managed account penetration, superannuation tax reform and the retirement income covenant.

Australian Finance Group Ltd (ASX: AFG)

The Australian Finance Group share price is $2.21 on Friday, down 1.12% today and up 42% in the YTD.

Australian Finance Group is one of Australia's largest mortgage aggregators and securitised home loan lenders.

This small-cap ASX financial share enjoyed 20.9% share price growth in May.

Hawkesford and Broeren said the stock was supported by a reignited housing market and another interest rate cut in May.

They said expectations of further rate cuts in the near term "should drive increased mortgage activity and strengthen AFG's competitiveness on mortgage lending relative to the banks".

The analysts see this ASX financial share as good value, despite the recent run, commenting:

AFG's valuation is compelling, trading on 15x P/E, offering mid-teens earnings growth and a ~5% fully franked dividend yield.

The post Forget CBA shares. What about small-cap ASX financial shares? appeared first on The Motley Fool Australia.

The fast-rising company in question is Australian Finance Group Ltd (ASX: AFG).

On 7 April, you could have bought shares in the mortgage broking company at an intraday low of $1.43 a share.

In late morning trade today, those same shares are changing hands for $2.20 apiece, up 53.9% in less than two months.

The ASX 300 stock also trades on a fully franked 3.6% trailing dividend yield.

Despite that blistering recent run higher, Richard Ivers, the portfolio manager of Prime Value Asset Management's Emerging Opportunities Fund and Microcap Fund, forecasts more outperformance ahead for Australian Finance Group.

But you may want to buy shares before the next RBA interest rate cut.

Here's why.

ASX 300 stock poised to catch falling interest rate tailwinds

Asked which stock his fund holds that he believes has the most near-term upside, Ivers said (courtesy of The Australian Financial Review), "Australian Finance Group is an interesting stock right now and not well-known nor well owned."

Commenting on his bullish outlook for the ASX 300 stock, Ivers explained:

A mortgage broker aggregator, its network of 4,000 brokers writes 10% of all residential mortgages in Australia. This distribution business is relatively stable and consistent and benefiting from recent investment in systems.

AFG also manufactures mortgages and, after a tough few years competing with bank cash-back offers, is now writing good volumes again.

As for the potential impact of further interest rate cuts on the ASX 300 stock, Ivers said, "This will really start to be evident in FY 2026 which is fast approaching, and interest rate cuts are positive for the company."

Ivers concluded:

AFG is trading on a relatively low price-to-earnings multiple, and earnings momentum is accelerating. So the near term looks good. With many building materials companies no longer listed, there are few options to gain housing exposure, so we expect it to become more widely owned in the coming period.

What's the latest from Australian Finance Group?

The last price-sensitive news out from AFG was the company's half-year results, released on 28 February.

Highlights included an 11% year-on-year increase in revenue for the six months, to $626 million. Net profit after tax (NPAT) of $15.3 million was up 6%.

As for what's ahead for the ASX 300 stock, Australian Finance Group CEO David Bailey said, "Favourable market conditions, an expanding distribution footprint, enhanced technology offerings and increased loan book size instil confidence in AFG's upward earnings trajectory."

The post Buy this surging ASX 300 stock before the next interest rate cut appeared first on The Motley Fool Australia.

Shares in Australian Finance Group Ltd (ASX: AFG) jumped 4.36% throughout the course of the day.

The increase follows a steady month of gains, increasing 22.97% in the month of May alone.

That's a significant gap between AFG's result and the All Ords increase of just 3.09% over the same period.

Trading at $2.28 per share on Wednesday, AFG's share price closed at the highest level seen since February 2022.

Why are AFG shares flying?

At its May meeting, the Reserve Bank decided to decrease the cash rate by 0.25 basis points, to 3.85%, and analysts expect there could be much more to come. The move has sparked confidence in the sector and points to a potential wave of house price increases.

The combination of even lower interest rates, higher property prices and better business conditions has fuelled strong demand for credit.

With an extensive broker network, AFG appears to be well positioned to meet the rising demand for home loans, BankingDay notes.

In particular, AFG's manufacturing arm – AFG Home Loans – is expected to drive the lions share of business revenue growth and profitability.

In April, AFG Home Loans announced it had had its highest third-quarter lodgement volume results on record, increasing by 5% on the same quarter in 2024.

AFG Chief Executive Officer David Bailey said AFG Securities' lodgements are up 20% on the same period last year and represented 56% of all AFG Home loans lodgements.

But AFG's share price surge isn't only due to a market-wide uptick in mortgage lodgements and refinancing, there are other factors at play.

MPA points out the theory that AFG has potential corporate activity on the horizon. 

Although a full takeover bid is considered less likely, the possibility of some mechanism allowing AFG's founders to reduce or exit their stakes has been floated. This group of original Perth associates collectively holds nearly 20% of AFG's shares.

This recent investor enthusiasm for AFG echoes its strong position within the Australian mortgage market.

What do analysts expect next for AFG?

According to analysts, one-year price forecasts for AFG's share price have a maximum estimate of $2.35. The average price forecast for the company's share price over the same period is $2.

The maximum estimate represents a 3.29% increase from Wednesday's closing price. Analysts' average price prediction represents a 12.08% decrease.

The post Why this ASX All Ords stock surged yesterday appeared first on The Motley Fool Australia.

Investors are bidding up the stocks following some strong earnings results reported this morning.

Which companies am I talking about?

Read on!

ASX All Ords share leaps on soaring profits

The first ASX All Ords share leaping higher on strong earnings results is IPD Group Ltd (ASX: IPG).

Shares in the distributor of electrical equipment and industrial digital technologies closed yesterday at $4.55. At the time of writing, shares are changing hands for $4.96 apiece, up 9.0%.

Investors are bidding up the IPD share price, with the company reporting record revenue of $290.4 million in FY 2024, up 28.0% year on year.

Underlying earnings before interest and tax (EBIT) soared 46.6% year on year to $34.3 million.

And underlying net profit after tax (NPAT) came in at $23.3 million, up 44.7% from FY 2023.

This strong result saw the ASX All Ords share declare 10.8 cents a share in fully franked dividends for the 12 month period, up 16.1% from the prior year.

Highlights for the year included a successful $65.0 million capital raising in December.

As at 30 June, IPD had $150.7 million of net assets.

Looking ahead, management said:

The outlook for our markets remains buoyant, driven by the transition to renewable energy, increasing demand from data centres and their energy requirements, the growing number of EV chargers, and a supportive legislative environment.

Which brings us to…

Investors rewarding revenue gains and outlook

The second ASX All Ords share racing ahead of the benchmark on Friday on strong earnings results is Australian Finance Group Ltd (ASX: AFG).

Shares in the mortgage broking company closed yesterday at $1.50. At the time of writing, shares are swapping hands for $1.63 apiece, up 8.7%.

Investors are bidding up the AFG share price after the company reported $1.1 billion in FY 2024 revenue, up 7% from FY 2023.

Reported NPAT went the other direction, sliding 22% year on year to $29 million.

But the ASX All Ords share reported a strong second half, ending the financial year with a combined trail book size of $214 billion.

Meanwhile, operating costs decreased by $3 million year-on-year. And net cash flows from operating activities came in at $39 million on a cash conversion ratio of 107%.

AFG declared a final fully franked dividend of 4 cents per share, bringing the full-year dividend to 8 cents per share. At the current share price, AFG trades on a fully franked dividend yield of 4.9%.

Commenting on the results sending the ASX All Ords share soaring today, AFG CEO David Bailey said:

The 2024 financial year has been a tale of two halves for our business. Our Distribution division recruited strongly, our residential loan book hit a record high $200 billion, and new income streams enabled that part of our business to generate $44 million in profit before tax for the group.

Our Manufacturing division was impacted in the first half by high funding costs and competition heavily skewed towards major lenders.

Looking at what could impact the company in the months ahead, Bailey added, "AFG is in an enviable position, equipped with a competitive edge that positions us well to drive our market share."

The post 2 ASX All Ords shares smashing the benchmark on Friday on strong earnings results appeared first on The Motley Fool Australia.

Four ASX shares that are falling more than most today are listed below. Here's why they are dropping:

Australian Finance Group Ltd (ASX: AFG)

The Australian Finance Group share price is down 10% to $1.50. This morning, the mortgage broking company released its half-year results and reported a 34% decline in net profit after tax to $7.4 million.

Chalice Mining Ltd (ASX: CHN)

The Chalice Mining share price is down 9% to $1.14. This is despite there being no news out of the mineral exploration company today. However, it is worth noting that its shares were on fire on Wednesday. So, this decline could have been driven by profit taking from some investors. Its shares remain up 13% over the last two sessions.

DroneShield Ltd (ASX: DRO)

The DroneShield share price is down 21% to 73.5 cents. This may also have been driven by profit taking after some incredible gains. Year to date, the counter drone technology company's shares are still up 100% despite this decline. In other news, this morning Bell Potter downgraded its shares to a hold rating but with an improved price target of 90 cents.

ResMed Inc. (ASX: RMD)

The ResMed share price is down almost 4% to $26.87 despite there being no news out of the sleep treatment company. However, news that there's a new weight loss wonder drug on the scene could be weighing on sentiment. Viking Therapeutics Inc (NASDAQ: VKTX) shares are up 150% in two days after its experimental drug reportedly helped obesity patients lose almost 15% of their body weight in a mid-stage study.

The post Why Australian Finance Group, Chalice, DroneShield, and ResMed are sinking today appeared first on The Motley Fool Australia.

The basic theory is that the amount of output from each person must increase for the economy, wages and standard of living to also climb upwards.

So if productivity is that important, which are the best ASX companies by that measure?

For stock investors, surely it would be useful to find out which publicly listed businesses are the most efficient on a per-employee basis?

Top 10 most productive ASX companies 

To gauge productivity, The Motley Fool turned to S&P Market Intelligence.

That service helpfully provides a listing of every ASX company's revenue per employee for the last 12 months.

The top 10 best ASX companies for productivity looks like this:

The top three are all investment companies, which are arguably not a fair comparison to other businesses.

That's because the employees don't themselves directly make the goods and services, but rather the revenue reflects the performance of the company's investments.

So for any given year, a two-staff entity like Carlton Investments could rake in tens of millions in revenue. On the flip side, they could have lost money during the year for performing the same investment work.

Therefore, if you exclude the top three from analysis, this is where it gets really interesting.

Mortgage broking seems to be a very productive venture, with $3.6 million of revenue figuratively passing through the hands of each Australian Finance Group employee.

Pointedly, with interest rates rising, the AFG share price over the past year has declined 8.4% notwithstanding this efficiency.

Industrial real estate manager Goodman Group also rakes in more than $3 million per staff member.

Perhaps the market appreciates this more, sending its shares up 31.8% over the past 12 months.

Service providers holding their own

The next two are fascinating to me personally.

Data#3 Limited (ASX: DTL) is a provider of information and communications technology services to business clients.

The stereotype is that services do not scale very well.

That is, if you have a factory making lollies, it could take the same number of employees to create 10 or 100,000.

But if you're providing a service, you can't scale it to multiple clients. Each client needs to be looked after by a particular human.

Regardless, the services that Data#3 offers its customers must be of tremendous value, seeing that a whopping $1.77 million of revenue is generated per employee.

Data#3 shares have risen 13% over the past year.

As a contrast, Suncorp is a large financial institution, which has been trying to offload its banking arm to ANZ Group Holdings Ltd (ASX: ANZ).

But even with this deal facing stumbling blocks from the competition watchdog, the business seems to be doing fine, at least by the revenue per employee productivity metric.

Suncorp shares have admittedly risen 39.2% over the past year, while each staff member has been generating $1.41 million of business.

The post REVEALED: Which ASX companies are the most productive in 2023? appeared first on The Motley Fool Australia.

Shares in the mortgage broking and lending group are currently trading at $2.02 each. They touched a high of $2.05 shortly after the market opened this morning.

Let's go over the highlights of the ASX financial company's report.

What did the company report?

• Fully franked dividend of 9.6 cents per share
• Total revenue up 24.35% year-over-year (YoY) to $928.98 million
• Normalised underlying net profit after tax and amortisation (NPATA) up 12% YoY to $55.8 million
• Balance sheet of net cash and short-term investments of $217 million
• Trail book net assets up 223.52% YoY to $5.5 million.

Australian Finance Group CEO David Bailey attributed its earnings growth primarily to diversification into additional different business lines, including AFG Securities.

This is claimed to have led to a 20% group earnings increase from the corresponding reporting period and buoyed the final dividend amount by 30%. Settlements for AFG securities doubled in FY22, with especially strong performance observed in 2H FY22.

Its direct lending product line experienced the most growth in FY22, with settlements up 102% to $2.7 billion. Still, Bailey notes that aggregation remains the company's most important business, with its loan book expanding to a record value of $182.2 billion and recording $59.4 billion worth of settlements throughout the year.

The fully franked dividend of 9.6 cents has a record date of 6 September and a payment date of 22 September. Total dividends for FY22 ended at 16.6 cents per share, representing a payout ratio of 80% and a dividend yield of roughly 9%.

What else happened in FY22?

Australian Finance Group mentioned the performance from its strategic investments into Thinktank, Fintelligence, and BrokerEngine, saying they contributed to its earnings and helped the company achieve its strategic priorities of expansion and diversification.

Thinktank contributed $6.1 to the company's earnings, and Fintelligence contributed $3.6 million in FY22.

Some opportunities these investments allow the company to tap into include the reportedly under-served asset finance market. BrokerEngine's financial technology will also synergize with its offering to brokers and customers.

The company notes that its efforts in expansion and diversification have been largely successful, with AFG securities contributing 26% of gross profit for FY22, behind its leading aggregation segment at 46%. By comparison, AFG Securities is claimed to have only contributed 4% in FY2015.

What did management say?

Bailey welcomed the FY22 results, saying:

AFG Securities settlements more than doubled in the year, significantly outperforming the strong 36% growth in both white label (distributed on behalf of ADIs) and aggregation settlements.

This outperformance was maintained throughout the year, with settlements in the second half exceeding the first half period.

What's next?

In its outlook for FY23, Australian Finance Group noted that interest rates were in the process of moving to "more neutral levels" by the Reserve Bank of Australia (RBA).

However, the company added that the big picture was that these rate hikes remained at "historically low levels" and that the broader economy was still performing strongly, noting the low unemployment levels. The company estimates that demand for mortgage and broking services will likely remain high.

Alongside a more neutral backdrop, the company also said it had a solid pipeline of fixed-rate residential mortgages that were due for renewal over the next few years, valued at roughly $46 billion. The impact of these loans is that they will provide the company with future settlements as well as cross-selling opportunities to expand its loan book further.

Australian Finance Group share price snapshot

The Australian Finance Group share price is down 23.96% year to date. Comparatively, the S&P/ASX 200 Financials Index (ASX: XFJ) is doing better. It's down 4.01% over the same period.

The company's market capitalisation is around $540 million.

The post Australian Finance Group shares rally 6% as company posts $55 million profit appeared first on The Motley Fool Australia.

The ASX share market has returned an average of around 10% per annum over the long-term. That return has been made up of a return of dividends and capital growth.

What if some ASX shares were able to deliver a (grossed-up) dividend yield of at least 10%? Dividends are not guaranteed and can be cut. However, it could be useful if a business were able to pay large dividends and also deliver capital growth. Of course, capital growth isn't guaranteed either. A major risk of the ASX share market is an investment not working out.

However, experts believe the below businesses are both good value and could pay large dividends.

Australian Finance Group Ltd (ASX: AFG)

Macquarie is one broker that currently rates Australian Finance Group as a buy.

This ASX dividend share is one of the largest mortgage broking businesses in Australia. It claims to write around 10% of residential mortgages.

The Australian Finance Group share price ended last week down 6.5% at $1.72.

The price target is $2.94 – that implies a potential rise of around 70%.

There is a lot of market focus on rising interest rates at the moment, but Macquarie thinks that Australian Finance Group could be a winner as borrowers try to find a better loan by refinancing.

The company says that brokers are systematically important to all lenders, including those with branch networks, as they provide competition and choice. The overall broker market share of mortgages continues to grow – it was 67% in the first quarter of FY22, up from 50% in FY16.

The company is looking to grow its market share and grow margins through expanding into lending and across non-residential asset classes. Management note that the future development of an asset financing lending product will further accelerate growth.

Macquarie thinks that the ASX dividend share is going to pay a grossed-up dividend yield of 12.6% in FY22 and 12.8% in FY23.

New Hope Corporation Limited (ASX: NHC)

New Hope is one of the largest coal miners in Australia, with its projects including New Acland and Bengalla.

The business is currently benefiting from the elevated price of coal amid strong energy prices after the Russian invasion of Ukraine.

In the quarter for the three months to April 2022, the business generated $358.6 million of underlying earnings before interest, tax, depreciation and amortisation (EBITDA) and it made $281.8 million of cash generation.

However, rainfall and COVID-19 has affected the production in recent months.

Credit Suisse currently rates the business as a buy, with a price target of $4.90. With the New Hope share price closing out last week at $3.84, that implies a possible rise of close to 30%. The broker thinks that New Hope could pay a grossed-up dividend yield of 27% in FY22 and 34% in FY23.

The post Brokers predict these 2 ASX dividend shares will pay yields above 10% appeared first on The Motley Fool Australia.

• BWX and AFG are two ASX shares that are highly rated by brokers
• Australian Finance Group is one of Australia's major loan broking businesses, which is seeing significant loan volumes
• Natural beauty business BWX is rated as a strong buy by brokers, with international growth potential

Some of the ASX's best brokers have looked over the stock exchange for opportunities and have identified some ASX shares that could have significant upside.

There are always some businesses that are liked by individual analysts, but when multiple experts all like a business at the same time then it could be an indictor of compelling potential.

Here are two that are well-liked right now:

Australian Finance Group Ltd (ASX: AFG)

Australian Finance Group is one of the largest mortgage broking businesses in Australia.

AFG said that it finished the 2021 calendar year on a high with record volumes. It revealed residential lodgements were up 24% on the same period last year. It had lodged $24.6 billion for the three months to December 2021.

Residential lodgement volumes across the final three months of 2021 increased in Victoria, Queensland, South Australia and Western Australia whilst activity in NSW slowed marginally during the quarter.

One of the highlights from AFG's recent update showed that the big four banks of Westpac Banking Corp (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Australia and New Zealand Banking Group Ltd (ASX: ANZ) have seen their combined market share drop from 57.31% to 53.55%, their second lowest market share recorded in the past 10 years. ANZ and CBA registered the biggest drops.

This ASX share is rated as a buy by at least three brokers. Morgans thinks that AFG is going to report well in February thanks to volume growth, but changing monetary policies could be a negative.

Morgans has a price target on the business of $3, suggesting upside of more than 30%.

BWX Ltd (ASX: BWX)

BWX is a leading business in the natural beauty industry with businesses like Sukin, Flora and Fauna, Mineral Fusion and Go-To.

Experts are expecting the business to report good revenue and profit growth in the February reporting season.

Citi rates it as a buy with a price target of $5.70. That's a potential upside of more than 60% over the next 12 months, if the broker is right. Over the last month, the BWX share price has fallen by more than 20% along with many of the other ASX growth shares..

The ASX share has been busy making acquisitions in the last few years to bolster its growth potential and market share.

Flora and Fauna is one of the more recent buys. It's a leading and fast-growing online retail platform. It complements its existing online platform business Nourished Life and adds scale, diversity and efficiency to BWX's online offering.

A few months ago, it bought a 50.1% stake in Go-To Skincare. It's going to expand into the North American market in 2022.

The ASX share says that natural skincare is accelerating, and BWX is building a brand-new operations and manufacturing hub in Clayton, Victoria, to meet this opportunity. Construction is nearing its final stages. This "transforms its ability to grow the business".

Citi's numbers suggest that the BWX share price is valued at 18x FY23's estimated earnings.

The post Brokers rate these 2 top ASX shares as buys in February 2022 appeared first on The Motley Fool Australia.

So it's not a long bow to draw to suggest ASX shares in that industry have some optimism.

Sure, the big banks have hogged the limelight in recent months with their massive dividends and share buybacks.

But here are 3 smaller players that experts picked this week as a "buy", which might have more room for growth:

These ASX shares are about to reverse their fortunes

Shares for Australian Finance Group Ltd (ASX: AFG) have disappointed this year, sinking more than 4%.

However, Marcus Today portfolio manager Thomas Wegner told TheBull that its business is actually expanding.

"This mortgage broking group lodged $24.1 billion in home loans in the first 3 months of financial year 2022 — a 33% increase on last year's prior corresponding period."

And as interest rates inevitably rise from the current historic low, it'll only spur on AFG's activities.

"We expect earnings growth in the near term to be supported by an underlying shift to higher-margin products," he said.

"As interest rates start to rise, the role of a mortgage broker will become more important to borrowers."

AFG shares dived 1.9% lower on Wednesday, to close at $2.58.

A classic 'buy the dip'

The share price for Queensland business Suncorp Group Ltd (ASX: SUN) has taken a beating recently, losing 15% since mid-October.

Catapult Wealth portfolio manager Tim Haselum attributed the plunge to "an increase in natural disaster costs due to storms on the east coast".

But that's now provided a golden buying opportunity.

"Historically, Suncorp is at a point in the claims and premium increase cycle where investors can consider taking advantage of share price weakness," he said.

"Offsetting higher costs are rising premiums and bond yields, which should lead to an increase in earnings in the absence of significantly more claims."

JP Morgan agrees with Haselum, setting a price target of $13.30, as opposed to Wednesday's closing price of $10.85.

2022 could be as great as 2021 for this ASX share

Pure insurance player QBE Insurance Group Ltd (ASX: QBE) has seen its shares rise more than 42% this year so far.

Fat Prophets chief executive Angus Geddes reckons it still has plenty of legs.

"This insurer has made substantial improvements to its business in recent years," he said.

"Narrowing its focus has simplified the business and led to improving underwriting outcomes."

The analysts at Morgans are in sync with Geddes, also rating the insurance giant as a "buy" with a price target of $13.70. That compares to the Wednesday closing price of $12.19.

Rising interest rates will benefit QBE, according to Geddes.

"The business should be a major beneficiary ahead of a steepening yield curve," he said.

"The insurance pricing market has become more rational, and QBE's premiums have firmed considerably, which should continue, in our view."

The post 3 ASX finance shares to buy right now (hint: no big banks) appeared first on The Motley Fool Australia.

Australian Finance Group shares are currently up a pleasing 3.5% at $2.63 a share. What's the occasion? Well, this rise is likely due to an announcement the company made this morning before market open.

Australian Finance Group announced it is acquiring a 75% stake in the asset finance aggregator National Finance Alliance Pty Ltd, which commercially trades as Fintelligence. This will set Australian Finance Group back $52.5 million, which will be "primarily funded" through a "new corporate debt facility". 

Australian Finance Group share price rises amid acquisition

Australian Finance Group told investors that Fintelligence is a "fast-growing, technology-enabled asset finance aggregation business of scale which will drive further growth in AFG's asset finance volumes and market share".

As part of the deal, Australian Finance Group will also have an "exclusive option" to acquire the remaining 25% of the company over the next 3 and a half years. That's if Fintelligence achieves "agreed milestones". Australian Finance Group is expecting the buyout to be completed by 31 December 2021. 

Australian Finance Group told investors that the tie-up will result in a combined 3,335 brokers at the company. That's together with combined asset finance settlements of more than $1.7 billion per annum.

The company also stated the deal is "expected to be [earnings per share] accretive" in the first full year of integration. The funding structure will also allow Australian Finance Group to maintain its dividend policy.

Here's some of what Australian Finance Group CEO David Bailey had to say on the deal:

This acquisition represents a significant opportunity to build a fast-growing, technology-enabled asset finance aggregation business of scale. 

It will drive growth in AFG's asset finance volumes, market share for the combined group, and more lender and product opportunities for brokers and their customers. In addition, the acquisition allows AFG to increase the availability of white label and securitised asset finance products to meet the needs of our brokers and customers.

At the current Australian Financial Group share price, this ASX company has a market capitalisation of $683 million.

The post Australian Finance Group (ASX:AFG) share price lifts on acquisition news appeared first on The Motley Fool Australia.

Brokers are always on the lookout for opportunities. With share prices changing every day and every week, it can lead to some companies becoming opportunities as valuations change.

Whilst it's possible that all of those analysts are wrong at the same time, it could indicate that there is an opportunity:

Australian Finance Group Ltd (ASX: AFG)

Australian Finance is one of the biggest mortgage brokers in the country.

It's currently rated as a buy by at least three brokers, including Macquarie Group Ltd (ASX: MQG). The broker has a price target of $3.18 on the business. That suggests that the Australian Finance Group share price could rise by almost 20% over the next 12 months, if the broker is right.

Macquarie noted the recently quarterly update by the ASX share for the first three months of FY22. The broker believes that Australian Finance Group's update showed good signs for its profit.

AFG said that mortgage brokers have lodged a record $24.1 billion in home loan finance for the first three months of the new financial year. That's almost $6 billion more than the same period last year. It was a 33% increase year on year and a 7% increase quarter on quarter.

However, the company noted that recent moves by the regulator to rein in the property market will affect borrowing capacity for some homebuyers.

Macquarie thinks that the current Australian Finance Group share price is valued at 14x FY22's estimated earnings with a grossed-up dividend yield of 7.5%.

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is one of the leading retailers of baby products in Australia. It is also making moves to expand into New Zealand.

It's currently rated as a buy by at least five brokers, including Morgan Stanley, which has a price target of $6.90 on the business. The broker noted various positives from a recent trading update.

Baby Bunting said at its annual general meeting (AGM) that in the year to date, to 3 October, comparable store sales were strengthening and were only down 1.3%. In the first seven weeks of FY22, comparative sales had been down by 6.4%.

Excluding NSW and ACT stores, comparable store sales grew by 4.7% to early October.

Online sales (including click and collect) were up 37.7% by the ASX share, which was on top of 126% growth in the prior corresponding period.

The gross profit margin increased by another 120 basis points to 38.7%.

It's expecting to open between six to eight new stores in Australia in FY22, and two in New Zealand, towards the end of the second half of FY22.

Finally, the company said that the transformation program is "progressing well" with an anticipated launch of its new Australian website and phase two of the loyalty program in early November.

Using the projections by Morgan Stanley, the Baby Bunting share price is valued at 26x FY22's estimated earnings. It also comes with a projected FY22 grossed-up dividend yield of 3.8%.

The post These 2 ASX shares are buy-rated by many analysts appeared first on The Motley Fool Australia.